It’s common for growing companies to have a number if IT projects in the works, and it’s sometimes difficult to determine where to focus your resources.
Dedicating your staff and money to a particular project is a serious investment, and it involves a certain degree of risk. While many IT projects go well, some have been known to drag out in development, eat up the business owner’s cash and patience, or simply fail to deliver the necessary returns. Thankfully, you can usually avoid these outcomes by thoroughly assessing a project before you commit.
We have learned a lot from the mistakes made in the 1990s, when scores of companies invested in new equipment without putting a comprehensive IT management plan in place. After the Internet bubble burst, companies had to endure layoffs and budget cuts that left their IT portfolios in a state of disarray.
Now that the dust has cleared, business owners have become more cautious and savvy about how they manage IT investments.
A good first step is to determine why each IT project is important. Ask yourself the following questions to determine whether it is a worthwhile investment:
- What business needs will the project satisfy and do the deliverables align with my long-term business goals?
- How risky is each project?
- Do I have the resources to successfully complete it?
More mature companies may have a number of aging projects in the works and it’s important to decide whether they are still worth pursuing. Perhaps the technology has become outdated or obsolete, or your business goals have changed.
Make sure that all the IT projects in your company’s portfolio are relevant to your plans over the next three to five years.
Once you are confident in the strength of your project portfolio, you need to decide which project to tackle first. Small businesses often have limited resources and thus find it difficult to budget and manage more than one project at a time.
But that doesn’t mean that small business owners can’t learn a few tricks from the Chief Information Officers (CIO) at larger companies. A number of CIOs have begun looking at IT projects in the same way that CFOs look at financial investments. They assess the risks, goals, and budgets of each individual project and manage them according to their estimated return on investment (ROI).
ROI is a common financial term but it can also be used as an essential measuring stick for determining the value and urgency of various IT projects.
Ask yourself what return you expect to generate from each project, and then determine how essential that return is to your business. The return may be the smooth day-to-day running of your business, or it may involve a longer-term goal. By looking at the potential results of each project, you can begin to prioritize your IT investments. Then, you may incorporate your risk assessment into your plan.
Maybe your top priority project has a high return but also a high risk factor. A high risk factor could be a large or unknown price tag, or it could involve a new and untested technology. Weigh the benefits against the risks before jumping in feet first, and always circle back to your core business objectives. The project may be risky but important enough to your business to pursue it.
By rating the projects according to business needs, return, risk, and budget, you should be able to develop an IT investment schedule. Even after you have prioritized your IT needs, continue to periodically assess your project portfolio to make sure that it is current and tied to your present business goals.
For more information on managing your IT investments, read Who Should Manage Your Company’s IT Investment? and Match Your Technology Goals to Your Company’s Future Strategy.
Scarlet Pruitt is a freelance writer and business consultant based in San Francisco. She has covered business and technology for publications in the U.S., Europe, and Latin America.