Chapter 9
GAP ANALYSIS AND BUSINESS
CASE DEVELOPMENT
Chapter Contents
2
¾ General Framework For Business Case Development
¾ Business Analysis
¾ Objective Setting
¾ Gap Analysis
¾ The Applications Portfolio
Th A li ti P tf li
¾ Developing A Business Case Justification
GENERAL FRAMEWORK FOR BUISNESS CASE
DEVELOPMENT
3
¾ Used to justify investment in a particular system
¾ No initial Where were stage and justification replaces final
Where went wrong
Where went wrong.
GENERAL FRAMEWORK FOR BUISNESS CASE
DEVELOPMENT ‐ 2
DEVELOPMENT
4
1 W2R-Where We aRe
• Critical analysis
y of current information
systems- may include SWOT analysis- see
below.
• Definition of the information strategy
2 W32B-Where We Want
to Be
actually required to meet the business
strategy.
• Strategy to get from where IS is now to
3 (GT2)-Going To Get
There where it needs to be. Takes into account
risk of failure from previous projects.
• Provides the decision makers with the
4 Justification information they need to decide whether
to proceed with the system.
BUSINESS ANALYSIS
5
Key points:
¾ Investigate the relationships between information systems
and business performance.
db i f
¾ Similar to position audit in strategic management.
Definition
Information audit: information gathering exercise to
g g
determine what information each manager needs in order
to do their job.
BUSINESS ANALYSIS ‐ 2
6
• Managers specify the information
1 Information
needs
assessment
required to do their job. Difficult
because managers tends to focus on
information has now-not that
actually required.
• Information currently provided by
2 Information
analysis
information system recorded and
analyzed.
l d Quantity
Q i and
information checked.
d quality
li off
3
• Information provided compared to
Gap analysis information needs. Gaps identified
where information needs not
currently met.
met
GAP ANALYSIS
7
Definition:
Gap analysis: Finding the difference between where the organization
will be and where the organization would like to be.
Determine Establish what
Stage in gap
analysis objectives for will happen if no
y
system change takes place
In th efuture, try and establish difference
Develop strategies between where the organiszation will be
to close this gap with no change and where organization
would like to be.
Gap Analysis for IS Strategy
8
Types of gap:
¾ Simple gap: the current state does not meet the current
expectation level. Result of past performance.
t ti l l R lt f t f
¾ Continuous gap: the predicted state does not meet the
Continuous gap: the predicted state does not meet the
predicted expectation level.
¾ Simple gap cannot be close but continuous one can. IS
strategy therefore focuses on closing continuous gap.
Closing the Gap
9
IS strategies to close continuous gaps include:
g g p
¾ Increase performance of existing applications.
¾ Possibility of outsourcing some applications.
¾ Developing new systems.
Selection of projects
¾ Includes deciding on financial costs and benefits, and other
iintangible factors including risk of project failure.
t ibl f t i l di i k f j t f il
¾ Simple grid used to help choose appropriate projects.
Closing the Gap ‐
g p 2
10
Project risk
Project risk
LOW HIGH
Routine projects Avoid
LOW
Can be implemented Little point in
nefits
with little fear of embarking on a high
disruption or failure. risk project when
Poteential ben
Include many
Include many benefits are minimal.
benefits are minimal.
transaction processing
systems.
Identify and develop Examine carefully
“Ideal” project.
HIGH
May be undertaken,
Undertake because but because of high
returns are high with risk defer to low risk
relatively low risk
relatively low risk. projects first
projects first.
The Applications Portfolio
pp
11
McFarlan and McKenney
and McKenney strategic grid
strategic grid
¾ Identifies how much an organization depends on IT
¾ Uses Boston consulting group matrix
gg p
The applications portfolio – Peppard
¾ Development of the strategic grid
¾ Looks at strategic impact of individual application within
the organization then classifies as if they were products in
the organization, then classifies as if they were products in
the BCG matrix
The Applications Portfolio ‐
pp 2
12
Strategic impact of future information systems
g p y
LOW HIGH
ormation sysstems
S
Support Hi h P t ti l
High Potential
LOW
A applications that improve These applications are
management effectiveness innovative, and might be
but are not critical to the of future strategic
Strateggic impact off current info
b i
business. The benefits they
Th b fi h potential.
t ti l
deliver are mainly
economic.
Strategic
Key operational
Key operational
Application critical to the
These applications are
HIGH
future success of the
critical to sustain the organization.
excising business. Such
applications generally
applications generally
support core organizational
activities.
Developing a Business Case Justification
13
Developing a Business Case Justification
Developing a Business Case Justification
¾ Investment criteria of an organization must be met before a
g
project carried out
¾ Normally include some form of cost benefit analysis
ll l d f f b f l
Developing a Business Case Justification ‐ 2
14
Costs Include: Benefits Include:
• One-off capital cost Cost • Direct benefits e.g.
e.g. computer B
Benefit
fi saving in salaries
hardware Analysis from deceased
staffing.
• Ongoing running
costs e.g.
eg • Indirect benefits
consumables and e.g. better
power decisions and
• Intangible costs e.g.
Techniques Used: improved customer
service
decreased staff
morale
•Payback period
•Net present value
•Internal rate of return
Approaches to Measure Benefits
15
Approaches to measure benefits:
Approaches to measure benefits:
¾ Ignore –
g not acceptable as system never show overall
p y
benefits
¾ Quantify benefits –
f b f d ff l
difficult to guess – and may not be
d b
quantifiable until after system implementation
¾ Change the approach – best to find some non‐financial
methods of assessing benefits.
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