I have started thinking about patterns for business value models. The most obvious is the "reduce costs" pattern.
There three general types of business value model. One for increasing revenue, one for protecting revenue, and one for reducing cost.
The reducing cost model probably follows the same pattern. It also is the one that needs the most careful investigation.
The first step for a reduces cost model is to identify the current costs. Consider a project to implement a new system to replace an old and inefficient system.
The costs will include:
Operational Staff Costs
Software Licenses
Hardware Costs
IT Support Staff Costs
Normally, the intention is to achieve the cost reduction by reducing operational staff costs through automating the process.
There are a number of things to consider with cost reduction business value models.
1. It is important to make sure that the cost reductions will actually occur. Often to reduce the opposition to change a company will say that no jobs will be lost when a new system is implemented.
2. Increased automation may result in an increase in the number of IT Support Staff required to support the system.
3. You should make sure that the cost savings you are aiming to achieve are real cost savings rather than "accounting" cost savings. A system may have an annual hardware cost due to the amortisation of the system costs over a number of years. The business value model may include a term to reduce the hardware costs. This is not a real saving as the hardware has already been paid for even though its cost is being spread out over a number of years.
Posted by chrismatts at December 10, 2004 3:26 PM