Tuesday, January 24, 2012

Cost justification is vital

You should almost never do a business project just because it feels like a good idea. The most successful projects come with a cost justification that's going to deliver benefits as near-certain as possible.

Colleagues have just taken a paper-based process and turned it into an electronic form, almost an 'app,' that runs on iPad, iPhone and Android phone and tablet computers ... It is estimated to save £20k

So, how do we calculate this?
  • Sixteen users are each saving about half an hour per week; that's one full eight hour day
  • Assuming that it costs about £50 per hour to employ someone (not just salary, but space and utilities and other support costs) ... That's about £400 per week
  • At fifty weeks in a year you've found a saving of around £20,000
This £20k saving is achieved with a software project that, in this case, was £5k. That number is going to change depending on the size and scope of the project, but here was to take a suite of paper processes. 
So, the client has got a really fast payback that justifies the project in a matter of months; and it only took a few weeks to implement. And it compares very well indeed to the cost of developing a custom application on a mobile device, such as Aviva's experience of spending £30k on an application to run on BlackBerry PlayBooks!
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