Business Foundation Value Assessment

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Jul 30, 2012 (6 years and 3 months ago)

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The
WebSphere
Rapid Investment Justification

Model

An
Introduction to Financial Selling






Putting the spotlight on value



Abstract

This
sales guide

introduces the basic top
ics necessary to achieve a firm
,

conceptual
grasp o
f

financial

selling
. During this introduction, the WebSphere Rapid Investment Justification (RIJ) model is
presented and
used to illustrate the

basics of financial selling
and

provide
some
real
examples
t
o serve
as a learning aid. This guide should be the first guide you read before tackling solution selling or
attempting to use the RIJ model in real sales situations.



















Dave Roush

Solution Architect

WW WebSphere Sales

J
uly

7
, 2003

Version
1
.
0
































© 200
3

IBM

Corporation. All rights reserved.

The information contained in this document represents the current view of
the
IBM

Corporation on the issues discussed as of the date of publication. Because
IBM

must respond
to changing market conditions, it should not be interpreted to
be a commitment on the part of
IBM
, and
IBM

cannot guarantee the accuracy of
any information presented after the date of publication.



INTR
ODUCTION

................................
................................
..........

1

Who Should Read This Paper

1

Prerequisites

1

CUSTOMER MOTIVATIONS

................................
........................

2

The Sales Model Spectrum

2

Value

vs. Risk

3

Winning with Value

4

Introducing the Rapid Investment Justification Model

5

UNDERSTANDING CUSTOM
ER NEEDS

................................
......

7

The Business Assessme
nt

7

Business Assessment Examples

8

Needs Assessment Profile

8

Business Assessment Profile

8

CONCEPTUALIZING SOLU
TIONS TO SATISFY NEE
DS

.............

9

Solution Definition

9

Solution Patterns

10

F&T Solutions

11

Solution Definition Examples

15

Solution Bill of Mate
rials

15

GETTING A HANDLE ON
COSTS AND BENEFITS

....................

16

Cost


Benefit Analysis

16

Current Operational Cost Basis

16

Proposed Solution Costs

17

Quantifying Business Benefits

18

Cost
-
Benefit Examples

19

Current System Cost Summary

19

Upfront Investment Summary

19

Ongoing Operational Cost Summary

20

Savings Profile

20

CONTENTS

UNDERSTANDING INVEST
MENT RISK

................................
....

21

Risk Profile

21

Business Risk

21

Technology Risk

22

Scoring Risk

23

Risk Profile Examples

24

BRINGING IT ALL TOGE
THER

................................
..................

26

Financial Justification

26

The Financial Scorecard

26

The Solution Proposal

30

Financial Justification Examples

30

THE SOLUTION SALES L
IFECYCLE

................................
.........

32

The Plan
-
Do
-
Review model

32

SUMMARY

................................
................................
.................

34




WebSphere RIJ


Introduction to Financial Selling

1

In today’s business climate, business and IT executives
alike
are looking for a rapid
and balanced economic assessment of
technology

investme
nt alternatives.
This
sales guide is meant to provide you with an introduction to financial selling, which is
the basis for performing such a balanced economic assessment. You will be
introduced to the key aspects of cost
-
benefit analysis and financial j
ustification.
Additionally, you will also learn about a financial sales process which can be used
to systematically produce financial sales proposals for your customers. This sales
process is called the Rapid Investment Justification (RIJ) model.

Who Sho
uld Read This Paper

All software sales professionals who want to learn how to beat the competition and
increase the size of their software deals through the efficient use of a financial sales
model.

Prerequisites

A passion for overachievement, a love for s
elling, and a desire to demystify the
sometimes complex concepts of financial s
ales
.

INTRODUCTION


2

WebSphere RIJ


Introduction to Financial Selling

Enterprise customers are constantly faced with the challenge of acquiring and
implementing technologies, whether it be the infrastructure for web app
lications, or
the web applications themselves. We call
th
is

constant, iterative challenge the

e
-
B
usiness solution lifecycle
.










Figure 1


The e
-
Business solution lifecycle

It begins with a
planning

phase, followed by the
build

phase. It i
s during these 2
phases that customers invest in the building and/or buying of technology to solve
their business problems. Once a solution has been built and/or bought, it is put into
production


we call this the
manage

phase. Once the technology solut
ion has
been implemented, customers will once again spend money to optimize its use
within the budget the business has allocated for its “shelf life”


or better stated as
its projected useful life to the business. We call this the
optimize

phase. Once t
he
technology solution has been used by the business for its original budget life, the
customer re
-
enters the plan phase where they decide to reinvest in the technology
solution and take another trip through the lifecycle or, they may decide to retire the
existing technology solution and start anew.

All throughout these 4 core phases of the solution lifecycle, business leaders in the
customer’s organization are constantly measuring risk and reward. These leaders
are consistently trying to
maximize the busi
ness value

from their investment while
simultaneously
minimizing the risks

associated with it. Understanding these two
key customer motivations is fundamental to successful
financial

selling.

The Sales Model Spectrum

As customers work their way through th
e 4 phases of the e
-
B
usiness solution
lifecycle, they purchase products & solutions from technology companies. Some
are very formal, using RFP’s as a mechanism for documenting their requirements
and purchasing solutions. Others are very informal and simp
ly hide their business
justifications from technology companies, creating the illusion that they buy
products based on price alone. As a solution provider, we at IBM can choose one
CUSTOMER
MOTIVATIONS



WebSphere RIJ


Introduction to Financial Selling

3

of two basic approaches for selling solutions to enterprise customers


th
e
financial
sales approach

or the transaction centered
product
approach. Let contrast the two.

The financial selling approach
is proactive, consultative and focused on selling to
business executives


usually someone with the letter C in their job title


someone
like a CEO, COO, CFO, CIO

or CTO
. These types of executives all have budgets
and the business responsibility to make technology investments.
Financial

selling is
based on having relationships with business executives that takes into
consideratio
n the full lifecycle of a technology solution and helps the customer
uncover and maximize business value while minimizing risk.

Transaction centered
product
selling, on the other hand, is reactive in nature and
often times is only focused on selling one pr
oduct at a time to technical people in
the organization


you know the type


the ones that are only concerned about the
numbers of features or functions in your product. These are the kinds of people
that assume value is equal to price and tend to ignore

business and technical risk
when making recommendations to purchase products.

In the long run,
financial

selling will make you rich once you master the craft where
transaction centered selling will only help you make your quota, assuming you have
the best

price at the right time. Customers need us to learn the
financial

selling
approach and apply it to their e
-
B
usiness solution lifecycle. We at IBM need to
learn it so we can reach the higher hanging fruit and become over achievers.

Value vs. Risk

The val
ue centered selling approach can provide us with a framework for
understanding the relationship between value and risk.











