Chapter 9

GAP ANALYSIS AND BUSINESS 
CASE DEVELOPMENT
 Chapter Contents 
2

¾ General Framework For Business Case Development
¾ Business Analysis
¾ Objective Setting
¾ Gap Analysis
¾ The Applications Portfolio
Th A li ti P tf li
¾ Developing A Business Case Justification
GENERAL FRAMEWORK FOR BUISNESS CASE 
DEVELOPMENT
3

¾ Used to justify investment in a particular system 

¾ No initial Where were stage and justification replaces final 
Where went wrong
Where went wrong.
GENERAL FRAMEWORK FOR BUISNESS CASE 
DEVELOPMENT ‐ 2
DEVELOPMENT 
4

1 W2R-Where We aRe
• Critical analysis
y of current information
systems- may include SWOT analysis- see
below.

• Definition of the information strategy

2 W32B-Where We Want
to Be
actually required to meet the business
strategy.

• Strategy to get from where IS is now to

3 (GT2)-Going To Get
There where it needs to be. Takes into account
risk of failure from previous projects.

• Provides the decision makers with the

4 Justification information they need to decide whether
to proceed with the system.
BUSINESS ANALYSIS
5

Key points:
¾ Investigate the relationships between information systems 
and business performance.
db i f
¾ Similar to position audit in strategic management. 

Definition 
Information audit: information gathering exercise to 
g g
determine what information each manager needs in order 
to do their job.
BUSINESS ANALYSIS ‐ 2
6

• Managers specify the information

1 Information
needs
assessment
required to do their job. Difficult
because managers tends to focus on
information has now-not that
actually required.

• Information currently provided by

2 Information
analysis
information system recorded and
analyzed.
l d Quantity
Q i and
information checked.
d quality
li off

3
• Information provided compared to
Gap analysis information needs. Gaps identified
where information needs not
currently met.
met
GAP ANALYSIS
7

Definition: 
Gap analysis: Finding the difference between where the organization 
will be and where the organization would like to be.

Determine Establish what

Stage in gap
analysis objectives for will happen if no
y
system change takes place

In th efuture, try and establish difference

Develop strategies between where the organiszation will be
to close this gap with no change and where organization
would like to be.
Gap Analysis for IS Strategy
8

Types of gap:

¾ Simple gap: the current state does not meet the current 
expectation level. Result of past performance.
t ti l l R lt f t f

¾ Continuous gap: the predicted state does not meet the 
Continuous gap: the predicted state does not meet the
predicted expectation level.

¾ Simple gap cannot be close but continuous one can. IS 
strategy therefore focuses on closing continuous gap.
Closing the Gap
9

IS strategies to close continuous gaps include:
g g p
¾ Increase performance of existing applications.
¾ Possibility of outsourcing some applications.
¾ Developing new systems.

Selection of projects
¾ Includes deciding on financial costs and benefits, and other 
iintangible factors including risk of project failure.
t ibl f t i l di i k f j t f il
¾ Simple grid used to help choose appropriate projects.
Closing the Gap ‐
g p 2
10

Project risk
Project risk
LOW HIGH

Routine projects Avoid
LOW

Can be implemented  Little point in 
nefits

with little fear of  embarking on a high 
disruption or failure.  risk project when 
Poteential ben

Include many
Include many  benefits are minimal.
benefits are minimal.
transaction processing 
systems.

Identify and develop Examine carefully
“Ideal” project. 
HIGH

May be undertaken, 
Undertake because  but because of high 
returns are high with  risk defer to low risk 
relatively low risk
relatively low risk. projects first
projects first.
The Applications Portfolio 
pp
11

McFarlan and McKenney
and McKenney strategic grid 
strategic grid
¾ Identifies how much an organization depends on IT
¾ Uses Boston consulting group matrix
gg p

The applications portfolio – Peppard
¾ Development of the strategic grid
¾ Looks at strategic impact of individual application within 
the organization then classifies as if they were products in
the organization, then classifies as if they were products in 
the BCG matrix
The Applications Portfolio ‐
pp 2
12

Strategic impact of future information systems 
g p y

LOW HIGH
ormation sysstems 

S
Support Hi h P t ti l
High Potential 
LOW

A applications that improve  These applications are 
management effectiveness  innovative, and might be 
but are not critical to the  of future strategic 
Strateggic impact off current info

b i
business. The benefits they 
Th b fi h potential. 
t ti l
deliver are mainly 
economic.
Strategic
Key operational
Key operational 
Application critical to the 
These applications are 
HIGH

future success of the 
critical to sustain the  organization. 
excising business. Such 
applications generally
applications generally 
support core organizational 
activities. 
Developing a Business Case Justification
13

Developing a Business Case Justification

Developing a Business Case Justification

¾ Investment criteria of an organization must be met before a 
g
project carried out

¾ Normally include some form of cost benefit analysis
ll l d f f b f l
Developing a Business Case Justification ‐ 2
14

Costs Include: Benefits Include:

• One-off capital cost Cost • Direct benefits e.g.

e.g. computer B
Benefit
fi saving in salaries
hardware Analysis from deceased
staffing.
• Ongoing running
costs e.g.
eg • Indirect benefits
consumables and e.g. better
power decisions and
• Intangible costs e.g.
Techniques Used: improved customer
service
decreased staff
morale
•Payback period
•Net present value
•Internal rate of return
Approaches to Measure Benefits
15

Approaches to measure benefits:

Approaches to measure benefits: 

¾ Ignore –
g not acceptable as system never show overall 
p y
benefits

¾ Quantify benefits –
f b f d ff l
difficult to guess – and may not be 
d b
quantifiable until after system implementation 

¾ Change the approach – best to find some non‐financial 
methods of assessing benefits. 
16