IT Acquisition Version 2 0 I Have Added Case Study
- Length: 8 pages
- Subject: Economics
- Type: Case Study
- Paper: #39749032
Excerpt from Case Study :
IT Acquisition. Version 2.0
I have added info to the last three questions, and changed quite a bit Question #4. The area in yellow are new or changed. I did make a few corrections elsewhere too so if this works you might want to look over each completely.
What can an organization do to guard against funding proposed projects that intentionally or unintentionally underestimate the costs, do not fully communicate the risks, and/or otherwise exaggerate the likely financial benefits? Explain your answer.
If the answers provided in questions 1 and 2 above are properly followed, then the chances of these kinds of problems will be greatly diminished. The previous suggestions should ensure that our team has undertaken the due diligence needed to try to ensure that either purposeful or unintentional errors of these kinds cannot get into their proposal. We have already double and triple checked the financial and project elements and thought through (as we continue to do) many of the hidden elements that can result in other unexpected costs.
One of the most often overlooked issues is the variability of pricing in high-technology equipment and capabilities. Advancements in computer functionality and even size can often lead to the need for new items (which can add some costs) or can even result in dramatic cost reductions. It is particularly important to see that the proposal reflects and awareness of this and is able to be adjusted accordingly. If the costs go up as new elements are added, the original planning should allow for this to stay within budget constraints. Then too the proposal should anticipate reductions and either redirect that money or reflect it in lower costs over time.
However, at this point we would also look at making much greater use of the "just in time" budgeting, such as is now being used by some levels of the federal contracting services. Not a new concept since parts of the government and business have been using it for years, there has been a resurgence in the idea during these volatile economic times. The basic idea is that project providers, working with the buyer, create a number of budgeting options for continuous monitoring, what might be called role-laying experiments and other types of budget monitoring. These are essentially experimental budgeting options created to meet and test unique circumstances. While the original budget has to be correct and as well developed as feasible, once contracting is formally authorized, a number of steps are put into place to reconfigure the budget as circumstances change. This is not meant to penalize the provider (necessarily) as much as it is to help both parties to keep abreast of real-time considerations. This kind of flexible budgeting is also well adapted to the creative elements mentioned before.
Some of the best benefits of this method are that they can be set up with serious auditing tests integrated into what are basically risk experiments. As the two parties work to keep on top of true cash flow and budget ups and downs, it is possible as well to set up controlled scenarios that will help judge if certain components of the budget are within realistic parameters. If they are and all else goes well, this may ensure that the provider companies would be in a good position to qualify for incentives, which can be great for both parties because the full cost of the project will not be exceeded and the provider will be rewarded for doing better than expected.
Another contemporary consideration may have to do with the calculations used to undertake a quality risk assessment. Risk analyses need to be tied to the company's mission and to its strategic use of IT elements. The proposal should be able to demonstrate how the cost and benefit analysis was made, including specific dollar estimates for everything from initial costs, ongoing assumptions, compatibility, limitations of capacity, and security evolutions. If the initial projections, for example, contemplated limited external access to some sensitive sites because of safe-guarding vulnerabilities, this factor may be very significant as add-on security systems come within reach. Similarly, missions evolve in companies with major IT components based on user desires and this too could require accurate risk management reconsiderations. The budgetary aspects of these considerations should be evident from the beginning and should be able to be reviewed over time.
Question 4: Which group is correct? Is it Group A, which argues that all benefits and costs are quantifiable in a meaningful way? Or is it Group B, which argues that often the most important benefits and costs are qualitative and as such cannot be quantified? State which group you believe is correct, Group A or Group B, and explain why you selected that group. If you pick Group A, give two examples of major qualitative benefits and how they may be quantified. If you pick Group B, give two example of major qualitative benefits and explain why neither one can be quantified.
Group A is correct. At some time and in some way all benefits and costs can be quantifiable and thus can be presented in a way that can fit into the budget's actual or better-than-projected costs. The government and many private entities have accumulated experience to provide sufficient guidance on how to convert some intangible items into measurables by assigning direct monetary values or by otherwise tagging them on to incentive initiatives. Good proposal awareness will reflect some acknowledgement of these advances at the very least. Vetting candidates as well as a solid foundation of marketing research can suggest how others are dealing with these variables.
Some of these factors are inherently hard to quantify, such as the overall sense of satisfaction with a new operation vis-a-vis past options. Others have more to do with unpredictable circumstances or the realities of limited options, such as the magical qualities that sole-source contracting often brings. Yet these factors still need to be dealt with. IT purchases of significance are prone to these realities in no small part because staff and customers tend to learn to use what they have access to and in many instances they judge changes with their adaptations as the baseline. As such, it can be very important to learn about these levels in order to prepare for dealing with them. Project proposals and the preparations of the purchaser both need to incorporate this into their overviews. Once this happens, it may be possible to broaden the scope of what to ask for from more sources and thus provide the decision-making team with more information for projecting likely budget impacts. The military uses these kinds of analyses of alternative steps to set criteria and then to ensure that the selected methods remain close to their parameters. DoD's guidance cover everything from engineering build-up, analogy and parametric approaches, each looking at direct factors for guidance or was to estimate otherwise hidden values.
In addition to these hurdles, other challenging cost factors can be associated with two realities: creativity and staff (or other user) ramp-ups. It can be the case that some costs are hard to quantify because the creativity quotation may otherwise slow down progress. Some equipment or infrastructure linkages might simply require either trial and error or innovative uses of new or emerging methods. Generally these types of circumstances can mandate a great deal of personnel time or unexpected hardware or software costs, some of which can be factored in and some of which cannot be easily quantified. Through the intelligent use of incentive options, it seems like greater pressures can be applied at these junctures to encourage the project staff to move their innovative ideas ahead more systematically. If this is done in conjunction with other intelligent and even some experimental budgeting checks, then the time allocated to this unknown can be better determined and incorporated with the realistic budget parameters.
Qualitative conversions of staff ramp-up costs can come about also by developing new methods for incentivizing staff at various critical early junctures in order to allow for predicting better expectations. Training and educational costs can usually be set but if it takes longer than expected or if the learning process shots off in an unanticipated direction, these costs can be much different and may require additional support. In either latter case, it can be very important to start to solidify a realistic number as soon as possible. Conducting small experimental trainings, using intensive testing Q&As, developing user feedback loops, etc. can be very helpful in judging what might happen as the trainings begin. Again, if these considerations are anticipated they can be recognized and judged for the costs potentials first and then examined in more real-life settings.
Question 5. You are the consultant in IT acquisitions and need to provide the CIO with recommendations on the steps needed to help ensure the success of NatFarmCo's acquisition of cloud computing services as well as the success of other NatFarmCo IT acquisition projects. Your answer should also describe the differences there…