AJ Global Industries Data Center Modernization Business Caseanalysisplace.com/portals/0/docs/sample_it_project_business_case... · Overview of the IT Project ROI and Business Case

Project Business Case

Assessment created using AnalysisPlace.com IT Project ROI & Business Case Toolkit Copyright ©2012 Hall Consulting & Research LLC Page 1

AJ Global Industries

Data Center Modernization Business Case

Prepared for: AJ Global Industries Prepared by: Service Provider Date Prepared: February 6, 2012 Disclaimer This document is for informational purposes only. HCR, partners, and suppliers MAKE NO WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, AS TO THE INFORMATION IN THIS DOCUMENT. Complying with all applicable copyright laws is the responsibility of the user. HCR may have patents, patent applications, trademarks, copyrights, or other intellectual property rights covering subject matter in this document. Except as expressly provided in any written license agreement from HCR, the furnishing of this document does not give you any license to these patents, trademarks, copyrights, or other intellectual property. All derivative works must maintain copyright and other appropriate notices. © 2011 AnalysisPlace and Hall Consulting & Research LLC (HCR). All rights reserved.



Executive Summary This report contains a summary of the results of an assessment conducted using the “IT Project ROI and Business Case Toolkit”.

Based on inputs specifically about the organization’s environment, the table and charts below summarize key results, including

project costs, benefits, ROI, NPV, IRR, and payback period. The results are shown "per user" average and the total for the

organization.

$580

$3,272

$-

$1,000

$2,000

$3,000

$4,000

Costs Benefits

Co

sts

& B

en

efi

ts (

pe

r U

ser)

Total Costs Vs Benefits(per User)

Dep

loy

Sta

rt

Ben

efit

s St

art

Pa

yba

ck

-1000

-500

0

500

1000

1500

2000

2500

3000

2012 2013 2014 2015 2016

Cu

mu

lati

ve C

ash

Flo

w (

pe

r U

ser)

Year

Cumulative Cash FlowDeploy Start Deployment Benefits Start Payback

Financial Analysis Summary

Per User Organization Total (000)

Costs $ 580 $ 1,115 Benefits $ 3,272 $ 6,294 Net Benefits $ 2,693 $ 5,179 NPV (Net Present Value) $ 2,099 $ 4,037 ROI 465%

IRR (Internal Rate of Return) 194%

Payback Period (Months)** 6

Number of Users 1923

*Return on Investment - [Net Benefits / Total Costs] **From when benefits start to accrue

The tool also estimates current and projected KPI performance levels before and after the solution is implemented. This is

summarized in the chart below:

50%

30%

50%

30%

50%

30%

50%55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sales/MarketingPerformance

BusinessManagement

Effectiveness

Supply/OperationsPerformance

TechnologyEffectiveness

Pe

rfo

rman

ce P

erc

en

tile

KPI Performance Comparison As-Is

To-BeWorldClass

Laggard



Overview of the IT Project ROI and Business Case Toolkit The IT Project ROI and Business Case Toolkit enables rapid development of comprehensive business cases for IT projects. It helps

organizations to assess, quantify, and communicate the costs, benefits, business value, and ROI of most types of enterprise-scale

technology-based initiatives. It also helps to assess the organization’s current (as-is) and expected (to-be) IT spending (TCO) levels

and the solution’s impact on a variety of key performance indicators (KPIs). It produces high quality, customized, and editable

business case reports that can be presented to decision-makers.

The model simulates "To-Be" capability adoption based on initiatives selected by the model user. The model estimates

The tool estimates the costs required to implement the new capabilities/solution, including hardware, software, IT labor, services,

and user labor. It simulates benefits (user productivity, IT TCO savings, business cost savings, revenue growth, and KPI

improvements) enabled by the solutions selected.

It supports both rapid (30 minute) and highly detailed assessments. The tool uses robust industry best-practice methods and

extensive research to assist the organization in rapidly assessing the costs and benefits of investing in the IT initiative. However, this

tool cannot accurately/credibly estimate costs/benefits without review, validation, and adjustment of key data inputs. These inputs

should be customized to each particular organization and scenario.

