Identifying the Business Benefits of an IT Project

To be successful, all business projects should have a clear objective, practical implementation, and deep understanding of all the related costs and benefits of the project. While it may seem relatively simple, understanding and defining business benefits can be tricky sometimes. To break down the concept in a simple and comprehensible way, business benefits can be divided into three major types – soft benefits, hard benefits, and productivity.

Determining and measuring hard benefits

These benefits include measurable firm commitments in terms of savings or revenue. Your business manager may claim hard benefits due to an increase in revenue or savings. He may make additional changes to the project, like increasing revenue growth by increasing sales and expanding market shares. Additionally, other changes like cost reduction in terms of electricity and other resources, and eliminating unnecessary employee positions can be made.

Understanding the soft benefits

Soft benefits are usually anticipated benefits in any business project, and are generally not accompanied by solid statistics. These benefits sometimes carry a small amount of risk, because of which business managers are hesitant to make adjustments in the budget. If savings or revenues are based on unsubstantiated estimates or educated guesses, business managers may not prefer soft benefits. However, they do provide considerably in terms of benefits.

An important type of soft benefit is cost avoidance, an automated process that allows businesses to increase processed transactions without increasing the headcount. Although you may not have made any adjustments to your current budget, productivity improves without incurring any additional expenses. This makes cost avoidance an important benefit. Risk-oriented benefits for business projects are considered in terms of anticipated growth, whether for revenue increase, cost reduction, personnel reduction, or cost avoidance.

Increasing productivity

IT projects mainly consist of automating manual business processes, and streamlining or simplifying complex ones. When fewer employees and lesser time are required to complete a job or to generate good results, you are increasing productivity within your organization. Productivity benefits are considered as reduction, since the effort required to complete a task is greatly reduced. Generally, full-time equivalents (FTEs) work about 2,000 hours a year.

Productivity is generally considered as a soft benefit, since increase in productivity cannot always be achieved in the same way as revenue generation. Many times, your company may be unable to cut down on employees or resources, which in turn limits the productivity. But an increase in productivity is considered as a benefit because it reduces overtime, headcount, and subsequent costs.

One Comment

  1. Tony 2013/05/10 at 10:38 - Reply

    Totally agree yet still amazed that Projects and in particular IT projects are started without either a formal validated business case or where there is one, a detailed plan of how to deliver the benefits and manage the costs.
    I always ensure that projects adopt five core elements;
    1. The solution is aligned to the business need
    2. Full engagement with all of the key stakeholders
    3. Formal governance process is followed
    4. Absolute focus on benefits realisation from Day 1
    5. Clear approach to how the change/ solution/ system is to be embedded within the company
    These five element will ensure that the Cost Benefit Case is achieved.
    Tony Lockwood
    uk.linkedin.com/in/tonylockwood/

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