Figure 2


Value vs. Risk



4

WebSphere RIJ


Introduction to Financial Selling

In this example, value is represented by the Y
-
axis and is expressed in terms of
return on inves
tment. Risk is represented by the X
-
axis and is expressed in terms
of a numerical risk score that is calculated during the s
ales

process with the
customer. The purpose of this
“risk/reward scorecard”

is to help IBMers and
customers alike understand the t
wo basic principles of
financial

selling


maximizing
value and minimizing risk. All customers yearn to be enlightened and make the
kind of technology investments that put them in the upper left quadrant of the
scorecard. Often times, however, they find
themselves under investing in the Timid
quadrant or taking unnecessary risk and finding themselves in the Thrill Seeking
quadrant. Sometimes, due to the competitive nature of their business, they make
conscious choices to be Adventurous. The theme behind

a consistent value
centered selling approach is to help customers understand the risk/reward ratio and
move them towards enlightened investments in IBM
WebSphere
solutions.

Winning with Value

Now, let’s take the e
-
business solution lifecycle and unravel t
he spiral, iterative
nature of it by laying out the 4 phases as a left
-
to
-
right time continuum

as depicted
in Figure 3 below.














Figure 3


Compressing the Payback Period

This approach helps us
gain a more complete
understand
ing of

how to win w
ith
value. Its actually very simple


winning is all about working hand in glove with your
customers to compress the estimated payback period for your proposed solutions.
Sometimes this concept is also expressed as accelerating a customer’s “time to
valu
e” for a solution implementation
, which is the point in time that we reach a
positive cash flow
.



WebSphere RIJ


Introduction to Financial Selling

5

Regardless of how the concepts are expressed, the technology company that can
provide the shortest payback period for a technology investment usually wins. A
s
we stated previously, customers make their investment during the Plan and Build
phases of the solution lifecycle. Then, they are encumbered with ongoing
operational costs for a period of time until they reach the point of positive cash flow


or more pr
ecisely stated, this is the point in time where the cumulative benefit is
equal to the original investment. This point in time is simply calculated


it’s the
investment cost divided by the annual benefit. Once you get a handle on this
simple representat
ion of cost, benefit and value you will impress your customer
business executives with an understanding of the language of business and earn a
seat at their table when discussing IBM WebSphere solutions for their e
-
business
problems.


Introducing the Rapid

Investment Justification Model

H
ow can one master the
financial

selling approach and put the spot light on value
during our sales efforts with enterprise customers? We propose that the Rapid
Investment Justification model can be used to do so. RIJ is a
systematic

5 step
process that will guide you through the
financial

selling effort and help you gather
the information necessary to generate a winning proposal for IBM WebSphere
solutions.
Figure 4 below
provides a graphic overview of the RIJ financial sa
les
model.

Figure 4


RIJ Model

This financial sales process begins with a business assessment of customer need
and then is followed by a solution definition step that enumerates one or more “best
fit” WebSphere solutions that are capable of satisfying th
e customer needs
gathered during the business assessment.


Once we have a good handle on satisfying a customer need with a solution, we
proceed to the cost
-
benefit analysis step in the RIJ model. It is during this step that
we capture current cost data a
nd the required investment costs for the solution
scenarios

we defined in the preceding step. Additionally, we also calculate
estimated benefits which the customer may attain after implementing a proposed
solution.

Now that we have a basic handle on a cos
t
-
benefit model for the proposed solution
scenarios,

it is important to assess the risk associated with a solution’s
implementation. This is a very important step because it provides a C
-
level

6

WebSphere RIJ


Introduction to Financial Selling

executive with
an understanding

of
the potential success for a

solution

within the
business. Most executive will not make any substantial technology investments
unless they understand the business and technical risk associated with the
investment.

Finally, after we have completed the risk profile step, we are ready

to propose a
financial justification for a solution. It is during this step that we perform certain
financial calculations to compute the return on investment (ROI), the total cost of
ownership (TCO), the internal rate of return (IRR), the net
-
present va
lue (NPV) and
the payback period. We organize this information into a digital dashboard and
summarize the proposed benefits for implementing a WebSphere solution. Then
we generate a proposal and schedule a time with the customer to review our
findings.

I
t should be noted that the entire 5 step process in the RIJ model is designed to be
executed in close collaboration with the customer.

In fact, you can’t be successful
using RIJ unless you are able to persuade the customer to put some skin in the
game. T
he RIJ model is intended to be iterative in nature. In other words, at the
end of any given step, you and the customer may decide to go back to the
beginning of an earlier step and try again because you weren’t able to get the
answers you dreamed of. Tha
t’s ok


we call it consultative selling

and that’s how
you begin working smarter instead of just harder
. You
will
earn the respect and
trust of the customer when working with them in this collaborative fashion

which will
lead to repeat business and large
r deals in the future.







WebSphere RIJ


Introduction to Financial Selling

7

Customers without need have probably decided to go out of business and are
therefore of little interest to those of us in software sales.
However
, most customers
have

pressing business needs to survi
ve

and grow.

T
echnology
solutions to
business problems
hold the rich promise
of
giving business a competitive edge and
improving their agility in a fast paced world. The biggest challenge we have as
software sales professionals is to understand and quant
ify a customer’s business
need.

The
Business Assessment


The first step

in the RIJ model is the

Business Assessment
. During this step, we
conduct

a
study of
customer need
s
.

This is the most important step because it
provides the context for
satisfying
a

customer
’s

need in
the remaining 4 steps. If we
don’t get this step right, the other four will all be for naught. As we begin to
understand a customer’s need, its important to realize that they always have 3 basic
motivations for talking with you: they

either want to save money, make money or do
both simultaneously. The only reason they want to talk with you is to satisfy one of
these 3 basic needs. With this in mind then, you should begin taking an inventory
of their current strategies, investments a
nd vendor dependencies. Because IBM is
a relationship sales based organization, much of this data has probably already
been captured for you by the client team during their annual planning session that
has been conducted

with the customer. As a
n

F&
T

s
al
es professional
, your job is
to summarize this information into a business assessment profile that enumerates
their top 3 business priorities for the year, describes the customer stakeholder
critical success factors, their strategies for obtaining them and

what their key
performance indicators are for doing so. The account team has probably already
identified technology enablers for solving some of the problems


take note of these
because they have a good reason for identifying them. Once you have comple
ted
this activity, you have painted the selling target

and are ready to proceed to the next
step
.


UNDERSTANDING
CUSTOMER NEEDS


8

WebSphere RIJ


Introduction to Financial Selling

Business Assessment
Examples

The figures below represent some examples of the kind of information gathered
during the Business Assessment step.

Needs Asses
sment Profile

The needs assessment profile simply summarizes the information received by
interviewing the IBM account team and/or the Customer executives and staff.

Figure 5


A Needs Assessment Profile


Business Assessment Profile

The business assessment

profile summarizes the “business scorecard” for the key
stakeholders in the customer organization relative to their measure of success.

