Determining Business Need and Project Feasibility

Often, what a customer wants doesn't coincide with organizational goals, situations, or direction. For example, a customer might specifically request a system that she thinks meets her department ' s needs, without considering whether the IT department can support it. Perhaps the requested function is one that the company doesn 't want to make available to users at a certain level or in a certain department. Additionally, the solution that a customer decides he needs may not coincide with reality: perhaps it' s not feasible to build or buy—or it ' s not even available!

You enter into some pretty tricky territory when you must be aware of your own company' s business needs as well as assess the technology needed to initiate and complete a potential project. You are at the same time expected to make a decision about the project' s business worthiness and to identify the type of technology that will be used to solve the customer' s problem. Is it worthwhile to take on this project? Do you have the appropriate technology, budget, and corporate culture available to make it happen in the allotted timeframe? In other words, it is you who must assess the overall strength of the project.

Project feasibility, in this sense, means "is the project doable or not?" To do this, you establish the business case for the project. The business case is the means that you use to assess the project ' s value. You analyze several different components as you prepare the documentation that will propel the project forward, send it back to the customer for redefinition, or kill it altogether. The people who want the project, champion it, and ultimately "OK" it by picking up the tab are called the sponsors, or project sponsors (as opposed to the people who have a vested interest in the project—the stakeholders). Project sponsors can also be stakeholders. Following are some of the things to consider when formulating your business case. As we examine building a business case, we' l l ask these questions:

■ How long will it take to recoup our costs?

■ What do we get if the project is successful?

Note In larger projects, you may have a project sponsor or sponsors and an executive project sponsor. An executive sponsor is one who has the capability of authorizing the project and the expenditure of resources to develop the project' s deliverables. In smaller shops or with smaller projects, the executive sponsor and the sponsor are one and the same.

Costs Those who have power to approve the project look more closely at the cost assessment (and its associated budget) than anyone else. The sponsors undoubtedly want to see a line-by-line breakdown detailing the cost of each item that you see as being necessary to the project. Perhaps one of the biggest problems associated with assessing accurate project costs is delay between the time that you formulate the project ' s costs and the time that the sponsor approves the project and it' s ready to begin.

For example, you receive a project and assess that two new servers will be required to house the software that you' re going to use. You request a bid for the servers from a vendor, and the bid reflects a price that ' s good for 90 days. The project isn't approved for 180 days, and you have to have the vendor re-bid the cost of the servers. You may or may not get the same favorable bid that you had earlier, thus introducing a delay in the project implementation while you go back to the sponsors to see if they' re willing to authorize the additional money.

Payback period Sponsors also want to know how long it will be before the project pays for itself. You spend, for example, $100,000 on two new servers and some database software and coding that allows your customer support people to more accurately track where your customers reside. You expect to gain some valuable demographic information from this software so that you can more precisely target your catalog and website offerings. If the system is implemented and you gain a bunch of extra customers in certain targeted zones—in other words, you increase sales by virtue of the system—when will the additional sales finally pay off the initial investment in the new system? How long will it take—nine months, a year, five years? This is the answer that the sponsor will expect you to determine; they will want a very close estimate of when they can expect to hit the break-even point and start making real money.

Suppose that a project costs $1,250,000 to implement. The cash inflows for the project are anticipated to be $250,000 per quarter and begin at year one. The payback period would be 15 months, because the first year (four quarters) brings in $1,000,000 and the first quarter of the second year brings in the final $250,000. You would say the payback period is 15 months.

Note Payback period can be used to justify one project over another. Dor example, if Project A has a payback period of 15 months, and Project B has a payback period of only 6 months but costs the same, some may prefer to go with Project B, all other concerns such as project necessity and feasibility being equal. Benefits The sponsors of a project weigh the cost of the project against the "what will it get us?" question. Does this project increase productivity (an intangible and often unprovable "soft" benefit)? If so, how will it increase productivity? Will it improve security? Speed up transaction processing? Increase the number of website visits per day? Raise customer (or, in the case of governmental organizations, citizen) satisfaction? It' s up to you as the project manager to come up with these benefits and the method(s) by which you ' l l validate that the benefits were actually received.

Inadequate business-case definition could result in the project not gaining sponsorship because sponsors will not understand the purpose or value of the project. It' s up to you to somehow, in terms the sponsors will understand, bring forth the project ' s worthiness, its costs, benefits, and predicted payback period, so that sponsors can make a good decision about whether to proceed.

Note It' s also important to note that even if you' re hitting on all cylinders and the project looks like a wonderful thing on paper, that doesn' t necessarily mean sponsors will automatically give you the go-ahead. There may be other equally deserving projects vying for the same money. You might run into a personnel or political issue. In these cases, it might not matter how deserving the project is; if it' s being requested by a certain individual, it ' l l never be approved.

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