Evaluation of profitability of business transformation, IT and infrastructural investments

Challenge

Many organisations frequently encounter difficulties in estimating the benefits derived from an investment project or find themselves launching projects without a legitimate business case. Moreover, in case of quite a few projects, once they have become advanced, their owners realise that the costs exceed the profits not only in the short term but in the long run as well. Rather than due to the lack of financial competence in the organisation, reliable calculations often prove difficult to perform because of problems with availability of dependable information on the cost structure and the future economic results that takes the impact of the specific investment into account.

Carrywater’s solution

We apply our own proprietary approach to the profitability of transformation (Total Value of Transformation, or TVT). We use our own methodologies of evaluation of investment profitability in the following domains:

• IT – IT Investment Valuation Framework,
• business operations – BPO & BPR Valuation Framework,
• infrastructure – Infrastructure Valuation Framework.

Our evaluation of IT projects profitability covers both the upfront investment costs and the costs of maintenance. While analysing projects in the business operations area, we also have process outsourcing and reengineering in mind. Each time we work on an investment project, we consider the future investments and the costs of modernisation.

Carrywater consultants work with the Customer and use the information concerning its organisation and certain trustworthy sources of market intelligence to come up with an answer to the essential question: “what shall be the potential financial and business consequences of the investment decision the Customer is about to make?”

We believe that a good Business Case presents the expected financial results of the actions proposed, considering the time, the methods and the justification for the steps taken to qualify the revenues and the costs included in the final calculations.

Business value

Our work results in a comprehensive financial evaluation of the Customer’s venture, based on which its organisation is able to make a decision on whether to carry on with the project or to reject it.

Out of a group of projects, the Customer can select and execute those that are bound to bring maximum profit and can be carried out using the resources available at hand.

Deliverables

Depending on the scope agreed, our involvement usually produces the following deliverables:

• Analytical report that presents economic results, their components and totals, and which allows making an informed investment decision. Report contents:
  • Executive summary
  • Conclusions from the as-is status analysis and its projection into the future,
    assuming SIS would be used
  • Description and financial evaluation of the economic results generated by system users in the long, mid and short term
  • Description, comparison and pricing of the economic scenarios without the IT system (“as-is”) and with it (“to-be”)
  • Net Present Value analysis
  • Investment recommendation
• ROI Evaluation, which is an open calculation model that allows the Customer to set up the input parameters and provides full preview of the economic reasoning principles and formulas.