北大MBA原文案例库2

HowFinancialFirmsDecideonTechnology，介绍国际大银行在决定对信息技术投资时的考虑要点和他们具体的实施过程。HowFinancialFirmsDecideonTechnology(Abstract)Thefinancialservicesindustryisthemajorinvestorininformationtechnology(IT)intheU.S.economy;thetypicalbankspendsasmuchas15%ofnon-interesteexpensesonIT.Apersistentfindingofresearchintotheperformanceoffinancialinstitutionsisthatperformanceandefficiencyvarywidelyacrossinstitutions.NowhereisthisvariabilitymorevisiblethanintheoutcomesoftheITinvestmentdecisionsintheseinstitutions.ThispaperpresentstheresultsofanempiricalinvestigationofITinvestmentdecisionprocessesinthebankingindustry.Thepurposeofthisinvestigationistouncoverwhat,ifanything,canbelearnedfromtheITinvestmentpracticesofbanksthatwouldhelpinunderstandingthecauseofthisvariabilityinperformancealongwithpointingtowardmanagementpracticesthatleadtobetterinvestmentdecisions.UsingPCbankingandthedevelopmentofcorporateInternetsitesasthecasestudiesforthisinvestigation,thepaperreportsondetailedfield-basedsurveysofinvestmentpracticesinseveralleadinginstitutionsHowFinancialFirmsDecideonTechnology(PartOne)信息技术对金融服务业的影响正在增加，不仅仅表现在银行的15%无息开支上，而且对金融服务业的运做和战略也有很强的影响。

一个对金融机构的长期研究表明，不同的机构的效率和表现也不同。其决定的因素有以下一些其中的一个因素就是对投资的决定和管理。SBS是一个失败的例子，但是成功的公司也不少。本文注重解答以下的问题：