Figure 6


A Business Assessment Profile





WebSphere RIJ


Introduction to Financial Selling

9

Solution Definition

Once you ha
ve gained a good understanding of a customer’s need
and identified the key stakeholders in the customer organization, its time to think
about the various means for satisfying those needs.
Generally speaking, the
Solution Definition step in the RIJ model i
s the point in the sales process where we
attempt to determine a “best
-
fit” WebSphere solution for satisfying a customer need.

Customer
s

frequently
prefer technology companies that can provide complete
solutions
.

When a customer thinks about a “solution”
, we find the following
definition to be representative of their expectation:

Solution


A pre
-
configured, customizable combination of software,
hardware and services sold in one transaction to satisfy one or
more of my business needs


Customers take this
view of a “solution” because it simplifies how they think about
and budget solutions to satisfy their business needs.
It’s the “one stop shopping
model”.
Thus, it is advantageous for us to think of solutions in the same manner
because it
we’d like our cu
stomer to think of IBM as the “one stop shop” solution
provider.


Before we begin the task of defining a solution however
, we must realize that as
software sales professionals, we can’t sell solutions without involving other
members of the IBM sales team
in our efforts. The
eServer

team and
the

AIM
Services

team are “must haves” in most solution definition activities.

Why so?
Because they have the knowledge and skills we need to craft the hardware and
professional services components of our solution.

O
nce we gain the commitment
and involvement of our other IBM colleagues in the sales effort, we have essentially
formed a “Solution Definition Team” that will stay with us throughout the RIJ sales
cycle.

CONCEPTUALIZING
SOLUTIONS TO SATISFY

NEEDS


10

WebSphere RIJ


Introduction to Financial Selling

Solution Patterns

“A complex system that works is in
variably found to have
evolved from a simple system that worked…A complex
system designed from scratch never works and cannot be
patched up to make it work. You have to start over with a
working simple system.”


John Gall in
Systemantics: How
Systems Real
ly Work and How They Fail


Enterprise customers are faced with the continuous challenge
of
designing and
implementing
systems

to satisfy business needs
.
Earlier we referred to this
challenge as the
e
-
Business solution lifecycle
.
In this context,
w
e use
the word
s
ystems

refer to those
business processes
implemented
manually by

human
s

and
those that are automated
to

various degrees through the application of information
technology.
The key to
a system’s
success is
keeping it simple

and it

is

useful to
hav
e a mental model for doing so
.

That’s where solution patterns come in.

Simplicity can be
achieved

by
us
ing

proven, repeatable
ideas

to
solve
recurring
problems

during the design phase of solution engineering.
Complex systems are
composed of many finer gr
ained components that are based on simple ideas. The
written representation of these ideas are called
solution patterns
.

Solution patterns,
in addition to solving problems, also facilitate communication
among solution
designers
and institute a
common

bus
iness vocabulary
for those involved.

Within the WebSphere family of technologies we have product
s

which

represent a
broad

range of technology capabilities that, when properly implemented, can satisfy
an equally broad range of business needs.

If one take
s a moment to reflect upon a
set of common customer business needs, such as modernizing existing host
software assets by exposing them for use on the Internet, then the “solution
architect” within us can conceptualize a solution pattern cut from the WebSph
ere
family of product capabilities which might satisfy this need.

For example
, let’s say that a
n insurance

customer has a mission critical claims
processing application running on CICS

and their business executives want to
make certain claims processing fu
nctions available on the Internet for physicians so
that they can inquire as to the status of various claims.

In the spirit of recognizing a simple solution pattern to satisfy this need, it would be
great if the physicians could just use a Web browser to

access the CICS inquiry
transactions to retrieve the information they are authorized to access. However, the
CICS transactions are written to communicate with 3270 “green screen” terminals,
not Web browsers. So, some additional technology will be requir
ed to provide and
interface between the CICS transaction and a Web browser. If we can do so, the
customer can avoid having to rewrite their CICS business logic in a “web enabled”
technology such as J2EE or .NET. Thus, we have envisioned a simple solution

pattern to satisfy this business need


a pattern to provided some “glue” between a
3270 terminal program and a Web browser. We will call this solution pattern “CICS
modernization”.



WebSphere RIJ


Introduction to Financial Selling

11

F&T Solutions

Now that we have an idea of what a solution pattern is and

how you could use one
in the Solution Definition step of RIJ, wouldn’t it be cool if we had some pre
-
defined
solution patterns at our disposal before we began the solution definition effort?

This
would save us and the customer a lot of time assuming that

their business needs
lined up well with one or more of the pre
-
defined solution patterns. Additionally, if
the pre
-
defined solution pattern wasn’t a perfect fit for satisfying their need, it will be
easier to customize an existing pattern than to create
a brand new one from
scratch.


Sometimes new patterns do need to be created however.

A “solution architect”
needs to maintain a balanced perspective during the solution definition effort. It is
often easy to try to “force fit” a solution pattern to sati
sfy a specific need


we call
this the “hammer and nail syndrome”. If you have a hammer in your hand,
everything begins to look like a nail in need of hammering. Realize that a pre
-
defined solution pattern is simply a recipe for satisfying a need and som
e
customization will almost always be required.

Within the WebSphere product family, the Foundation & Tools products provide a
rich set of capabilities for building, deploying and managing e
-
Business applications
for the On Demand environment. These produ
cts possess the key, strategic
software enablement capabilities for our customers to use when building their On
Demand computing infrastructure. The WW WebSphere F&T Sales Team has
taken the lead in defining some solution patterns for our product portfoli
o so that
they can be used with RIJ and the financial sales efforts. Let’s take a look a
high
-
l
evel

look at some of them in the matrix below:

Solution Pattern

Enterprise Modernization

for z/OS

Business Need

To find an efficient, economical and effective
means to expose existing host software assets on
the Web for the purpose of connecting to partners,
suppliers and customers

to our business
.

Solution Description

Enterprise modernization allows a business to re
-
use existing applications and data, and leve
rage all
enterprise skills, using the power of the
WebSphere Platform to cost
-
effectively deliver new
e
-
business on demand architectures.

Business Benefits



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12

WebSphere RIJ


Introduction to Financial Selling

Solution Bill of Materials

Hardware



[ none, assumes z/OS host has excess capacity ]

Software



Various software

products from the F&T portfolio.
Please read the
Enterprise Modernization
Users’ Guide

for detailed information.

Services



Various AIM services offerings. Please read the
Enterprise Modernization Users’ Guide

for
detailed information.

Support



IBM Softw
are Support

Education/Training



Various WebSphere education offerings. Please
read
the Enterprise Modernization Users’ Guide

for detailed information.


