2. 2
• Hardware cost
• Software cost
• Network cost
• People cost
• Transition cost
• Opportunity cost and risk cost
• Maintenance and Support cost
• $1 of initial development cost --> $4 maintenance cost
over the life time of the system
• Don’t forget the intangible cost
Understand What It
Takes!
3. 3
• Tangible Benefits
• Intangible Benefits
• Efficiency gains
• Effectiveness gaines
• Transformation effects
• Make concrete connection to your firm’s
strategy
• Total value of ownership
Understand the Benefits
5. 5
• “The system will eliminate the need for
hiring two positions for an annual savings of
$100K.”
• Justify using hard data, quantitative,
structured feasibility assessment
• Target Audience:“Sensing”
Arguments of Fact
6. 6
• “IS is infrastructure.We need it to support
our growth and stability.”
• Justify by vision. Investment X will lead to
benefitY.
• Target Audience:“iNtuitives”
Arguments of Faith
7. 7
• “If we don’t do this we may be eaten alive by
our competition.”
• Justify by perception of events.
• Target Audience:“iNtuitives”
Arguments of Fear
8. 8
New System or Modification?
Enabling Infrastructure
Networks, Servers, backup systems, etc.
Support Activities (process re-
engineering)
Accounting, HR, etc.
Business Applications
Sales Tools, Inventory Mgmt, etc.
Increased
Funding
Difficulty
Types of IT Projects
10. 10
• Costs are easy to establish, but benefits are
often elusive.
• Technology superiority does not necessarily
lead to business value.
• Emphasis on intangible benefits are hard to
sell after dot.com bust.
• IT governance structure is not clearly
established.
Why is IT Investment
Decision Hard?
11. 11
• IT investment decision is not a simple
technical decision.
• IT investment decision is not a simple
financial decision.
• IT investment decision is related to the
firm’s (or it’s senior executives’) IT value
frame.
• IT investment decision is related to the
firm’s IT governance structure.
What isYourValue
Frame?
