Evaluating IT investments: a manager-friendly roadmap

Authors

Abstract

Executives are under increasing pressure to perform return-on-investment analyses to justify IT spending. This happens due several reasons: top managers and shareholders want to know how IT money is used; the IT projects compete with other organization endeavours for a tight budget; and there is an increasing interest in understanding how IT can provide value to the organization. Since there are several available methodologies and techniques that can be used to evaluate IT investments, the real problem is that of choosing the right one for each concrete venture.

We propose a process to guide executives in choosing the most suitable evaluation instrument, according to the characteristics of the investment project at hand. We start by classifying the IT investment according to its contribution to the business, using McFarlan's strategic grid; then, in second step, we cross-reference the project characteristics (such as resources needed, benefits types, and risk) with the characteristics of the evaluation instruments themselves in order to identify the most appropriate one. By assisting the executives in making easier and informed decisions about which IT investments techniques to use in each particular case, we hope to help them improve the quality of their decisions.

Keywords

IT Evaluation, IT investments, IT projects

Subject

IT investment

Conference

European Conference on Information Technology Evaluation (ECITE), September 2005