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IT transformation and positioning IT as a broker of cloud services can result in significant changes to service delivery and accountability. A new IT operating model and a new way of thinking are needed for leveraging new technologies, consolidating and standardizing hardware & applications, and migrating workloads to new platforms and/or service providers. Also required are new IT processes that are aligning business needs, new organizational structures and skill sets for IT staff. All of these changes require funding. How do you build a business case to justify the transformation costs to the business? Intuitively, we know it is more efficient. How do we prove it? Business Case Components Independent of the goals of the IT transformation (e.g. technology change, process improvement, IT as a Service (ITaaS) journey, buy vs build) the components of the business case always include what the:
Business-as-Usual costs are the total cost of ownership for the current environment (hardware, software, labor, facilities, external services, network, and overhead). Understanding those costs at a unit, atomic level, is key for comparisons. Costs associated in executing the changes, as well as the costs of operating in the target environment, need to be determined. This may include costs for services, additional resources (labor, hardware, software, facilities, etc.) as well as the opportunity cost. Expected benefits could include cost savings, increased functionality, increased productivity, reduced risk, better customer relations, and faster time to market. Timeframe spells out the stages in which the costs and benefits can be expected. It drives the change planning milestones, provides opportunities and justifications for project controls, and sets and manages expectations. Risks are on both sides of the equation. There are risks in not doing the changes, as well in doing potentially disruptive changes. Some risks are quantifiable, such as fines for non-compliance and loss of service availability. Some are subjective, such as impact to reputation due to publicized downtime or security breaches. Cost-Benefit Analysis Cost-benefit analysis (CBA) is what compares the costs and benefits of the current environment to the costs and benefits of the changed environment. It is the foundation for building the business case. The first step is to identify and collect data from asset and inventory systems. Cost models must be built for each service, including costs for hardware, software, network, personnel, facilities, external services and overhead assets. This may sound simple and straightforward, but there are challenges with data collection in multiple sources in varied formats, accuracy, and gaps that need to be filled with industry standard data. The next step is to determine the cost of transformation including running parallel systems and using services for configuration and training to accelerate the transformation. Finally, analytical models are built to compare alternatives, including transformation costs, determining investment benefits and break-even timing. There may be a lot of work to get to the point of being able to determine the cost benefit of transformation and its alternatives, but it will provide a solid decision base demonstrating that the efforts can be self-funded and result in lower costs of operations. The post Building the Business Case for Your IT Transformation appeared first on InFocus. |
