Justifying IT Projects: ROI, Risk, and Case Study Analysis

Introduction to IT Project Justification

According to Hopkins (2007), in the case of most IT projects — and most business projects in general — justifying an investment requires demonstrating a mixture of immediate "savings, efficiency gains or the reuse of existing resources," and a "simple forecasting methodology can then be used to calculate a potential return on investment (ROI) to determine a course of action." Forecasting methodology can often be extremely difficult to apply accurately in IT contexts compared to other types of projects. The environment is constantly changing, and a major investment in one project that seems valuable might be rapidly undercut by the emergence of another technology offering even better cost savings. No matter how great the potential financial savings in theory, "calculating the potential value of unknown information is similar to a prospector digging for gold" (Hopkins, 2007). Yet such digging is still necessary to remain effective and competitive within the business environment.

Phased Delivery and Business Case Components

Breaking a project into multiple steps can be useful, as "the value delivered by each step would be used to fund each subsequent step," which means "the project could not continue if any step did not deliver value" (Hopkins, 2007). However, as noted in the JW Consulting case, regardless of how the different stages are structured, every proposed business solution can benefit from an introduction to the problem and the proposed technology, a "business objective" the technology is supposed to address, a statement of "critical assumptions and constraints," an "analysis of options and recommendations," "preliminary project requirements," an estimate of the budget and schedule, and a risk analysis (Marchewka, 2015).