Need to justify investing in IT projects - Essay Example

Need To Justify Investing In IT Projects Affiliation NEED TO JUSTIFY INVESTMENT IN IT PROJECTS The case study by JWD Consulting’s Project Management Intranet Site Project touches on project initiation and planning. According to the case study, an organization need to think considerably during selection of a project so that the right projects are initiated backed by the right reasons. Strategic planning should be the foundation for decision making on what project is to be employed. The most important reason for initiation of IT projects is to give support to business objectives.

The team feels that project initiation does require a strong business case. Project planning involves guiding the execution of the project. A lot of resources are required in project planning since plans have to be useful and realistic. This paper looks at the need to IT projects investment justification. Best practices in governance of IT do identify efficient and effective IT investment as well as portfolio decisions as a significant objective and do insist on definition of the formal investment criteria for instance, Pay-back period, Net Present Value and ROI.

In order for an IT investment to be justified, it has then to be linked to the investment’s business benefits, whereby the benefits have to be qualified and some monetary values allocated to the outcomes. One of the main reasons as to why IT projects have to be justified is that it involves a major capital investment. According to Computer Economics Incorporation, in certain industries, more than half of all expenditure is accounted for IT. This means that if executives of information systems need new systems to gain approval, then it is good for them to understand how the executive management expects justification of large capital expenditures (Computer Economics Inc., 2014). Despite the difficulties in the quantification of IT investments benefits, the senior executive are asking information system leaders tough questions with regard to the proposed IT investment project is going to improve the key business as well as financial metrics.

Business benefits from IT projects happen to be indirect outcomes of interactions that are complex between business processes within which the technology is entrenched, and the technology itself. These benefits mostly include substantial intangible components. However, they take time to materialize because business processes and customer perception happen not to be instantaneous phenomena. A shortage of good processes for magnitude estimation as well as timing of business benefits that result from IT projects exists (ISACA, 2014).

Therefore, assigning monetary values to such results happens to be problematic, compromising the assessment of the project.Financial metrics like NPV, ROI, or IRR are needed in evaluation of IT project proposals. The primary input required for the approaches is a revenue stream, which is expected to be generated by the project over a given time, then; in some form they incorporate monetary time value. Computer Economics Inc. suggests the use of Economic Value Added for IT investments justification.

It is important as well for most projects to include a business case before they are approved officially by the business sponsors. This is because the business case does capture the reasoning for intiation of the project. At any time resources like efforts and money are consumed, there is need for them to be supported by certain business needs. ReferencesComputer Economics Inc. (2014). Using EVA to Justify IT Investments: Executive Summary. Metrics For IT Management, 2.ISACA. (2014). Justifying IT Projects. ISACA, 3.