Contents
The paper is based on the following requirement - - The purpose of a business case is to a) outline the business rational for undertaking an initiative, b) assess the capability of the IT Manager’s organisation to undertake and control the initiative, and c) define the parameters and management factors involved in the initiative itself.
- It provides the IT Manager with a tool to guide the development, management and evaluation of the project, and its approval provides funding and authority for commencement.
- The contents of the business case
- a) Your business case must evaluate each of these contenders and make a recommendation re which contender should be selected for the initiative.
- b) The business case will need to show (USING ANY 2 OF) the ROI, Payback Period, NPV and IRR for each of the 3 contenders, as well as providing a recommended course of action with justifications. It should also briefly explain the terminology and technique of analysis that were used.
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- c) Only use the facts provided when preparing the business case. Any projections and estimates must be based on the information provided.
- d) Appropriate assumptions and risks need to be identified.
Description
This paper is based on the following scenario -
CRM Solution for Bank of Central Queensland
The Bank of Central Queensland1 (BCQ), based in Longreach, was founded in 1958 by a farmers’ cooperative and has survived as a strong second tier regional bank servicing local communities. Despite strong competition and the impact of the “Big 4” banks in the region, BCQ has emerged strong and successful. Operating with a lean and cost effective business model, the bank has been able to return a reasonable yield to its shareholders to-date. Figures 1 & 2 show the salary and wages distributions in the local government areas in which BCQ operates.
Competition is intensifying as the Big 4 banks have launched new marketing (traditional and online media) initiatives to attract the BCQ’s clients. With the increasing demands for efficiency and effectiveness, BCQ is faced with a strong need to upgrade its business processes and technology support infrastructures in order to stay competitive. Amongst these, included the CRM solution that the bank badly needed in order to better to service and maintain its existing customer base while using it to launch campaigns in order to target new ones.
With recent government initiatives to rebuild industry and commerce in the region, there has been steady growth of business enterprises and “migration” of working folk
1 The Bank of Central Queensland is fictitious as are the performance figures.
into the region. It is for this reason that the Big 4 banks are demonstrating renewed interest in the area.
Bank of Central Queensland Business Performance Projections
Category
Numbers
Retail A/Cs
35,000
Home Loan
20,000
Personal Current
15,000
Trade/Business Current
12,000
Credit Card Holders
35,000 (inclusive of dependent cards)
Profit Contribution by products for financial year ending 30th June 2017
Products
Margin Contribution (% of total profits)
Contribution
Home Loans
45%
$56m
Business Loans
25%
$31m
Investment Accounts
15%
$18.6m
Retail A/Cs/Credit Cards & other retail instruments
15%
$18.6m
Projection of Growth in Total Revenue Dollars over next 5 years with CRM solution
Products
Year 1
Year 2
Year 3
Year 4
Year 5
Home Loans
2%
3%
4%
5%
5%
Business Loans
2%
3%
4%
5%
5%
Investment Accounts
0%
2%
3%
5%
5%
Retail A/Cs & Instruments
0%
5%
5%
5%
5%
Note: “Year 1” is taken to be the first 12 months after the CRM solution first goes live, assumed to be July 1st 2019.
The last IT strategic plan for BCQ has recommended that we should “stick to the knitting” and implement the CRM solution with a service provider. Consideration
should be given to outsourcing the support and maintenance of such a system to an external party experienced in CRM solutions and campaign managements.
The Contenders
Three vendors have been identified for your evaluation and recommendation in your final report:
Ozzie Solutions has proposed software systems cost of $1,250,000. This company is small and has a very brief history of operation. While they have done a number of very successful implementations, the company has never operated in the banking & finance industry. They propose to develop the full suite of software with all integration capabilities in five months and are prepared to host the software for BCQ if required although they have no experience in the hosting area to-date. They have no references for any middleware and integration experience that we can review. No Campaign Management experience has been evident. They quoted $350,000 to host the system on an annual basis for 5 years.
Customer Solutions Development Consulting is the second contender who quoted a mobilization fee of $300,000 with milestone delivery of $600,000 for the first phase of data warehouse and CRM database setup and another $350,000 upon delivery of the final solution. Training cost is quoted at around $200,000. This group has been around for a long time and has experience in the banking & finance industry although they only have one or two very senior project managers and it is not certain that the one with banking experience will be available. This company has quoted $450,000 pa to host and support the CRM solution. Reference sites for legacy integration work have been provided and are quite positive.
Relationship Plus Solutions is the third contender. They propose to develop the software for the on-line CRM solution over 8 months. The quoted software development cost is $1,650,000 with $500,000 down payment. $500,000 will be paid around month 5 when the data warehousing and CRM database phases are complete and the balance of $650,000 will be paid upon the completion of the total system in month 8. They further quoted an annual fee $560,000 of hardware and software maintenance and hosting for 5 years with CPI increases annually. An SLA will be negotiated. This organization is by far the most experienced organization and has currently hosting facilities and customers that are reference-able.
