EUGENE HUANG UNDERSTANDS the value of money. The commonwealth of Virginia’s secretary of technology also understands that to obtain funding it’s important to show value.
So, when Virginia Governor Mark Warner took office in 2002—inheriting a $6 billion budget deficit and mandating that the commonwealth take a businesslike approach to reforming government—one of the first things on the list was to adopt a business-case approach to prioritizing projects and ensuring that the state government was pursuing a best-practice strategy.
The transition to a more formal approach to IT project oversight and management wasn’t easy. It required practical change and cultural transformation. However, Huang knew it was essential.
“Without the ability to benchmark, evaluate and document various projects and practices, we were unable to understand which initiatives made sense and which were wasteful,” he explains. “We had project management failures that totaled upward of $100 million.”
Today, the commonwealth of Virginia is flying high. With a formal business case process in place for all IT projects, 90 percent of the approved projects are on schedule, and almost all are on budget.
Moreover, Huang states, “We can quickly recognize which projects are experiencing problems and can get them back on track early on. We no longer have project failures that drain taxpayer dollars.” Equally important, the business cases allow IT to more readily manage and share expertise about initiatives. That’s helping Virginia emerge as a best-practice government organization.
“Business case.” Just saying the words can send shivers down the spine of an IT manager. Collecting piles of data, sorting through myriad options, and presenting various choices about projects to CIOs and politicians can seem overwhelming—and a huge drag on time and resources. Yet, with state and local governments spending upward of $40 billion a year on technology, many agencies are demanding clear results.
“There’s a growing effort to reduce risk in complex projects,” says Carl DeMaio, president of The Performance Institute, a Washington, D.C.-based nonpartisan think tank that aims to improve government performance.
As a result, a growing number of state and local agencies are embracing the concept. When used effectively, a business case is far more than an appropriations process or a general review of benefits and risks.
“It’s a detailed document that provides an analysis of costs, risks, rewards and outcomes,” DeMaio says. “Ultimately, it involves a breaking down of cultures and silos, an understanding of individual work units and visibility into multiyear expenditures across program lines.”
For decades, business cases have been an entrenched part of the corporate landscape. Within most organizations, it’s essential to lay out all the facts in black and white. Now, the same focus on efficiency and effectiveness is rippling through government. Already, the federal government mandates the use of business cases for IT projects, and state and local governments are paying attention. They’re turning to business cases to justify spending and provide both qualitative and quantitative analyses about projects.
A business case can create a solid foundation for decision-making, but it can’t guarantee that higher-ups will choose a particular project or that the project will ultimately succeed. Without a solid grounding in writing a business case and an understanding of what’s required to create an analysis-driven framework, a business case isn’t worth the paper it’s written on—or the hard disk space it’s stored on.
The basis of a solid business case is aligning the agency’s mission statement with the impact internally and on constituents, DeMaio says. More than anything else, a business case must focus on enterprise architecture and how the technology will deliver services to taxpayers and constituents.
Key questions include: How and why are we investing in a particular technology? How will we manage it? How do we assess risk and return? What is the life cycle cost of the project?
“It’s far more than an issue of being on time, on spec and on budget,” DeMaio points out.
That’s a concept Patrick Hale, director of technical and data center services for Michigan’s Department of Information Technology, understands. During the last two years, the state has required business plans to create greater alignment and use resources more effectively. The IT department helps the governor create a cabinet-level action plan and uses it to build a business case for each potential project that fits the plan. “We want to go into a commitment with our eyes wide open,” Hale says.
In some cases, what staffers initially consider a good idea winds up on the back burner or is tossed aside. Michigan uses a template that walks the staff through more than a dozen core criteria, including goals and objectives; whether the project is government mandated; what the business significance is (cost reduction, additional revenue collection, increased security or privacy, customer service improvement and more); the impact on citizens; funding sources; financial analysis and project costs; and intangible benefits and return on investment.
