It is usually a manager who sees potential benefits of IT projects - meeting a business goal; while the technologists understands what it would take to achieve the goal - the costs. Unless people have an intuitive feel for both benefits and costs, they miss opportunities. When our IT specialists bring the two together, people see value:

When positive value IT projects are discovered, they are prioritized in order to get the most bang for the buck:

Because benefit and costs vary with respect to when they accrue, a better measure than absolute value is:

To discount a dollar figure is to state some future amount in terms of time-constant dollars determined by 1) an interest rate and 2) the length of time until the amount is paid or received. By discounting amounts from differing time periods, we are able to add benefits and subtract costs meaningfully in terms of current dollars.

There are other equations (such as ROI and IRR) and issues (such as the effect of risk on the interest rate) in addition to NPV that should be considered when deciding to accept or reject IT projects. However, the important issue here is that length of time to realize a benefit, or to incur a cost can greatly affect the value of the project. Time can turn a good project into one of low or even negative value, and vice-versa!

Our specialists use Strategic IT to identify the true timing of costs and benefits in order to reliably calculate the return on investment (ROI) of alternative IT projects.

Some examples of the impact of time on the success of IT projects include:

• Rate of Adoption: Time to Market (TTM) is only important because it necessarily preceeds Time to Benefit (TTB). An IT project does not incur benefits until it achieves the required level of adoption.

  Most projects assume that the system will be adopted immediately upon completion of acceptance testing and ready for the market. In fact, more time will be required to train potential users and for users to see benefits before adopting a system. If 50% per year of non-users adopt a system, it will achieve a 90% adoption level within 5 years after introduction - longer than the expected lifetime of many IT systems!

  
• Risks of total work required:
  • Estimates of development effort - unless quality metrics hare used regarding critical aspects of the project, such as the number of function points coded per month on a similar effort, one cannot accurately estimate costs.
  • Scope Creep - unless there exists both a method to document what the project is to include and what it is not to include, and a method to control changes to those requirements, it is extremely easy to add marginally beneficial functionality to the detriment of TTB.
  • Turnover of Key Personell - IT personell are in high demand. Unless concious efforts are made to retain, transition, and replace key IT personell projects will take longer to complete and cannot be maintained after delivery.
• Project start time: The number one reason that projects finish late is because they start late.
  • Delaying the start of a project, will delay the TTB. Unless costs also delayed, the ROI will be impacted negatively.
  • Delaying the start of a project, may impact the total benefit expected especially if the project is to capitalize on an opportunity with a small time window or is sensitive to being first to market.
  • Additional costs may be incured by the late start, such as unbecessary payroll or eqipment leases incurred before progress is actually started.
  • Additional costs may be incured by the resultant late finish, such as late fees and penalties, or through the loss of market share.