BVPS Partner Training Business Case

2. Agenda Introduction to business case Elements of the business case Communicating benefits Communicating costs Sensitivity analysis Summary

3. Workshop Sequence Chart

4. Intro Business Case Objectives Communicate value of the future state process design and solutions to senior Business Decision Makers Communicate both the financial benefits and costs associated with the implementation of the proposed solution

5. Elements of the Business Case Key Message � In the following sections we will learn how to estimate the numbers to build a business case spreadsheet Slide Script � This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none Key Message � In the following sections we will learn how to estimate the numbers to build a business case spreadsheet Slide Script � This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none

6. Developing the Business Case Process Map ? Key Message � Mapping processes is the foundation for measuring business and financial benefits Slide Script - Process mapping can potentially be the broadest task � several processes may need to be included to accurately measure work or cycle time. Work & Cycle time improvements are part of the cost/benefit equation, which is even further clarified into three standard key financial metrics (IRR, NPV, Payback) Additionally, successfully completing each step will lead to the next step, and the better process data collected, the better your work and cycle time measures, and the better cost/benefits measures, and so on. Additional information for presenter Note that other metrics are out there � ROI is a popular one but there are too many interpretations � but by focusing on these three you can always perform apples-to-apples comparisons and can defend yourself against accusations of flaky data. Documentation Current Future Change/difference Key Message � Mapping processes is the foundation for measuring business and financial benefits Slide Script - Process mapping can potentially be the broadest task � several processes may need to be included to accurately measure work or cycle time. Work & Cycle time improvements are part of the cost/benefit equation, which is even further clarified into three standard key financial metrics (IRR, NPV, Payback) Additionally, successfully completing each step will lead to the next step, and the better process data collected, the better your work and cycle time measures, and the better cost/benefits measures, and so on. Additional information for presenter Note that other metrics are out there � ROI is a popular one but there are too many interpretations � but by focusing on these three you can always perform apples-to-apples comparisons and can defend yourself against accusations of flaky data. Documentation Current Future Change/difference

7. The Benefit Line Key Message � Understand how the numbers come together Slide Script � This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none Key Message � Understand how the numbers come together Slide Script � This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none

8. Value Equations Examples Key Message � Provide examples of Key Performance Indicators to help the audience brainstorm some of their own. Slide Script - Lets review two business value equations for productivity before we do some individual work. Additional information for presenter Work on Handout for the next 30 minutes. In this exercise you will develop the cycle time benefit equation. KPIs often have standard, simple equations: Such as Utilization, Close Rate, Error Reduction Equations can be a mix of known variables and estimates of unknown variables Have customer make estimates of variables that are not currently measured If you can get cycle time & work time from the customer, you can estimate and extrapolate other KPI variables and present for discussion Use sales guide Example If you have sufficient time. Discuss what Productivity means. How it can differ by client. Stress important of not double counting. Hand out IIc Key Message � Provide examples of Key Performance Indicators to help the audience brainstorm some of their own. Slide Script - Lets review two business value equations for productivity before we do some individual work. Additional information for presenter Work on Handout for the next 30 minutes. In this exercise you will develop the cycle time benefit equation. KPIs often have standard, simple equations: Such as Utilization, Close Rate, Error Reduction Equations can be a mix of known variables and estimates of unknown variables Have customer make estimates of variables that are not currently measured If you can get cycle time & work time from the customer, you can estimate and extrapolate other KPI variables and present for discussion Use sales guide Example If you have sufficient time. Discuss what Productivity means. How it can differ by client. Stress important of not double counting. Hand out IIc

