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CHAPTER 5 Evaluating IT Investments-- A Common Decision Tool 5.1 A Process for Valuing IT Systems Evaluating the value of proposed systems is one of the more difficult tasks airport executives undertake. Executives often make investment decisions based on incomplete data. For example, total costs of the system may be underestimated, potential funding sources may be overlooked, or benefits may not be properly quantified. The solution is to have a consistent methodology for evaluating systems and a scoring mechanism for valuing them individually or against one another to make objective investment decisions. Evaluating and deciding on IT investments is done during the system planning phase of the IT system lifecycle. (See Chapter 4 for information about all the activities performed during the system planning phase.) This chapter outlines a four-step methodology for making these tough investment decisions: · Documenting system benefits. · Determining TLC. · Performing a costbenefit analysis. · Scoring system values objectively. 5.2 Documenting System Benefits The system benefits are the most important component when evaluating the value of a sys- tem. Without benefits there would be no reason to invest in the system. The IT department must take the lead on collaborating with stakeholders so that the benefits of a proposed system are described effectively. It's important for stakeholders to agree on the expected benefits so that they will support the value that is assigned. Benefits are difficult to define. Some have financial value and others have intangible value that cannot be expressed in monetary terms. Table 5-1 gives examples of both financial and nonfinan- cial benefits to look for. Clearly, the easier path to funding a project is to establish that the financial value outweighs the capital costs. Make every effort to find the hidden financial value in nonfinancial benefits. Following is an example. In a project such as installing common use kiosks, a nonfinancial benefit, "enhances passenger satisfaction," can be converted to a financial benefit by doing a little research. Calls to other airports might reveal that this technology and the improved passenger experience have translated into a small increase (1% or 2%) of passengers using the airport--which could mean 20,000 more passengers 49