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Rapid Economic Justification (REJ)

An introduction to the Microsoft® REJ™

Framework

REJ light, come dimostrare il valore

di business degli investimenti IT
Gennaio 2003
I L V A L O R E D I B U S I N E S S D E L L’ I T

INDICE

RAPID ECONOMIC JUSTIFICATION (REJ)

An introduction to the Microsoft®
REJ™ Framework 3

REJ light, come dimostrare il valore

di business degli investimenti IT 7
MICROSOFT
ENTERPRISE CLUB
AN INTRODUCTION TO THE MICROSOFT® What is Rapid Economic Justification?
REJ™ FRAMEWORK
Rapid Economic Justification (REJ) is a framework to help IT professionals
Introduction analyze and optimize the economic performance of IT investments, and
appropriate optimal resources and capital for IT projects. The core
IT investments are becoming larger and more strategic to most premise of this framework is that it is “business centric” and drives
organizations. As a result, CFOs and CEOs are increasingly demanding to align business priorities and IT investments. The focus is on business
quantifiable benefits to the business from these investments. Company improvement, which may include operational efficiency as an important
executives want to know the business impact of investments element, but not the primary focus. In a collaborative process, REJ
in IT infrastructure in relation to investments in other strategic parts of the enables both business and IT stakeholders to understand how technology
business, such as R&D, manufacturing, sales and marketing. Some capabilities can improve the metrics that define success for the business.
companies are even requiring IT investments be mapped to shareholder
value. Bottom line: IT Managers today must be able to show their CIO
or CFO in hard numbers what kind of a return they can expect on their V
IT investment. But determining the bottom line when it comes to
BUSINESS FI
T CO
ST FINANCIAL
A
NE
IT investments isn't always an easy thing to do. ASSESSMENT SOLUTION
BE
RISK METRICS
L
Traditionally, companies evaluate IT investments on the basis of cost
improvements, primarily within IT. Methodologies tend to focus on Total
U
Cost of Ownership (TCO) and the strategic role of IT driving new E
opportunities for the business is largely ignored. In this light, IT's benefits
to the business can be difficult to quantify, and as a result are often left
out of the business case. But though traditional accounting methods Figure 1: REJ Steps - The REJ process consists of five individual steps, resulting in new optimization
make it awkward to absolutely quantify IT's value, that doesn't mean the opportunities for your IT project. Each step focuses on a specific dimension of the economic analysis.
issue of IT's value should be ignored.
This has created a need for a more refined approach to IT investment - an REJ work starts with the understanding the business and ends with the
evaluation framework that can identify and quantify the payoffs from metrics. Each step is articulated in the language of the business,
IT across functions, departments and value chain over a period of time. so business executives clearly understand the tangible impact of the
The economic justification of IT projects has been researched extensively IT initiatives and gain a greater understanding and appreciation for the
in the past decade. While the models and techniques developed through strategic implications of IT investment. This method is faster and more
this research provide a high degree of precision and mathematical flexible than traditional methods, and produces just enough data to avoid
certainty, they require extensive data and time to prepare. Our research the analysis paralysis that can often occur in developing a business case.
shows that IT managers need a new, pragmatic, and quick approach
to understanding and quantifying the value of IT investments. How is the Rapid Economic Justification
Framework Used?

The REJ Framework follows five logical steps represented below to derive
the business value.

Step 1: Understand the Business

Value, like beauty, is "in the eye of the beholder," which is why the
business and IT team members need a clear map to achieve a common
perspective of what really drives the business and its investments. The
Business Assessment Roadmap, shown below, identifies the key
stakeholders, their critical success factors (CSF), the strategy to achieve
them, and the key performance indicators (KPI) that determine success.
Business Assessment Roadmap
Stakeholders CSF Strategy KPI Current Desired Process Owners
CEO
CFO7VP
CIO
IT stuff
Resellers
Suppliers

Figure 2: Business Assessment Roadmap

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Step 2: Understand the Solutions
Next, the project team will work with the owners of the key business
processes using flow charts, fishbone graphs, and process analysis
to identify ways of applying technology solutions to increase alignment
with the organization's critical success factors.

Step 3: Understand the Benefit/Cost Equation

The benefit calculation in REJ goes beyond just an itemized list of benefits
for the IT budget owners, traditionally found under the Total Cost
of Ownership (TCO) umbrella. Benefits can be expressed in many ways,
but they often fail to communicate in the language used by the business
decision makers.
In order to communicate effectively, the team uses tools and best
practices that take the process from planning to implementation analysis
to establishing metrics, where BDMs can evaluate the IT scenarios
in terms of business value.

