Business Case and Cost estimation
20 important questions on Business Case and Cost estimation
What is the definition of a business case?
What are the attributes of a good business case?
- Details all possible impacts, costs, and benefits
- Helps to compare alternatives
- Objectively includes all pertinent information
- Systematic in terms of summarizing findings
What is the stepwise approach for a business case?
- Define Measurable Organizational Value (MOV)?
- Form a cross-functional business case team
- Identify alternatives (including non-IT solutions)
- Define feasibility and assess risk
- Define total cost of ownership
- Compare alternatives
- Propose and support the recommendation
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What are the steps to formulate a MOV?
- Identify desired area of impact
- Identify desired organizational value (better, faster, cheaper, do more)
- Develop appropriate metric (money, % change, numeric values)
- Set a time frame for achieving the MOV
- Verify and get agreement from project stakeholders
- Summarize MOV clearly and concisely
What are important aspects of a cross-functional business case team?
- Credibility
- Alignment with organizational goals
- Access to real costs
What are advantages of a cross-functional business case team?
- Ownership, support
- Agreement
- Bridgebuilding
What are some examples of alternatives for step 3?
- Option 0. Do nothing
- Option 1. Cautious approach
- Option 2. Bold approach
In step 4, we define the feasibility. Which elements does feasibility have?
- Economic: business case, budget
- Technical (including availability of data): interoperability, maintainability, complexity
- Organization, social: support, expertise, HR
- Other (legal, logistics, planning, … )
In step 4, we asses the risk. Explain
- Identification
- Assessment: often H, M, L
- Response
We used to estimate risks in terms of likelihood and impact. Likelihood is a probability between 0 and 1. Impact is usually expressed in terms of money value, the cost for repairing the risk. Usually risk management methods have several phases in it, identify, assessment, and response
In step 5, we define total cost of ownership. Which types of costs are there?
- Direct or up-front costs — purchase price of hardware, software, and telecommunications equipment, all development or installation costs, outside consultant fees, etc.
- Ongoing costs — Support, salaries, training, upgrades, supplies, maintenance, etc.
- Indirect costs — Initial loss of productivity, time lost by users when system is down, cost of auditing, quality assurance, and post implementation reviews.
In step 6, we define total benefits of ownership. Which types of benefits are there?
- Increasing high-value work. -– value-added (see Lean)
- Improving accuracy — reducing errors, duplication, rework
- Improving efficiency –- reducing effort, duration or number of steps
- Improving decision making— providing timely and accurate information.
- Improving customer service— new products or services, faster or more reliable service, …
Which two methods are common for organizations to decide on their IST investments according tot the paper of Bacon (1992)?
- Net present value (NPV)
- Internal rate of return (IRR)
What is the difference between cost and price?
What different kinds of scope are there?
- Scope grope: inability to define the project’s scope
- Scope creep: tendency to increase features
- Scope leap: fundamental change in project scope
Which types of cost estimation techniques are there?
- Guesstimating: guessing based on estimates
- estimates often unreliable (underestimate, buffers)
- Delphi technique: multiple experts arrive at consensus (G DSS) - group decision support system
- Time boxing: focus on only the most important features
- Top-down estimating: how long it should take, should costs ….
- Bottom-up estimating: based on experience of PM and teams
- Planning Poker: reliable estimates; support; collaboration
Which types of software metrics are there?
- LOC: lines of code: you need proper code, can compare it to previous projects. On the basis of that you can convert the lines of code into a time-estimate and therefore into a salary estimate.
- Function Points: amount of functionality (based on requirements)
Explain the difference between complex and complicated
What is the criticism on FP?
- Not universally applicable e.g. real-time software
- Algorithmic metrics
- Difficult to interpret
- Not based on proper ‘theory’
- Reasons for weight are not transparent
- Largely manual process
- Research on tools that automatically derive FP, from formal specification.
Why not use machine learning, for establishing a historical analogy?
What are 'Story Points'?
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