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Date Posted: 3/15/16
By Ben Massie, contact:


No matter the industry, IT costs tend to be a large part of capital and operating budgets for most companies.  They include capital costs for new hardware, software, and personnel as well as annual operating costs supporting past initiatives.

But are past IT projects still providing the value they were forecasted to generate?  Do certain systems or processes need to be refreshed, or does it make sense to invest in new technology to replace aging IT initiatives?

Last year we helped a large multinational energy company assess several IT solutions they had deployed over the years.  Controlling costs has been a major theme in the industry of late, and the company wanted to know whether each solution in the portfolio was still generating value in the years following implementation.  The portfolio included products and solutions ranging from IP and internal knowledge management to organization of the company’s most critical engineering standards.  We looked at 7 projects or solutions with a total annual operating budget of about $2.3M.

The Approach

Using the targeted “lookback” approach shown below we assessed each solution on an individual basis.

Look-back Graph

Each step in the process addresses a specific need.  Mining the available original project documentation allowed us to understand how the solution was originally intended to perform, the scope of the solution, and its projected quantitative and qualitative benefits.  Using tools like Objectives Hierarchies and Influence Diagrams we were able to validate the quantitative and qualitative benefits with the owner of each solution.  From there we interviewed each owner, surveyed end users, and built stochastic models which calculated the range of potential value generated by each solution.  Survey results were then incorporated into the models and the outputs were reviewed with each product owner.  The individual analyses were then rolled up into a larger portfolio analysis that provided an overall view of the portfolio.

Insights & Results

All compiled data was used to generate an executive summary presentation as well as a detailed report for comprehensive understanding of the insights.  The modeling produced a set of stochastic curves depicting the potential range of value generated by each solution.  The example below shows that there is an 80% chance that this particular IT solution generates between $400K and $16.8 of benefits annually.  When compared to annual operating costs of $500K, it is likely (but not statistically certain) that this solution is still generating value.


Another outcome for each IT solution was identification of areas for improvement that could boost the potential value.  As discussed above, this particular example likely generated value for the company, but our analysis showed that while the solution increased end user productivity, adoption of the solution was holding back additional value creation.  Because the potential value was so high, the company could better capture value by spending the resources to increase awareness of the solution and driving adoption rather than scrapping it for something new.

From a portfolio perspective, the range of potential value was between $2.6M and $37.3M (p10 to p90) and the total operating costs were about $2.3M.  It was found that one of the IT solutions was not being used as forecasted and the resulting costs were much higher than the value generated.  The company now has the option to spend that solution’s $950K budget on improvements or on a new system.


This was a relatively large analysis of a portfolio of IT initiatives, but the approach and tools can be scaled to fit any portfolio of IT projects and even used to cost effectively assess the value of one IT system.  As cost pressures drive continuous improvement and IT opportunities develop, having a clear picture of where your IT money is spent and the value it is generating is critical to making smart project investments as well as getting the most out of existing programs.  A disciplined lookback approach can help you accomplish both.



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