A model to create a Business case for SOA

1. Creating a Business Case for SOA
Guidelines

2. Steps
1. Identify current Business-level Strategy
2. Identify the Value Chain
3. Select the Business Processes – Scope
4. Create performance indicators
5. Design the solution
6. Identify stakeholders and their benefits
7. Make the calculations
2

3. Identify current Business-level Strategy
Cost Leadership Differentiation
Broad
Target
Integrated Cost
Leadership/Differentiation
Narrow
Target
Focused Cost Leadership Focused Differentiation
3

4. Business-level Strategy
• Cost leadership strategy
– Sell no-frills, standardized goods or services
– Candidate processes are:
• Inbound logistics
• Outbound logistics
• Support activities (e.g. procurement, HR)
• Differentiation Strategy
– Sell differentiated products or services at competitive costs
– Candidate processes are:
• Design
• Marketing and Sales
• Operations
4

5. Identify the Value Chain
Firm Infrastructure
Secondary
Activities
Human Resource Management
Technology Development
Procurement
Inbound Outbound Marketing
Operations Service
Logistics Logistics and Sales
Primary Activities
5

6. Select the Business Processes - Scope
• Select the link in the Value-Chain and then breakdown to
analyze the business processes involved
Define rules
Select
providers
Create RFI
Procurement
Create Receive
catalogue orders
6

7. Selecting Business process
• Ask questions as following:
– Is the process designed to achieve competing advantage in terms
of differentiation or low cost?
– Does the process eliminate steps that do not add value?
– Does the process maximize customer value as perceived by the
customer?
– Will the process win orders?
• Tools
– Flow Diagrams
– Time-function mapping / Process mapping
– Value-stream mapping
– Process charts
– Service Blueprint
7

8. Create performance indicators
• Accordingly to the business strategy:
– Differentiation strategy
• Focus on Revenues indicators
– Cost Leadership
• Focus on Costs indicators
• Look for industry benchmarks
• Indicators must be SMART
(Specific, Measurable, Achievable, Relevant, Time-Bound)
• Use this indicators to estimate the cash flow from the project
8

9. Design the solution
• Classify the process accordingly the matrix and follow the order
1 2
Value
3 4
Cost
• Focus on KPI
• Different presentations accordingly to the audience
– IT
– Business
9

10. Identify stakeholders and their benefits
• Identify Organizational Structure
• Match with the Business Process
• Identify benefits
– Tangible X Intangible
– Quantitative X Qualitative
10

11. Make the calculations
• Calculate the cash flow expected from the project
– The increase of revenues or decrease of costs
• Decide the timeframe (3 years, 5 years)
• Choose the discount rate*
– Based on Industry
– Risk of the project
* the rate of return that could be earned on an investment in the financial markets with
similar risk
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12. Make the calculations (cont.)
• Calculate the Net Present Value
N
Ct
NPV t
t 0 (1 r)
t = the time of the cash flow
N = the total time of the project
r = the discount rate
Ct = the net cash flow
• Evaluate the NPV
– If NPV > 0, the project must be accepted
– If NPV < 0, the project must be rejected
– If NPV = 0, the project does not add nor remove value
12

13. Making assumptions
• Look for similar projects to assess the risk
• Always keep the business sense
– Is it feasible?
– Does it make sense?
• Just assume when something is find to research, if not
research it!
13

14. Thank You
rodrigo_nascimento@infosys.com
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