When it comes to making a business case for software investments, many people fail to recognize that the case itself is just one part of what amounts to an internal sales and
We usually ask participants in our benchmark research what software they use to manage or support a process and whether their company recently considered replacing it. Typically, two-thirds of companies have within the past year or two evaluated an alternative to the software they’ve been using for the subject of the research. However, only 15 to 20 percent actually acquire and deploy new software. The remaining number is divided between those that decided not to replace their software and those that are still considering it. Those that have opted not to replace the software typically give as the main reasons a lack of resources (47%), of budget (45%), and of awareness of the problem (40%), as well as no executive sponsorship or support; they also often say the existing software works well enough and the business case wasn’t strong enough. We get much the same responses from those that are still considering replacement, as well as that they’re still in the evaluation process. Of course it may be true that there was no budget or sufficient resources, or that the existing software works well enough, but we think it’s more often the case that the business case wasn’t strong enough and so the investment was deemed a low priority.
One common mistake of advocates for new software is failing to consider how the proposed investment will meet the needs and motivations of all of the people who will be evaluating the project. Their needs might be different, or they may have different priorities. For instance, the advocate may want to make some process more efficient so that he or she won’t have to work so many nights and weekends, but this is likely to be of little concern to those who have to approve the investment. For those decision-makers, the ability to get information sooner, gain deeper insight or reduce their
Another pitfall for advocates is failing to secure executive sponsorship before proposing an investment; lacking that substantially reduces the chance of success. This can be tricky because today’s software investments are rarely made for direct cost savings alone. In the early days of business computing, IT investments were made to eliminate the need for clerks and bookkeepers, so there was a direct, measurable savings involved. Today, these sorts of benefits represent a fraction of the value of software investments. Instead, the benefits include, for instance, getting information sooner or shortening the end-to-end length of a process. The end result may be improved customer service and, therefore, customer satisfaction – benefits that executives understand. When the business case presents an answer to the question, “What’s it worth to this company to cut cycle times from two months to one week?” It’s important that someone with sufficient stature in the decision-making process will vouch for the answer in the business case as well as reiterate the urgency for making that particular investment right away. It’s even more important to have the right sponsorship when the impact of the investment spans business units or functions; this should be either an individual with sufficient seniority or multiple sponsors from within these groups.
Probably for those reasons, participants asked to identify the most important considerations that lead to the successful presentation of a business plan most frequently cited executive sponsorship (67%) and an understanding of the potential value (that is, those making the decision were aware of the problem and the value of addressing it). Being able to demonstrate increased efficiency, reduced risk and enhanced effectiveness (such as by being able to meet audit or compliance needs) are also important.
Independent
Regards,
Robert Kugel – SVP Research