Prioritizing IT Projects: An Empirical Application of an IT Investment Model

Information Technology projects are organizational investments that anticipate positive returns. When viewed as such, the development of a diversified “portfolio” of projects helps reduce risk from a single project failure, and results in an overall positive return. Positive returns on IT projects are usually indirect, since they have value only insomuch as they enable the accomplishment of larger organizational goals. We present here a model that integrates elements of risk, cost, and internal rate of return that can be applied to individual IT projects. The model produces a numerical score that can be used to rank potential IT projects. Projects with higher scores return more value to the organization, and therefore should be given a higher priority. We apply the model using the IT project portfolio of a large state-charterd credit union. The results indicated that the credit union was prioritizing projects with more visibility but lower returns that other projects with less visibility but that offered greater returns. The implications of applying the model in other organizational settings are discussed