With a detailed business-case report in hand—anywhere from three to 25 pages—it’s possible to determine which projects make sense, and which cost too much and provide too few returns. After reviewing the documents, the state’s CIO and executive team decide how to focus resources within the organization.
“A business case helps IT professionals focus on the issues and communicate in the language of business,” Hale explains. “A business case forces IT and an entire organization to become more visionary.”
The result? Michigan has become more proactive. Hale says the state is operating more efficiently and political leaders report that they have access to more information and understand it better. What’s more, various departments and staff have developed a greater partnership to meet common goals. Already, the initiative has helped Michigan trim more than $100 million in costs from its budget. “We are operating more like the private sector all the time,” Hale says.
Organizations without a business case often wind up taking a chaotic approach to IT, states The Performance Institute’s DeMaio. In some cases, different branches of the same agency pay very different amounts to license software or purchase hardware, resulting in a great deal of duplication and waste.
“Too often, a department builds an entire technology system that another department has already built,” DeMaio says. With schools and police and fire departments in need of funds, many politicians don’t like to spend money on technology, but, if money is spent, they “want to see it put to strategic use,” he adds.
Virginia’s business case initiative evolved during the last few years. Today, each agency develops a justification for desired projects, and the Virginia Information Technologies agency, which provides oversight for technology in the state, evaluates and ranks initiatives numerically. At any time, 40 to 50 projects exist.
They are selected on a combination of factors, Huang says, including budget imperatives, agency preferences and politics. Since turning to the structured business-case approach, Virginia hasn’t experienced a single technology project failure.
Adopting a holistic approach is paramount. For example, Huang and other leaders in Virginia rely on a dashboard system to show the status of any given project at any moment. The system makes it easier to see when problems occur, what’s causing them and how effectively staff is hitting deliverables. “We no longer wind up with a problem that gets worse and worse until we hit the point of no return,” he says.
The biggest challenge isn’t the technical side of the equation. “It has been putting the processes in place and getting IT and others to understand the significance of using a business case approach,” Huang says. In some instances, particularly early on, Huang and other leaders had to help IT staff understand that a formal process wasn’t simply adding to the bureaucracy and draining staff time; it was ensuring that the organization uses best practices and makes sound analytical decisions.
Most agencies are equipped to handle business cases internally, but it’s often necessary for outside consultants to help establish metrics, benchmarks and processes, DeMaio says. At that point, managers and other staff need training to understand how to conduct effective analyses and build a solid business case.
“When business cases match the mission statement of an agency, it’s possible to evolve into a far more successful organization,” DeMaio says.
Here are five key ways to create a successful business case:
1. Develop a formal structure and use templates. An effective business case is more than a simple list of pros and cons. As Carl DeMaio, president of Washington, D.C.-based think tank The Performance Institute explains, “It’s far more than an issue of being on time, on spec and on budget.” It’s essential to develop worksheets, spreadsheets and applications that ensure consistency.
2. Use solid criteria to guide the development of business cases, benchmarks and metrics to gauge performance objectives. Decision-making cannot occur in a vacuum. It’s important to use benchmarks, metrics, industry standards, internal goals and other data to determine what’s important. Security, privacy and financial factors are only a few of the considerations.
3. Allow adequate time to gather data and create a report. Compiling and assembling data requires time and resources, but the up-front investment can pay enormous dividends. Depending on the scope of a project, a business case can take days or weeks to complete. Along the way, if it becomes obvious that the project is doomed, it’s wise to abandon it and move on.
4. Use the process effectively. Ideally, an agency develops business cases, compiles and ranks them, and hands them over to decision-makers and politicians to make choices. By creating links throughout the organization, an agency can streamline the process and simplify the way selections take place.
5. Provide training and address change-management issues. Staffers must learn how to collect and compile data while molding it into a useful business case. In fact, the entire mindset surrounding business cases requires different—and more entrepreneurial—thinking. Some employees will resent the up-front work and believe that it adds to the bureaucracy. “Nothing is further from the truth,” says Eugene Huang, secretary of technology for the commonwealth of Virginia.