the true value of the potential benefits. Since there is no escaping this approach, however, it is incumbent on the IT staff to provide sufficient persuasive information to help the partner make an informed intuitive decision.

An intuitive belief coupled with other methods for analysis is probably a valid way of valuing projects. It should not, however, be the only way. Intuition only goes so far. It ignores nuances that the person appointing intuition might not be aware. It is not a rigorous analysis.

Another method that is often argued, but should seldom be persuasive, is loss of productivity. The argument goes something like this: It takes a typical lawyer six minutes each day clearing the spam from his or her inbox. We have 1,000 lawyers. Therefore, we are spending 6,000 minutes (100 hours) each day clearing spam. Our average billable rate is $300 per hour. Therefore, we are spending $30,000 each day clearing spam. With 250 business days each year, we would make $7.5 million each year by implementing an effective spam protection. Nuts.

The problem with this analysis is that while apparently logical, it ignores real life. To make this type of claim, a firm must analyze objectively actual patterns. The presumption in this argument is that if you get rid of spam completely from the environment, each attorney will bill six minutes more each day and the firm will make $30,000 additional revenue for each day. If an IT staff argues this position, it should be graded on its ability to increase the firms bottom line by that amount.

We have seen the same arguments used to support redundancy and high availability systems. If the network is down for a day, we would lose a zillion dollars. Is that a fact? There are, unfortunately, ways to accurately measure these claims. Every enterprise has suffered a major casualty where systems are unavailable for long periods of time, perhaps even a full day. Find one of these days and analyze the effect on the hours worked on client billable matters, compared with that normally worked on an average day. Compare not only the day of the casualty but also the week starting with the casualty. Were any hours missed on the first day made up on later days? Only after conducting this type of analysis can a true loss of productively claim comprise a business justification.

Perhaps the best way to approach return on investment is by deploying a real option strategy. The best way to describe real options is to think of a poker game. You sit down at the table and ante one dollar for the option of receiving your first cards. For that dollar you receive two hole cards and one card face up. You are in the game, but youre not required to stay in the game. If based on what you know (i.e., on your cards as compared to the other cards showing), you decide that you are in a favorable position, you can participate in the betting for that round and buy an option to proceed to the next round. If, however, you conclude that you are not favorably situated, you have

the option to drop out. Youve lost your one dollar, but you have not obligated yourself to the bitter end on what now appears to be a losing proposition. The game progresses with a series of options until you either opt to drop out, you win, or you lose.

The lesson here is to approve and analyze the business justification of projects in pieces. Put the riskier pieces upfront. When each piece is done, analyze your business justification based on what you know then.

Each time we roll out a new system, we should set benchmarks for its expected use, and we should ensure we have a way to measure our actual usage against those benchmarks. This should be included in and delivered by each project. For example, if we decide that an online employee evaluation system is valuable in that it would be used to create all evaluations, we should periodically check to make sure that it is being used. This can be done by counting the number of evaluations created or by comparing the people for whom evaluations were created against the employee list. To the extent that the system is not being used, we should contact management and develop management reports to provide the required emphasis. Or, management may decide to abandon the system.

As part of every project, we should establish metrics to ensure that the return on investment we anticipate is being attained.

As IT professionals, we should pride ourselves on undertaking projects that provide good business value. We should not use business value to justify our pet projects. To avoid this, we should implement best practices in arguing this justification. Then, we should provide a way to objectively measure and report on the systems actual results against those justification arguments.

A project is a temporary effort to create a product or service. It is to be distinguished from operations, which are regular and systematic efforts to continue to provide products or services on an ongoing basis. While both projects and operations need to be systematized, the way they are systematized differs. Operations are routine and often repetitive tasks. While projects have repetitive steps, how these steps are completed differs from project to project and is not subject to formula. Nevertheless, there are best practices to consider in managing projects.

Budget

I dont care too much for money-for money cant buy me love.

-the Beatles.

This topic presents a practical overview of IT budgeting and cost containment practices for the IT director. In creating the department budget, the IT director must analyze a large number of variables and balance multiple competing priorities, while devising the most cost-effective approach for

delivering mission critical services. Because of the impact the budget has on the IT managers ability to run an effective department, budget creation is one of the most important jobs an IT manager has. Exhibit 17.7 displays the amount of IT spending as a percentage of revenue by industry. As you can see, professional services is high. Exhibit 17.8 illustrates IT spending per employee. And finally Exhibit 17.9 shows the ratio of IT personnel to the total company population. The previous three charts can help you determine the approximate dollars you should be spending on IT.

To prepare for budgeting, collect in advance the following types of information to help streamline and improve accuracy of the budget:

Actual operating, capital, and budget variance figures from the previous year

Initial statistics on employment growth or decline at the company Initial statistics on profit and sales expectations for the company for the

coming fiscal year Any changes to company operating policies

9.0 8.0 7.0 6.0

Exhibit 17.7 IT Spending as a Percentage of Revenue by Industry