Business analytics is all about ROI

It may seem counterintuitive to some readers that adding a business analyst to a development team for IT projects will save money. But the numbers support this claim. Business analysis pays for itself by helping the sponsoring organization and development team focus on business value and the right goals throughout the project.

The chart below (familiar to many of you) shows the cost of changing requirements at different stages of a software development project.

It is clear that the cost of changing or adding requirements is lowest when done in the earliest project stage analysis. If you don’t start a project with a good business analysis, it will haunt you later at an increasing cost. The toll of bad or no BA work is very high:

• 71% of failed software projects can be traced to bad requirements CIO Magazine, 2006
• 40% of the effort in an average software project is spent fixing bugs, and 56% of that rework is caused by requirements defects Butler Group, 2005
• In 2010, the International Institute of Business Analysis estimated that bad requirements are responsible for annual global losses of $250 billion in software development projects

According to the US Bureau of Economic Analysis, $194.4 billion was spent on software development in 2008. If you apply the same formula, 40% of that spend goes on rework, and 56% of that 40% is due to requirements flaws you get about $44 billion spent fixing requirements errors. So almost a quarter of all software development spending in the US is spent on rework related to incomplete or incorrect requirements! Poor requirements, questionable strategic alignment, and insufficient focus on the business can all be addressed with better business analysis.

How business analysis pays off

When done right, business analysis can significantly increase the ROI of a software development project in two main ways.

Increased solution value

The image below shows how expert analysis contributes to the value of a solution and the success of a project.

Business analysts are skilled in:

• Discovering business needs and requirements, hidden behind stated wishes, that directly contribute to the value of the solution
• Keeping the development team and stakeholders focused on implementing requirements with the most potential benefit
• Locating the actual problems the company is trying to solve to eliminate requirements with minimal value or purpose

Lower implementation costs

The following figure illustrates how business analysis results can significantly reduce development costs.

Business analysts are trained for this:

1. Reduce post-processing by:
   • Clarify and focus on the right requirements
   • Eliminate unnecessary changes
   • Match and tailor solutions to business needs
2. Create a shared vision by:
   • Painting comprehensible pictures of current and future conditions
   • Building consensus among stakeholders about the problems and solutions
   • Drawing the roadmap to get from the current state to the future state
3. Prevent late change of requirements by:
   • Facilitate logical, orderly decision-making
   • Identifying and communicating unresolved issues
   • Thoroughly documenting discussions and meeting results
4. Discover more cost-effective solutions by:
   • Involve the right people in the process at the right time
   • Facilitating brainstorming sessions
   • Enabling the free exchange of information

The importance of a good business analysis for a software development project can hardly be overestimated. When thinking about return on investment, consider conducting business analysis before, during, and after the project lifecycle.