Part B - Information Systems and Information Technology Solutions

B.4.9. Criteria for Appraisal of the Financial

Investment in IS&T Projects
When investing in IS&T, a number of key criteria for evaluating and approving the project must be
considered. Investments in IS&T are no different to other significant investments in terms of the
procedures they must follow and the need for rigorously constructed business plans. However, the
mixture of technical and organizational issues raised by such investment demand that several
questions must be raised by the decision-makers involved in the process of systems planing, design,
and acquisition. They form the basis for criteria against which approval will be given. The criteria
apply irrespective of the source of financing.
The discussion that follows is based on recommended criteria used by the U.K. National Health
Services, developed by the NHS Management Executive, Information Management Group. Criteria
which management should apply in assessing all IS&T investments, and against which approval will
be given for those which are substantial, are:

1. The investment is part of an overall IS&T strategy based

on the organization's business plan
Every IS&T investment must support the business and service objectives of the organization. These
are usually detailed within the organization's business plan. It is also important that the total of all the
IS&T systems within an organization provide consistent and coherent support to the business. It is,
therefore, essential that every investment is part of an overall IS&T strategy based on the
organization's business plan. Strategic horizons will generally be three to five years with an annual
review.

2. There is a properly structured business plan based on good investment

appraisal and realistic scheduling, with staged review points
When scrutinizing a business plan one must expect that the appropriate development of a Project
Plan has been considered according to the criteria defined in Sections B.2.1. to B.2.8. above.

3. Account has been taken of achieving the same benefits

from better use of existing assets
A range of IS&T options will usually exist, delivering differing levels of benefit but at differing costs
and must be considered within the investment appraisal. The following options must be considered:
(a) Status quo - what would happen if the investment did not proceed? This must always be
included for comparison purposes.

Part B - Information Systems and Information Technology Solutions

(b) The non-IS&T solution - is it possible to alter current practices to achieve increased benefits
without implementing an IS&T solution?
(c) Changing existing systems - is it possible to increase the benefits from existing systems by
changing the systems or the organization's working practices rather than implementing a new
system?

4. The benefits (cash-releasing and noncash-releasing) have been

properly and realistically identified and assessed with a commitment
from the affected parties to their realization
In order for a benefit to be properly and realistically identified and achieved, it is necessary that:
(a) the benefit is accurately and precisely described;
(b) methods for measuring the benefit are outlined;
(c) the tasks required to achieve the benefit are identified; and
(d) a commitment to the achievement of the benefit is obtained from those affected.
If an investment in a provider organization is likely to result in increased costs to purchasers, then the
continued viability of the provider's business plans should be considered. National demonstration
projects may be of help in identifying the benefits that can be achieved.

5. Full assessment of the risks surrounding the investment is carried out

at an early stage together with an evaluation, setting out how sensitive
options are to change in the underlying assumptions that have been
made
Options are often close together in terms of costs and benefits and the estimates used in the option
appraisal can be uncertain. It is important to perform an analysis of these uncertainties and two
essential elements sensitivity analysis and risk analysis must be addressed.
Sensitivity analysis will identify the assumptions made and consider the impact of varying the
assumptions made on the options. Risk analysis considers the nature of the risks associated with the
investment and their impact on the project. What measures can be introduced to minimize their
impact?

6. There is a clear understanding of the procurement process

The procurement process will vary depending on the type, complexity, and size of the project being
undertaken. In all cases the procurement process and the proposed contract will be expected to
follow the guidelines explained in detail in Part C of this document. The contract must conform to all
the necessary contractual safeguards.

Part B - Information Systems and Information Technology Solutions

7. The project will be handled in a structured manner

Each major project must be managed using a well-structured methodology. Guidelines can be found
in a number of easily available general publications related to technology project management. A
general introduction and recommendations are found in Sections B.2.1. to B.2.8. above. For large
investments, consideration should be given to appointing a Project Supervisory Committee.
All participants in the project management structure must have an appropriate level of training and/or
awareness of their roles. The Project Manager must be fully trained and experienced in information
systems project management, and projects should not be started unless this can be demonstrated.

8. There is an unequivocal commitment from the Project Manager and

Project Supervisory Committee and clear understanding of their
roles, and of their senior staff, in the procurement, implementation,
and benefits realization process
Implementation of a major IS&T investment can have a major impact on an organization. Senior
members of the organization must be aware of all the potential internal and external impacts and be
committed to the successful achievement of the investment.

9. There are sufficient and adequately skilled IS&T resources to

manage successfully the specification, procurement, and
implementation of the project
The IS&T human resources requirement must be identified. Where such resources are not available
within the organization, the methods for obtaining the resources must be identified. When resources
are obtained from outside the organization (outsourcing) it is important to ensure that the organization
has sufficient skills to absorb their contribution and supervise those resources.
This will be an area of particular scrutiny. It can be difficult to recognize that in-house skills and
experience may not be sufficient. However, this will be critical to a project's success. The larger the
project the more skilled and experienced the project manager and internal IS&T staff need to be. It is
the responsibility of the organization to make decisions on the suitability of their IS&T staff.

10. There is a resourced and structured training program

Implementing a major IS&T investment will mean training staff to operate the new procedures. A
training need assessment should be performed and a structured training program produced to meet
the needs identified. The plan for achieving benefits will normally be described within the business
case. This will often be a substantial part of the investment up to 15% of the capital costs.

Part B - Information Systems and Information Technology Solutions

11. There is a clear plan for benefits realization, including a commitment

to assign responsibility for realizing benefits to an individual
with sufficient authority and resources to deliver
In order to obtain benefits from an IS&T investment, changes to the organization and its work
practices will often be required. To successfully implement the investment requires that an individual
with sufficient authority and resources be prepared to commit to achieving the benefits outlined. To
ensure that all parties play their role in achieving benefits, that authority should normally derive
directly from the Project Manager.
As benefits are normally obtained within user departments or units, the managers of those
departments, rather than IS&T specialists, will normally be responsible for the actual achievement of
benefits. It is the responsibility of the Project Manager to ensure that they do so.

12. There is a commitment to post-implementation evaluation, the

results of which will be made available to the authority approving
the investment
It is essential to have a formal post-implementation review program whose prime purpose should be
to identify problems and initiate appropriate remedial action. The process should not be regarded
solely as a single exercise that occurs once the project has been implemented, but should be based
on a continuing process which contributes to a final formal review at an appropriate point. This review
should be aligned to a suitable milestone in the achievement of benefits, and should occur within two
years of implementation. Plans for collecting monitoring and evaluating data should be set out in the
preparation phase of the business case.
Where projects take a year or more to implement from the signing of the contract, or if there is no
contract one should consider the start of implementation, the organization should identify a significant
milestone in each year. At this milestone the Project Committee should review the project to ensure it
is on schedule, within costs and that it should continue. A report should be submitted to the normal
approval body. For projects where implementation will take a year or less, a post-implementation
review report should also be submitted at the end of the scheduled implementation.