The Appraisal of ICT and Non-ICT Projects: A Study of Practices of Large UK Organisations

Abstract

As companies become more and more reliant on ICT systems to aid good decision-making, a regular review of their information technology requirements is inevitable. The appraisal of such investments is not, however, without its problems.¹ Arguments have been raised that the traditional methods of financial appraisal are inadequate because ICT investments differ, in many respects, from non-ICT capital investments.² The literature shows that some companies now tend to use a greater number of appraisal techniques than in the past, but there is no consensus on the actual combination.³ The literature also shows that individual appraisal models on their own are now inappropriate and a more hybrid approach is required, one that includes both economic and strategic dimensions of choice.⁴ As a result of the perceived failure of some of the traditional methods of capital investment appraisal, managers sometimes base their decisions on ‘acts of faith’ or, as some researchers report, use less sophisticated financial models to evaluate what must be regarded as sophisticated IT projects.⁵ It is argued that the positivist approach to the evaluation of IT projects that places excessive emphasis on accounting aspects may no longer be relevant and that a more ‘interpretive’ approach should be adopted.⁶ Sophisticated investments, such as investments in ICT, may require a more sophisticated approach in their appraisal, with the use of a larger diversity of financial, risk, and strategic assessment models.