IT Project Planning based on Business Value Generation

IT Project Planning based on Business Value Generation

Otavio Prospero Sanchez (Sao Paulo Methodist University and Fundacao Getulio Vargas FGV/EAESP, Brazil) and Alberto Luiz Albertin (Fundacao Getulio Vargas FGV/EAESP, Brazil)
DOI: 10.4018/978-1-60566-400-2.ch011
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Abstract

In this chapter the authors investigate the management of service innovation projects; can ICT based service innovation be facilitated by traditional project management thinking? Or should the initiators strive for more interaction with users and other stakeholders, thus organizing the initiatives much looser than what the traditional project work method allows for? Building on a large survey, the authors found that ICT based service innovation was not associated with a tightly run project – focused on cost, time and quality; nor with the presence of a professional project manager. Rather, successful service innovation was found in projects where the service providing organization and the users of the forthcoming services were well integrated in the project. They discuss three alternatives to the traditional project work form model, called Integrated Classic Structure, Mutual Adaptation and TQM, and assess their potential strengths and weaknesses in service innovation, as an agenda for further experimentation and empirical research.
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Introduction

Achieving effectiveness in Information Technology (IT) projects is becoming increasingly important for organizations as market competition changes and poses threats to value creation at the firm level (Kohli & Devaraj, 2003). Recent literature has emphasized how IT deployment can improve firms’ strategic positions based on the difficulty of imitation of the combination of IT and organizational resources (Wade & Hulland, 2004); it has also underscored how rare IT resources can allow a firm to reach a sustainable position of competitive advantage (Melville, Kraemer, & Gurbaxani, 2004).

Many works have shown that the amount invested in IT has reached over 50% of the total of firms’ investments. In addition, the proportion of IT investments to net income has increased as business complexity has increased. While it is argued that the use of IT is becoming more expensive to firms as businesses’ environmental conditions increase in complexity, other streams of research have argued that it is difficult to evaluate the firm-level benefits of IT uses given the intangibility of many of those benefits.

These intangible benefits are usually associated with the business side of the firm, mainly related to market aspects, geographical presence, and customer satisfaction, among other things. In this sense, IT investment decision prioritization skills tends to become part of the job description of business executives rather than that of IT executives (Bassellier, Benbasat, & Reich, 2003; Tallon, Kraemer, & Gurbaxani, 2000).

Nevertheless, decisions about IT investment have been seen as complex and risky. In an attempt to cope with this complexity and risk, a myriad of interdisciplinary financial and non-financial techniques and methods have been used to support the prioritization processes. These include ROI, Payback, EVA, BSC, cost/benefit, transaction costs, gap analysis, etc. (Schniederjans, Hamaker, & Schniederjans, 2004). In practice, however, organizations usually deal with a number of simultaneous IT projects in a situation in which the costs tend to be more easily identified than the benefits.

Consequently, the ability of executives to identify the benefits of any specific future IT deployment is an important determinant of better investments prioritization, which constrains the possibility of delivering value and business performance. Therefore, shared knowledge between business managers and IT professionals is an important enabler of the alignment of business and IT objectives (Reich & Benbasat, 2000). Based on the above, we have observed two tendencies:

  • a.

    Business executives are required to be more involved in IT decisions because they are in a better position to evaluate an intangible, business-related parcel of benefits and,

  • b.

    IT executives are demanded to be more involved in business aspects, lowering the emphasis on exclusively technical issues (Bassellier et al., 2003).

However, executives’ perceptions of the business value generated by IT deployment is limited (Simon, 1978) because both business and IT executives lack the personal skills necessary to produce an appropriate analysis that encompasses two such diverse domains, with very different rationales (Bassellier et al., 2003; Tallon et al., 2000). Additionally, the success or failure of a firm using IT in business is only partially dependent on how deeply the executives understand the aspects involved. There are some emblematic cases of failure or even unexpectedly sound success in using IT that still require explanation. Some inconsistencies remain unexplained when the best practices are applied, but even so, there has been no IT investment effectiveness observed (Santhanam & Hartono, 2003).

Key Terms in this Chapter

IT Payoff: The extent in which a specific project generates benefits comparison to the amount invested.

Business value: Value generated and captured by the firm based on its operations.

IT Project Effectiveness: The relationship between actual value generated by the implementation and the ex-ante potential value.

EEIH (Ex-Ante Economic Inefficiency Hipotesys): The pre-existent condition for the business value generation of the IT implementation.

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