Step Scope Approach

Analyze Use well-known functional categories that give Automation, disintermediation, or from the book "Information Economics:"
credibility to the analysis. An example would be use Value Acceleration, Value Restructuring, Value Linkage, or TCO Savings.
of a work breakdown structure (WBS) diagram
to represent a process.

Profile Identify all of the benefits associated with a project, REJ Benefit Matrix
not just the 2-3 most obvious benefits. This can
be derived from the analysis in the previous step.

Quantify The common and unifying language for IT and non-IT Model and project data from best practices examples using techniques
management is money. like Expected Monetary Value (EMV)

Table 1: Profiling Benefit

For example, an IT manager analyzes a Microsoft® Office 2000 upgrade

and determines that the improved reliability and functionality for the
company's employees will result in a 10% cost reduction in system
management and support.
In the next step, the IT manager looks beyond IT impact and profiles which
business tasks, functions, and processes can be improved using this
technology. This will often involve a close investigation of how the
technology is used in different departments across a company and
determining how the new functionality will impact these business
practices.

REJ Benefit Matrix

Value Creation - IT Value Creation - Business

IT Application Process in the

Function
Operations Development Value Chain

Increase or $$$
Protection of revenue

Reduction and
$$$$
avoldeance future costs

Figure 3: Benefit Matrix

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The Microsoft® Windows and Office 2000 upgrade will, for example, help
the sales force more effectively communicate with customers and improve
collaboration internally, which should help reach next quarter's sales
goals. The same upgrade will also help the Human Resources department
manage and share documents better, which will improve the turnaround
time for making new hires. The same IT solution implemented in different
situations creates very distinct returns on the company's investment that
are only discovered through a careful inventory of company business
processes.
Finally, the team will quantify benefits using tools such as Expected
Monetary Value, Real Option Theory, Five Steps to Productivity, etc. In our
scenario, using the web collaboration features of Microsoft Office 2000,
the sales department will be able to complete 20% more proposals with
the same staff. This means x% more revenue and y% larger market share,
resulting in a value chain reduction of the cost–of–items sold by z%.
Benefits may be expressed in many ways, but the key is to express them
in terms that match the needs of the business, and evaluate the total cost
to achieve those benefits. REJ provides the modeling tools that leverage
rich industry databases from the Gartner Group, CNI, IDC, BRG, and
others to optimize the cost/benefit analysis.

Step 4: Understand the Risks

Many IT projects successfully build an economic justification identifying High
benefits and costs, but then fail to live up to the expectations of senior Impact
management or stakeholders. Accurately profiling potential risks of an IT
investment can help avoid pitfalls by identifying various forms of risk,
developing risk mitigation solutions, and adjusting the estimates
of benefits and costs accordingly. Low
The various categories of risks are profiled for their probability and impact Impact
using a matrix. This provides a visual representation of the risks
associated with the project and the ability to perform sensitivity analysis
and develop the necessary risk mitigation plans to optimize the economic
impact.
Unlikely Likely
Step 5: Understand the Financial Metrics
Finally, the team projects the impact of the proposed IT investment Figure 4: Risk Profiling
in financial terms (such as IRR, NPV, and payback period) used by a
specific company to present the business case for any investment.

Summary

The Rapid Economic Justification framework builds a bridge of common

language between IT and business executives to demonstrate how
investments in IT benefit the business. This framework ensures that the IT
projects are aligned with the specific business strategies and priorities;
and that all stakeholders (business and IT) are committed to both the
process and the final results.

For more information

For additional information about the Microsoft Rapid Economic
Justification offering, please contact your local Microsoft office or your
authorized Microsoft Solution Provider. Please also refer to
http://www.microsoft.com/value, or email: value@microsoft.com.
© 2003 Microsoft Corporation. All rights reserved.
This document is for informational purposes only. MICROSOFT MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, IN THIS DOCUMENT.
Microsoft and Windows are registered trademarks and Visual Basic is a trademark of
Microsoft Corporation.

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 REJ LIGHT, COME DIMOSTRARE IL VALORE
DI BUSINESS DEGLI INVESTIMENTI IT
Scenario

Gli investimenti in tecnologie IT stanno diventando sempre più importanti

e strategici per la maggior parte delle organizzazioni. Diventa dunque
un bisogno importante per i CEO e CFO poter quantificare i benefici che
derivano da tali investimenti. I dirigenti di azienda sono interessati
a conoscere l’impatto sul business degli investimenti in IT rispetto
a investimenti in altre aree di attività quali, per esempio, ricerca e sviluppo,
vendite, marketing e produzione. Alcune società richiedono anche che gli
investimenti in IT siano posti in relazione al valore che il titolo stesso può
assumere. Oggi i CIO devono quindi poter mostrare ai loro CEO e CFO che
tipo di ritorno economico può derivare da tali investimenti.

