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The Business Case

Some experts are souring on conventional ROI analysis because the numbers seem to come out of thin air. Here's what's coming next.

Well, not quite. The project is on hold because the chairman didn't buy Yagley's arithmetic. "He said, 'Show me concrete savings. Who will get laid off?' " Yagley says.

It's a scene being replayed in many IT shops. Management wants evidence of ROI, and, under intense pressure, IT is grasping for numbers. Trouble is, executives often don't trust IT's calculations because they don't view tech managers as business experts. Worse is the perception that IT has a stake in pumping up the numbers.

Now, more IT organizations are moving beyond pure arithmetical ROI assessments to a project-planning methodology that treats each IT asset something like a stock in an investment portfolio. Line items that are delivering returns get more funding; lackluster projects get the ax. The stock analogy isn't perfect--savvy investors don't buy high and sell low--but there are signs that interest in this portfolio approach will intensify as IT organizations try to regain credibility lost during the freewheeling tech boom and subsequent bust.

All the major tech consulting firms are championing this approach, and they say they're signing up clients at a rapid clip. One in five IT shops will have adopted the practice by next year at this time, predicts Meta Group analyst Howard Rubin.

The emphasis is on phasing in technology investments rather than jumping in feet first. Too many large, long-term IT projects are approved based on flawed assumptions because the business case is made so early, when the least is known about how the project will impact the business, analysts and customers say.

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