TABLE OF CONTENTS We are merely reminding ourselves that human decision affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectations, since the basis for making such calculations does not exist; and that it is our innate urge to activity which makes the wheels go round, our rational selves choosing between the alternatives as best we are able, calculating where we can, but often falling back for our motive or whim or sentiment or chance.
John Maynard Keynes, The General Theory of Employment, Interest and Money (1936)
There are three kinds of lies: lies, damned lies and statistics.
Benjamin Disraeli, cited in: Mark Twain, Autobiography (1959)
Having decided the direction of the organization s IT investment at a business level it is then necessary to perform some detailed analysis of the financial impact that the proposed investment is likely to have on the organization. This involves either business case accounting or cost benefit analysis.
The techniques used for this type of analysis include capital investment appraisal, which involves the calculation of financial ratios such as the payback, the return on investment (ROI), the net present value (NPV) and the internal rate of return (IRR).
There are many different financial concepts and issues involved in business case accounting. It is essential that all these elements be addressed in the financial analysis. In Chapter 5, the concept of IT costs was discussed and therefore does not require much further definition...
