Abstract
It is well known that the decision to invest is preceded by (pre-)feasibility analysis and studies, which should show that the investment is necessary, opportune, and ef- ficient. As concerns the information field, we consider this feasibility study practice as partially adequate, as there is no full financial assessment of the necessity and opportunity of the information project by taking into account its advantages/disadvantages, the studies presenting only a list of these advantages/disadvantages. Moreover, given the impossibility of determining the contribution of each information function to the economic efficiency indicators of the organization (turnover, profit, etc.), the final result is also a partial assessment of the efficiency of the information project, which may lead to bad influences on the managerial team when making the decision of investing or not in that project. This is why we proposed in this study a new method of financial assessment of the necessity and opportunity of the information project, namely the annual net discounted advantages method or, more simply, the ANDA method). This chapter also includes, besides theoretical aspects, a case study with a concrete application of the ANDA method to an information project. We mention that the ANDA method may be applied to the assessment of the efficiency and of the opportunity of any investment project of modernization in any business area.
TopBackground
Modern management lays increasing emphasis on the organization on projects of investment activities and their funding, by means of the budget technique.
Briefly, a project is the first decomposition of a program, with a beginning and an ending, including a series of logically chained and efficiently planned actions/activities, which are supposed to be carried out in a certain period of time, for which a financial support is associated/assigned by budget, aimed at achieving one or a set of objectives (Belanger, 1995; Devaraj & Kohli, 2002; Hayes, 1989; Lewis, 2000; Lientz & Rea, 1999; Mantel, Meredith, Shafer, & Sutton, 2001; Oprea, 2001; Project Management Institute [PMI], 1996; Sages Group [SG], 1997; Ţugui & Fătu, 2004).
The previous definition leads to the idea that a project should include:
- 1.
A (logic) schemata for running the established activities depending on the objectives undertaken;
- 2.
An adequate financial support, that would enable the mobilization of the resources necessary for objective achievement;
- 3.
A project administration team with a project manager that should coordinate the necessary procedures like a traditional manager.
The three items required for objective/objectives achievement within a project, support the project management concept, which has been thoroughly developed and widely used lately.
Basically, project management is defined as being the application of the knowledge and techniques specific to the project-oriented activities, so that the stakeholders’ expectations and requirements should be attained or even overcome (Beise, Neiderman, & Mattord, 2006; Kern, Galup & Nemiro, 2000; Laudon & Laudon, 2000; PMI, 1996; Sisco, 2001; Walker, 2001).
Information project is a particular case of the project concept. As to the information-related activities in an organization, we can state that the project which reassembles them is an information project within a program run by such organization.
For a project to succeed, it is necessary to perform all the tasks assigned to the project management team resulting from the objective set, so the project management work becomes of primary importance.
Irrespective of the type of project considered for financial efficiency and opportunity analysis, the following information is necessary (Ţugui & Fătu, 2004, p. 139):
Key Terms in this Chapter
Scenario Project: The scenario “without project” is the variant in which the analyzed investment project is not applied, while the scenario “with project” is meant to commission the analyzed project
Information Project: This is a particular case of the project concept. Information project may regard the computerizing of a function inside an organization or the modernizing of an older computer investment, as well as all the activities that are meant to reorganize information-related processes
Project Management: The application of the knowledge and techniques specific to the project-oriented activities, so that the stakeholders’ expectations and requirements should be attained or surpassed
Project: First decomposition of a program, with a beginning and an end, made up of a set of interlinked actions planned to be run over a certain time period, with its own budget established in order to reach a well-defined objective/objectives set
Financial Opportunity: In practical life, it is much simpler to convince a manager or a managing team of the opportunity of an investment project if the indicators calculated by the ANDA method are positive because the project value can be redeemed only from the highlighted advantages
Opportunity/Efficiency Assessment: The opportunity and efficiency assessment of an investment project is a very important stage in any economic entity. As for the assessment of the efficiency of investment projects, there are specific indicators, such as: internal rate of return (IRR), payback time, net present value (NPV), and so forth
ANDA Method: This consists in substituting the cash flows with net advantages within the method of present value cash flows in order to calculate the indicators IRR, NPV, and so forth