9. Business Process Value Modeling: Best Practices Study one process at a time Prerequisite: Work directly with the end user Physically map business process metrics to get buy-in for process change Business managers are the source for pains and benefit equation variables Pain/KPI discussion drives business value versus productivity Keep equations simple Estimate process change metrics and then present them for approval if you can�t get the numbers you need Get buy-in to defend numbers before presenting Key Message � Don�t try to do too much, and keep communication open and constant with your customer. Slide Script - Let�s summarize the key lessons learned for you to perform a successful sales engagement using business value evidence Additional information for presenter Limit Number of Processes Targeted by Study: Limit analysis to one process at a time (e.g. one business group and not the whole company). Understand that large #s of users become productivity surveys. Why? because over 10,000 employees, you will have tremendous variation in function and activity. The only common metric will be productivity Insist that IT contacts put you in touch with end-users or the work might not be worthwhile. It is essential to get ground-level process information from users. Second-hand estimates of potential process changes are more difficult to defend to company management Use business managers to provide high-level KPI information as well as review and approve model. White boarding and creating flow charts of the business process (before and after the proposed solution) can help users understand how the process will change and estimate the value. Many times, getting the target customer to commit to a business value study is the hardest part of the engagement. Typical barriers include: Already made decision to buy IT does not have strong relationships with business management Afraid of time commitments for them and their staff Not sufficiently convinced of solution�s value Concerned with privacy and IP issues Key Message � Don�t try to do too much, and keep communication open and constant with your customer. Slide Script - Let�s summarize the key lessons learned for you to perform a successful sales engagement using business value evidence Additional information for presenter Limit Number of Processes Targeted by Study: Limit analysis to one process at a time (e.g. one business group and not the whole company). Understand that large #s of users become productivity surveys. Why? because over 10,000 employees, you will have tremendous variation in function and activity. The only common metric will be productivity Insist that IT contacts put you in touch with end-users or the work might not be worthwhile. It is essential to get ground-level process information from users. Second-hand estimates of potential process changes are more difficult to defend to company management Use business managers to provide high-level KPI information as well as review and approve model. White boarding and creating flow charts of the business process (before and after the proposed solution) can help users understand how the process will change and estimate the value. Many times, getting the target customer to commit to a business value study is the hardest part of the engagement. Typical barriers include: Already made decision to buy IT does not have strong relationships with business management Afraid of time commitments for them and their staff Not sufficiently convinced of solution�s value Concerned with privacy and IP issues

10. The Cost Line Key Message � Understand how the numbers come together Slide Script � This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none Key Message � Understand how the numbers come together Slide Script � This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none

11. Common Costs Elements Key Message � Correctly analyzing costs requires input from customers and partners but many of the cost buckets are the same for Server and Client solutions. Slide Script �This table shows many of the common cost elements which we are going to discus in further detail � cost element, likely source of that cost information, and whether the cost is associated with a desktop or server solution, or both. For example: Software costs for Microsoft software are best obtained from the MS Account Manager, since there are often customer-specific pricing agreements in place, and this cost type applies to both server and/or desktop solutions. Equally important to knowing which costs to consider, is where you will find the costs. As this shows, only the cost of the software assuming a 100% MS solution can be estimated with little customer or partner interaction. However, for all other costs, which happen to comprise the majority (80%) of the total solution costs, you will be required to work closely with the customer and partner to understand and analyze what it will cost their business. Additional information for presenter -- none Key Message � Correctly analyzing costs requires input from customers and partners but many of the cost buckets are the same for Server and Client solutions. Slide Script �This table shows many of the common cost elements which we are going to discus in further detail � cost element, likely source of that cost information, and whether the cost is associated with a desktop or server solution, or both. For example: Software costs for Microsoft software are best obtained from the MS Account Manager, since there are often customer-specific pricing agreements in place, and this cost type applies to both server and/or desktop solutions. Equally important to knowing which costs to consider, is where you will find the costs. As this shows, only the cost of the software assuming a 100% MS solution can be estimated with little customer or partner interaction. However, for all other costs, which happen to comprise the majority (80%) of the total solution costs, you will be required to work closely with the customer and partner to understand and analyze what it will cost their business. Additional information for presenter -- none

12. Cost Analysis: Best Practices Group costs into buckets For example, desktop and server solutions usually have different cost buckets The key to effective costing is identifying the time spent on each activity Recognize costs that should not be included in analysis Costs that would be incurred anyway e.g.., normal hardware refresh Costs not directly related to the project e.g., additional system changes Costs already incurred (sunk costs) e.g., operating system upgrades already completed Be sure to include all components Always perform �what-if� analysis Like benefits, get buy-in to defend numbers before presenting business value�study Key Message � Many of the elements of cost are the same, but specific areas of attention must be paid to two different types of solutions Slide Script � We have broken out the two types of solutions consistent with how Microsoft is approaching cost. We are going to discuss the activities, hardware and software costs that compose the balance of cost as well as soft costs like lost productivity. How a customer�s IT operations is set up to deploy for the desktop or the particular nuances of a solution have a tremendous effect on the cost to acquire and operate technology. As such, there are few benchmarks regarding costs. The best strategy is to identify best practices as well as many of the cost bucket to ensure that a conservative estimate is put forth to the client. We will touch on areas which a generally easy to determine as well as spend time with cost areas that are more difficult to analyze. Additional information for presenter - none Key Message � Many of the elements of cost are the same, but specific areas of attention must be paid to two different types of solutions Slide Script � We have broken out the two types of solutions consistent with how Microsoft is approaching cost. We are going to discuss the activities, hardware and software costs that compose the balance of cost as well as soft costs like lost productivity. How a customer�s IT operations is set up to deploy for the desktop or the particular nuances of a solution have a tremendous effect on the cost to acquire and operate technology. As such, there are few benchmarks regarding costs. The best strategy is to identify best practices as well as many of the cost bucket to ensure that a conservative estimate is put forth to the client. We will touch on areas which a generally easy to determine as well as spend time with cost areas that are more difficult to analyze. Additional information for presenter - none

