Margaret McIntyre Wrote:
"So I'm wanting to draw on the group's intelligence if possible to help me
think <about valuing information technology projects. I wondered if anyone
on the list <has had any experience with this, given it could be very
subjective and elusive. I <am also trying to develop a framework for
prioritizing work and stopping IT projects <for a client of mine. Any
thoughts from the group would be most appreciated."
>From a purely financial perspective the best way to value and prioritize
IT projects is Net Present Value (NPV). You create a capital budget of
expenses, revenues associated with the project (if any) and cost savings
of the project (if any). You then layout the timing of these cash flows
over months or years, and then discount the cash flows at the company's
cost of capital or use IRR to come up with the Internal Rate of Return
(the discount rate at which NPV = 0. All projects with a positive NPV are
worth doing (from a financial standpoint). The project with the highest
NPV has the highest priority. You must also apply judgement to the NPV
ranking, i.e. you may decide that a very large project which has a lower
(but positive) NPV is better to do than a very small but very high NPV.
I'm happy to point you deeper into this if you have interest.
Shaun Gilley
--Shaun Gilly <shaun.gilley@fanb.com>
Learning-org -- An Internet Dialog on Learning Organizations For info: <rkarash@karash.com> -or- <http://world.std.com/~lo/>