The toolkit is powered by (hosted on) the AnalysisPlace.com platform and was developed by Hall Consulting & Research LLC

(http://hallcr.com).

Figure 1 IT Project ROI and Business Case Toolkit Components Diagram



AnalysisPlace Overview AnalysisPlace.com develops and hosts “managed” Excel -based business and technology

applications to improve decision-making and to articulate the business value (ROI) of

products and services.

A variety of models/tools benefit from being hosted on the platform, including: value-based sales tools, decision-making tools,

ROI/TCO calculators, maturity models, proposal generators, business process simulators, etc.

There are many benefits to tools users as well as tool publishers:

Tool users benefit from being able to rapidly conduct credible assessments and to produce highly customized reports, such

as business cases or proposals. A few of the key features that enable these benefits include: language and currency

switching, the ability to collaborate with colleagues, and the ability to conduct assessments online or offline.

Tool authors benefit from being able to publish tools that are cost-effective to develop, easy to manage, user friendly and

highly effective at articulating the value of their products (value-based selling). A couple of the key features that enable

these benefits include: version control, the ability to control access, and usage tracking.

The AnalysisPlace platform utilizes an innovative combination of technologies to transform standard Excel spreadsheets into

managed applications. AnalysisPlace.com “Managed” tools are Excel xlsm files (compatible with Excel XP/2002, 2003, 2007 and

2010) that are downloaded and opened just like any excel file, except these converted tools have many advantages for the tool user,

as well as, for the tool author/publisher. Tool users must be registered at AnalysisPlace.com and login to the tools prior to use.

Key Features

The platform provides a full array of capabilities to enable powerful, yet flexible, tools and analysis.

For Tool Users and Decision-Makers For Tool Publishers/Administrators

Key Features Strong privacy and security protections

Very easy to use

Collaborate with coworkers or vendors

Multi-language/multi-currency

Change tracking

Online or offline flexibility

Flexible scenario analysis

Dynamic & customizable Word and PowerPoint

reports (business cases)

Protect IP

Limit access, if desired

Usage tracking

Centralized consolidation of user inputs and tool results

(privacy-dependent)

Tool version control

Easy to build and maintain tools and reports

Highly flexible Excel-based platform

Access to a potentially large tool user base

Key Benefits Enables rapid or detailed analysis

Highly credible customizable business cases can

be created quickly

Objectively evaluate, quantify and prioritize

investments

Most existing spreadsheets are very easy to convert,

upgrade, and manage

Credibly quantify and articulate product/service business

case (increasingly required by decision-makers)

Can dramatically improve sales close rates

Cost-effective (qualified vendor-neutral tools published

free)

Contact Information

Hall Consulting & Research LLC (HCR)

Pittsburgh, Pa 15243

Website: AnalysisPlace.com

Email: [email protected]

Phone: 1-412-344-5103

HCR can provide an array of cost-effective services to help design, develop, publish, and support AnalysisPlace.com tools.

http://www.analysisplace.com/

mailto:[email protected]



Current Environment The tables below show the organization profile data that was entered into the tool and used to estimate the solution costs and

benefits.

Organization Profile Below is key information about the organization.

Organization Name AJ Global Industries

Industry Manufacturing - Chemicals

Location NORTH AMERICA - United States

Employees / FTEs (in project scope) 5000

Organization Revenue (Millions) in scope $ 2,345

Number of PC Users (in scope) 1923

Total Number of PCs (in scope) 1962

Solution Selected for this Analysis The table below summarizes the extent of the organization's adoption of BI capabilities. The simulated (to-be) adoption is based on

the scope/scale of selected initiatives enabling increased capability adoption. All costs in this model are based on scope/scale of

initiatives selected. All benefits in this model are based on improvements to capability adoption - adoption of more BI capabilities

and best practices lead to improved business performance. Details are contained in the "Initiatives" worksheet.

Project Name: Data Center Modernization Assessment

Project Description:

• Virtualization, consolidation, clustering, real-time infrastructure, self-service provisioning, power and cooling • Improved performance, reliability, manageability, security • Multi-core, 64-bit, RISC/Itanium, x86

• Web servers, application servers, DBMS servers, data warehouse servers, infrastructure servers, high performance computing servers

Project Scale (Investment level)

Major (e.g. transformational)



IT Spending (TCO) Analysis TCO (Total Cost of Ownership) analysis of the IT environment is shown below. It includes an assessment of hardware, software,

internal IT personnel, external IT Services, and telecommunications and networking operating costs. It includes both current (as-is)

as well as projected (to-be) TCO after the initiative has been implemented. The TCO savings is the difference between the as-is TCO

and the to-be TCO. The to-be TCO does not include incremental costs resulting from the initiative -- these are included in "Costs".

$1,615 $1,560

$1,760 $1,714

$2,128 $2,060

$3,012 $2,929

$1,950 $1,930

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

As-Is To-Be

An

nu

al I

T Sp

en

din

g (p

er

PC

Use

r)

IT Spending (TCO) Summary

Telecom /Networking

Internal IT Staff

External ITServices

Software

Hardware

$1,615

$1,760

$3,012

$2,128

$1,950

$1,560

$1,714

$2,929

$2,060

$1,930

$- $1,000 $2,000 $3,000 $4,000

Hardware

Software

Internal IT Staff

External IT Services

Telecom / Networking

Annual IT Spending (per PC User)

IT Spending (TCO) SummaryAs-Is

To-Be

As-Is To-Be Savings % Savings

IT Spending

Total IT Spending (000) $ 20,128 $ 19,606 $ 522 2.6%

IT Spending per Employee $ 4,026 $ 3,921 $ 104 2.6%

IT Spending per PC User $ 10,465 $ 10,193 $ 271 2.6%

IT Spending as % of Operating Expenses 1.0% 1.0% 0.0% 2.6%

IT Spending as % of Revenue 0.9% 0.8% 0.0% 2.6%

IT Staffing

Total IT Personnel FTEs 46.0 44.8 1.2 2.7%

IT Personnel as % of Employees 0.9% 0.9% 0.0% 2.7%

IT Personnel as % of PC Users 2.4% 2.3% 0.1% 2.7%

Ratio of Employees to IT Personnel 108.7 111.7 3.0 2.8%

Ratio of PC Users to IT Personnel 41.8 43.0 1.2 2.8%



Cost and Benefit Summary The charts and table below summarize the costs required to implement and maintain the solution and the expected benefits

resulting from the solution.

$96

$239

$149

$96

$-

$100

$200

$300

$400

$500

$600

$700

Co

sts

(pe

r U

ser)

Initiative Cost Summary(per User)

End-User Labor &Training

IT Labor, Services, &Training

Software

Hardware $1,086

$108

$1,495

$584

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Be

ne

fits

(p

er

Use

r)

Initiative Benefit Summary(per User)

Revenue Growth

User ProductivityBenefits

Other Direct CostSavings

IT Spending/TCOSavings

Costs & Benefits (per PC) Costs & Benefits (000)

One-Time

Annual Recurring Project Total One-Time

Annual Recurring Project Total

Costs $ 400 $ 45 $ 580 $ 769 $ 87 $ 1,115

Benefits $ 29 $ 811 $ 3,272 $ 56 $ 1,560 $ 6,294

Solution Costs Below are the initial design/development/deployment and added annual on-going costs required to fully deploy, adopt and support

the initiative. Additional details can be found below and on the "Cost" worksheet.

The charts and table below summarize the costs required to implement and maintain the solution and the expected benefits

resulting from the solution

Costs (per User) Costs (000)

One-Time

Annual Recurring

Project Total One-Time


Hardware $ 60 $ 9 $ 96 $ 115 $ 17 $ 185

Software $ 124 $ 29 $ 239 $ 239 $ 55 $ 459

IT Labor, Services, & Training $ 147 $ 0 $ 149 $ 283 $ 1 $ 286

End-User Labor & Training $ 68 $ 7 $ 96 $ 131 $ 14 $ 185

Total $ 400 $ 45 $ 580 $ 769 $ 87 $ 1,115



The table/chart below provide additional cost details.

