In many companies, some sort of formal justification is needed to initiate and fund an IT project, this is called cost-justification analysis. A rough breakdown of the costs is as follows: hardware-31%; software, including DBMS - 24%, staff and system integrators - 35%; administration-10%.
How can you justify the total cost by balancing the risks against the benefits?
How can you calculate the ROI (Return of Investment)?
How can you make a business case?
Usually the senior management demands a business case as a part of RFI (Request for Information) to roll out an RFP (Request for Proposal).
"A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation. The logic of the business case is that, whenever resources such as money or effort are consumed, they should be in support of a specific business need." - Wikipedia
I want to present few typical approaches taken for justifying DWBI project, pick the best that will work for your organization. Here are some sample approaches for preparing the business case:
1. Calculate the current technology costs to produce the applications and reports supporting strategic
decision making. Compare this with the estimated costs for the data warehouse and find the ratio
between the current costs and proposed costs. See if this ratio is acceptable to senior management.
2. Calculate the business value of the proposed data warehouse with the estimated dollar values for
profits, dividends, earnings growth, revenue growth, and market share growth. Review this
business value expressed in dollars against the data warehouse costs and come up with the
justification.
3. Identify all the components that will be affected by the proposed data warehouse and those that
will affect the data warehouse . Start with the cost items, one by one, including hardware purchase
or lease, vendor software, in-house software, installation and conversion, on-going support, and
maintenance costs. Then put a dollar value on each of the tangible and intangible benefits
including cost reduction, revenue enhancement, and effectiveness in the business community. Go
further to do a cash flow analysis and calculate the ROI.
How can you justify the total cost by balancing the risks against the benefits?
How can you calculate the ROI (Return of Investment)?
How can you make a business case?
Usually the senior management demands a business case as a part of RFI (Request for Information) to roll out an RFP (Request for Proposal).
"A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation. The logic of the business case is that, whenever resources such as money or effort are consumed, they should be in support of a specific business need." - Wikipedia
I want to present few typical approaches taken for justifying DWBI project, pick the best that will work for your organization. Here are some sample approaches for preparing the business case:
1. Calculate the current technology costs to produce the applications and reports supporting strategic
decision making. Compare this with the estimated costs for the data warehouse and find the ratio
between the current costs and proposed costs. See if this ratio is acceptable to senior management.
2. Calculate the business value of the proposed data warehouse with the estimated dollar values for
profits, dividends, earnings growth, revenue growth, and market share growth. Review this
business value expressed in dollars against the data warehouse costs and come up with the
justification.
3. Identify all the components that will be affected by the proposed data warehouse and those that
will affect the data warehouse . Start with the cost items, one by one, including hardware purchase
or lease, vendor software, in-house software, installation and conversion, on-going support, and
maintenance costs. Then put a dollar value on each of the tangible and intangible benefits
including cost reduction, revenue enhancement, and effectiveness in the business community. Go
further to do a cash flow analysis and calculate the ROI.
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