Chapter 2. Business Considerations

The 1990s were characterized by an IT investment frenzy. Everybody wanted to jump onto the Internet bandwagon. Little effort was expended on analyzing and justifying the IT investment requirements and benefits.

The bursting of the Internet bubble not only resulted in a myriad of failed businesses and large monetary losses but also led to a renewed emphasis on scrutiny and accountability when making investments in IT. Indeed, in many organizations, today's IT investments are not made at the discretion of the CIO or CTO. The CFO is a key participant in the decision-making process for allocating the organization's funds to IT. As a result, the need for a clear, concise, and robust IT business case has become imperative.

A term that is often used interchangeably or in conjunction with business case is return on investment (ROI). However, these two terms do not necessarily denote the same thing. In fact, ROI is only a subset of a business case and focuses exclusively on the financial ramifications of an investment.

ROI is often erroneously considered to be the silver-bullet metric that will ensure that the IT purchase will be beneficial to the organization. As you will see in this chapter, ROI has benefits and pitfalls. An ROI analysis is something senior management understands, and it instills rationality and standardization in the IT decision-making process. However, because the strategic impact of IT investments is next to impossible to quantify, ROI does not provide a vehicle for capturing these benefits. Furthermore, elements such as the risk associated with the investment and the time value of money are not accounted for by plain-vanilla ROI analysis. The specific benefits and pitfalls of ROI will be covered in greater detail later in this chapter.

The goal of a business casefor WLANs or for other assetsis to provide a holistic cost justification. This chapter demystifies the process of developing an exhaustive and vigorous business case for WLANs in your organization. It also provides frameworks for tackling the challenge of business-technology alignment and identification of opportune application points for WLANs within the organizational ecosystem. Quantitative, qualitative, and risk considerations are covered to provide an exhaustive view. Finally, given the importance of economic returns, the most common financial barometers including ROI, payback period, Net Present Value, and internal rate of return are described in detail.