Solution Pattern

Improve I/T Operational Efficiency

Business Need

Drive cost out of the operational s
ide of the
information technology business to create a
funding pool for new
application development
projects
.

Solution Description



Consolidate over built infrastructure by
reducing number of servers
and people
needed to run existing applications



Re
-
host w
eb applications running on non
-
strategic
application
platforms to WebSphere
Application Server to reduce future
infrastructure expense



Simplify the deployment, management and
support processes for web applications



Provide development platform for
re
-
hosted

WebSphere applications

Business Benefits



Improve operational productivity



Reduce hardware & software maintenance and
licensing costs



Reduce
management &
support costs



Improve application reliability & availability


Solution Bill of Materials

Hardware



De
pendent on customer’s current computing
capacity. Please read the
Improve I/T
Operational Efficiency Users’ Guide

for more


WebSphere RIJ


Introduction to Financial Selling

13

detailed Information.

Software



Various software products from the F&T portfolio.
Please read the
Improve I/T Operational
Efficiency

Users’ Guide

for detailed information.

Services



Various AIM services offerings. Please read the
Improve I/T Operational Efficiency Users’
Guide

for detailed information.

Support



IBM Software Support

Education/Training



Various WebSphere education offeri
ngs. Please
read the
Improve I/T Operational Efficiency
Users’ Guide

for detailed information.

Solution Pattern

Accelerate the Application Development Lifecycle

Business Need

Build new e
-
Business applications quickly, with
better quality and integrate
my existing developer
skills into a common lifecycle model to optimize
their knowledge contribution and enhance their
productivity.

Solution Description

Accelerate team application development
throughout the life cycle while productively
leveraging existi
ng software assets and human
resources.
Provides s
eamless integration of the
WebSphere Studio developer tooling with the
WebSphere Application Server
for an
integrated
design, development and testing
experience
.
Coupled with Rational’s software engineer
ing
processes, methodologies and tools, and Eclipse
-
based partner plug
-
ins, worldwide development
teams
can
predictably, rapidly and efficiently
create, deploy and maintain higher
-
quality e
-
business applications at a lower cost when
compared to competitive

solutions.


Business Benefits



Accelerate reduction of the application backlog



Improve application code quality resulting in
improved application reliability



Reduce developer skill requirements and
improve productivity



Integrate developer talent across a
wider range
of projects using a common lifecycle process

14

WebSphere RIJ


Introduction to Financial Selling

and a role
-
based development model


Solution Bill of Materials

Hardware



Dependent on customer’s current computing
capacity. Please read the
ADLC

Users’ Guide

for
more detailed Information.

Software



Various software products from the F&T portfolio.
Please read the
ADLC

Users’ Guide

for detailed
information.

Services



Various AIM services offerings. Please read the
ADLC

Users’ Guide

for detailed information.

Support



IBM Software Support

Education/T
raining



Various WebSphere education offerings. Please
read the
ADLC

Users’ Guide

for detailed
information.

Figure
7

-

F&T Solution

Patterns

Other solution patterns are under development and will be announced separately
over the course of the year.

Remem
ber, you should use these solution patterns as
recipes for satisfying customer needs during the solution definition process. Actual
customer need will vary depending on their individual situation. Thus, you will need
to customize the bill of materials fo
r most sales engagements.



WebSphere RIJ


Introduction to Financial Selling

15

Solution Definition Examples

The figures below represent some examples of the kind of deliverables generated
during the Solution Definition step
.

Solution Bill of Materials

During the Solution Definition step, the solution defini
tion team works together to
customize a bill of materials that represents a solution configuration which the
customer can purchase. Pre
-
configured WebSphere solutions will have the bill of
materials partially completed when you use the
appropriate
RIJ spr
eadsheet during
the sales engagement. The solution definition team will add and subtract items
from the pre
-
configured bill of materials to represent the various hardware,
software, services, support and training items that make up the solution which is t
o
be proposed.

Here is an example of a bill of materials for a solution definition

effort.

Figure
8



A Solution Bill of Materials


16

WebSphere RIJ


Introduction to Financial Selling

Cost


Benefit

Analysis


In the two
preceding

steps

of the RIJ model
, we learned ho
w to assess the
customer’s business needs and map them to WebSphere F&T Solution
s
, which
included the appropriate combination of hardware, software, services, support and
education. Now, its time to “run the numbers” so we can gain an economic
understand
ing of our solution proposal.


Prior to further elaboration on this topic however, it should be noted that we may
arrive at an economic conclusion during Cost
-
Benefit analysis step we don’t enjoy.
That’s OK. If we do come to a conclusion we don’t like,
we need to go back to one
of the preceding two steps and refine the definition of need and/or change the
scope of our solution proposal

in collaboration with our customer and IBM
teammates
. Once we’ve done so, we can then reenter the Cost
-
Benefit analysis

step with the hope of arriving at a different economic conclusion.

Until now, we haven’t spoke much of the RIJ spreadsheet tool written in Microsoft
Excel by the WW WebSphere F&T Sales Team. This spreadsheet tool contains a
variety of information contain
ers that can be used by the solution definition team
and the financial justification team for data capture and analysis. There is a
worksheet tab in the spreadsheet for each step in the RIJ process. Now that we are
examining the Cost
-
Benefit analysis ste
p, you will soon see that the spreadsheet
can be used as a handy tool for recording captured cost data into containers that
will be used to quantify benefits, calculate total cost of ownership and ultimately
calculate the financial justification for inclus
ion into a solution proposal from IBM. In
the reaming description of the Cost
-
Benefit analysis step, we will refer to the
container concept frequently.

So, what do we do in the Cost
-
Benefit analysis step? Essentially, we collect and
summarize financial d
ata which we have gathered from the customer into
3
aggregate information containers



Current
Operational
Costs,
Proposed Solution

Costs and Business Benefits.

Current
Operational
Cost Basis

In order to establish the “cost context” for a proposed solut
ion investment, its
important to establish the current
operational
costs basis for the scope of study.
For example, if the customer is running 3 Microsoft applications in production and
they wish to re
-
host those applications on WebSphere and consolidate
the workload
on a more economical infrastructure, then we would establish the current
operational
cost basis based on the cost to maintain, manage, operate and support
the 3 Microsoft applications.

Once we establish this
operational
cost basis, we can fo
recast how much it would
cost to operate the “as
-
is” environment for an extended period of time, say 5 years,
by simply multiplying the annual cost of running the Microsoft applications by 5.
This number would represent the “cost of doing nothing d
if
feren
t” for the next 5
GETTING A HANDLE ON
COSTS AND BENEFITS



WebSphere RIJ


Introduction to Financial Selling

17

years and would represent the 5 year total cost of ownership (TCO) for the
Microsoft applications.

