Welcome to the German WiBe Framework

Justifying IT projects –
Economic efficiency assessments with WiBe 5.0

What’s economic efficiency, how can it be determined?

The principle of economic efficiency is based on achieving the most favourable relationship bet­ween the set purpose and the means used to attain it, i.e.: the bene­fits anticipated from an IT project should stand in highest ratio possible to the anti­ci­pa­ted costs for attaining them.

The scientific tool for reaching this equation is the WiBe^® Framework, taken from Wirt­schaft­lich­keits­-Betrachtung, the German term for economic effi­cien­cy assessment. This is applied to indi­vidual pro­jects and procurement mea­sures and thereby dis­tin­guishes itself from perio­dic cost and activity accounting.

The WiBe Framework is already inter­na­tio­nally acknowledged for its reliable eco­no­mic efficiency assessments.

• Which costs and benefits will occur from this project within a specified time?
• Which budget-relevant outcomes are expected from the project?
• Which further qualitative effects of importance can be derived?
• Why is it advisable to accomplish this IT project at this time?

The WiBe^® Framework extrapolates the traditional project con­siderations and provi­des solid statements as to the eco­nomic efficiency of the measures planned.

Because economic efficiency assessment deals with assumptions about the fu­ture, the approach taken must be methodical and trans­parent – and its procedure organi­zed about a common framework.

• Monetary evaluations constitute the core of each assessment, thus the method of net present value is recom­mended as the most suitable proce­dure. All future dis­bursements and de­posits of an IT mea­sure are dis­coun­ted to the base year of the calculation, i.e., the year in which the IT measure is to commence. The sum of all net values within the calculation period represents the cumulative net value. If the sum is favorable, the project is eco­no­mically efficient.
• Non monetary, qualitative evaluations supplement WiBe^® core calculations by describing additional effects of the IT measure which cannot be mea­sured in money. A benefits analysis, weighing all qualitative criteria with respect to their relative importance, is given a score on a scale from 0 to 10 to reflect the value of benefits. The higher the score, the bet­ter the qualitative prog­nosis for pending IT measures.

What determines an IT project’s extended economic efficiency?

The extended economic efficiency is deter­mined by measuring the impact of various criteria on a project, such as:

• • • Cost and benefit parameters as quantified in monetary terms,
    • Strategic quality improvement through implementation of a new IT system,
    • The external impact an IT project will have on other institutions.

Which factors are necessary when projecting by the WiBe^®?

To ensure the highest feasibility and inte­grity, all potential factors must be carefully projected and then comprehensively and methodically calculated. These are

• Profitability: economy of cost vs. benefit

All parameters defining cost and benefit which are capable of being quantified in monetary terms are of cen­tral importance.

• Investment & development costs 

These are the one-time, initial expenditures made primarily for hardware and software, in­stallation & systems implementation.

• Operating costs & benefits

These are ongoing costs reflecting consumable materials, personnel expenditures, mainte­nance and/or system updating, etc. The ana­lysis assesses the efficiency of each cost crite­rion within the new system, indicating the savings attainable through discontinuation of the old process. The end balance shows addi­tional vs. fewer or lower operating costs and is reflected in the subsequent cost-benefit calcu­lation.

The calculated or estimated figures are dis­counted from the base year of cal­cu­la­tion and form the net present value of the IT project (‘WiBe KW’). If the result is favour­able, the project is economically effi­cient.

Aside from monetary impacts there are further evaluations which serve to deter­mine the ex­tended economic efficiency of the IT project. These concern the quail­ta­tive aspects which are detailed in a benefit analysis.

• Urgency surrounding the IT measure (version 4.1., not included in version 5.0)

The urgency called for in replacing a system currently in use is an important factor in the assess­ment. What about reliable, continuous main­te­nance? Are there re­stric­tions for further expansion, personnel bottle­necks or interface problems? Will existing legal restraints remain valid, or will system replacement facilitate a new solution?

• Qualitative, strategic importance

  

The qualitative-strategic relevance of the new solution is a central criterion. For example, how will the solution fit into the sector’s overall de­ve­lop­ment? How significant will the qua­lity in­crease be upon completion of the spe­cia­li­zed tasks? These and numerous further questions are asked and evaluated.

• External effects of the IT measure

The IT solution can affect (intentionally or non-intentionally) external parties and institu­tions substantially. These ‘external effects’ have to be considered if they are more than just inci­dental. For example, how is user friend­li­ness from the customer side? Does the customer gain any direct economic benefit?

How do the WiBe ^® key data figures simplify assessment?

WiBe generated key data figures deliver a set of rules decisive for the effective launching of individual IT pro­jects. For example, when posi­­tive net present value shows the IT pro­ject to be economically efficient even before conside­ration of strategic importance or external effects; commencement with the project is recommended.

Likewise, a negative net present value marks the IT project as planned to be in­efficient in a mone­tary sense. However, projects can be qualified as efficient in an extended sense when key data figures regarding quality index and an optional external effects analysis surpass predefined thresholds.

(WiBe^® software offers a variety of report tem­plates for the pre­sentation of eco­no­mic effi­cien­cy assess­ments and results. WiBe^® software is browser based and can be imple­men­ted as an intranet solution or by Soft­ware as a Service (SaaS)).

WiBe Framework: flexible …

The WiBe^® concept and the accompanying WiBe^® software are adaptable to the re­quire­ments of both individual institutions and their varying projects. Easily navigating through the WiBe frame­work, the user manages the assess­ment with ease, cer­tain that all aspects relevant to the evalua­tion have been factored systematically.