Staying Focused on Strategic Value Key to Prioritizing IT Projects
Wed, October 15, 2003
CIO — It is certainly gratifying to read about a CIO who is so committed to financial justification, value assessment and the strategic alignment of projects undertaken by his department. He is certainly outside the norm. Our research shows that more than 50 percent of CIOs do not have a process in place to assess IT projects for their value. It is also gratifying to note that George Germann worked diligently not only to involve the CFO and his department, but also to develop an evaluation methodology suitable for the needs of the entire Visiting Nurse Service of New York. However, I would like to draw attention to potential weaknesses and suggest some remedies.
It should come as no surprise that modern technology can have a rather short shelf life, especially embedded software, which may go through multiple upgrades, resulting in unforeseen costs. Additionally, the cost of education, training and support of such technology can be three to five times its purchase price. There are far too many examples of projects where such costs outstripped any promised ROI. Both Germann and CFO Sam Heller need to make sure that the values used in justifying any project cover more than just the one-time costs.
IT project costs are grossly underestimated, at times, to secure management approval. Therefore, if at any time during the project development phase, the estimate-to-complete value of a project exceeds the original estimate used to justify it, the project may no longer be financially viable. Our experience shows that few organizations diligently monitor the estimate-to-complete metric.
Value is in the eye of the beholder (customer). Therefore, CIOs must ensure that sponsors define the value of the proposed project in a SMART (specific, measurable, achievable, relevant to strategy and time-bound) manner. If they can’t, the project is still a half-baked idea and should not be approved.
These issues aside, I again congratulate Germann and Heller for their excellent work in instituting a project value assessment process.
