The Business Case for Storage Networks [Electronic resources] نسخه متنی

Chapter 3. Building a Value Case Using Financial Metrics

Understanding the financial impact of deploying an IT solution is the most critical part of the decision-making process. Projects involving the deployment of storage networks tend to be unique because the financial benefits associated with them (primarily increased utilization) are easily quantifiable, as demonstrated in Chapter 1, "Industry Landscape: Storage Costs and Consumption," and Chapter 2, "The Business Impact of Storage Networking Technology." Many IT projectsespecially the ones designed to increase operational efficiencieshave benefits that are less easily measured, which makes building the value case for them more difficult.

Presenting an articulate, financially sound business case to management is a fundamental step in ensuring that your project is approved. Performing the analysis ahead of time, using proven financial metrics, and demonstrating the benefits of the project in a value case that supports the decision builds credibility not only in the project, but also in the project's leadership capabilities.

Value case analysis is not new; it has long been used to build decision matrices for corporations investing in real estate, manufacturing equipment, and mergers and acquisitions. It is used for any project in which significant investment is required. In recent history, value case analysis was often overlooked when it came to IT investments; however, given the recent economic climate and the increased attention to corporate governance, it is highly unlikely that large capital investments in IT can continue without highly detailed financial analyses to justify the expenditures.

It is critical that the project owner selects the appropriate metric based its relative merits and on his or her own company's methodology for benchmarking the financial impact of new projects. In this chapter, I cover in detail the following, most commonly used metrics:

Payback method

Return on Investment (ROI)

Net Present Value (NPV)

Economic Value Added (EVA)

Value case analysis