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Before I’ll discuss my understanding or notion to the nature of the relationship between the business plan and the IS plan. Let me define Business, Business Plan, Information System and the Information System Plan.

Business. It is an organization which primary objective is to provide goods and services needed by the people.

Business Plan. It is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. The business goals may be defined for for-profit or for non-profit organizations.

Is there a need for having a business plan?

Yes. And I have browsed some reasons of having a business plan. These are the following:

1. To Map the Future

A business plan is not just required to secure funding at the start-up phase, but is a vital aid to help you manage your business more effectively. By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can detail alternative future scenarios and set specific objectives and goals along with the resources required to achieve these goals.

By understanding your business and the market a little better and planning how best to operate within this environment, you will be well placed to ensure your long-term success.

2. To Support Growth and Secure Funding

Most businesses face investment decisions during the course of their lifetime. Often, these opportunities cannot be funded by free cash flows alone, and the business must seek external funding. However, despite the fact that the market for funding is highly competitive, all prospective lenders will require access to the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. In essence the former helps investors understand the past, whereas the business plan helps give them a window on the future.

A well-written business plan can help you convey these points to prospective investors, helping them feel confident in you and in the thoroughness with which you have considered future scenarios. The most crucial component for them will be clear evidence of the company’s future ability to generate sufficient cash flows to meet debt obligations, while enabling the business to operate effectively.

3. To Develop and Communicate a Course of Action

A business plan helps a company assess future opportunities and commit to a particular course of action. By committing the plan to paper, all other options are effectively marginalized and the company is aligned to focus on key activities. The plan can assign milestones to specific individuals and ultimately help management to monitor progress. Once written, a plan can be disseminated quickly and will also prompt further questions and feedback by the readers helping to ensure a more collaborative plan is produced.

4. To Help Manage Cash flow

Careful management of cash flow is a fundamental requirement for all businesses. The reason is quite simple--many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall due). While the break-even point--where total revenue equals total costs--is a highly important figure for start-ups, once a business is up and running profitably, it becomes less important.

Cash flow management then becomes more vital when businesses pursue investment opportunities where there are significant cash out flows, in advance of the cash flows coming in. These opportunities need to be assessed against any seasonal variations in the business and the timing of the flows. If you are a ‘cash-only’ business, you can bank the income immediately; however, if you sell on credit, you receive the cash in the future and hence may need to pay some of your own expenses before that income hits your account. This will put a further strain on the company’s solvency and hence a well structured business plan will help you manage funding requirements in advance.

5. To Support a Strategic Exit

Finally, at some point, the owners of the firm will decide it is time to exit. Considering the likely exit strategy in advance can help inform and direct present day decisions. The aim is to liquidate the investment, so the owner/current investors have the option of cashing out when they want.

Common exit strategies include;

• Initial Public Offering of stock (IPO’s)
• Acquisition by competitors
• Mergers
• Family succession
• Management buy-outs

Information System. It is referred as the interaction of the process and technology. Information System has three major components – Hardware, software and peopleware. Hardware is the physical components; Software refers to programs that are being installed in the computer; Peopleware refers to the end-users.

Information System Plan. It is actually the process for developing a strategy and plans for aligning information systems with the business strategies of an organization.

In Information Planning, we have to consider the characteristics of a quality Information System Plan. These are the following:

Timely. The ISP must be timely. An ISP that is created long after it is needed is useless. In almost all cases, it makes no sense to take longer to plan work than to perform the work planned.

Useable. The ISP must be useable. It must be so for all the projects as well as for each project. The ISP should exist in sections that once adopted can be parceled out to project managers and immediately started.

Maintainable. The ISP should be maintainable. New business opportunities, new computers, business mergers, etc. all affect the ISP. The ISP must support quick changes to the estimates, technologies employed, and possibly even to the fundamental project sequences. Once these changes are accomplished, the new ISP should be just a few computer program executions away.

Quality. While the ISP must be a quality product, no ISP is ever perfect on the first try. As the ISP is executed, the metrics employed to derive the individual project estimates become refined as a consequence of new hardware technologies, code generators, techniques, or faster working staff. As these changes occur, their effects should be installable into the data that supports ISP computation. In short, the ISP is a living document. It should be updated with every technology event, and certainly no less often than quarterly.

Reproducible. The ISP must be reproducible. That is, when its development activities are performed by any other staff, the ISP produced should essentially be the same. The ISP should not significantly vary by staff assigned.

Now that we have known and differentiated the business from business plan, and information system from an information system plan, we can now distinguish the importance of having the business plan and the information system plan. The importance of business plan is that, it serves the following functions:

• Helps management or an entrepreneur to clarify, focus and research their business's or project's development and prospects.
• Provides a considered and logical framework within which a business can develop and pursue business strategies over the next three to five years.
• Serves as a basis for discussion with third parties such as shareholders, agencies, banks, investors etc.
• Offers a benchmark against which actual performance can be measured and reviewed.

A business plan should be a realistic view of the expectations and long-term objectives for an established business or new venture. It provides the framework within which it must operate and, ultimately, succeed or fail. For management or entrepreneurs seeking external support, the plan is the most important sales document that they are ever likely to produce as it could be the key to raising finance etc. Preparation of a comprehensive plan will not guarantee success in raising funds or mobilizing support, but lack of a sound plan will, almost certainly, ensure failure. In a business plan, business plan process is also vital, for entrepreneurs to understand more clearly what they want to achieve, and how and when they can do it. Even if no external support is needed, a business plan can play a vital role in helping to avoid mistakes or recognize hidden opportunities. It is much easier to fold a sheet of paper than a business.

For many, many entrepreneurs and planners, the process of planning (thinking, discussing, researching and analyzing) is just as, or even more, useful than the final plan. So, even if you don't need a formal plan, think carefully about going through the planning process. It could be enormously beneficial to your business. A packaged business plan will make it easier to interest possible supporters, investors etc. A well-prepared business plan will demonstrate that the managers or entrepreneurs know the business and that they have thought through its development in terms of products, management, finances, and most importantly, markets and competition.

The relationship of Business Plan and Information System Plan: In making information system plan, it’s not just a simple plan that caters the current issue, but it should be a strategic plan to cater a wide scope of interest in the field of information technology. Strategic planning is actually aims to cater the major change of the organization from planning for information systems based on users’ demands to those based on business strategy. Information System Plan focuses in improving the management side and the to improve the performance of the business while on the other hand a Business Plan is focusing in the attainment of the goals of the business in short it gives more attention to the business side. Business-planning methods help people develop detailed plans at lower levels. Business-driven data modeling methods then help them to identify their information needs, based on those developed plans. Identified information is then provided. The Strategic Model was analyzed to identify Business Activities and develop Project Plans for data modeling. Activities were identified which management should assess, to identify priorities. These activities will become priority projects to be developed and delivered early to provide maximum benefit of any organization. The Strategic Information System Plan will make Business Plan to align its information systems directly with its strategic plans.

References:

http://www.planware.org/businessplan.htm#4

http://www.clarionmag.com/cmag/v3/informationsystemsplanning.pdf

http://viu.eng.rpi.edu/publications/strpaper.pdf

http://en.wikipedia.org/wiki/Business_plan

http://en.wikipedia.org/wiki/Business

http://en.wikipedia.org/wiki/Information_system

http://en.wikipedia.org/wiki/Information