Business Case

Purpose

Reasons

• It gives a formal authority from the Executive to the Project Manager (see mandates) to carry out all the operations needed for delivering the stated outcome within the given tolerances without further authorizations. However, based on Prince2 concepts, the Project Manager shall ask for authorization for each of the stages compounding the project.
• The Business Case makes explicit references to the outcome (either product or service) supporting the reasons for its creation.

Strategy

1. "Reasons" for carrying out the project include both environments:
   1. Production
   2. Usage (market)
2. The "Options" are chosen using the very same assumptions (possibly with a trace of the decision process).
3. The remaining items (constraints, e.g. costs, time, quality & scope etc.) are the logical effects of the above choices.

1. Identify the business needs

2. Outline product description

3. Identify Executive and Project Manager

4. Set constraints

   1. Budget

   2. Scope & Output’s Quality

   3. Delivery date

   4. Approach (e.g. outsourcing)

   5. Tolerances

   6. Sensitivities (e.g. environment/political)

5. Set Assumptions(e.g. values for NPV/IRR)

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Verifying that all necessary information is consisted with the company’s current standards.

C

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Assessing the feasibility of the preferred option

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Approving

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Updating it whenever the board gives explicit authorization

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1. The reasons for the project must be consistent with the corporate or program strategy.

2. The proposed options have to be presented within their proper frames, in order to make them fully understandable.

3. Each option has to be presented in the following aspects:

   1. Business

   2. Organization

   3. Financial

   4. Technical

4. The chosen option will be supported by strong case that can be confronted with the eliminated ones.

5. The benefits should be clearly identified and justified.

6. It should be clear how the benefits will be realized.

7. It should be clear what will define a successful outcome defining the logic to be used for creating the metrics.

8. The Business Case conforms to organizational accounting standards (e.g. break-even analysis and cash flow conventions).

9. Where external procurement is required, it should be clear what the preferred sourcing option is, and why.

10. The Business Case must be use for aligning all documents. For this reason, any update shall be timely communicated to the Project Manager, who will verify the impact on the modifications on the existing versions.

Reasons

Defines the reasons for undertaking the project and explains how the project will enable the achievement of corporate strategies and objectives.

They vary for each different scenario. These are just some examples:

• Request For Proposal / Statement of Work

• Compliance to "external" regulator

• Customer’s request

• Product Description

Business Options

This is the pool of the available opportunities. From a Risk Management viewpoint, it is the place where to search for the "alternative route", when the risks posed to the actual plan are just too big.

• Cost / Benefits Analysis

• Product Analysis, which involves the marketing and related experts

• Alternatives identification

• Constraints (e.g. budget, delivery date, technologies - to be matched with the available skills, existing legislation, company’ s governance)

• Assumptions. They span from financial data (e.g. interest rate) to market’s response.

Expected Benefits

The benefits that the project will deliver expressed in measurable terms against the situation as it exists prior to the project. Benefits should be both qualitative and quantitative. They should be aligned to corporate or programme benefits.

The assessment of the progress toward realization has to include the impact on the ongoing operations. As a result, explicit references to the current processes are requested for negotiating the needs of both sides: project and operating business.

This section will receive the results of the calculations made previously in the "Business Options"

Tolerances

The permissible deviation above and below a plan’s estimate of time, cost and scope/ quality without escalating the deviation (and the necessary approval) to the next level of management.
They should be set for each benefit and for the aggregated benefit. Any benefits realization requirements should be stated.

They are one of the key values for enabling the constraints (especially the "Iron Triangle"). Their settings depends upon these factors:

• Company’s governance about the budget approval.

• Reliability of estimations, and then the Quality of historical data for productions of similar "objects".

• Robustness of Change Management Procedures

• Specific arrangements for outsourcing contractors

Negative impacts

Outcomes perceived as negative by one or more stakeholders.
These Dis-benefits are actual consequences of an activity whereas, by definition, a risk has some uncertainty about whether it will materialize. Dis-benefits need to be valued and incorporated into the investment appraisal

These values are worked out in the same process used for the "Expected Benefits"

Timescale

These figures have to be matched with:

• Sought Product Delivery date

• Scope (Product Description) and available resources (Budget)- called "Iron Triangle".

• Marketing analysis, which includes the technical considerations about the product’s shelf life.

• Maintenance costs and constraints, including the transference of the necessary knowledge.

Costs

A summary of the project costs (taken from the Project Plan), the ongoing operations and maintenance costs and their funding arrangement

In a SW project, people represent the major cost; however, there are some other elements that are influenced by people’s location, skills, contractual forms etc. The estimations used for calculating the Delivery Date are the main input for working out the costs in the production phase. The maintenance’s costs have to be calculated separately.

EVM: Earned Value Management

C.F.: Cash Flow

Investment Appraisal

Compares the aggregated benefits and dis-benefits to the project costs (based on bottom-up estimations) and ongoing incremental operations and maintenance costs. The objective is to be able to define the value of a project as an investment. The investment appraisal should address how the project will be funded. This is the place where the business finds the future benefits (and the dis-benefits). Clear links to stakeholders could dramatically increase the project acceptance’s opportunities.

This is the financial core of the document. These are the tools that are fed with the input supplied by Assumptions

IRR: Internal Rate Return
NPV:Net Present Value
C.F.:Cash Flow
Break Even Analysis:Break Even Analysis

Major Risks

This section should be composed by two elements: (A summary of the key risks associated with the project together with the likely impact and plans should they occur - the entire site is dedicated to the Risk Management). Establishing clear guidelines for setting a proper strategy. In essence, the attitude toward risks has to be made clear in order to encourage every stakeholder to collaborate also in this area.

• Will use new or emerging technology.

• Will require a new work process.

• Are intended for a new customer or unproven market.

• Will impact numerous departments or organizations.

• Are highly critical to the success of the business.

• Are a known high risk from specific sources (more or less already identified).

• Avoid over-allocating limited skilled resources.

• Any coordination with other active projects.