As it turns out, the RIJ model represents the current
operational
costs basis using
nine standard categories. The
se

nine
standard
categori
es establish an “apple
-
to
-
apples” comparison capability between an existing situation and proposed solution
investments which will change the
mix in
current cost structures. This is a very
important point to understand. Many of our competitors hate to us
e these standard
categories because they surface the true costs of technology ownership. If we and
our customers use this sort of standardized approach to detailing cost information,
our customer will gain a truer appreciation for total cost
of ownership
and our
competitors will have to compete on a level playing field, belly to belly, with IBM.
Some time we will loose, but often we will win.

The nine categories for establishing the current
operational
cost basis are listed
below
:



Hardware Maintenance Cos
ts



Software Maintenance Costs



Storage Costs



Network Maintenance Costs



Consulting & Training Services Costs



Facility Costs



Personnel Costs



Downtime Costs



Support Costs

Proposed Solution Costs

During the Solution Definition step, we detailed a bill of materi
als that represent the
acquisition costs for the solution.

A CFO would look at the acquisition cost as an
investment and will ask the I/T organization to justify this investment.
Furthermore,
the CFO will want to understand the cost to operate and mainta
in the investment
over a budgeting time frame, usually 3 to 5 years.

The RIJ model breaks down the solution costs into 2 pieces


the
u
pfront
i
nvestment

and the
o
ngoing
o
perational
c
osts
. In order to maintain a consistent
financial model, the
u
pfront
i
nve
stment and the
o
ngoing
o
perational
c
osts use the
same nine cost categories mentioned above. Let’s take a closer look.

Upfront Investment

The upfront investment for our proposed solution will be detailed using the 5
a
cquisition cost

elements

listed in our
bill of materials: Hardware, Software,
Services, Support and Education/Training.
Naturally, these 5 cost elements map
neatly into our nine cost categories.
If we did a good job of estimating the pricing

18

WebSphere RIJ


Introduction to Financial Selling

for the components in the bill of materials, we ca
n easily transfer those cost
elements to the upfront investment container so that we don’t need to spend a lot of
time reviewing the acquisition costs with our customer. However, the customer may
wish to add other cost elements to the upfront investment w
hich are associated with
the solution but are not provided by IBM. If so, they should be added to the upfront
investment container before proceed
ing

to capturing the ongoing operational costs
.

Ongoing
Operational
Costs

One might suspect that if the custom
er purchases our proposed solution, they will
have to maintain, manage, operate and support it for the next 3
-
5 years. So, we
need to capture the ongoing cost data for our proposed solution and store it in the
cost containers set aside for this informatio
n in the RIJ spreadsheet. For example,
the IBM WebSphere software purchase for solution implementation will have an
annual maintenance price associated with its use. Thus, there is a row in the
ongoing cost container for recording the annual software mai
ntenance charge for
the software based upon the discounted purchase price of the software.
Accordingly, we can also record similar ongoing costs data for the remaining 8 cost
categories. Once you have completed this exercise, an estimated total cost of
o
wnership for the proposed solution can be simply calculated by adding the upfront
investment total to the ongoing operational cost total.

Quantifying Business Benefits

Up to this point in the Cost
-
Benefit analysis step, we have calculated the current
cost
s basis and the proposed solution costs. Now its time to capture various
business benefits associated with the proposed solution.

These benefits are simply
stated as
:



R
evenue
i
ncreases

and/or revenue p
rotection,

or



C
ost

reductions and/or cost avoidance

T
he business benefits we usually focus on with WebSphere solutions have to do
with cost reduction or cost avoidance. Often times we don’t have the sales or
consulting experience necessary to help a customer think about projecting new
revenues for their bus
iness because we would have to have a good understanding
of their business model. However, the RIJ model has a container to record revenue
contributions from a solution implementation if the customer has prepared and will
endorse the data.

But, there are
still many benefits to think about within the cost dimension. For
example, productivity increases are directly translated into a business benefit by
using
a
productivity increase to compute the bottom line savings based on the cost
of labor.

Other types
of savings can be easily calculated as well, such as reduced
hardware/software maintenance, reduced payroll costs due to infrastructure
consolidation, reduced downtime expense achieved by migrating to a more robust
WebSphere platform, and a reduction of th
e application backlog liability due to an
acceleration of the application development lifecycle.



WebSphere RIJ


Introduction to Financial Selling

19

All in all, the Cost
-
Benefit step is one of the more exciting steps in a financial sales
engagement. This is where the “rubber meets the road”. Sometimes we
don’t get
an answer we like, so we make a u
-
turn in the RIJ process and go back to the
Business Assessment or the Solution Definition step to rework the solution. Even
then, we may not get an attractive answer.

That’s when we need to apply a little
conve
ntional
sales wisdom: “when the horse dies, dismount!”. If you can’t get the
right answer after a few

valiant attempts
, move on to the next sales opportunity.

Cost
-
Benefit Examples


Current System Cost Summary

Here is an example of a current cost basis f
or someone running a single B2C
Microsoft application in production today.


Figure
9



Current Cost Basis for 5 Years

Upfront Investment Summary

Here is an example of the upfront investment cost container representing a
WebSphere F&T solution for server c
onsolidation and re
-
hosting a Microsoft COM+
application using AIM migration services to convert the application to WebSphere.

Figure
10



Upfront Investment Summary




20

WebSphere RIJ


Introduction to Financial Selling

Ongoing Operational Cost Summary

Based on the same scenario described in the upfront i
nvestment example, here is a
summary of the ongoing operational costs for the WebSphere solution based on
server consolidation and application conversion.

Figure
11



Estimated ongoing operational cost summary including amortization &
depreciation.


Saving
s Profile

Here is a business benefit savings profile that compares current systems costs
based on the nine categories to the savings generated in each of the 5 years for a
proposed solution.

Figure
12



Estimated server savings profile






WebSphere RIJ


Introduction to Financial Selling

21

Risk Profile


Up to this point in the RIJ process we have gained a good understanding of the
customer’s need, a solution to satisfy that need and an economic understanding of
costs and benefits associated with the solution. Some seasoned fi
nancial sales
people may be inclined to declare victory and summarize the information we’ve
gathered, analyzed and validated so far into a proposal. However, both the IBM
team and the customer must frame the risk associated with a solution investment
befo
re most CFO’s will spend a dime.

When you think about it for a minute, it makes sense. Would you take $500
,000

and just plop it into the stock market without first understanding the risk? Probably
not. Most CFOs won’t do so either with their hard earn
ed cash when it comes to
investing in WebSphere solutions.

That is why we now need to develop a risk
profile for the solution investment.

Whenever a business considers spending money on technology to satisfy business
needs, there are two dimensions of ris
k involved


business risk and technology
risk. Let’s examine both in a little more detail.

Business Risk

There are many unknowns in business.
Up to this point in the
RIJ
sales
process,
the customer and the IBM team have probably uncovered a few of them.

