From What to How

PhysicalPhysical PhysicalPhysical

LogicalLogical LogicalLogical

Current SystemCurrent System New New SystemSystem

““What”What”

““How”How”

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2

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5

We are here

The Geometric Truth

Cheap Now

Right

Emphasizing quality generally diminishes the likelihood of

cost minimization and fast delivery.

Emphasizing cost minimization or delivery time generally

diminishes the quality.

Emphasizing quality and delivery generally diminishes the likelihood of significant

cost minimization.

Transition From Logical to Physical Design

Prepare a detailed

development plan for the

physical design

Identify a physical design which meets the

requirements

Document the physical design

in detailAssess the

feasibility of the physical design

across all dimensions Recommend

based on the outcome of the

feasibility assessment

3 Ways to Make a Business Case

“The system will have a net present value of $753,000.”“The system will yield a minimum reduction in operating cost of $193,000 annually.”“The estimated increase in market share is 14.7%.” within the first 24 months of operation.”

“IT is part of the infrastructure, we can’t cost justify it like a new fleet of trucks.”“It seems reasonable to assume that this new system will reduce our costs of servicing this market sector.”“Trust me. This is why you hired me as the IT Director.”

“Our competitors are doing this even as we speak.”“Our shareholders will view us as technologically behind if we don’t do this now.”“We have a small window of opportunity here and we are wasting precious time trying to decide.”

Breakeven Analysis

Breakeven Analysis

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Evaluating a COTS SolutionEvaluation Criteria Characteristics

 Application Efficiency

• Acceptable response times under actual conditions• Efficient use of a wide variety of data storage solutions• Efficient use of backup and recovery mechanisms 

 Application Effectiveness

• Meets all stated requirements for the present process needs• Expandable & scalable to expected future needs &  platform requirements• Logical organization of menus and data capture screens• Capacity for current and expected future user load 

 Usability

• Functional and logical user interface• Context-sensitive online help system• Appropriate user feedback with regard to application processes and user error• Non-destructive error recovery from command or menu selection errors 

 Documentation

• Well-organized and comprehensive written user documentation• Complete duplication of all documentation in online form• Comprehensive user tutorials for all application functions 

 Vendor Support

• Telephone technical support with direct access to technicians• Web-based support site with downloadable updates• Searchable web-based technical support knowledge base for first line   

solutions 

Evaluating Outsourcing 

 Terms of reference document that sets out the objectives, scope and approach of the evaluation 

Strategic business plan (where does the organization want to be?) 

Analysis of how outsourcing integrates with the purchaser's strategic plan 

Business analysis and feasibility study (the high level requirements and how the process would work) 

Human resources impact assessment (may require the assistance of employment law specialists at an early stage) 

Request for information (RFI) (seeking suitable services and indicative costs) 

Cost-benefit analysis (what are the economics?) 

Risk analysis and business impact (what are the risks?) 

Business case and recommendation to management 

Specification of requirements (detailed statement of services and service levels required) 

Call for proposals from suppliers known as a request for proposal (RFP) 

Evaluation of proposals  

Typical Tangible BenefitsBenefit Category Common Examples

Cost Reduction 

 Reduction in labor or headcount Less paperworkReduction or elimination of overtime Efficiencies in distributionConsolidation of jobs or employee roles Less need for travelReduction in supply usage Less maintenanceSmaller inventory needs or carrying costsLower costs of hardware and/or softwareIncrease in product/process qualityImproved production throughput or costsReduction in overall cost of fundsEfficient use of utilitiesImproved subcontractor or external vendor controlReduction in or improved effectiveness of training 

Revenue Increase 

 Introduction of new products  Improved product qualityIncreased efficiency in sales processes   Product enhancementsImproved advertising support and target marketing Development of, or access to, new marketsDecreased time to marketEffective bidding tools  

Typical Intangible Benefits

• Improved employee morale• Improved corporate image• Increase in perceived quality of products or services• Perceived decrease in time to market by customers• Improved decision making• More timely information• Increased organizational flexibility• Improved resource allocation and control• Increased strategic or competitive advantage• Improved public and community relations• Improvements in addressing environmental concerns• Reduced employee turnover• Increased quality of work for employees• Proactive attention to ethical issues• Proactive addressing of legal issues• Increased workplace and/or community safety

Typical System CostsCost Category Common Examples

 

Tangible Development 

Development personnel  Data conversion costsAnalysis and design consulting fees  Pre-development trainingVendor installation and consulting  Materials and suppliesHiring costs for new operating personnelHardware and software acquisition or developmentPhysical plant acquisition and/or conversion

  

Tangible Operating 

 Maintenance and upgrades (hardware and software)  End-user trainingAnnual or renewable software licenses  Operational personnelRepairs (hardware and software)  Depreciation of system assetsConnectivity and communication chargesMaterials and suppliesEquipment lease payments

   

Intangible 

 Potential disruption to existing productivity and environmentLoss of customer goodwillReduction in employee moraleDiversion of attention to daily responsibilities 

Categories of RiskCategory of Risk Examples of Risk

Project Size

 

 • length of development schedule•  number of members of development team•  span of involvement across organizational business units• span of involvement across unrelated organizations• size of project as measured in number of applications or lines of code

  Project Structure

 

 • degree to which development effort is new and/or innovative• extent of organizational or structural change required• overall managerial commitment to project

Analysts

 

 • familiarity with business environment• familiarity with proposed technologies• familiarity with similar project scopes and complexities

  End-users

 

 • perception of end-users to necessity or relevance of new system• familiarity with system development process and change• familiarity with proposed system application environment