Tuesday, 13 July 2010 09:00

The Business Case for Business Analysis

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Apologies to any economists - the real value of BA is probably way higher than I could determine in 1000 words. There is probably a multiplier just from workers watching crazy process insanity disappear from their daily lives.

To see the big picture sometimes we drill down.  I give a specific example (completely fictional of course - this is not you, so don't call please).  In this project BA 007 was asked to help introduce BA practices into a water utility's IT project practices.

The usual "fire hose" of information was sprayed on 007 for the first weeks.  As 007's intelligence base grew, one of his early questions was "How much money is currently spent on IT projects and infrastructure per year?"   The response was:  "Oh, we have that, it's around $3,000,000.00".  No documentation available, but, what the heck, eh?

So 007 continued to analyze the information he was getting, patient and secure that his question had been, or would be, answered.  As an initial business case for implementing BA for IT projects began to emerge, it became apparent that the out of pocket costs looked something like the following:

  • 12 SMEs on staff acting as BAs
  • 8 person team doing requirements for ERP enterprise project
  • 100 stakeholders engaged part time at any given time (about 10 full time equivalents)
  • 70 Contract IT personnel
  • Average IT Infrastructure investment of $3,000,000/year

Total 100 personnel out of 2700 employees @ $75K/year on average = $7,500,000/year

At this point, 007 starts to suspect that the $3,000,000 only covered total annual infrastructure costs (hardware, software, support and maintenance), and that the client was not counting payroll or overhead costs for projects (not unusual in a government environment).  Given the 35% failure rate across all water utility IT projects (we ignore those that were merely "compromised"), the "lost money" to failed projects seemed more like $2,625,000 per year, or $26,250,000 over 10 years.

The costs of BA (requirements) failure above are incomplete and incorrect - they do not include overhead like office space, supplies, PCs, office equipment and other resources wasted on failed projects (promotion of the guilty, punishment of the expert, rock bottom morale, employee turnover and more).

The cost of retraining personnel for improving the BA function at the water utility was calculated to be 20 BAs plus 20 IT personnel, Each receiving 8 weeks of training in year one, 4 weeks in year two, and two weeks per year in subsequent years.  Classes were estimated at $3500/week including travel, and salaries/benefits at $75K per year on average. 

It was also estimated that increased/improved BA activity would require twice as much involvement from stakeholders - 20 full time equivalents instead of 10. 

These costs to invest in BA came to about (40*(8+4+2+2+2+2+2+2+2+2) person weeks * ((75,000/52) +3,500) per person week)
= $5,536,385

PLUS 10 more full time equivalents @ $75K * 10 years
= $  7,500,000

TOTALING:
$ 13,036,385 

OK, those of you who do real business cases know just how flawed this is, but, as 007 likes to say, $26M - $13M gives a LOT of room for refinement.  Go ahead, add inflation to personnel costs, add in lost benefits to the "merely wasted" money, add any complexity you want - 007 defies you to show that BA investment can ever lead to a negative ROI.

Have fun, and I'd love to get your feedback! 

Don't forget to leave your comments below

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Marcos Ferrer

Marcos Ferrer, CBAP has over 20 years experience in the practice of business analysis and the application of Information Technology for process improvement. Following graduation in 1983 from the University of Chicago, Mr. Ferrer joined IBM in Chicago, where he worked on requirements and systems implementations in diverse industries. His recent projects include working requirements for the Veteran's Administration, introducing BA practices at the Washington Suburban Sanitary Commission, and creating bowling industry models for NRG Bowl LLC. In November 2006, Marcos Ferrer is one of the first CBAPs certified by the IIBA. He has served as an elected member of the DC-Metro chapter of the IIBA, most recently as President, and assisted in the writing of the BOK 2.0 test.

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