They are
probably characterized as assumptions, concerns, political issues, budgetary angst
or just plain old lack of confidence the “course and speed” proposed by the solution
will not be accepted by “the business” for some anticipated reasons.

UNDERSTANDING
IN
VESTMENT RISK


22

WebSphere RIJ


Introduction to Financial Selling

Now is
the time to formalize our documentation of the issues that constitute
business risk. There is a simple approach for doing so by using a simple
Risk
Profile
template:

Risk Category

Risk Statement

Risk Mitigation Plan

Alignment Risk

Some key stakeholders
d
isagree with solution
approach.

Educate those in
disagreement and obtain
commitment prior to the
beginning of solution
implementation.

Benefit Risk

Many benefits are based on
estimates due to lack of
information from 2 key
departments

Request CFO assign s
taff to
validate data from 2
departments.

Operating Risk

The customer call center does
not have budget for full
training curriculum.

Adjust cost model to include
trained contractor personnel
for staff augmentation if
needed.

Figure
13



Business Risk Pro
file

A profile like the example above is exactly what a business executive is looking for


a simple summary of the risks and the plans to deal with it. This approach allows
customers to compute a “comfort level” with the solution and the people responsib
le
for designing and implementing it.

Technology Risk

As you might imagine, the customer needs to get comfortable with the technical risk
of a WebSphere solution just like they did with the business risk. Using the same
simple
template

we used for the Bus
iness Risk Profile, we will now create a
Technical Risk Profile like the one below:












WebSphere RIJ


Introduction to Financial Selling

23

Risk Category

Risk Statement

Risk Mitigation Plan

Software

Risk

Application Server
Product is
new in the market & untested
here

Ensure user acceptance test
plan i
s covered in
implementation plan and that
system test results meet
established criteria.

Network Risk

Remote business units will
experience slow response due
to 9600 connections.

Include network upgrade in
cost case for v2
implementation. Get remote
busin
ess sign off on this
approach.


Security Risk

New web application requires
individual authentication to
meet requirements & no
central security authority
exists.

Establish centralized security
authority in solution definition
and add to cost case.

Figure

14



Technical Risk Profile

This example of a Technical Risk Profile summarize the high level concerns for the
solution. By its very existence, we have formulated the perfect tool for setting
customer expectations for our technical implementation. As th
e old saying goes “its
better to under sell and over deliver than the other way around”. Using a Risk
Profile tool is a natural way to do so.

Scoring Risk

Once we capture the elements of risk, its hand to score the potential impact of the
risk so that one

can judge how concerned they should be. In the RIJ model, there
is a simple means for doing so. In the example below,
we’ve developed a simple 6
point scoring system. A score of zero signifies that there is no risk, a score of five
signifies that there

is high risk. Obviously, taking this approach is more art than
science. However, it turns out to be an effective way to weigh the impact of risk.


Risk Category

Risk Statement

Risk
Score: 0
-
None, 5
-
High

Alignment Risk

Some key stakeholders
disagree wit
h solution
approach.

2

Benefit Risk

Many benefits are based on
estimates due to lack of
information from 2 key
departments

4


24

WebSphere RIJ


Introduction to Financial Selling

Operating Risk

The customer call center does
not have budget for full
training curriculum.

3

Software Risk

Application Server Pr
oduct is
new in the market & untested
here

3

Network Risk

Remote business units will
experience slow response due
to 9600 connections.

1

Security Risk

New web application requires
individual authentication to
meet requirements & no
central security autho
rity
exists.

2

Average Score:

2.5

Figure
15



Scoring Risk

For brevity’s sake, we removed the Risk Mitigation Plan column form the example
above. If you were documenting a risk profile for a real customer solution you
would keep all 4 columns in tact.


The average score computed above, in and of itself, probably doesn’t mean a lot.
But, if you are comparing two different solutions, the two different risk scores can be
a useful comparison. One can gain an appreciation for what we term the “Risk /
Rewar
d Ratio” between one or more solution scenarios. After all, that is why
business executives are paid to make big decisions


to judge the trade offs of
making one decision versus another. We can help them by giving them a tool to
compare these tradeoffs
and win their confidence in the process.

Risk Profile Examples

We covered the simple approach to creating a Risk Profile in the discussion above.
Sometimes, a customer may not judge this approach to be complete enough for the
size of the investment they
are considering or the revolutionary impact the
investment may have on the business.

The RIJ model has a more comprehensive approach to profiling this kind of risk, but
i
t

is
also more complicated and takes more time to complete. We call this approach
the

RIJ In
-
depth Risk Assessment and it is well documented in the sales guide
named
The WebSphere Rapid Investment Justification Model


An In
-
depth
Risk Profile Questionnaire
.

You should contact the WW WebSphere F&T Sales Team before attempting to use
this

approach to create a risk profile

because the questionnaire is quite involved


WebSphere RIJ


Introduction to Financial Selling

25

and requires some consulting experience to use properly
. However, here is an
example of the scorecard created using the In
-
depth Risk Assessment.

Figure
16



An In
-
depth Risk P
rofile Scorecard






26

WebSphere RIJ


Introduction to Financial Selling

Financial Justification


In the
preceding

4 steps, the RIJ process has uncovered important customer
business needs, formulated a solution to satisfy those needs, produced a cost
-
benefit analysis associated wit
h implementing and operating the solution for a
period of time and profiled the risk associated with th
at

solution. Now, its time to
bring it all together into a digital dashboard for a business executive to digest.

Once
we complete this task, we will ha
ve most of the information we need to make a
winning WebSphere proposal to our customer.

The Financial Scorecard

The financial scorecard is a digital dashboard of financial metrics that measure the
relative merit of a WebSphere solution investment. During

this fifth and final step in
the RIJ process, we will compute the solution investment pay back period (PB), the
discounted return on investment (dROI), the estimated total cost of ownership
(TCO) for the solution, the estimated net present value (NPV) for

the proposed
investment and the internal rate of return (IRR).

Additionally, we will graph the
various metrics to illustrate the significance of certain relationships which we can
easily include in the final proposal.


These terms may be new to most of
us and they deserve further explanation in
order to gain a firm understanding of financial basics.

Financial Basics

There are many different techniques
for
measur
ing

the financial
merits of a
WebSphere solution investment.

The vast majority of companies us
e one or more
of the following

metrics

we mentioned above
to make their "go or no
-
go" investment
decisions
.

To better understand the
se

terms we will work through them using
a

simple
example.

Imagine
you plan to buy a new car so that you can become a 2 car

family

and relieve the contention for a single car
.
Let's assume that the initial costs for this
car is
$10,000 and that it brings a

productivity boost to
your family worth $5,000 per
year based on calculating all the lost time you spend coordinating the

use of one
car.

After all, your time is valuable!

Before discussing the
example further
, it

s important to understand two
basic
concepts that form the basis for

the financial
analysis
. They are:



Discount Rate



your cost of capital



Present Value



today’
s value of future money based on the discount rate

What is a
Discount Rate
?