Costs (per User) Costs (000)

Cost / Benefit Category One-Time

Annual Recurring

Project Total One-Time

Annual Recurring

Project Total

Hardware

Client Hardware $ - $ - $ - $ - $ - $ -

Data Center Hardware $ 60 $ 9 $ 96 $ 115 $ 17 $ 185

Total $ 60 $ 9 $ 96 $ 115 $ 17 $ 185

Software

Client Software $ 41 $ 9 $ 79 $ 79 $ 18 $ 151

Server Software $ 83 $ 19 $ 160 $ 160 $ 37 $ 308

Total $ 124 $ 29 $ 239 $ 239 $ 55 $ 459

IT Labor, Services, & Training

One-time Implementation Labor/Services $ 79 $ - $ 79 $ 152 $ - $ 152

Annual On-Going Labor/Services $ - $ 0 $ 2 $ - $ 1 $ 3

Incremental Help Desk Calls $ 4 $ - $ 4 $ 8 $ - $ 8

IT Training $ 64 $ - $ 64 $ 123 $ - $ 123

Total $ 147 $ 0 $ 149 $ 283 $ 1 $ 286

End-User Labor & Training

End-User Labor $ 18 $ 7 $ 46 $ 34 $ 14 $ 89

End-User Training $ 50 $ - $ 50 $ 97 $ - $ 97

Total $ 68 $ 7 $ 96 $ 131 $ 14 $ 185

Total Costs $ 400 $ 45 $ 580 $ 769 $ 87 $ 1,115

Below are the initial design/development/deployment and added annual on-going costs required to fully deploy, adopt and support

the initiative. Additional details can be found below and on the "Cost" worksheet.

$-

$96

$79

$160

$79 $2 $4

$64

$46

$50

$-

$100

$200

$300

$400

$500

$600

$700

Project Total

Tota

l C

ost

s ($

pe

r P

C)

Total Implementation Costs (Per PC)

End-User Training

End-User Labor

IT Training

Incremental Help Desk Calls

Annual On-GoingLabor/ServicesOne-time ImplementationLabor/ServicesServer Software

Client Software

Data Center Hardware

Client Hardware



Solution Benefits The graph and chart below summarize the estimated benefits from the solutions selected.

Benefits (per User) Benefits (000)

Benefit Summary One-Time Annual

Recurring Project Total One-Time


IT Spending/TCO Savings $ - $ 271 $ 1,086 $ - $ 522 $ 2,089

Other Direct Cost Savings $ 29 $ 20 $ 108 $ 56 $ 38 $ 207

User Productivity Benefits $ - $ 374 $ 1,495 $ - $ 719 $ 2,876

Revenue Growth $ - $ 146 $ 584 $ - $ 281 $ 1,123

Total $ 29 $ 811 $ 3,272 $ 56 $ 1,560 $ 6,294

Benefit Sub-Categories

IT Spending/TCO Savings $ - $ 271 $ 1,086 $ - $ 522 $ 2,089

Other Direct Cost Savings

IT Savings $ 29 $ 20 $ 108 $ 56 $ 38 $ 207

Business Savings $ - $ - $ - $ - $ - $ -

Total $ 29 $ 20 $ 108 $ 56 $ 38 $ 207

User Productivity Benefits

Individual Computing $ - $ 191 $ 764 $ - $ 367 $ 1,469

Collaborative Computing $ - $ - $ - $ - $ - $ -

PC Systems Management $ - $ 183 $ 731 $ - $ 352 $ 1,406

Total $ - $ 374 $ 1,495 $ - $ 719 $ 2,876

Revenue Growth $ - $ 146 $ 584 $ - $ 281 $ 1,123

Total $ 29 $ 811 $ 3,272 $ 56 $ 1,560 $ 6,294



KPI Assessment The table/chart below provides a summary of the 4 categories of non-financial KPIs. There are 4 to 10 specific KPIs in each category.

