IT leaders use a variety of methods to ensure that each new investment stacks up, usually depending on the size of the IT project. The larger the project, the greater the analysis taken and risks assessed and measured.
For larger projects, the Bay of Plenty District Health Board uses the net present value (NPV) accounting method to measure the worth of projects, though its general manager of information management Owen Wallace says this process can be difficult as projects can have "intangible" benefits such as improving work quality. For example, using wireless mobile devices gives health staff patient data faster and more accurately than paper-based systems. This should lead to more responsive care and, hopefully, a better rate of recovery for patients -- but this is tougher to measure.
Projects at MetService are monitored for progress against a plan to a degree depending on their size, and the weather service claims most projects come in within around 10% under-budget. "The use of extreme programming practices -- by breaking a project into smaller pieces -- helps ensure projects deliver only what is needed," CIO Marco Overdale says.
MetService "rigorously" studies return on investment, using NPV and internal rate of return (IRR), and larger projects are tightly integrated into its business goals. Projects costing greater than $100,000 are subject to board approval. Overdale says projects of a more speculative nature cannot necessarily carry a hard ROI, but are still subject to management review as to their likely value to customers and hence the company.
Auckland City Council believes as well as adding value, the effects of IT projects on skilled people, reliable data and adapted business processes must be considered.
The council uses what it calls "strategic alignment scoring" in its NPVs, to "reflect the contribution the proposed project will make to achieving the strategic goals of the organisation", says IT manager Ian Rae. This means business cases have clearly identified business benefits identified up front with measurement metrics and accountability structures in place, he says.
"The management and monitoring of the benefits will continue well after the completion of a project."
Projects at Auckland University of Technology are normally pushed by the end users rather than the IT department, but either way a capital budget proposal must be submitted to the board for approval. This proposal, says Wendy Bussen, executive director of IT services, details and attempts to justify whether the project is to maintain capacity, create new business or otherwise, its priorities, the financial impact of the project, details of proposed equipment needed, the age of current assets and the consequences of deferment.
If the budget is approved, a full evaluation of the products is made to meet users' needs. A detailed business case is then submitted for final approval. Presentations may be given to help with the approval process.
The AUT oversees projects by creating steering committees with defined project charters. Project managers are assigned and there is regular reporting, says Bussen.
The Bay of Plenty health board uses Microsoft project management tools, has trained is staff in project management. It sometimes uses external project managers for larger projects, says Wallace.
Auckland City uses portfolio management to provide a "holistic" view of projects to identify conflicts and other problems early, says Rae. Projects are tightly scoped up front and involve strict processes to approve changes. Larger projects will be done in stages. Budgets are tightly managed to correctly identify costs. "Surprises are simply unacceptable."
Similar sophistication might be expected from the Auditor General’s office. But IT manager Grant Johnson says approvals come from the end users, or the board for larger projects.
Since the audit office is not a commercial organisation and works on fixed budgets, IRRs and the like are less important. "It doesn’t matter how fantastic a system is, [if there is no money left] it isn’t approved," he says.
IT leaders agree that it is important to let the business users drive the justification as much as possible.
"A team approach is the most successful,” Bussen says. “Linking IT back to the business helps senior management understand why the expenditure is justified over and above other priorities.”