Justifying IT Investments in Tight Times

Justifying IT Investments in Tight Times

The four key elements of a successful business case

IT is already a part of everything government does, from managing operations to delivering services. The industry has finally reached the point where the promise — increased productivity, reduced costs and improved services — can be realized.

Profound changes over the past decade have transformed the IT landscape, building capacity and value. These changes include:

  • computing power — rapid growth of processing power
  • bandwidth — high-speed network access is rising faster than computing power
  • cost — innovations quickly become commodities, driving costs down
  • security — advanced measures safeguard information
  • adoption — more and more Australians are now online.

Governments are understandably reluctant to embark on major IT projects, having witnessed many highly publicized failures. But systems implementation is no longer a matter of pioneering the cutting edge of technology — it is about addressing the questions of “What are we getting in return?” and “How can we do better?”

Government decision-makers are focusing more on a real return on the investment (ROI) that can provide measurable, value-added results . . . quickly. Measuring ROI is necessary for major IT projects, virtually all corporate IT executives agree. However, focusing on financials alone does not capture all the benefits of technology.

Since governments exist to serve people, the business case must be more than ROI analysis. It has to demonstrate value, which includes everything from improved constituent services to political returns, on top of operational efficiency. Value is much more difficult to measure, since it includes the quality of services provided as well as the cost.

The successful business case will therefore address hard benefits (cost savings), soft benefits (process savings) and strategic benefits (for example, service improvements, citizen satisfaction). To achieve these benefits, you not only have to build the business case, but also demonstrate the value and sell the plan.

A business case is basically a structured way to answer the question: “How will this initiative improve the organization’s performance?” The object is to compare the results of the status quo with other options in terms of cash savings, process savings, service improvements and revenue enhancements.

Four key elements of successful business cases are:

1. Assessing the Current State

It sounds self-evident: to make good investment decisions, you have to know what you have got now. But the truth is, few governments know the extent of their IT assets, who is doing what or how much it costs to provide a particular service.

Identifying and tracking of the IT inventory should include all aspects of spending:

  • personnel
  • systems
  • applications
  • hardware
  • software
  • licences

2. Identifying the Benefits

Integrating and consolidating the IT infrastructure clearly produces efficiency, but the real gains come from integrating and consolidating business processes. To build a strong business, you need to analyze both.

Identifying the benefits of IT should include analyzing factors such as:

  • cost savings
  • cost avoidance
  • process savings
  • service improvements

3. Identifying the Risks

A major problem for federal IT implementations is identifying how systems perform compared with original cost, schedule and mission-improvement goals. Government agencies can prevent such problems by focusing on risk management before the project begins and continuing throughout the implementation. That means assessing, tracking and managing all areas of risk, including:

  • technological risk
  • execution risk
  • organizational risk
  • business risk
  • concentration risk

4. Considering the Alternatives

In the old days, “funding alternatives” was a code word for outsourcing. But today, government entities can explore a wide range of creative partnership choices, to include:

  • consolidation
  • integration
  • collaboration
  • renegotiation
  • standardization
  • outsourcing

The real challenge is getting people to believe that you can turn potential savings into real savings. Often, good plans fade away because their champions were unable to “sell” them to decision-makers. Here are keys to overcoming this trap:

Articulate the vision — when you can articulate a long-term vision for the future, and map the particular project back to that vision, you are more likely to succeed.

Craft the story — getting full value out of your IT investment depends on changing your organization and culture, and a good story can pave the way for change.

Target your audience — the easiest way to sell a business case is to educate people at all levels of the organization using different tools for different groups.

Demonstrate value — government leaders have been burned before by big promises that were never realised; to justify your investment in tight times you also have to show how you will achieve these benefits.

With these tools, you can make a strong case for your IT project — and get the tools you need to create the future.

Phil Napier is senior manager, public sector for BearingPoint

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