Develop financial projections for alternative solutions
Question 1. One of the most important activities in IT acquisition planning is identifying alternative solutions.Yet, it is an activity that often results in the implementation of a solution that is less advantageous than other possible solutions. The solution may not be competitive or may even be obsolete. This has cost organizations millions of dollars because they have had to replace weak solutions early in their expected useful life. Sometimes the planning for the replacement begins before the original project ends or soon after it ends.
Question 2. A large US organization–a leader in its field–decided to outsource almost all of its IT operations “to gain more agility.” It made arrangements with several highly regarded domestic IT service providers to hire thousands of its IT staff who otherwise would be laid off. In return, it agreed to give these service providers multi-year outsourcing contracts. Seven years later, it reversed its decision and said it will seek to hire back former IT staff as well as hire new staff. It said its budget “will move from 90% outsourced to 90% in house.” Today, with the growth of cloud computing, some organizations are considering outsourcing almost all of their IT operations to a cloud service provider. There are others that are considering moving most of their IT operations to an applications management service provider that does not use the cloud.
Question 3. An executive uses a software system that calculates the amounts of the federal and state tax incentives and loan guarantees available for energy production of various types. The calculation results are provided to clients on a fee basis. His clients are energy producers in nuclear power, fossil fuel, “clean oil,” renewable electricity, and related undertakings. The software system has become slow, resulting in missed due dates for reports that clients were counting on. The executive decided to form an integrated project team (IPT) to determine the root cause of the problem.
Question 4. Solution requirements need to be aligned with the goals and objectives of the organization. The goals and objectives are documented in a strategic plan and usually measured quantitatively by key performance indicators (KPIs). Assume you are hired by an organization that has an outdated strategic plan and no KPIs. You are placed in charge of a major IT project and are told that it is critical to the organization’s future.
Question 5. In many organizations, each integrated project team uses the same economic analysis tool to develop financial projections for alternative solutions to performance improvement problems. The teams then compare the financial projections and, taking into account cost and risk, make a decision about which alternative solutions should be recommended for funding. Each team sends its recommendation to an executive committee that makes the funding decisions. Here is a case in which one organization that used this approach encountered a vexing problem.
The Case: An organization had a policy of requiring all integrated project teams (IPTs) to use the same professional economic analysis tool. The objective was to generate results that could be compared. In general, proposals with the most attractive risk-adjusted financial projections were selected for funding. The executive committee became concerned when IT projects were not achieving the financial returns promised in their proposals, and the gap between the projections and the actual results seemed to be widening. The executive committee decided that steps must be taken to increase the accuracy of the financial projections so they will more closely match the results that are achieved.
