Check on stakeholders, value when taking on projects

To continue down this path, we will examine the next steps to take after you decide that a proposed project is aligned with business objectives.

There are many reasons why some technology projects fail. One main cause is the lack of support from key management. Before any project can begin, you first need to identify who the stakeholders are. Once they are committed to the project, determine what their expectations are. These constituents are key to a successful project.

The next step is to assess the technology. To do this, figure out whether the planned project fits your organization in terms of infrastructure.

In other words, if you are planning a Web-based ordering system, you need to find the most appropriate platform and whether you have the infrastructure  servers, security, etc.  to make that work. If you need to add to your infrastructure for the project, then make sure the technology fits in with your long-term infrastructure plans. If you dont have the technology in-house, there are hosting options available.

Being able to prove the value of a proposed project is paramount, and there is little chance your project will get funded unless you can prove that it will have a positive return on investment. The good news is that by the time you have gotten to this point, there is a great chance the proposed project has been deemed worthwhile and has the support of key management personnel. Proving the return should be a simple matter of some number crunching.

There are three key calculations that should be included to determine the return on investment.

1. The first is the net present value. Net present value is used to determine if the projected income of a project exceeds the cost in todays dollars (present value). Calculating the net present value can be difficult because you have to decide which discount rate to use. Most spreadsheets and good financial calculators have a net-present-value function, which should make this easier.

2. The second calculation is the internal rate of return. This allows you to consider the time value of money. Essentially, it allows you to find the interest rate that is equivalent to the dollar returns you expect from your project. Once you know the rate, you can compare it to the rates you could earn by investing your money in other projects and come up with the best value for your money. Again, most spreadsheets and financial calculators will have a function for this.

3. The last calculation is the payback period. This will tell you how long it will take to earn back the money spent on the project. The formula is simple: Divide the cost of the project by the annual cash flow. Under the payback method of analysis, projects or purchases with shorter payback periods rank higher than those with longer paybacks. The theory is that projects with shorter

paybacks are more liquid and thus less risky  they allow you to recoup your investment sooner, so you can reinvest the money elsewhere.

Calculating the return on investment is more than just adding some numbers. When deciding whether to fund the next project, make sure you ask yourself:

< Is the project aligned with business objectives?

< Have you identified all the stakeholders and determined their goals and expectations?

< Does the technology fit?

< Have you proven the math?

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