IS Business Case: “Water-flow Framework”

22 Feb

“Water-flow Framework”

Group 6 members
Edward Quinn, Christopher Corcoran, Timothy Halpin, Paul Haughney & Jerry Peleke

Water flow 1

Introduction

This blog aims to provide a conceptual framework to support management teams in creating business cases for IS investments.  It is important to note that this blog will draw directly from the individual blogs previously created by the group members based on academic research, original opinions and collaboration between the group. The conceptual framework created will assist in supporting management teams when trying to accomplish investment plans, in particular for IS business cases. The framework is designed to aid in all steps, from the original thought process through to the implementation.

Capture

*The above framework is an original creation*

(Click on image for a clearer view.)

Water-flow framework explained

The above framework draws from the idea of a water-flow feature, whereby until such time as the water fills each compartment, then and only then can the over spill flow into the next compartment. This flow process is repeated until the end, when usually the last compartment over spill is pumped back to the start, thus restarting the process from the beginning.

Applying this “water-flow” concept to the above framework, each of the four stages (compartments) has a number of steps that must be completed in order to move onto the next stage.

Stage 1 – “Logical Rational”

Steps include:

Assuming at management level a decision to create a business case for IS Investment has occurred,  at a theoretical level, a logical rational needs to be clear and transparent to all involved at the creative and planning  level. This logical rational should be based on accurate and up to date research, where the basic yet essential questions are answered such as:

– “Why do we need an IS investment?”

– “What are the tangible and intangible benefits we might envision for the firm?”

– “How much will it cost?”

– “Will the change be accepted within the organisation?”

Once these essential yet fundamental questions are examined in depth, and more importantly answered, the planning step can then begin.The planning step builds on the previous step, whereby a logical rational provides a clear justification for the need to apply for and create a business case for a particular IS investment. Also, it is important to note at this stage that the planning step needs to ensure that the future IS investment is aligned with the organisation’s core capabilities.

Stage 2 – “Financial Justification”

Steps include:

Once the logical rational stage has been completed, the next stage moves on to the financial justification. This section is concerned with assisting management in deciding whether or not, based on financial grounds, to go forward with a proposed IS investment. Financial justification entails answering questions such as:

– “Can this proposed investment pay for itself?”

– “Will investing in this technology constitute optimal use of our funds?”

– “Will our financial position be improved in the long-run by this investment?”

It is imperative that the business case focuses on the cost analysis of the investment in question, which includes consideration for both the cost and the payback of it. Depending on management priorities, financial justification may be decided on by one or more cost-benefit analyses including Net Present Value (NPV), Payback Period (PBP), Internal Rate of Return (IRR), Return or Investment (ROI), etc.

Cost-benefit analyses assess the impact and net benefits of the chosen option in achieving the desired outcomes, in comparison with other feasible approaches. This will include the evaluation of both tangible and intangible factors, as well as quantitative and qualitative factors, which will accurately assess the value of specific technologies (i.e stated monetary values for specific software / hardware, hidden costs, calculated depreciation costs). It will apply for the lifetime of the proposal as opposed to just the implementation period.

Stage 3 – “The Human Element”

Steps include:

Having completed the financial justification stage, the next stage is concerned with the human element attached to creating the business case for securing investment within the organisation. In many organisations, more often than not, human involvement can be the most critical component which may in fact determine the overall success or failure of a project – regardless of how logically or financially sound the IS business case may be. This issue can often go overlooked in academia and in industry, thus the human element stage can assist in highlighting areas for management which can improve the chances of a positive reaction. Mistrust and fears are often the basis for resistance to change within firms, where employees particularly against IS or IT changes, may have many uncertainties such as:

– “Will this affect my current employment and pay?”

– “Why are they changing the system if it works fine as-is?”

– “Will we receive sufficient training?”

– “Will I be made redundant?”

Creating an honest, transparent and inclusive process to all affected parties can overcome this obstacle. If the uncertainties in question are addressed adequately, an IS business case not only gathers crucial support, but it also minimises potential objectors. Subsequently, the process is made smoother whilst improving the organisation’s culture to change. Finally, this stage is quite significant as it combines all three stages (Logical Rational, Financial Justification and The Human Element) and, provided each stage(s) are correctly completed, one can assume that the signing-off / granting of the IS investment will be approved (for the purpose of this framework).

Stage 4 – “Implementation Stage”

Steps include:

The implementation stage is the final part to the “Water-flow” framework.  Within this stage, a number of steps should be followed to ensure greater security and monitoring. Within the monitoring step, clear agreed timelines, delegation of workload, resource allocation and budgetary expectation should be clearly outlined (as forecasted in the Financial Justification stage). As alluded to before (in the Human Element stage), people are greatly affected in the implementation process. Therefore, the introduction of an Organisation Change Management (OCM) plan can help inhibit unforeseen negative and potentially harmful consequences that may arise.

Lastly, this stage should constantly filter back to the logical rational step at crucial and planned incremental periods, thus mapping progress. This ensures that the IS business case plan is on the correct path, the financial constraints are within budget, and also the people affected within the organisation due to the change are satisfied with the new transition.

Conclusion

In summary, we believe that the Water-flow framework can help management teams overcome many of the challenges faced in organisations today, especially when trying to create and implement a successful IS business case with an attempt to secure investment. The conceptual framework represents certain procedures and steps that must be completed before progressing onto the next stage. One could argue that the Water-flow framework highlights key and fundamental areas for creating a“watertight” IS business case, which in essence provide direction and clarity for all parties involved. However, it is important to note that, although each stage is quite clear in definition, the internal steps can be altered depending on the specific needs of an organisation. The Water-flow framework is targeted at IS business cases, although one could argue that with a few adjustments, the same concepts can be applied when trying to secure investments in other areas such as IT and Human Resources.

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