Rapid Economic Justification

La giustificazione economica dei progetti di IT è stata oggetto di un’estesa

campagna di ricerca nell’ultimo decennio. Se da un lato i modelli
e le tecniche sviluppate in seguito a questa ricerca forniscono un alto
livello di precisione in termini quantitativi, dall’altro richiedono una grande
quantità di dati e tempo per la loro preparazione. I responsabili IT, tuttavia,
hanno bisogno di uno strumento che consenta loro di comprendere nel più
breve tempo possibile il valore di un investimento in IT. In quest’ottica si
rende quindi necessaria una metodologia “rapida” di valutazione
economica, che possa trovare impiego e fornire risultati attendibili nella
maggior parte delle situazioni. Con Rapid Economic Justification
(“giustificazione economica rapida”) o REJ, si intende un modello
di riferimento in grado di aiutare i professionisti del settore IT a valutare
i rendimenti economici degli investimenti in IT, a supporto del processo
di definizione degli stanziamenti di risorse e capitali in progetti
infrastrutturali e/o applicativi.

Il modello REJ
Il processo REJ si articola nei seguenti passi successivi:

BENEFIT
BUSINESS
ASSESSMENT SOLUTION
COST
FINANCIAL
METRICS VALUE
RISK

Step 1: Analisi del business

In questa fase vengono descritti gli obiettivi aziendali che si vogliono
perseguire e si identificano i parametri di valutazione degli stessi.

Step 2: Analisi della soluzione

In collaborazione con i responsabili dei processi aziendali identificati,
vengono ricercate le soluzioni IT da adottare. Avvalendosi dei più
opportuni strumenti vengono analizzati gli effetti dell’applicazione delle
soluzioni tecnologiche per ottimizzare l’allineamento dei processi con
i fattori critici di successo dell’organizzazione.
www.microsoft.com/italy/business/value_services/

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Step 3: Determinazione dell’equazione costi/benefici
Con riferimento alle iniziative di business, l’analisi REJ ha l’obiettivo
di analizzare, identificare e quantificare i benefici indotti dalle iniziative
d’evoluzione IT, per confrontarli con i costi relativi da sostenere.

Step 4: Valutazione dei parametri finanziari

Il gruppo di lavoro valuta quindi (qualora possibile e compatibile con gli
obiettivi dell’analisi svolta) l’impatto dell’iniziativa IT in termini finanziari
sul bilancio d’esercizio, espresso in utili per azione (EPS, Earning per
Share) e valore aggiunto economico (EVA, Economic Value Added)
marginali.

Step 5: Valutazione dei rischi

Lo scopo di questa fase è facilitare l’identificazione delle varie forme
di rischio, lo sviluppo di soluzioni per la riduzione dei rischi individuati
e il conseguente adeguamento delle stime relative ai benefici e ai costi.

Servizio “REJ Light”

REJ non solo costituisce un mezzo di comunicazione tra gli specialisti

IT e i manager del business, ma consente di dimostrare come gli
investimenti in IT creino valore per l’impresa. Il modello REJ assicura che
i progetti IT siano in sincronia con le priorità e con le specifiche strategie
del business e anche che tutti gli operatori (business e IT) siano impegnati
nei confronti dei risultati finali.
Poiché il modello completo di analisi comporta un certo impegno di tempo
e risorse del cliente affiché possano essere mappati tutti gli investimenti
in IT, proponiamo qui una versione “light” del servizio, che possa con
egual esaustività fornire l’analisi del ROI associato a un singolo scenario
identificato dal cliente.
Questo servizio è offerto da Senior Consultant specializzati di Microsoft
Services e ha la durata complessiva di 7 giorni. Il Senior Consultant
svolgerà l’attività per una parte in back office (3 giorni) e per una parte
on site con la collaborazione del cliente (4 giorni).
Come risultato finale sarà prodotto un report con analisi del ROI associato
allo scenario analizzato.
Gli elementi essenziali del report saranno:
• il business assessment con descrizione degli obiettivi aziendali;
• l’analisi della soluzione;
• la valutazione dei parametri finanziari;
• la valutazione dei rischi;
• la determinazione dei costi e benefici.

© 2003 Microsoft. Tutti i diritti riservati.

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