Let’s assume you have
$10,000 cash it can use any way
you

want.
You

could buy
that new car
or it could invest it in the bank at a 10% interest rate. Let's say
you
decide not to buy

the car
and

instead invest all $10,000

with the bank
. After one
BRINGING IT ALL
TOGETHER



WebSphere RIJ


Introduction to Financial Selling

27

year,
you

would have $10,000 plus interest on $10,000 at a 10%

rate. So
you

would
have $10,000 + ($10,000 * 10%), or $11,000
.

During year two,
let’s say you don’t withdraw the money and you

keep it in the
bank.

This means
you

are

investing

$11,000, not just the initial $10,000 amount.
So at the end of the second year,
you

then ha
ve

$11,000, the

sum at the end of the
first year, plus interest on $11,000 at a 10% rate. At the start of year th
ree, this

means
you have

$11,000 + ($11,000 * 10%), or $12,100. If
you
leave all
your

money invested during

year three, it will build up 10% interest on $12,100 and will
end the year with $12,100 + ($12,100 * 10%), or

$13,310.

This process can be
easily
e
xpressed by saying that the amount
you have

after "x"
number of years is

equal to its initial principal (here $10,000) multiplied by its rate of
return to the power of "x"
.
After three

years,
you

ha
ve

$10,000 * (100% + 10%)^3,
or $13,310. This is defined

as compound interest. The

interest rate to the power of
"x" is the compounded interest rate.

The
discount rate

is simply the
inverse

of the interest rate used in the above
compound interest example.

To calculate a discount rate, you have to start with
you
r final amount and try to get back to your initial

investment. At what rate would
you have to discount the $13,310
you

will have

in year three for it to equal

the initial
$10,000. In other words, what discount rate would satisfy the
following equation:

$10
,000 = $13,310/(100% + discount rate)^3?

For
your

investment of $10,000, the discount rate is 10%.

What is
Present Value
?

Imagine now
you

going to buy the new car instead of investing the $10,000 in a
bank
.
You
will want to compare the

return, let's say ov
er three years, from
buying a
new car
, to the return
you

w
ould get just by leaving

money in the bank and
expending no effort.

But the benefit of
buying anew car is not simply
three years
times $5,000 (annual benefit) per year, or $15,000. This approach do
es not take
into account

the time value of money.

In finance, time value of money is expressed as the present value of a future sum of
money. To find the present

value of a future benefit, ask

yourself

"What is x
number of dollars to be received in the fu
ture worth to me

right now?"
.

This is
where the compound interest and the discount rate become important.

The
$5,000
that
you

will

receive next year is numerically equal to some "y" amount of dollars
you have

invested in the bank now.

This "y" dollar i
s the present value.

To calculate this "y" dollar amount, we have to use the

discount rate, which, as
explained before, is the
“inverse

interest rate

.

Present value is equal to the

future
benefit in year "z" divided by the quantity ((1 + discount rate)
compounded by "z").

So
,
the present value of $5,000 received in 12 months is $5000/(100% + the 10%
discount rate)^1, or about

$4500. If
you

had $4
,
500 now and invested it,
you

would
have about $5,000 in 12 months.


28

WebSphere RIJ


Introduction to Financial Selling

However,
you
want to know the value of be
nefits
you

will receive over three
y
ears

with the purchase of your second car.
We

need to find out the present value of
$5,000 received after one year, $5,000 received after two years, and

$5,000
received after three years

using a discount rate of 10%, wh
ich expressed as 1.10 in
our formulas
.

To do so, we use the formula
s in the table

below:




End of Year 1

End of Year 2

End of Year 3

Benefit

$5,000

$5,000

$5,000

PV Formula

$5,000/((1.1)^1)

$5,000/((1.1)^2)

$5,000/((1.1)^3)

PV of Benefit

= $4,545
.45

= $4,132.23

= $3,756.57

3 Year Benefit =

$4,545.45

+
$4,132.23

+
$3,756.57

=
$12,434.25


What is Net Present Value?

Net Present Value (NPV) gives you a dollar value of your expected return and
therefore indicates the

magnitude of your
investment
. I
t is
simply calculated
by
summing the present value of the benefits for each year

over a specified period of
time, then subtracting the
upfront investment
.

In our example, we subtract our
$10,000 investment for the second car from the PV of $12,434.45 ,g
iving our family
a NPV of $2,435. That means we generated a profit because we invested in a
second car. However, we didn’t make as much profit as we would have made by
putting the money in the bank (
$13,310
). Now, we have to decide if convenience is
mor
e important than profit for our family. We may even go back and work our
benefit numbers a little more and realize that we under estimated the annual benefit
of having a second car. So goes the process of financial justification.

What is
discounted
Retur
n on Investment?

Return on Investment (ROI) is arguably the most popular metric
, and the most
misused metric,

when it is necessary to compare the

attractiveness of one business
investment to another.
ROI is simply calculated as a ratio: net
-
benefit / upfr
ont
-
investment. However, this simple formula doesn’t take into account the time value
of money for the investment return. Thus, we need to use our present value as a
basis for calculating ROI


we call the answer the discounted ROI.

Your
discounted
retur
n on investment
(dROI)
equals the present value

of your
accumulated net benefits (gross benefits less ongoing costs) over a certain time
period, divided by

your
upfront investment
.

The

equation for a three
-
year ROI is:
(Net benefit year 1 / (1 + discount

rate) + net benefit year 2 / (1 + discount

rate)^2 +
net benefit year 3 / (1 + discount rate)^3) / initial cost.

So if the initial cost for your
new car is
$10,000

and

your annual

benefits less annual costs are constant at
$5,000 for the next three years
, and the discount rate is 10%,

your 3
-
year ROI
would be:

(($5,000 / (1 + .1)) + ($5,000 / ((1 + .1)^2)) + ($5,000 / ((1 + .1)^3))) /
$10,000 = 124%
.



WebSphere RIJ


Introduction to Financial Selling

29

While
the d
ROI tells you what percentage return you will get over a specified period
of time, it does n
ot tell you

anything about the magnitude of the project.
We use
NPV to judge magnitude.
So while a 124% return may seem attractive initially,
would

you rather have a 124% return on a $10,000 project or a 60% return on a
$300,000 investment? That is

why yo
u will often want to know the Net Present
Value

in addition to dROI
.


What is a Payback Period?

The p
ayback period is used to find out how long it will take for an investment to
show a profit. It is

important when time and cash flow are in issue. It is the

time it
takes for your project to recoup the funds

expended, and normally is expressed in
years or months. The equation for a simple payback period is:



upfront

cost / annual net benefit.

So if we use the same new
car purchase

example as before, your payb
ack period
is: $10,000 / $5,000 = 2 years.

