Investing in an Intranet

Investing in an Intranet

INTRANETS–INVEST FIRST, ANALYZE LATER

1. The “invest first, analyze later” approach is appropriate when technology is initially introduced and it is difficult to quantify the costs and paybacks associated with the technology. In these situations, managers can rely on their expertise and their understanding of the technology and the benefits that it will provide their business. This approach is inappropriate when it is unclear how the technology will benefit the company, or when the company has a history of unprofitable early adoptions.

2. To some degree, the shift toward traditional analysis has already occurred. This is because intranets and the Internet are no longer new technologies with no histories on which quantitative methods can be applied. Instead, companies such as EDS are in an excellent position to provide the necessary information to companies regarding investments and expected savings. Some companies will continue to be on the cutting edge of technology and may continue the “invest first, analyze later” approach, but it is probably a waning approach.

3. The most significant risk of getting into a project that has not been through financial analysis is that the company will suffer a loss on the project, or that the project will not be as profitable as anticipated. Actual costs could be higher, actual savings could be lower, and the company faces problems in either of these situations. To avoid this, companies can perform at least some rudimentary analysis using “best guess” scenarios to help guide decision makers.

4. Using an interest rate of 7 percent, the following present value is derived for Cadence Design:



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