LESSON 4:

ANALYZING THE BUSINESS CASE

OBJECTIVES:
At the end of this lesson, students should be able to:

● define and understand the importance of business case;

● identify and apply the quality approach to composing business case ;
● cite and understand the key elements during a business case composition;
and
● create their own business case analysis for an data system project.
Duration: 3 Hours
 Thoughts to Ponder
“Going into BUSINESS withoUT a BUSINESS plan is like going on a moUNtain trek
withoUT a map or GPS sUPport – YOU'll evENTUAlly get lost and starve!"

― Kevin J. Donaldson

Project Business Case

Before pursuing a project, the potential benefits havet to be analyzed during a
project business case. This document is additionally the idea for stakeholder
decisions and, the selection of project options.
The Project Management Institute defines the business case as a 'documented
economic feasibility study' that outlines the business needs, the present situation,
economic analysis, and proposals. Usually, the structure of business case
documents usually tailoring to the wants and expectations of the stakeholders and,
therefore, the organization. to gauge the economic effects of a project and make
different project options comparable, project managers leverage the tools and
techniques of the analysis. (PMBOK Guide Sixth Edition, 2017)

Figure 2.17 Cost-Benefit Analysis as Part of the Project Business Case.

Source: Sebastian. (2020, August 09). Cost-Benefit Analysis for Business Cases (Definition, Steps, Example).
Retrieved August 31, 2020, from https://project-management.info/cost-benefit-analysis-business-cases/

A business case is often accompanying by a benefits management plan

(which is also suggested by the PMBOK). This document points out how the
project will make sure that the expected benefits will eventually materialize actually.
Both the business case and, therefore, the benefits management plans are the
inspiration and input documents of the project charter, which is that the formal
documented authorization and mandate for initiating a project. (Sebastian, 2020)

Why Use Business Case Analysis?

Business case development may be a step that companies often use for
project selection. It contains information about the proposed project, in such a way
that the management will be guided in their corporate strategy and competitive
advantage towards other businesses. This business case can only be developed to
collect pertinent details or information from the management itself based on the
evaluation of their existing business processes.
 You can also convert the business case to action steps and significant
milestones to develop an idea that will guide your venture through the whole project
life cycle, including the project outcome. The business case may be a key input to
the project management plan and is typically owned and created by the project
sponsor. Following project close or completion, a post-project evaluation (PPE) will
usually be held- usually some months after project completion – to live the project's
benefits against those began in the business case. (Sebastian, 2020)

Business Case Composition

Most organizations will have a standard approach to composing a business
case. However, key elements usually include:

Executive Summary
Describe the vital points from the business case, including historical background,
nature of business, services offered, operational and technical system audit if
applicable, competitive advantage, and other pertinent information. This section of
the business case is a concise overview of your project's definition and goals. Use
this section to clarify the matter and the way you will solve it briefly.

Reasons
Describe the explanations for doing the project, just like the business problems
you will be trying to resolve. It will even be useful to explain how the project
helps to realize corporate objectives or strategies.

Business Options
Describe the numerous options which are considered and recommend an alternate.
One option should be the 'Do nothing' option. This feature does not end during a
project. Other options could be 'Do the minimum we can, 'Do something else' etc.
The difference between these options is the benefits that the investment will buy.
Plan to provide enough information to the approvers of the business case to judge
which option gives the only value for money.

Expected Benefits
Describe the benefits of the recommended option in measurable terms. They
need to be both qualitative and quantitative.

Expected Downside
Describe any dis-benefits. These are the actual negative consequences of the
project. If possible, quantify the dis-benefits and include them within the
investment appraisal.

Timescale
Describe the project timescale and the timescale over which the benefits will be
realized.

Cost and Benefit Analysis

● Costs - This includes the breakdown of the total sum of your One Time Cost
Worksheet, which provides for Development Cost, User Training, and
Additional Software/Hardware expenses. Recurring costs on the succeeding
year of the implementation of the project should also be calculated.
 ● Benefit -This includes a breakdown of all tangible benefits of the proposed
system, which includes costs such as annual supplies cost of all consumed in
the proposed system(pen, ballpen, folder, paper, ink, and the like.) and labor
cost of all involved in the proposed system (employees salary).
● Break-Even Analysis Table and Break-Even Analysis Chart- This includes
the calculation and graphical representation of break-even point or payback
period based on your NPV calculations of Benefits and Cost for a certain
period.

Major Risks
Describe the most project risks, their impact which may likely to occur, and any
proposed responses.

Recommendations
Give a strong recommendation. Explain why the project you've chosen must be
pursuing and why you think this is the best solution. (Buehring, 2020)

Business Case Template

play online games or read an

Project Name: Web Lane Cafe online book. If customers have
Information Management System questions while using the
computer, the cashier also serves
Project Manager: Kendra Santos as an IT Assistant to provide
assistance to its customer. Each
Date of Project Approval: café also offers training courses
December 1, 2020 for beginning computer users at a
minimal cost.
Executive Summary

Web Lane Café is a modern chain

of cybercafés offering high end
and state of the art facilities. Web
Lane Café is more of the
technologically advanced
cybercafés situated at the heart of
the city.

