Capturing the Strategic Value of IT: A Review of IT Investment Evaluation Methods

10 September 2008

As the role of IT evolves and transforms the way insurance companies conduct business, decisions related to IT investments receive more attention. When defining actions and investments supporting their overall strategy, the crucial issue for insurers is to define which range of projects they should give top priority.

In a new report, Capturing the Strategic Value of IT: A Review of IT Investment Evaluation Methods, Celent examines various IT investment evaluation methodologies and the rationale behind them. Traditional methodologies are reviewed and Celent concludes with practical advice on how those involved in the IT decision making process can select the methodologies most appropriate for their situation.

In most cases, it is still unclear for insurers how to compare a strategic investment in IT that includes a range of intangible and uncertain costs versus benefits with other investments whose elements are more tangible. In some organizations, IT is considered a key enabler for supporting an enterprise-wide strategy. The problem linked to evaluating the real benefits it generates still triggers tension in executive committees, even though CIOs and, to a certain extent, CTOs have become increasingly involved in the decision making process.

"Choosing an appropriate evaluation method has often been at the center of tensions between CIOs and CEOs/CFOs when deciding to set IT project priorities or investing in a new IT infrastructure." notes Nicolas Michellod , senior analyst with Celent's insurance group and author of the report. "Insurers should evaluate each project according to its level of impact on strategic goals and organizational structure in order to select an investment evaluation methodology which best captures the strategic value of IT."

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