Development of a framework to assess and guide IT investments: An analysis based on a discretionary-mandatory classification

Assessing the economic feasibility of information technology (IT) projects remains a challenge for most organizations. On one hand there are concerns for the rising IT costs, on the other hand organizations may lose significantly if they do not make an appropriate investment in IT. Considering the range of IT projects, a single, standardized capital budgeting approach may not serve the best interests of organizations. This paper presents a framework to help evaluate different IT projects through a mix of suitable methods. The framework is based on the classification of IT projects along a discretionary-mandatory dimension into four types: purely discretionary, mainly discretionary, mainly mandatory, and purely mandatory. A set of factors are identified that may influence the final classification of an IT project into one of the four types. This classification is used to arrive at suitable IT evaluation techniques and methods. Use of strict financial evaluation criteria is suggested for discretionary projects. The need for analyzing financial risks associated with IT projects is also identified and it is suggested that higher standards of project acceptance be used for riskier projects that are not deemed mandatory in the earlier analysis. The framework should be useful for information systems researchers and practitioners in streamlining the assessment of IT projects.