Necessity of developing IT business cases

Developing business cases is the most important part while requesting investments in information technology. The request for the IT business case development arises when there is a need to justify how exactly IT investment helps to satisfy specific business needs or goals.

Business case - verbal or written value proposition aimed at stimulating decision-making process by the authorised person to invest in task or project realisation.

During a process of the business case development, the ultimate business goal should always be followed. For example, the modernisation of server or network equipment can’t have the ultimate goal of increasing the productivity of IT systems - such an effect must always be demanded by the business within the framework of specific projects or operational tasks.

The reasonable question is should the business case be developed for any IT investment reason?

To answer mentioned above question the multilevel business case maturity model should be reviewed.

On the first level of maturity business case concentrates only on the IT costs. This approach can be implemented when the sum of investment and its business impact is low. Usually, the lowest level of maturity is applied in insignificant information systems automation and IT infrastructure modernisation. If you want to buy a router or automate filling the data from another system through API, considering business benefits is not necessary.
On the second level of maturity business case could be concentrated on a limited volume of business needs. Moderate investments in acquiring of employees' time tracking system or learning management system, purchase of additional capacities for business information systems scaling can require development of the light business case. On this level business representatives can confirm the necessity of IT spending, but there still will not be financial justification for investments.
The third level of business case maturity assumes treating investment in terms of project management. The cost of all IT resources should be calculated, and the business value of investment should be revealed. Investment metrics for such projects as ERP / CRM / WMS systems implementation or IT infrastructure migration to the cloud should be defined, including calculation of the payback period, net present value, return on investment and internal rate of return. All significant IT investments that have serious business impact requires not less than third level of business case maturity.
The fourth level of business case maturity requires thorough business benefits analysis from proposed IT investment in comparison with other investment opportunities. Taking in account resources limitations we can't afford carrying IT spendings for all possible investment options. Thus, NPV metrics should be calculated for each candidate to IT investments' portfolio and the most valuable of them should be considered taking in account current budget limitation.
And finally, the fifth and the last level of business case maturity requires dynamic management of project outcomes through the full economic lifecycle of IT investment, which starts with developing the necessary capabilities for project realisation and ends by decommissioning of the project resulting assets. The economic lifecycle of IT investment go far beyond IT investments portfolio. It assures continuous business value creation of project resulting assets by establishment of permanent monitoring over IT operations and business metrics.

Necessity of developing IT business cases mostly depends on volume of IT investment and its business impact. Also, while choosing proper level of business case maturity the size of organisation and purpose of IT investment should be considered.

Investing in moderate systems automation and infrastructure modernization projects usually requires the first level of business case maturity while significant informatisation and digital transformation projects can't be performed until the most important investment metrics are calculated.

In general, knowledge of ITFM basics plays a crucial role in supporting a business by IT executives. Skills of business cases development gives them an opportunity to speak with management board members in financial language, effectively optimising IT costs, managing significant projects, and preparing reliable budgets.

I designed the special module in my IT Financial Management course about business cases development. Maintaining economical lifecycles of IT investments, developing the real business case for CRM system implementation, familiarising with critical success factors for increasing of investment's business value, calculation of key investment metrics and other helpful topics for IT executives are revealed.

Read more about the ITFM course at fin4cio.com and be sure you developed the right skills for IT executive position before you have a most desired proposition in your life.