The percentiles shown are how the organization compares to others in the industry. 0% represents worst performance in the

industry (laggard); 50% is average performance; 100% is best in the industry (world class performance). The "Improvement"

indicates how much the organization is expected to improve KPI performance due to the solution. Additional details can be found in

the "KPIs" worksheet.

Percentile

As-Is To-Be

Improve-ment

Sales/Marketing Performance 50.0% 50.0% 0.0%

Business Management Effectiveness 30.0% 30.0% 0.0%

Supply/Operations Performance 50.0% 50.0% 0.0%

Technology Effectiveness 30.0% 54.6% 24.6%

Average 40.0% 46.2% 6.2%

50%

30%

50%

30%

50%

30%

50%55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sales/MarketingPerformance

BusinessManagement

Effectiveness

Supply/OperationsPerformance

TechnologyEffectiveness

Pe

rfo

rman

ce P

erc

en

tile

KPI Performance Comparison As-Is

To-BeWorldClass

Laggard



Financial Analysis Shown below are the costs and benefits by year, the net benefits (benefits-costs), and the cumulative cash flow. This is used to

calculate payback period, IRR, and NPV.

Start Date End Date

Deployment Duration (Months) 6 4/1/2012 10/1/2012

Project Duration (Years) - not including deployment

4 10/1/2012 10/1/2016

Payback Date 4/2/2013

Payback Period (from start of benefits) 6.0 Months

Payback Period (from start of deployment) 12.0 Months

Growth Rate (of costs and benefits) 0.0%

-400 -45 -45 -45 -45

29

811 811 811 811

$(600)

$(400)

$(200)

$-

$200

$400

$600

$800

$1,000

Deploy 1 2 3 4

Cas

h F

low

(p

er

Use

r)

Time Period

Cash FlowCosts One-time Benefits On-Going Benefits

Dep

loy

Sta

rt

Ben

efit

s St

art

Pa

yba

ck

-1000

-500

0

500

1000

1500

2000

2500

3000

2012 2013 2014 2015 2016

Cu

mu

lati

ve C

ash

Flo

w (

pe

r U

ser)

Year

Cumulative Cash FlowDeploy Start Deployment Benefits Start Payback

Time Period Costs One-time Benefits

On-going Benefits Ramp-Up

On-Going Benefits

Total Benefits

Net Benefits

Cumulative Cash Flow Start Date

Deploy $ (400)

$ (400) $ (400) 4/1/2012

1 $ (45) $ 29

100% $ 811 $ 840 $ 795 $ 395 10/1/2012

2 $ (45)

100% $ 811 $ 811 $ 766 $ 1,161 10/1/2013

3 $ (45)

100% $ 811 $ 811 $ 766 $ 1,927 10/1/2014

4 $ (45)

100% $ 811 $ 811 $ 766 $ 2,693 10/1/2015

Total $ (580)

$ 3,244 $ 3,272 $ 2,693 $ 2,693

NPV (Net Present Value)

$ (545)

$ 2,617 $ 2,644 $ 2,099 $ 2,099

Next Steps

For information on AnalysisPlace's products and services view AnalysisPlace.com or call: 1-412-344-5103.

Email: [email protected]

Website: www.AnalysisPlace.com

mailto:[email protected]

http://www.analysisplace.com/



Appendices

Financial Profile

Organization Financials

Operating Margin % of Revenue 15.0%

Default value is based on industry average. This margin rate is used to calculate the business value of incremental revenue enabled by the initiative

Discount Rate / Cost of Capital (WACC) 9.2%

Used in Net Present Value calculations

Expected annual revenue growth rate 0.0%

Annual growth rate increases on-going costs and benefits in the cash flow financial analysis. Default is based on HCR analysis of ValueLine data

Project Financial Data

Duration of analysis (years) - Select from drop-down box.

