北大MBA原文案例庫(kù)2

HowFinancialFirmsDecideonTechnology，介紹國(guó)際大銀行在決定對(duì)信息技術(shù)投資時(shí)的考慮要點(diǎn)和他們具體的實(shí)施過(guò)程。HowFinancialFirmsDecideonTechnology(Abstract)Thefinancialservicesindustryisthemajorinvestorininformationtechnology(IT)intheU.S.economy;thetypicalbankspendsasmuchas15%ofnon-interesteexpensesonIT.Apersistentfindingofresearchintotheperformanceoffinancialinstitutionsisthatperformanceandefficiencyvarywidelyacrossinstitutions.NowhereisthisvariabilitymorevisiblethanintheoutcomesoftheITinvestmentdecisionsintheseinstitutions.ThispaperpresentstheresultsofanempiricalinvestigationofITinvestmentdecisionprocessesinthebankingindustry.Thepurposeofthisinvestigationistouncoverwhat,ifanything,canbelearnedfromtheITinvestmentpracticesofbanksthatwouldhelpinunderstandingthecauseofthisvariabilityinperformancealongwithpointingtowardmanagementpracticesthatleadtobetterinvestmentdecisions.UsingPCbankingandthedevelopmentofcorporateInternetsitesasthecasestudiesforthisinvestigation,thepaperreportsondetailedfield-basedsurveysofinvestmentpracticesinseveralleadinginstitutionsHowFinancialFirmsDecideonTechnology(PartOne)信息技術(shù)對(duì)金融服務(wù)業(yè)的影響正在增加，不僅僅表現(xiàn)在銀行的15%無(wú)息開支上，而且對(duì)金融服務(wù)業(yè)的運(yùn)做和戰(zhàn)略也有很強(qiáng)的影響。

一個(gè)對(duì)金融機(jī)構(gòu)的長(zhǎng)期研究表明，不同的機(jī)構(gòu)的效率和表現(xiàn)也不同。其決定的因素有以下一些其中的一個(gè)因素就是對(duì)投資的決定和管理。SBS是一個(gè)失敗的例子，但是成功的公司也不少。本文注重解答以下的問(wèn)題：

１.銀行對(duì)ＩＴ投資的評(píng)估和管理過(guò)程？

２.在對(duì)ＩＴ的管理過(guò)程中，理論和實(shí)際操作的結(jié)合如何？

３.ＩＴ投資的管理和銀行性能的關(guān)系如何？1.0IntroductionInformationtechnology(IT)isincreasinglycriticaltotheoperationsoffinancialservicesfirms.Todaybanksspendasmuchas15%ofnon-interestexpenseoninformationtechnology.Itisestimatedthattheindustrywillspendatleast$21.1billiononITin1998,andfinancialinstitutionscollectivelyaccountforthemajorityofITinvestmentintheU.S.economy.Inadditontobeingalargecomponentofthecoststructure,informationtechnologyhasastronginfluenceonfinancialfirmsoperatonsandstrategy.Fewfinancialproductsandservicesexistthatdonotutilizecomputersatsomepointinthedeliveryprocess,andafirms'informationsystemsplacestrongconstraintsonthetypeofproductsoffered,thedegreeofcustomizationpossibleandthespeedatwhichfirmscanrespondtocompetitiveopportunitiesorthreats.Apersistentfindingofresearchintotheperformanceoffinancialinstitutionsisthatperformanceandefficiencyvarieswidelyacrossinstitutions,evenaftercontrollingforfactorssuchassize(scale),productbreadth(scope),branchingbehaviorandorganizationalform(e.g.stockversusmutualforinsurers;banksversussaving&loans).Giventhecentralrolethattechnologyplaysintheseinstitutions,atleastsomeofthisvariationislikelytobeduetovariationsintheuseandeffectivenessofITinvestments.WhilesomeauthorshavearguedthatthevalueofITinvestmenthasbeeninsignificant,particularlyinservices,recentempiricalworkhassuggestedthatITinvestment,onaverage,isaproductiveinvestment.Perhapsmoreimportantly,thereappearstobesubstantialvariationacrossfirms;somefirmshaveveryhighinvestmentsbutarepoorperformers,whileotheresinvestlessbutappeartobemuchmoresuccessful.BrynjolfssonandHittfoundthatasmuchashalfthereturnstoITinvestmentareduetofirmspecificfactors.OnepotentiallyimportantdriverofdifferencesinITvalue,andoffirmperformancemorebroadly,islikelytobethedecisionandmanagementpeocessedforITinvestments.HorrorstoriesofbadITinvestmentdecisionsabound.Considertheexampleofthenewstrategicbankingsystem(SBS)atBancOne(AmericanBanker1997).BancOneCorp.andElectronicDataSystemsCorp.agreedlastyeartoendtheirjointdevelopmentofthisretailbankingsystemafterspendinganestimated$175milliononit.AsstatedintheAmericanBankerarticle,SBS"wasjustsooverwhelmingandsocompletethatbythetimetheyweregettingtomarket,itwasgoingtotaketoolongtoinstallthewholething,"saidAlanRiegler,principalinErnst&Young'sfinancialservicesmanagementconsultingdivision.However,notallthestoriesarenegative.NewITsystemsareplayingavitalroleinreshapingthedeliveryoffinancialservices.Forexample,newcomputer-telephonyintegration(CTI)technologiesaretransformingcallcenteroperationsinfinancialinstitutions.Byinvestingintechnology,moreandmoreinstitutionsaremovingoperationsfromhigh-costbranchoperationstothetelephonechannel,wherethecostpertransactionisone-tenththecostofatellerinteraction.ThisITinvestmentnotonlyreducesthecostofservingexistingcustomers,butalsoextendsthereachoftheinstitutionbeyonditstraditionalgeographicboundaries.Inthispaper,weutilizedetailedcasestudiesofsixretailbankstoinvestigateseveralinterrelatedquestions:１.WhatprocessesdobanksutilizetoevaluateandmanageITinvestments?２.HowwelldoactualpracticesalignwiththeoreticalargumentsabouthowITinvestmentsshouldbemanaged?３.WhatimpactdoesthatmanagementofITinvestmentshaveonperformance?HowFinancialFirmsDecideonTechnology(PartTwo)Forthefirstquestion,wedevelopastructuredframeworkforcatalogingITinvestmentpracticesandthenpopulatethisframeworkusingacombinationofsurveysandsemi-structuredinterviews.WethencomparetheresultsofthisexercisewithasynthesisoftheliteratureonITdecisionmakingtounderstandinghowpracticesvaryacrossfirmsandtheextenttowhichthisisconsistentwith"bestpractices"asdescribedinpreviousliterature.Finally,wewillcomparetheseprocessestointernalandexternalperformancemetricstobetterunderstandwhichsetsofpracticesappeartobemosteffective.Tomakethesecomparisonsconcrete,weexamineboththegeneraldecisionprocessaswellasthespecificprocessesusedfortworecentITinvestmentdecisions:theadoptionofcomputer-basedhomebanking(PCbanking),andthedevelopmentofthecorporatewebsite.Thesedecisionswerechosenbecausetheywererecentandarerelatedbutprovidesomecontrast;inparticular,PCbankingisafairlywelldefinedproductinnovation,whilethecorporatewebpresenceismoreofaninfrastructureinvestmentwhichislesswell-definedintermsofobjectivesandbusinessownership.Overall,wefindthatwhilesomeaspectsofthedecisionprocessarefairlysimilaracrossinstitutionsandoftenconformto"bestpractice"asdefinedbypreviousliterature,thereareseveralareaswherethereislargevariationinpracticeamongthebanksandbetweenactualandtheoreticalbestpractice.Mostbankshaveastrongandstandardizedprojectmanagementforongoingsystemsprojects,andformalstructuresforinsuringthatline-managersandsystemspeopleareincontactattheinitiationoftechnologyprojects.Atthesametime,manybankshaverelativelyweakprocesses(bothformalandinformal)foridentifyingnewITinvestmentopportunities,allocatingresourcesacrossorganizationallines,andfundingexploratoryorinfrastructureprojectswithlongtermoruncertainpayoffs.Thereminderofthispaperisorganizedasfollows.Section2describesthepreviousliteratureonperformanceoffinancialinstitutionsandtheeffectsofITonperformance.Section3describesthemethodsanddata.Section4describesthecurrentacademicthinkingonvariouscomponentsofthedecisionprocessandcomparesthattoactualpracticesatthebankswevisited.Section5describestheresultsofourin-depthstudyofPCbankingprojectsandthesummary,Section6containsasimilaranalysisfortheCorporateWebSiteanddiscussionandconclusionappearinSection7.施HowF談inanc禁ialF牽irms湖Decid含eon澤Techn耳ology線(帶Part惰Three巖)閥2.0染Previ裳ous跑Lite班ratur午e錄2.1襯Perfo傳rmanc耽eof歉Finan映cial墊Insti誘tutio禁ns出The持reha嚷ve蕉been忠anu拍mber攻ofst構(gòu)udies紡that喉have夫exam英ined才thee攤ffici睡ency焰ofth宣eban想king坦indus騾trya扁nd奧感ther胸oleo籠fvar協(xié)ious粱facto欠rssu御chas旗corp質(zhì)orate燕cont輪rols拿truct糾ure麥(typ削eof逆board買,dir金ecto輕rs,i葉nside粗rsto讀ckho盡lding宿s,et險(xiǎn)c.),拖econo巡mies刻ofsc睡ale(攝size)宜,eco數(shù)nomie卸sof芳scope粉(pro戰(zhàn)duct界bread絕th),雀andb推ranch襯ings文trate輕gy;s抓eeBe叫rger,架Kash亦yupa歸ndSc杜alise怖(199移5)an盜dHar寒kera少ndZe倉(cāng)nios狠(fort處hcomi設(shè)ng)f菠ora峰revie麻wof還theb繁ankin謙geff宇icien經(jīng)cyli闖terat補(bǔ)ure.汪While常ther賽eis酷subst糾antia忍ldeb邊atea確sto冰ther良o(jì)leo趟fthe噸seva穩(wěn)rious漏fact疾ors,蓄there桶iso圓neun若ambig劇uous閣resul豪t:th朵atmo衫stof咽the街(in)燥effic濁iency竄ofb旅anks狡isno互texp喉laine匯dby飛thef督actor條stha澤thav刺ebee創(chuàng)ncon野sider捏edin拾prio肚rwor敵k.Fo名rexa承mple,斜Berg搜eran羨dMes鉤ter(襲1997)殃esti鞠mate放that阿asmu捐chas址65-9若0%of柳the虹x-ine御ffici呼ency倦remai耗nsun壘expla詳ined叔after案cont泳rolli勒ngfo州rkno妙wndr喊ivers燙ofp蠟erfor豆mance漁.As留imila稀rsto床ryal戰(zhàn)soap腎pears媽ini近nsura軋ncew唇here殼"x-ef胡ficie域ncy"這varie躺ssub監(jiān)stant料ially遵acro羅ssfi重rmsw堵hens已ize,呆scope霜,pro常duct農(nóng)mix,掃distr巨ibuti密onst斯rateg心yand進(jìn)othe塌rstr鞠ategi鼓cvar慶iable魄sare穴cons擠idere羊d.It擺has改been莫argue帽dtha河tone火must搖get派"insi售deth漏ebla甲ckbo擺x"of酬the散bank坑otco曉nside剩rthe蓋role乳ofo慕rgani洲zatio戶nal,頑strat流egic飼andt胸echno胞logic濃alfa筋ctors掀that濃may臉bemi釋ssed芳inst龜udies滾that笑rely憶hea彩vily四onpu禮blic宵finan四cial拍data.2.2InformationTechnologyandBusinessValueEarlystudiesoftherelationshipbetweenITandproductivityorothermeasuresofperformanceweregenerallyunabletodeterminethevalueofITconclusively.Loveman(1994)andStrassmann(1990),usingdifferentdataandanalyticalmethodsbothfoundthattheperformanceeffectsofcomputerswerenotstatisticallysignificant.Barus,KriebelandMukadopadhyay(1995),usingthesamedataasLoveman,foundevidencethatITimprovedsomeinternalperformancemetricssuchasinventorytrunover,butcouldnottiethesebenefitstoimprovementsinbottomlineproductivity.Althoughthesestudieshadanumberofdisadvantages(smallsamples,noisydata)whichyieldedimprecisemeasuresofITeffects,thislackofevidencecombinedwithequallyequivocalmacroeconomicananlysesbyStevenRoach(1987)implicitlyformedthebasisforthe"productivityparadox".AsRobertSolow(1987)onceremarked,"youcanseetehcomputerageeverywhereexceptintheproductivitystatistics."MorerecentworkhasfoundthatITinvestmentisasubstantialcontributortofirmproductivity,productivitygrowthandstockmarketvaluationinasamplethatcontainsawiderangeofindustries.BrynjolfssonandHitt(1994,1996)andLichtenberg(1995)foundthatITinvestmenthadapositiveandstatisticallysignificantcontributiontofirmoutput.BrynjolfssonandYang(1997)foundthatthemarketvaluationofITcapitalwasseveraltimesthatofordinarycapital.BrynjolfssonandHittalsofoundastrongrelationshipbetweenITandproductivitygrowthandtahtthisrelationshipgrowsstrongeraslongertimeperiodsareconsidered.Collectively,thesestudiessuggestthatthereisnoproductivityparadox,atleastwhentheanalysisisperformedacros倒sind堤ustri逗esus拾ingf誼irm-l顯evel尼data.葉The騰diffe允rence兔sbet馬ween據(jù)these爆resu袍ltsa茄ndea保rlier汽stud傍iesi竭spro良bably潛due崖toth炒euse鋤ofd朝atat困ahtw繁asre米cent釀,mor煉ecom翼prehe億nsice洲,and鞭more辭disa殺ggreg講ated撓(firm菌leve淋lrat齡hert討hani曲ndust焰ryor弊econ酒omyl墾evel)氣.植Mos脈tpre季vio誓ussu販tdies箏have特cons浩idere屠dthe衰effe民ctso血ftec塌hnolo槽gyac嚷ross壽firm殼sin寨multi喪plei冠ndust眼ries,圣alth千ough漲afew餡stud尿iesh記avec恥onsid嶺ered延ther趙oleo騰ftec治hnolo裕gyin奪spec榜ifica鹿llyi扯nthe蕉bank跨ingi濟(jì)ndust配ry.S悶teine防rand外Teix居iera僅surve糖yedt授heba勉nking覆indu羅stry客anda稼rgued鑼that酷whil陜elar它gein共vestm武ents菜inte蟲chnol吳ogyc什learl渴yhad遠(yuǎn)valu索e,lit慈tleo敲fthi排sval符uewa走sbei阿ngca鋸pture敘dby樣theb少anks駝thems綿elves蒜;mos透tof喂theb盒enefi賄tswe好rebe言ingp主assed三ont蓋ocus功tomer眠sas茶ares姓ulto財(cái)fint婚ense仆compe壯titio拔n.Al逢para蒙ndKi冷mexa悟mined棋the泡cost臺(tái)effic農(nóng)iency疲ofb閱anks稼overa倦llan霜dfou木ndth柔atIT嬌inve撈stmen草twas池asso視ciati典edwi殃thgr節(jié)eater碗cost怒effi甜cienc儀yalt湖hough沾the翠effec逆tswe鴉rele進(jìn)ssev鄉(xiāng)ident柿when拖fina治ncial羊rati崗oswe嘉reus木edas綁the淋outco創(chuàng)meme碗asure初.Pra棒sada萌ndHa燦rkere渡exam孫ined沃ther胞elati貪onshi杰pbet仔ween充techn萍o(jì)logy窩inve中stmen抽tand貞perf驚orman爸cefo筋r47羨retai榜lban趁ksan笛dfou褲ndpo兔sitiv替eben望efits梅ofi帽nvest梯ments綁inI吧Tsta繪ff.劑滲Whil波ethe蹄sest伍udies攔show礦ast訴rong地posit廈ivec色ontri偽butio賭nof撤ITin翼vestm錢ento闊nave亂rage,張they隸don始o(jì)tco菊nside炮rhow立this但cont警ribut施ion(臟orle鏈velo脈finv場(chǎng)estme谷nt)v奮aries倆acro裂ssfi五rms.籮Brynj劈olfss口onan教dHit勵(lì)tfou估ndth氧at"f診irme焦ffect閃s"ca貪nacc沃ount刮fora皇smuc驢has釋half裝the柴contr尺ibuti江onof握ITf構(gòu)ound慧inth血esee凡arlie晉rstu嬌dies.廊Rece叼ntre攀sults役sugg忙estt更hata呼tlea訓(xùn)stpa此rtof舊thes機(jī)edif叉feren貼cesc置anbe陳expl垮ained纖byd伍iffer洞ences壞ino鳴rgani里zatio壇nala低ndst乘rateg授icfa藝ctors肢.Bry日njolf出sson央andH策ittf私ound漸that卸firms暈that估use努great突erov懲erall獲ITb禁enefi賀ts.B止resne丘han,進(jìn)Brynj獸olfss技o(jì)nan任dHit使tfou戶nda串simil魯arre惰sult尿forf扭irms接that別have埋great猛erle憶vels察ofsk額ills救andt出hose抓that芹make芳great們erin面vestm稅ents伯intr淚ainin明gand欠pre-宵emplo鴉yment慈scre蝕ening并for學(xué)human葉capi披tal.大Ina智dditi導(dǎo)on,s屯trate炭gicf融actor莫sals巧oapp節(jié)ea頑rto蔬affec莊tthe膠valu聞eof專IT.F饅irms哭that狗inves乓tin宏ITto鑰crea依tecu感stome挑rval搖ue(e拆.g.i角mprov賭eser寄vice,拆time劃lines描s,co村nveni捏ence,秒vari偏ety)幣have懲great俱erpe肺rform爸ance醋than宇firms共that攝inve批stin使ITt瘦ored龜ucec遞osts.