Cost Benefit Analysis

Cost benefit analysis can be applied to everything. In simple terms it means that when looking at solutions you ask yourself if a particular approach is worth doing. Asking does the benefit outweigh the cost is one the most  powerful tools for the Business Analyst.

This approach works at all levels within a project, right from the top level business case all the way down to individual requirements. Is it worth doing?

I have worked on analysis projects that have shown sometimes it’s not worth changing anything at all because you would have to live forever in order to get back the costs invested! Therefore those projects were shelved.

Other times because we have been required to do something as a result of new regulation we have no choice but to make a change. But we have considered the various options and looked for the best value.

When evaluating a project or an individual requirement I do need be careful and consider all the other project drivers (reasons for doing the work) and not just the cost. I also have to be mindful of any dependencies between projects or requirements. So even if a particular requirement does not have a compelling case in itself it may be a building block to a requirement that does.

Here are some typical costs and benefits I often come across, with the exception of the intangible benefits everything has a number:

Example costs

  • Analysis
  • Development
  • Implementation
  • Opportunity
  • Time

Example benefits

Tangible

  • Efficiency
  • Timeliness
  • Cost savings
  • New business
  • Comply with Regulation

Intangible

  • Improve customer satisfaction

Hard facts enable you to take the emotion out of decisions. Armed with the above I can focus on what is important and deliver the best project I can with the resources available.

I found getting reliable costs are easier to obtain from people than benefits. Benefits can be subjective or fuzzy, even the apparently tangible ones. Where possible I try to obtain some hard numbers or other evidence to support a benefit. As a minimum I always get something written from the source. It can be useful to remind sources that after a project has gone live there will be a period of time where the benefits are tracked!

Posted in Requirements, Tools & Techniques Tagged with: , ,