Author's note: Since I thought it would be a good idea to include the perspective of a seasoned finance executive in the book, I turned to Leo Sadovy of SAS, the business software company. Leo is something of a Renaissance man, with a wide range of business experience. At SAS, Leo is currently responsible for worldwide marketing of the company's suite of corporate performance management solutions. Prior to joining SAS, Leo was vice president, finance and business operations, at Fujitsu Ltd. He has an M.B.A. in finance from San Francisco State University.
Instead of merely answering my questions about the various ways in which CFOs typically evaluate IT investments, Leo wrote the following chapter, which I present to you in its entirety.
Every CIO has a contingency fund, but dipping into it too often will be perceived as an indication of poor management. The CFO, the CEO, and the board take capital budgets seriously, and so should the CIO.
The starting point for the CFO's evaluation of an IT investment or project would be no different than for any other type of investment. The key issues would be cash, risk, and benefits.
Let's begin with cash. An IT investment will have an impact on the capital budget and on ongoing operational budgets, both in the IT department and elsewhere in the organization.
While the capital budget might initially appear to be just an annual allocation, it is typically always ...