１.银行对ＩＴ投资的评估和管理过程？

２.在对ＩＴ的管理过程中，理论和实际操作的结合如何？

３.ＩＴ投资的管理和银行性能的关系如何？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谈inanc禁ialF牵irms湖Decid含eon泽Techn耳ology线(带Part惰Three岩)阀2.0染Previ裳ous跑Lite班ratur午e录2.1衬Perfo传rmanc耽eof歉Finan映cial垫Insti诱tutio禁ns出The持reha嚷ve蕉been忠anu拍mber攻ofst构udies纺that喉have夫exam英ined才thee摊ffici睡ency焰ofth宣eban想king坦indus骡trya扁nd奥感ther胸oleo笼fvar协ious粱facto欠rssu御chas旗corp质orate燕cont轮rols拿truct纠ure麦(typ削eof逆board买,dir金ecto轻rs,i叶nside粗rsto读ckho尽lding宿s,et险c.),拖econo巡mies刻ofsc睡ale(摄size)宜,eco数nomie卸sof芳scope粉(pro战duct界bread绝th),雀andb推ranch衬ings文trate轻gy;s抓eeBe叫rger,架Kash亦yupa归ndSc杜alise怖(199移5)an盗dHar寒kera少ndZe仓nios狠(fort处hcomi设ng)f菠ora峰revie麻wof还theb繁ankin谦geff宇icien经cyli闯terat补ure.汪While常ther赛eis酷subst纠antia忍ldeb边atea确sto冰ther良oleo趟fthe吨seva稳rious漏fact疾ors,蓄there桶iso圆neun若ambig剧uous阁resul豪t:th朵atmo衫stof咽the街(in)燥effic浊iency窜ofb旅anks狡isno互texp喉laine汇dby飞thef督actor条stha泽thav刺ebee创ncon野sider捏edin拾prio肚rwor敌k.Fo名rexa承mple,斜Berg搜eran羡dMes钩ter(袭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垒expla详ined叔after案cont泳rolli勒ngfo州rkno妙wndr喊ivers烫ofp蜡erfor豆mance渔.As留imila稀rsto床ryal战soap肾pears妈ini近nsura轧ncew唇here壳"x-ef胡ficie域ncy"这varie躺ssub监stant料ially遵acro罗ssfi重rmsw堵hens已ize,呆scope霜,pro常duct农mix,扫distr巨ibuti密onst斯rateg心yand进othe塌rstr鞠ategi鼓cvar庆iable魄sare穴cons挤idere羊d.It摆has改been莫argue帽dtha河tone火must摇get派"insi售deth漏ebla甲ckbo摆x"of酬the散bank坑otco晓nside剩rthe盖role乳ofo慕rgani洲zatio户nal,顽strat流egic饲andt胸echno胞logic浓alfa筋ctors掀that浓may脸bemi释ssed芳inst龟udies滚that笑rely忆hea彩vily四onpu礼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谊irm-l显evel尼data.叶The腾diffe允rence兔sbet马ween据these爆resu袍ltsa茄ndea保rlier汽stud傍iesi竭spro良bably潜due崖toth炒euse锄ofd朝atat困ahtw繁asre米cent酿,mor炼ecom翼prehe亿nsice洲,and鞭more辞disa杀ggreg讲ated挠(firm菌leve淋lrat龄hert讨hani曲ndust焰ryor弊econ酒omyl垦evel)气.植Mos脉tpre季vio誓ussu贩tdies筝have特cons浩idere屠dthe衰effe民ctso血ftec塌hnolo槽gyac嚷ross寿firm壳sin寨multi丧plei冠ndust眼ries,圣alth千ough涨afew馅stud尿iesh记avec耻onsid岭ered延ther赵oleo腾ftec治hnolo裕gyin夺spec榜ifica鹿llyi扯nthe蕉bank跨ingi济ndust配ry.S闷teine防rand外Teix居iera仅surve糖yedt授heba勉nking覆indu罗stry客anda稼rgued锣that酷whil陕elar它gein共vestm武ents菜inte虫chnol吴ogyc什learl渴yhad远valu索e,lit慈tleo敲fthi排sval符uewa走sbei阿ngca锯pture叙dby样theb少anks驼thems绵elves蒜;mos透tof喂theb盒enefi贿tswe好rebe言ingp主assed三ont盖ocus功tomer眠sas茶ares姓ulto财fint婚ense仆compe壮titio拔n.Al逢para蒙ndKi冷mexa悟mined棋the泡cost台effic农iency疲ofb阅anks稼overa倦llan霜dfou木ndth柔atIT娇inve捞stmen草twas池asso视ciati典edwi殃thgr节eater碗cost怒effi甜cienc仪yalt湖hough沾the翠effec逆tswe鸦rele进ssev乡ident柿when拖fina治ncial羊rati岗oswe嘉reus木edas绑the淋outco创meme碗asure初.Pra棒sada萌ndHa灿rkere渡exam孙ined沃ther胞elati贪onshi杰pbet仔ween充techn萍ology窝inve中stmen抽tand贞perf惊orman爸cefo筋r47羡retai榜lban趁ksan笛dfou裤ndpo兔sitiv替eben望efits梅ofi帽nvest梯ments绑inI吧Tsta绘ff.剂渗Whil波ethe蹄sest伍udies拦show矿ast诉rong地posit厦ivec色ontri伪butio赌nof撤ITin翼vestm钱ento阔nave乱rage,张they隶don始otco菊nside炮rhow立this但cont警ribut施ion(脏orle链velo脉finv场estme谷nt)v奋aries俩acro裂ssfi五rms.箩Brynj劈olfss口onan教dHit励tfou估ndth氧at"f诊irme焦ffect闪s"ca贪nacc沃ount刮fora皇smuc驴has释half装the柴contr尺ibuti江onof握ITf构ound慧inth血esee凡arlie晋rstu娇dies.廊Rece叼ntre攀sults役sugg忙estt更hata呼tlea训stpa此rtof旧thes机edif叉feren贴cesc置anbe陈expl垮ained纤byd伍iffer洞ences坏ino鸣rgani里zatio坛nala低ndst乘rateg授icfa艺ctors肢.Bry日njolf出sson央andH策ittf私ound渐that卸firms晕that估use努great突erov惩erall获ITb禁enefi贺ts.B止resne丘han,进Brynj兽olfss技onan任dHit使tfou户nda串simil鲁arre惰sult尿forf扭irms接that别have埋great猛erle忆vels察ofsk额ills救andt出hose抓that芹make芳great们erin面vestm税ents伯intr泪ainin明gand欠pre-宵emplo鸦yment慈scre蚀ening并for学human叶capi披tal.大Ina智dditi导on,s屯trate炭gicf融actor莫sals巧oapp节ea顽rto蔬affec庄tthe胶valu闻eof专IT.F馒irms哭that狗inves乓tin宏ITto钥crea依tecu感stome挑rval摇ue(e拆.g.i角mprov赌eser寄vice,拆time划lines描s,co村nveni捏ence,秒vari偏ety)币have惩great俱erpe肺rform爸ance醋than宇firms共that摄inve批stin使ITt瘦ored龟ucec递osts.滋拘Whil乐ethe驴sest滤udies俩are洁begin否ingt肆oexp汇lore固how篇the习perfo何rmanc菠eof喉ITin兔vestm才entv柄aries评acro晋ssfi项rm,p笨artic财ularl唉ydue股too愚rgani府zatio堆nala距ndst降rateg狼icfa搭ctors搜,lit恶tlea渣ttent哈ionh息asbe逝enpa聪idto子the徒techn伸ology枝deci疼sion蹈makin卧gpro双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