13. Pulling Financial Metrics Together Key Message � Understand how the numbers come together Slide Script � Many of you have seen a presentation like this in a financial model or other tool. This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none Key Message � Understand how the numbers come together Slide Script � Many of you have seen a presentation like this in a financial model or other tool. This is where all of your numbers work comes together. Year 0 costs, or the initial costs of the investment. Ongoing costs, maintenance, support etc. Let�s talk about one-time and ongoing benefits: One-time benefits are those that will occur only once. Examples of these include reduction in accounts receivables, Inventory and the like. If you increase the collection speed of receivables, you assume that the speed stays the same in the future and the benefit is only realized once (as that extra bump you get when the newly-instituted faster receivables overlap with the outgoing-process old receivables). Most productivity and efficiency benefits are on-going. If you lower the cost of customer acquisition, this benefit is realized each and every time you land a customer. Additional information for presenter - none

14. Key Metrics By Stakeholder Key Message � Metrics vary and must fit the concerns of the owner. Slide Script � Financial analysis is the language of the people who review and approve capital budgets. CFOs and some BDMs may be responsible for return on capital investment. IT (and thus the CIO) is often looking only at TCO. They are a service and must deliver their service at the lowest price. Knowing the metrics that are important to the discussion maker, as well as others who may have the ability to influence the buying decision is key. Discussing and evaluating IT like other strategic assets is the first step in making IT a strategic asset! Key Message � Metrics vary and must fit the concerns of the owner. Slide Script � Financial analysis is the language of the people who review and approve capital budgets. CFOs and some BDMs may be responsible for return on capital investment. IT (and thus the CIO) is often looking only at TCO. They are a service and must deliver their service at the lowest price. Knowing the metrics that are important to the discussion maker, as well as others who may have the ability to influence the buying decision is key. Discussing and evaluating IT like other strategic assets is the first step in making IT a strategic asset!

15. Sensitivity Analysis � Illustrates the sensitivity of model results to model assumptions Assumptions: Hurdle Rate, Adoption Rate, Rate of KPI Improvements, Deployment Cost Estimates Outputs: Payoff period, NPV, ROI Risk Analysis/Sensitivity Analysis Sensitivity analysis allows an analyst to understand how changing variables will affect project returns Positive project return given a range of potential costs and benefits will ease customers fears that an analysis is over aggressive Common risks for IT projects Cost overruns Lack of benefit realization Key Message � Risk is a aspect of all project analyses. Proper risk analysis provides comfort that results are in a reasonable range Slide Script � The risk that project might not go as planned is real. We all know of deployments that have failed in terms or cost overruns or failed to achieve the benefits desired. The larger the project, the more acute the customer�s sensitivity to risk may be. Project failure might cost the manager their job. It is critical to identify and quantify project risks. What if the project takes two more man months to develop at $100/hr? What if application testing takes twice as long as budgeted? What is the process improvement is slightly less than expected? Every metric used to compute the financial analysis can be tested for sensitivity and exposure -- both KPIs and financial metrics. Let�s look at our exercise again and see how changing cash flows effect return. Additional information for presenter Sensitivity analysis allows an analyst to understand how changing variables will affect project returns Positive project return given a range of potential costs and benefits will ease customers fears that an analysis is over aggressive Common risks for IT projects Cost overruns Lack of benefit realization Key Message � Risk is a aspect of all project analyses. Proper risk analysis provides comfort that results are in a reasonable range Slide Script � The risk that project might not go as planned is real. We all know of deployments that have failed in terms or cost overruns or failed to achieve the benefits desired. The larger the project, the more acute the customer�s sensitivity to risk may be. Project failure might cost the manager their job. It is critical to identify and quantify project risks. What if the project takes two more man months to develop at $100/hr? What if application testing takes twice as long as budgeted? What is the process improvement is slightly less than expected? Every metric used to compute the financial analysis can be tested for sensitivity and exposure -- both KPIs and financial metrics. Let�s look at our exercise again and see how changing cash flows effect return. Additional information for presenter

16. Anticipated Process Benefits Template

17. Anticipated Financial Benefits Template

18. Anticipated Costs Template