Payback is very easy to calculate but it doesn't tell you about the magnitude of your
savings, or even how

your investment performs after your benefits equal the initial
costs.

What is Internal Rate of Return?

Int
ernal Rate of Return (IRR) is the most sophisticated of
financial
metrics and often
is used to analyze

large, multi
-
year investments. IRR equals the percentage rate by
which you have to discount the net

benefits for your time period until the point that
th
ey equal the initial costs.

The rate of return calculated by IRR is the discount rate you would need to apply to
your

benefits to obtain a net present value of zero. The expression for IRR (in this
case, a three
-
year IRR) is:

initial costs = (net benefit
year 1 / (1 + IRR)) + (net benefit year 2 / ((1 + IRR)^2))

+
(net benefit year 3 / ((1+IRR)^3)

IRR often is calculated through a trial
-
and
-
error process or data table, since solving
the above equation is

very time
-
consuming.
The good news is that Microsoft

Excel
has a built
-
in function for computing IRR.
If we use the same new
car purchase

example as before, the IRR would equal

23%. This gives an NPV of:

(($5,000 / 1.23) + ($5,000 / (1.23^2)) + ($5000 / (1.23^3)))
-

$10000 = 0


which follows the relations
hip between NPV and IRR.





30

WebSphere RIJ


Introduction to Financial Selling

The Solution Proposal

Once you have calculated all the relevant financial metrics, it

s time to summarize
them into a formal proposal to be delivered to your customer. As with most written
proposal
s,

follow this guideline: “le
ss is more”. Most business executive
s, if they
have a budget to buy your WebSphere solution,

are very busy and will not usually
read more than one

to two

page
s

of information. Summarize the key business
benefits, use the digital dashboard and a few selec
ted charts to tell your story.

Remember, you will probably have to go through this proposal cycle
several times
for the same solution until the customer sees what they want. So, don’t spend an
enormous amount of time creating a tome for them to read. I
f you feel it is
necessary to provide detail, put it in an appendix and refer to it in the one
-
two page
summary sheet.

Financial Justification Examples

The figure below represents a digital dashboard which summarizes the financial
metrics for a 5 year inv
estment.

Figure
17



Digital dashboard

One can easily find the relevant financial metric and executives love its simplicity.














WebSphere RIJ


Introduction to Financial Selling

31

The figure below compares the annual operating costs of a current system to a
proposed solution.

This might be why the
y say a picture is worth a thousand words,
or in this case,
millions
of dollars.

Figure
18



Annual Cost Comparisons


In the figure below, we itemize where the savings come from for a proposed
solution. As with most solutions, savings related to either a
reduction in staff and/or
an improvement in productivity represent the biggest benefits.

Figure
19



Savings Profile



$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
Current System
Solution 1
Annual Operating Cost Comparisions
Support Costs
Downtime / Year Cost
Personnel Costs
Facilities Costs
Consulting & Training
Services
Network Maintenance
Storage
Software Maintenance
Hardware Maintenance
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Solution 1
Where do the Savings Come From?
Support
Downtime
Personnel
Facilities
Consulting & Training Services
Network
Storage
Software
Hardware

32

WebSphere RIJ


Introduction to Financial Selling

The consultative sales approach can be decomposed into a set of methods that
increase the odds of success.

As such, t
he basics of solution selling are no
different than any other complex endeavor. The over achievers all have one
characteristic in common: they plan their work and work their plan.

The WW WebSphere F&T sales team recommends the Plan
-
Do
-
Review m
odel as a
set of methods for implementing a consultative sales approach. Let’s take a closer
look.

The
Plan
-
Do
-
Review

model

All successful sales efforts, unless someone else did the work for you, began with a
plan. Once the plan is developed, documented
and understood, people execute
the plan. Then, they review their effort and decide if they should try
again assuming
the desired results were not achieved. We call this approach the Plan
-
Do
-
Review
model as depicted in the figure below.












Figure

20



The Plan
-
Do
-
Review
model

RIJ is in the center of the model because justifying a financial WebSphere
investment is the center of what we do. The RIJ steps we previously coverer in this
sales guide constitute the disciplined activities during the
Do

p
hase. However, it
would be a good idea to understand why we are doing them first. We discover the
“why” in the
Plan

phase.

In the
Plan

phase, we attempt to discover if our customer is even remotely
interested in a WebSphere solution. We begin by present
ing our portfolio of
WebSphere solutions to the customer after strategizing with the account team to
identify certain needs and business priorities that fit well with our solution
capabilities. We also qualify our customer during the
Plan

phase to make su
re they
have a budget for a solution and approval to spend it if the solution fit is well
formed. If so, we gain customer agreement with a share vision for investigating a
THE SOLUTION S
ALES

LIFECYCLE



WebSphere RIJ


Introduction to Financial Selling

33

solution fit for their business needs in more detail. One of the pre
-
built RIJ solu
tion
spreadsheets can be used to show the customer the process and detail of the RIJ
model and how it can be used to determine a good fit.

Next, we execute the 5 RIJ steps in the
Do

phase as previously described in this
sales guide.

We will most likely it
erate through the five steps a couple of time
before we make our first proposal because both the customer and the IBM team will
be learning the RIJ model for the first time.

Once we complete the 5 RIJ steps in the
Do

phase and deliver a proposal to our
c
ustomer, we will enter the
Review

phase to digest the feedback we get from the
customer as well as feedback from members of the IBM sales team.

Often times,
this is where we learn of a competitive threat which was not uncovered during the
initial
Plan

pha
se. Thus, we must reassess our odds of winning the business and
adjust our plan as necessary. If we decide we can win, we proceed again to the Do
phase and modify the deliverables we created the first time through with the
feedback we gained from the
Rev
iew
phase.

The Plan
-
Do
-
Review model is offered as a common sense approach for solution
selling. You may have a different sales approach you use that is equally effective.
If so, use it! If you don’t have a systematic sales approach and you have been
loo
king for one that complements the RIJ model, we hope you will find the Plan
-
Do
-
Review model a useful one.


34

WebSphere RIJ


Introduction to Financial Selling

Introducing the concepts of financial selling is never an easy task. Many
approaches are described at such a high level they leave the reader

thirsting for a
practical means to try it. Other approaches are so detailed that you soon get lost in
the arcane language of “finance speak” and give up due to frustration.

I have tried to strike a balance with this introduction by providing a mental mod
el for
thinking through a financial sales scenario and then provide practical guidance and
examples as a learning aide. I’m certain that I haven’t covered all the topics of
potential interest. In fact, many were left out on purpose to simplify the concep
ts
and “jump start” you level of interest in the approach.

Please let this author know your thoughts and ideas for improvement. Our ultimate
goal is to make the reader self sufficient in the art and science of financial selling
and we can’t do it without
your valuable feedback.




SUMMARY