滋拘Whil樂(lè)ethe驢sest濾udies倆are潔begin否ingt肆oexp匯lore固how篇the習(xí)perfo何rmanc菠eof喉ITin兔vestm才entv柄aries評(píng)acro晉ssfi項(xiàng)rm,p笨artic財(cái)ularl唉ydue股too愚r(nóng)gani府zatio堆nala距ndst降rateg狼icfa搭ctors搜,lit惡tlea渣ttent哈ionh息asbe逝enpa聰idto子the徒techn伸ology枝deci疼sion蹈makin臥gpro雙cess.HowFinancialFirmsDecideonTechnology(PartFour)2.3ITInvestmentDecisionsWhilethereisnoconcisedefinitionof"bestpractice"inITinvestmentdecisions,thereareanumberofconsistentargumentsadvancedintheITmanagementliteraturethatcanbesynthesizedintoanunderstandingoftheconventionalwisdom.ForthepruposesofdiscussionitisusefultosubdividetheprocessofITmanagementintosevendiscrete,butinterrelatedprocesses.Thefirstsixprocessesareorientedaroundtheproposal,developmentandmanagementofITprojects,whilethelastprocessisaboutmaintainingthecapabilitiesoftheITfunctionanditsinterrelationshipswiththerestofthebusiness:1.IdentificationofITopportunities2.Evaluatingopportunities3.ApprovingITprojects4.Themake-buydecision5.ManagingITprojects6.EvaluatingITprojects7.ManageandDeveloptheITFunctionThissubdivisionlooselycorrespondstomanyofthemajorissuesinITmanagementsuchasoutsourcing,linemanagement-ITalignment,softwareprojectmanagement,andevaluatingITinvestments.Inaddition,thislistlooselycorrespondstoframeworksforthemanagementofIT.TheprimarydifferenceisthatthislistviewstheITmanagementprocessasmanagingastreamofprojectsratherthanfocusingonthefunctionoftheITdepartmentoverallortheroleoftheCIO,thetypicalperspectiveinthepreviousliterature.Forexample,acommonframeworkusedtoalignITtobusinessstarategy,thecriticalsuccessfactors(CSF)method,includethreeworkshops:thefirsttoidentifyandfocusobjectives,thesecondtodecideandprioritizeonsystemsinvestment,andthethirdtodevelop,deployandreevaluateprototypesystems.Boynton,JacobsandZmud(1992)identifyfivecriticalITmanagementprocesses:settingstrategicdirection,establishinginfrastructuresystems,scanningtechnology,transferringtechnologyanddevelopingsystems.Rockart,EarlandRoss(1996)proposeeightimperativesfortheITorganizationwhichcanbegroupedintomanagingtheIT-businessrelationship,buildingandmanagingsystemsandinfrastructure,managingvendors,andcreatingahighperformanceITorganization.Thus,whilepreviousworkhassubdividedtheprocessindifferentways,collectivelythestudiescoverallthesevenprocessesweexamine.Wewilldiscusseachoftheindividualpointsindetailbelow.2.3.1IdentificantofOpportunitiesHistorically,theITfunctionwasprimarilyreactive,respondingtorequestsbybusinessunits.Abusinessunit.Abusinessunitmanagerwouldidentifyaneedforanewsystemorarepair/enhancementtoanexistingsystemandcommunicatethisneedtotheITfunction.TheITpersonnelwouldthenevaluatetheideafortechnicalfeasibilityanddevelopaprojectproposalincludeaninitialdeterminationofresourceneeds,cost,anddeliverytime.WhilethismakeseffectiveuseofITpersonnelinevaluatingparticularideas,itprovidesonlyalimitedroleforITpersonneltoaidintheidentificationoftechnology-basedbusinessopportunities.Forthatreason,someauthorshavesuggestedthattheITfunctionshouldplayalargerroleintheidentificationoftechnologicalopportunities.Forexample,DavenportandShort(1990)emphasizethatITcapabilitiesshouldinformbusinessneedsaswellasthebusinessunitsplacingdemandsontheITfunction.Fockart,EarlandRossandBoynton,JacobsandZmudidentifytheroleof"technologyscanning"and"technologyeducation"asanimportantcomponentofacentralizedITdepartment;theyarguethatinformationsystemsspecialistsshouldbereponsibleforevalustingnewtechnologiesforbusinessapplicabilitysincebusinessunitswillgenerallylacktheresourcesorthetechnologicalcapabilitytoperformtheseevaluationsthemselves.Moreover,centralITisbestpositionedtoeducatetheendusestomakethemgood"custmers"ofthecentralITgroup.Inthebankingindustry,ITmaybeabletoplayanadditionalroleincoordinatingtechnology.Becausebanksandotherfinancialfirmsareoftenmanagedwithlargelyautonomousbusinessunits(forexample,banksareoftendividedintoproductlines---cashmanagement,investment----oralongcustomersegments---wholesale,commercial,retail)onlythecentralITfunctionwillhaveaperspectiveovertheporfolioofsystemsprojectsandcapabilities.OnecriticalroleinthisrespectistheprovisionanddevelopmentofthesharedITinfrastructure(e.g.centralprocessors,networks,softwarestandards,etc.).OftentheseprojectsnaturallyspanbusinessunitssuchthattheonlyralowneristheITfunction;alsotheygenerallytendtobehighlytechnicalandthusthenaturalresponsibilitywouldalsofallontheITdepartment.HowFinancialFirmsDecideonTechnology(PartFive)2.3.2EvaluatingOppoutunitiesOnceaprojectisatleastinitiallydefined,thereisaprocessbywhichtheinitialideaisconvertedintoaproposalthatcanbeevaluatedbymanagementforapprovalorrejectionoffunding.Inthelasttenyears,ithasbecomemoreorlessstandardpracticestodevelopabusinesscaseorbusinessplanforanysubstantialITinvestment(somesmallmaintenanceprojectsaresimplydoneonrequest),althoughthecontent,sophisticationandformalityofthisprocessvariedsubstantially.Themosttypicaloftheseprojectproposals(assumingamid-sizetolargeproject)taketheformofabusinessplanwhichincludesaqualitiativedescriptionoftheobjectives,competitiveenvironment,adescriptionoftheopportunityand,insomecases,animplementationplan.Whiletheformoftheseplansvarieswidely,therearesomegeneralpointsofcomparison.Forthequalitativeportion,themajorissueiswhethertheplanexplicitlyaddresseschangesinthebusinessenvironment,orisprimarilyinwardfocused.Forminorsystemsenhancementprojectswithnostrategicobjective(orevenmajorinvestmentsthatarenotstrategicsuchasyear2000repairs),itmakessensefortheplantofocusentirelyoninternalissues.However,totheextentthattheinvestmentismadeforcompetitivereasonsorislikelytospurareactionfromcompetitors,itisimportanttoqualitativelyevaluatewhetherthebusinessenvironmentwillremainstaticand,ifnot,examinepossiblescenariosthatarelikelytooccur.TheassumptionofastaticbusinessenvironmentisacommondecisionbiasthatcanparticularlyplaguestrategicITinvestments;Clemens(1991)termsthisthe"trapofthevanishingstatusquo".Forthequantativefinancialevaluation,mostITevaluationmethodshavetheirrootsintraditionalcapitalbudgetingproceduressuchasdiscountedcashflowanalysis(DCF).However,whilethesetechniquescanworkwellforprojectswherecostsandbenefitsarwelldefined(e.g.purchasingoff-the-shelfsoftwareinpursuitofoperationalcostsavings),itisincreasinglyrecognizedthatsimpleapplicationofDCFapproachesisnotsufficientforITinvestments.ThisisbecausemuchofthevalueofmodernITinvestmentsislikelytobedifficulttoquantify--suchasrevenueenhancementsorcostsavingsthroughimprovedcustomerservice,productvariety,ortimeliness.Onecommonlyusedstategyistovaluenon-quantifiablebenefitsatzero,althoughthisstrategywillsystematicallybiasprojectevaluationstounnecessarilyrejectprojects.RecognizingthelimitationoftheDCFapproach,severalalternativeapproacheshavebeenproposed.Onemethodistobasetghecaseentirelyonqualitativeanalysis;unfortunately,thisapproachoftenleadstohightlysubjectivejudgementsandislikelytoerronthesideofacceptingbadprojects.Kaplan,recognizingthisprobleminthecontextofevaluatingcomputerintegratedmanufacturing(CIM),proposedusingavariantofDCF;afirmcalculatesthepresentvalueoftheinvestmentusingallthecomponentsthatcanbequantifiedandthencomparesthisprliminaryvaluetothequalitativelistofotherbenefitsandcosts.Inothercases,wheretheevaluationismakedifficultbecauseoffutureuncertainties(e.g.marketgrowthandacceptance;responseofcompetitors)decisiontreesorothertypesofprobabilitybasedassessmenttoolsmaysimplifyinvestmentdecisios.Finally,forsometypesofinvestmentsordecisions(forexample,thedecisionwhethertoinvestimmediatelyordefer),advancedtechniquessuchasrealoptionscanbeapplied.Althoughthisdiscussionhasfocusedprimarilyonevaluatingthebenefitpartofthequantitativeevaluation,thereareotherdifficultiesinestimatingthecostofITprojects,particualarlythoseinvolvingsoftwaredevelopment.ExistingmodelssuchasCOCOMOoffunctionpointsestimationareknowntoimprovetheabilitytopredictprojectlength,staffingrequirementsandtotalcosts,althoughtheyarekowntobesystmeaticallyoffbyasmuchas400%.However,theaccuracyoftheseestimatescanalsobeimprovedlaterintheprojectwhenspecificationsarewelldefinedorbycustomizingthemodelstotheexperienceofaparticularorganization.However,despitethefactthatthesetoolsandapproachesarereadilyavailablemanyfirmsstillutilize"seatofthepants"estimantsorlockinschedulesandcostestimantsbeforetheprojectsarefullydefined.HowFinancialFirmsDecideonTechnology(PartSix)2.3.3ApprovingITProjects

Onceaprojecthasbeenevaluatedandaformalprojectproposalexists,thereareavarietyofmechanismsthatareusedtodeterminewhichprojectsshouldbefunded.Mostinstitutionshavesomeformofcommitteestructure,similartocapitalbudgetingcommittees,whichisresponsibleforevaluating,modifyingandapprovingprojects.

MostofthepreviousliteratureonthemanagementofIThasfocusedontheso-called"ITsteeringcommittee"whichisanexecutivelevelgroup,oftencomprisedoftheheadsofbusinessunitsortheirdirectreports.TheobjectiveofthiscommitteeistoensurethatITstrategyisalignedwithbusinessunitstrategy,projectsarecoordinatedacrossbusinessunitswheretherearepossiblesynergiesandtoeducatethebusinessunitmanagersontheboththeactualactivitiesoftheITgroupandthepotentialITopportunities.2.3.4Make-BuyDecisions(Outsourcing)

Attheinceptionofanyproject,afirmhasthechoiceofwhethertoutilizetheirinternalresourcesintheITdepartment(insource)orutilizeanoutsidevendorforanyorallofaproject(outsourcing).Whilethemarketforoutsourcedserviceshasexistedsincesaleofthefirstcorporatecomputers,thesize