Cost-Benefit Analysis for Complex IT Investments: An Investigation of Perceived Best Practices
Performing a cost-benefit analysis (CBA) is an important initial step in planning and implementing IT investments. However, creating an accurate and useful CBA for complex IT investments (such as enterprise systems implementations) is difficult due to uncertainty in the expected benefits, costs, risks, timing, and deliverables of these frequently changing projects. This paper reports on a Q-method analysis of the opinions of 19 expert practitioners on the creation and evaluation of CBAs for complex IT investments. The analysis found common agreement on the most important practices including: 1) identify how the IT investment aligns with business strategy; 2) gain senior management support at the beginning; and 3) involve all relevant stakeholders in the analysis. However, further analysis revealed two main types of opinions among the participants that seemed to prioritize either internally-focused practices such as strategic alignment and management support, or externally-focused practices such as the importance of benchmarking and consulting external experts. Viewing these results through the lens of agency theory, we suggest that rather than seeking a single set of “best practices” for creating CBAs for complex IT investments, one must take into account the preferences and risk-tolerance of the decision-makers as well as the role of principals, agents, risks, and uncertainty in the decision-making process.
Zhou, Yao and McLaren, Tim, "Cost-Benefit Analysis for Complex IT Investments: An Investigation of Perceived Best Practices" (2014). CONF-IRM 2014 Proceedings. 13.