4 Years

Does not include the deployment phase. A 3-year life-expectancy is standard for most IT projects. Some major initiatives may be 7+ years.

Project Start Date

Month 4

4/1/2012

Year 2012

Project implementation time (prior to realization of any benefits) - Months

6 Months

In this model, the implementation period starts when sigificant costs start to accrue and ends when benefits start to accrue (i.e. recurring costs & benefits start to accrue at the end of the implementation period). NPV calculations are based off the end of the implementation periond.

Recurring benefit realization ramp-up Year 1 100%

Year 2 100%

Year 3 100%

Determines what portion of the annual recurring steady-state benefits is actually realized. For many projects, only a portion of the steady-state benefits will actually be realized the first year (or two). View the cash flow for how this impacts outcome.

User Profile and Labor Costs User Type Mix

% of PC Users # of PC Users

Portion of PC Users that are

Information Workers (IWs) 50% 958

Portion of PC Users that are

Data-entry or Structured-Task

Workers

50% 966



Total PC-Users (# of Employees

that use PCs on a regular basis) 100% 1,923

Information Workers (Knowledge Workers) perform non-routine, cognitive, or creative work that often requires both structured and unstructured

information inputs from multiple sources -- and that is not repeated throughout the course of the work day or work week. Examples include a product

manager, analyst, accountant, engineer, sales executive, CFO, or CIO.

Data-entry and Structured Task Workers perform routine, structured tasks typically in a repeated manner. Examples include a customer service

representative, insurance claims processor, or inside sales representative.

Labor Costs

Default values are provided based on inputs above. Defaults may be adequate for rapid/ballpark assessments, but otherwise should be reviewed/modified.

Burden rate (labor overhead as

a % of cash compensation)* 32%

Standard Work Hours per Year 1,824

* Non-cash benefits (such as medical insurance and Social Security) and occupancy costs (such as office space and supplies)

Primary Site Locations - select

the closest-matching from the

drop-down box

Suburban / Mixed

Used to scale labor costs. Urban labor costs tend to be 15-20% higher than suburban locations.

Average Ann'l

Cash Comp-

ensation** Burden Rate

Burdened

Annual Labor

Cost

Burdened

Weekly Labor

Rate

Burdened Hourly

rate

IT Staff Labor Costs

Application development $ 102,776 32% $ 135,664 $ 2,609 $ 74.38

Application support $ 95,282 32% $ 125,772 $ 2,419 $ 68.95

Data center $ 99,564 32% $ 131,424 $ 2,527 $ 72.05

Desktop / Client $ 88,323 32% $ 116,586 $ 2,242 $ 63.92

Help desk $ 58,882 32% $ 77,724 $ 1,495 $ 42.61

Voice Network $ 85,646 32% $ 113,053 $ 2,174 $ 61.98

Data Network $ 89,393 32% $ 117,999 $ 2,269 $ 64.69

Management & Administration $ 122,421 32% $ 161,596 $ 3,108 $ 88.59

Average (weighted) $ 95,385 32% $ 125,909 $ 2,421 $ 69.03

Source of salary data: based on HCR analysis of Bureau of Labor Statistics data and various Salary Surveys. Salary data is scaled based on industry,

geography, and organization size.

PC User Labor Costs

IWs (Information Workers) $ 84,327 32% $ 111,312 $ 2,141 $ 61.03

Data-entry or Structured Task

Workers $ 65,764 32% $ 86,809 $ 1,669 $ 47.59

Average (weighted) $ 75,008

$ 99,010 $ 2,171 $ 54.28

** Base compensation plus bonuses

Source of salary data: based on HCR analysis of U.S. Department of Labor, Bureau of Labor Statistics data; The World Bank, World Development Indicators

Database; and Organisation for Economic Co-operation and Development. Salary data is scaled based on industry, geography, and organization size.

Documents

AJ Global Industries Data Center Modernization Business Caseanalysisplace.com/portals/0/docs/sample_it_project_business_case... · Overview of the IT Project ROI and Business Case