IT Project Investment Concerns
When dealing with uncertainties and in justifying the investment of IT projects, go no further than common sense. There is a difference in a decision to proceed with a large or mid-sized industry based IT investment. The competitive market value has a large part in deciding whether to invest or not.
“Most large IT shops have a discretionary budget in which to invest in high-risk projects with a potentially big but unpredictable payoff. But in small and mid-market companies, smaller budgets often make justifying the cost of a speculative project an insurmountable obstacle.” (Hopkins)
Easily said, the less money you have, the less you have to invest, and the more valuable it becomes. Economically speaking, we must consider the opportunity cost of investments. The investment could be placed elsewhere with lower risk, but with lower returns. A CIO could justify this decision based on experience of value based decision making. If he sees that the opportunity portrays an excellent ROI, but the longevity of the investment is astronomical, the decision to hold, move forward, or research other venues becomes known. Smaller businesses must place a higher value on their dollar because of the higher risk associated.
To fully understand whether or not a business case will allow a project sponsor to approve the project, we must first understand what a business case is. A business case is a tool that supports planning and decision making–including decisions about whether to buy, which product to bring to market, which projects to fund, which vendor to choose, or when to implement a project.
“A serious business case for a complex business environment requires assumptions, arbitrary judgments, and the development of new data–new information that goes beyond existing budgets and business plans. This means that two people working independently can evaluate the same proposed scenarios, use correct financial math, and still produce quite different business case results. For that reason, the business case should also communicate the methods and assumptions underlying projected results.” (What’s a Business Case?)
In other words, the business case doesn’t necessarily hinder the sponsor’s decision, but in fact helps the decision process flow easier. The concept of a business case is straight forward and to the point, and strengthens ease of mind. Ease of mind is highly important when trying to get a project passed for implementation. You would need to truly trust the instincts of your CIO if sponsoring a project without knowing the underlying costs, risks, and benefits of doing so. The complexity of the project requires a more complex business case, but also allows room for concern because of its complexity. I feel that no matter the situation, the need for a business case for project approval is key to the success rate of getting projects passed.
Hopkins, J. Marc. “How to Justify an IT Project With Uncertain Returns (And Still Make Your CFO Happy) CIO.com.” CIO.com. 22 Aug. 2007. Web. 22 Mar. 2011. <http://www.cio.com/article/132452/How_to_Justify_an_IT_Project_With_Uncertain_Returns_And_Still_Make_Your_CFO_Happy_>.
“What´s a Business Case?” Business Case Analysis – Solution Matrix Ltd.ix. Web. 22 Mar. 2011. <.”>http://www.solutionmatrix.com/what-is-a-business-case.html>.