Delivering IT and e-Business Value
This book is focused on the evaluation issue in IT and how IT evaluation can proceed across the life-cycle of any IT investment and be linked positively to improving business performance.
TABLE OF CONTENTS Delivering IT and e-Business Value
3.7 Feasibility assessment
3.7 Feasibility assessment
Whether or not organizations pursue risk assessment and project prioritization, most are pursuing some forms of feasibility assessment. Feasibility assessment is best defined as evaluating the financial and non-financial acceptability of a project against defined organizational requirements, and assessing the priorities between proposed projects. Acceptability may be in terms of cost, benefit, value, socio-technical considerations [12].
Of course, feasibility assessment is only one step in the process of directing attention to IT spend as investment. The following will examine a number of significant feasibility assessment approaches found in the organizations. The approaches will be described together with an investigation of their benefits and limitations.
Return on investment
Return on investment was the feasibility evaluation tool most often mentioned, and is also known as the accounting rate of return . It depends on the ability to evaluate the money to be spent on the IT investment, and the quantification, in monetary terms, of a return associated with that investment. In other words, simple return on investment is the ratio of average annual net income of a project divided by the internal investment in the project. A refined version of return on investment is the evaluation of current value of estimated future cash flows on the assumption that future benefits are subject to some discount factor. The internal investment should include both implementation costs and operating costs. To apply return on investment to the feasibility investment, one would compare a rate of return against an established hurdle ...
Copyright Leslie Willcocks and Valerie Graeser 2001 under license agreement with Books24x7