At these cafes, you can do the

following: Connect to the Web
while drinking your favorite
specialty coffee or tea and eating
a snack; chat with or send email to
coworkers, friends, and family; use
Internet Explorer, Google Chrome,
or AOL to browse the Web; and
Nature of Business

How the company provides services to

their customer
Through high-speed T1 lines, information made available on the
customers have fast Internet Web. Vendors could download
access. Monitors are 19 inches. information sheets, press releases,
Cafe has a minimum of 15 photographs, and other information
computers, along with a color from the Web site. Placing this
printer, a laser printer, a digital information on the Web would save
camera, and a scanner. All John and her staff a great deal of
computers have popular time and money.
productivity software such as the
latest operating system and
in-demand software applications. One of the reasons for the financial
For each beverage or snack success at the Web Lane Café is
purchased, customers receive 30 they do not pay for their computers
minutes of free computer use – and equipment in the cafes.
including Web access. If they Instead, they allow computer
would like additional computer vendors to use the café as a
time, the fee is PHP50.00 per hour. storefront for their products. This
strategy provides their customers
Since Web Lane Café started with the opportunity to try the
operations in 2005, the business hardware and software before
has been thriving. The cafe serves making a purchase. When
hundreds of customers around the customers wish to purchase
city. The Web site has hundreds of computers, the café's staff directs
hits a day. John Simmons, chief them to the vendor's online
information officer (CIO) for Web storefront for discount pricing.
Lane Café, offers one suggestion
for its financial success. To showcase their hardware and
software in the cafes, computer
vendors request information from
"We do not let potential customers the cafe in-charge on that day.
of computer vendors pay for the The number of these requests is
computers and equipment in our rising quickly. The cost of copying
cafes. Instead, we allow computer and mailing this material is
vendors to use our café as a becoming excessive.
storefront for their products. It
provides customers with the
opportunity to try out the hardware
and software before making a
purchase. When customers are
ready to purchase computers, we
direct them to the vendor's
electronic storefront for discount
pricing".

To showcase their hardware and

software in the cafes, computer
vendors request information from
John Simmons, chief information
officer. The number of these
requests is rising quickly. The cost
of copying and mailing this material
is becoming excessive. For this
reason, John would like this vendor
System audit of hardware and software

Brief history of the company

State the competitive advantage of the

company towards other competitors

Introduce how the problem of the company

arises.

Restatement of the competitive strategy of the

company and how their problem arises.

Detailed identification of the problem &

background of the existing system
Reasons

The following problems are identified with the current information

system at the Web Lane Café:
● The time employees spend copying and duplicating vendor material is rising
quickly, raising the need for extension of their duty and working schedule.
● Potential vendors do not receive the material as quickly as in the past, which
possibly could cause poor relations
● Resources are wasted, including employee time, equipment usage, and
supplies.

Business Options

● Do nothing and stick on with their usual business practices.

● Adopt the proposed system and take the risk of investing PHP 178,500.00 to
a computerized information system that might give your company a more
competitive advantage towards another existing cafe nearby.

Expected Benefits

The following benefits are feasible if the Web site at the Web Lane Café were modified:
● Potential vendors would be more satisfied, leading to possible long-term
relations
● Supplies expenses would be reduced by more than 45%.`
● Due to automation procedures, there is a 9% labor cost reduction in the
employee's salary due to minimal needs or human labor.
● Through more efficient use of employees' time, the company could also
realize an additional reduction of 15% for the overtime pay of the employee
due to the extension of their duty and working schedule.

.Expected Downside

● Some employees will be terminated due to minimal human intervention

because of the computerization process.
● Lower morale among the employees because overtime payment will be
reduced.

Timescale

Initial analysis shows that the system will take approximately 3 to 4 months to
implement. (Here you can include your PERT Chart or GANTT Chart)

Cost and Benefit Analysis

● Costs
 This table taken from Figure 2.8 Breakdown of One Time Cost Worksheet in
Lesson 3 shows that there is a total of PHP 178,500.00 for the Total One Time Cost
Worksheet, which will serve as the initial investment for this project and the recurring
cost of PHP 20,500.00 that will be additional expenses on the cafe for the
implementation of the said project.
 ● Benefit

This table taken from Figure 2.9 Breakdown of Tangible Benefit Worksheet in
Lesson 3 shows a PHP 2,585.00 annual supplies cost reduction and PHP 60,000.00
labor cost reduction in employee's salaries due to a decrease in the number of
employees compared to the labor cost allotment for the existing system.

This table taken from Figure 2.10 Additional Cost Reduction Based on Employees
Salary in Lesson 3 shows that there is a PHP46, 320.00 cost reduction in the
employee's salary compared to the existing labor cost allotment for overtime pay of
the employees working in extended duties due to the volume of work in the cafe.
 This table is taken from Figure 2.11 Computation of Net Economic Benefit
Worksheet in Lesson 3 only shows a total of PHP 108, 905.00 Net Economic Benefit
annually if Web Lane Cafe will implement the project.

● Break-Even Analysis Table and Chart

This table taken from Figure 2.15 Example of Break-Even Analysis Table of
Web Lane Cafe Information Management System in Lesson 3 shows the detailed
computation of the NPV of both Cost and Benefits to come up with the calculation of
the ROI and payback period or break-even point as stated in the table above.
 They are taken from Figure 2.16 Example Payback Period Analysis Chart
based on Break-Even Analysis Table result of Web Lane Cafe Information
Management System. These two tables show that the actual break-even point
occurs on Year 3, 5 months, and 16 days. Thus if the project will be implemented on
December 1, 2020, it will give an estimated payback period on May 17, 2024.

Major Risks

The project team that will handle the initial data gathering procedure might
have lack of experience in specifying requirements on system projects. It could lead
to the wrong system software deliverables. It is likely to turn down the benefits
projected from the project

Recommendations

Having an ROI of 56% for an initial investment of PHP 178,500.00 and a

payback period of 3 Years, 5 months, and 16 days and after careful evaluation and
consideration of this proposed information system, I, therefore, conclude that this
project is feasible to be implemented at Web Lane Café.