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What are the BUSINESS FACTORS in IT?
Business Factors are mostly side notes when discussing an IT project, which can be costly. Find out why.
Tags: Magazine  services  CISCO  Human Factors  Tech Factors  business relevance  ROI  utilisation  optimization  business impact  cost saving  low cost  capex  opex  Business Factors 
Whenever a company makes an investment, it expects positive and even beneficial outcomes in return. This expectation applies to IT systems as well, which are set to deliver “value”. When we use the terms “business factors”, we refer to exactly this value that collaboration technology brings to the company using it. This value can be tangible or intangible, and can be delivered in various ways. Let’s dig into this increasingly important topic a little bit further.
No business factors without user adoption

However, you have to keep in mind that IT solutions are worth the effort (high return of investment) only if a lot of people use them (network effect). For instance, if your company invested in WebEx and paid a license for 200 users, but only 20 use it on a regular basis, then your phone bills and roaming costs will not decrease much. If you invest some time and money into user adoption and make sure that 105 people use it, then your value/return will increase dramatically.

We have seen plenty of projects that were technically brilliant, yet no one used the technology afterwards. Regardless if you aim for higher revenue or less CAPEX with the help of the technology, none of these efforts will get you anywhere if you stop the deployment when the green light starts blinking. It is quite the opposite; the hard work begins once the system is ready to use. Users need to be onboarded and comfortable enough to use the technology. Coincidently, we happen to offer a product designed for exactly that phase of your project.
5 reasons why business factors matter

(1) The C-level loves numbers, and an educated basis for decisions will not only make your life easier when it comes to reporting but it will also help the c-level justify budget spending. Besides, those guys are extremely number-driven and will appreciate any support to their mission.

(2) According to a study by Ernst & Young (2002), 79% of companies required ROI analysis before taking an IT investment. This means that the investment is only considered once it brings along a financial benefit for the company. In other words: this is the first go/no-go hurdle to be overcome when planning an IT investment for your company.

(3) The role of IT departments changes into a more business relevant one: from the guys you could call when your desktop was burning down, to a more service-oriented functional department, often located right by the CEO. IT guys are expected to come up, deliver and maintain systems that support the overall goal of the organization.

(4) The internal competition (“shadow IT”) is increasing. However, just because someone can buy online services with a corporate credit card, it does not mean that this person has a good overview when it comes to savings based on IT applications. So, why don’t you make good use of your knowledge advantage?

(5) Even if the business factors are intangible, they will bring value to the table, which cannot be neglected. Listing those factors and, again, delivering them to the C-level will only increase your chances for a successful career.
The methods

For calculating the financial benefits of IT projects, there are 4 main concepts: ROI, IRR, Break Event Point and NPV.

* Return On Investment (ROI): the return of a project is divided by the cost of a project and the result is shown as a percentage. Usually, investment thresholds of e.g. 190% or higher are set up to ensure enough business impact.
* Internal Rate of Return (IRR): this percentage represents the annual return of the investment – needless to say that a high IRR will make decisions easier.
* Break Even Point: this calculation considers the time axis by indicating how long it will take for the company to gain a return from the investment for the first time.
* Net Present Value (NPV): at a specific discount rate, the return of the project is calculated. Again, the higher the number, the better.

Categories for creating business impact

IT investments can have various motives for which they are undertaken. They might have a direct or an indirect impact on the organization. We will dive briefly into the direct implications to give you a better understanding of the options:
* Revenue enhancement: the technology should enable the company to generate more sales with existing and/or new customers (e.g. retail bank video for 24/7 client consulting)
* Cost reductions: the investment will decrease another cost block (e.g. reduced travel costs, roaming costs, phone bills by collaboration solutions)
* Cost avoidance: the technology will enable the company to avoid another cost block completely (e.g. time saved by less incident tickets, reduced length of calls in a contact center etc.)

The indirect implications are equal to the intangible values and advantages that the new technology brings along. Making both a business and financial impact on the organization, they cannot be expressed in direct numbers -or only at a later stage. Examples of such indirect outcomes are:
- improved customer satisfaction
- higher employee morale
- faster product development time and time-to-market
- better accessibility for suppliers & partners
- brand perception as a company that has arrived in 2015
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Editorial team: Claudia Kaefer