• Count everything that is directly associated with the project. For example: "I purchased a Web server for this project."
• Don't count infrastructure items not associated with the project. For example: "I used the existing Web server."
• Do count infrastructure items that were driven by the project. For example: "The company purchased a Web server because of this project and two others like it", means you should include one-third of the cost.

Personalized consultancy, of course, comes at a price. Question is, will it undermine the ROI? —A.L.

Project Portfolio Criteria: Stop the Squeaks

If the corporate world is unhappy with its IT scorecard, research from U.S.-based Meta Group reveals why. According to Meta, 70 percent of Global 2000 companies still use single-dimension criteria to select projects — generally cost/benefit analysis or some type of return calculation. Fewer than 10 percent apply several levels of criteria — risk, life cycle, return, planning horizon, and the like. "The remaining companies still rely on a first-come, first-served or squeaky-wheel method of allocating resources to projects," laments Marnie Ross, a Meta Group analyst.

Still, in the next few years, investment in "project portfolios" will grow, slowly. This means taking the gamut of business complexities into account when evaluating IT projects, and hopefully cutting the chance of investing in low-value projects. Meta believes that by 2006, more than 30 percent of Global 2000 companies will use multidimensional project-portfolio decision criteria.

Ross says various factors should be weighted — depending on competition, regulatory restrictions, market position, and long-term business goals — to ensure the right mix of investments. Typical considerations include:

• Term: A short-term project like application development might be required to take advantage of tax rebates available only for the current year. Long-term projects include application and infrastructure changes demanded by regulatory bodies.
• Risk: Business risk tolerance is affected by factors such as corporate aggressiveness, cash flow, and ownership (public or private). Internal business risk factors (such as employee acceptance of new systems) should not be forgotten.
• Duration: For resources to be tied up on a long-term project (more than two years, says Meta) other factors (regulatory, strategic benefit, high ROI) must exist.
• Expense: Most companies take this into account, with existing spending authority structures, budget processes, and cost/benefit reviews. But as the sole criterion for decision making, notes Ross, it is "exceedingly incomplete".
• Scope: Unless intimate knowledge of customers is the main driver of business value, projects with a global scope usually deliver greater value than those focused on local results.
• Posture: Tactical, line-of-business-driven "offensive" projects — those focused on seizing market share — and "defensive" projects — which reduce the risk of customer loss — can add value, provided other types of projects are in the portfolio.
• Planning horizon: Typically, strategic projects are driven by corporate offices. The focus is on business sustainability and improved management capabilities — and ROI can be hard to pin down. Classic example: ERP.
• Life cycle: Usually infrastructure-related, so-called asset life cycles span the business; they concern account skills, applications, processes, business markets, and customer segments. Over time, each element ages from "new and valuable" to "outdated liability." By tracking these assets, project portfolio managers know when to retrain, reengineer, replace, release or retire systems — setting in train a whole new string of projects.

—A.L.

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