Creating a Business Case for a Software Project
Early in most software development projects, business analysts are often asked to create a business case. A business case is used to document the business benefit and provide justification for the project and is used to support the related funding request for the project. In this blog post, I will discuss the typical components of a business case.
A business case compares the estimated resources, schedule and costs of a project with the benefits that it is expected to provides. The business case must show that the benefits outweigh the costs. In many instances, it includes a financial analysis that calculates the project’s return on investment (ROI) or the Net Present Value (NPV).
The benefits of a business case are specified in increased revenue and reduced costs. For example, a business case for producing a new product would include the anticipated increase in revenue from sale of the product. Although financial information is important, a business case is more than a financial justification for a project. It is business justification and will often include other benefits such as:
- Strategic advantage
- Corporate image an brand loyalty
- Increase in market share
- Business agility
- Reduction in cycle times
- Process efficiencies
- Improvement in customer satisfaction
- Employee loyalty and recruitment
A business case generally includes the following components:
Executive summary highlights the key points in the business case. These include important benefits and the return on investment.
Project background provides relevant information so that the people who must approve the business case can decide whether the project is both viable and worth doing. If a project involves complicated technologies, the audience may not believe the financial analysis until it understands how the technologies enable the benefits.
Business opportunity describes the motivation for the project that the business case will propose. The business opportunity includes a definition, a statement of scope, and a discussion of objectives that the project will help the organization achieve.
Alternatives are analyzed for the proposed project. For example, an online learning business case might compare the benefits and costs of classroom learning. All business cases involve at least two alternatives: doing or not doing a project.
Costs describe the resources for undertaking the project and their monetary value. The costs should include the cost of development, implementation, training, change management, and operations.
Benefits describe the projected financial benefits from undertaking the project. Benefits are usually presented in terms of revenue generation and cost reductions.
Financial analysis compares benefits to costs and analyzes the value of a project as an investment. The analysis may include a cash flow statement, return on investment, net present value, internal rate of return, and payback period.
Other benefits describe other expected benefits that cannot be quantified in terms of dollars and cents.
Assumptions are events that a business case anticipates will happen. For example, a business case might assume approval from a regulatory agency. Critical assumptions must occur for a project to succeed.
Constraints are schedule, resource, budget, staffing, technical, and other limitations that may impact the success of a project. For example, a project might require that all employees have access to a central database.
Organizational considerations examine how a project impacts an organization. A project’s success might depend on management support and employee acceptance.
Risk analysis evaluates the probability that a project can be implemented successfully and the risks involved in undertaking the project. Risks also may result from not undertaking the project.
Moving Forward explains how the project should be developed and implemented. This is usually explained in terms of phases and tasks. This section also offers suggestions on how to proceed.
The Enfocus Solutions Requirements Suites™ provides convenient the framework, tools, and repositories to store and share these methods for assembling a business case so the documentation is available throughout the project to ensure complete understanding by users, stakeholders and developers.