HR Tech Business Case Part II: Terms and Definitions

Know the language

The following terms are the key elements of a good business case. You will however see some operational or tactical elements such as CE, EB, TTH etc.

*Candidate Experience **Employer Brand ***Time-to-hire

Return on Investment (ROI)

This is used for financial decisions and measures the gain or loss generated on an investment relative to the amount of money invested. ROl is calculated by dividing the cost of the investment by the net benefit, expressed as a percentage or a ratio. A decision based on ROl considers the benefit over time of moving from an "as is" to a "to be" state.

Total Cost of Ownership (TCO)

The cost of owning an asset long-term by assessing both the purchase price and the cost of operation. A decision based on TCO considers the benefit as the difference between the "as is cost" (where we are now) vs. the "to be cost" (where we aim to be).

Net Present Value (NPV)

The difference between the present value of cash inflows and outflows over a period of time. NPV is used in capital budgeting and investment planning to analyse the profitability of a proposed investment or project.

In the simplest terms, it takes into account the future value of money based on a defined discount (i.e. a dollar/pound/euro today will be worth % less a year from now)

Cashflow

The net amount of cash and cash equivalents being transferred into and out of a business. A company's ability to create value for shareholders is determined by its ability to generate positive cash flow.

You need to show what impact your project will have on cash flow.

Payback

The payback period is the amount of time it takes to recover the cost of an investment. Basically, the length of time an investment takes to reach a break-even point. For larger projects, it's most likely to be in year 2 when there won't be any large implementation costs although this isn't always the case. Smaller projects are more likely to give a payback in the first year.

Ramp

This is, year-over-year, the percentage of the benefit that will be achieved. Depending on factors like implementation time, change management process, user adoption or realisation of business outcomes, the assumption is that 100% of any assessed benefit will not be realised in the first year but be ramped over the first year or two.

The amount of time between assessing the benefit of an action and realising the value of taking the action is what you need to show.

CapEx/OpEx

CapEx is funds used by a company to acquire, upgrade, and maintain physical assets such as property and buildings. an industrial plant, technology, or equipment. OpEx is the money a company spends on an ongoing day-to-day basis in order to run a business or system.

Typically (although not always) subscription software is Opex rather than CapEx.

Soft vs. hard costs

This can often be the harder bit of the puzzle. Soft costs are more intangible whereas hard costs are tangible as you'll see below:

• Soft examples: staff turnover, time-to-hire, time-to-productivity, % of internal hires.
• Hard examples: licence costs, dedicated system resources (people), maintenance, hardware/devices.

This is where some of the typical TA measures will be used/needed but as you will learn from future sections, make sure you don't overdo the TA measures and ignore the generic harder costs.

Buyer or seller

If neither the buyer or the seller knows how to build a solid business case the deal will end up as "closed/lost" in Salesforce. This is a massive lose/lose scenario so if as a buyer you are not sure, the seller might be able to help. But, also be "buyer aware" as most vendor business cases are pretty basic and just show you how to (try to) buy their product. In an ideal world, both buyer and seller will speak CFO language and work in harmony to build a great business case and seal the deal.

But the world is rarely ideal.