Do you ever experience difficulty choosing the ideal project as a project manager? It’s standard since organisations rely on project managers to make crucial decisions about project selection. How can you determine which project has the most potential to benefit stakeholders, sponsors, and the organisation? 

5 Techniques for selecting potential IT Projects

Sometimes it gets overwhelming, as numerous techniques are available for potential IT projects. But we’ve got you covered. Using these five strategies can help you select potential IT projects.

Focusing on broad organisational Requirements

When choosing projects, everyone needs to consider what the organisation needs. For example, the organisation may want to improve customer service or safety. It can take much work to prove the financial value of specific IT projects related to these goals.

To help with this, a method focuses on the organisation’s needs. It looks at the three criteria below.

Need: Does everyone in the organisation agree that the project should be done?

Funding: Does the organisation have enough money to do the project?

Will: Is there a strong desire to make the project successful?

As the project goes on, the project manager should keep checking for the project’s needs, funding, and will. This helps decide whether the project should continue, be changed, or terminated.

Categorising IT projects

IT projects can be grouped into different categories. Here are three ways to categorise them. One method is to see if a project solves a problem, captures an opportunity, or follows a directive.

Problems: These situations could be better for the organisation. For example, if a company’s system is slow because it’s overloaded, it’s a problem.

Opportunities: These are chances to make things better for the organisation. For instance, creating a new product that can significantly benefit the company is an opportunity.

Directives: These are new guidelines or specifications from within or outside the company. For example, if a company has to meet specific government standards because it’s involved in medical technologies, it’s a directive.

Time is another way to look at potential IT projects. Some projects can be finished quickly, while others may take a long time. An IT project manager must consider how long each project will take.

The third way to categorise potential IT projects is by priority. Organisations and project managers often divide tasks into easy, medium, and complex categories based on their importance. Even though low-priority projects might take less time, high-priority projects should always come first.

IT project managers can make better decisions when choosing potential projects by considering these categorisations, the time needed, and setting project priorities.

Performing financial analyses

Financial analyses are essential to project selection, especially during economic crises. Every project has specific financial projections before starting. There are three primary techniques to determine the projected monetary value of projects.

Net Present Value Analysis

Net present value, or NPV, is a method for calculating and determining whether a project is viable and cost-effective. The NPV looks at all the money a project is expected to bring in (like revenue or cost savings) and all the money it will cost (like expenses or investments). It then calculates the value of all that money in today’s terms. This is because the funds received in the future are worth less than now.

A positive NPV means the project is expected to generate more money than it costs, while a negative NPV indicates a potential financial loss. By considering NPV, decision-makers can select projects with higher profitability and value.

Read the full article: Advantages & Disadvantages of Net Present Value in Project Selection.

Return on Investment

ROI, or return on investment, compares the money gained from a project to the capital invested. When selecting potential IT projects, ROI guides decision-makers in identifying the best financial returns.

To illustrate, let’s say you invest €120 in a project today, and by next year, it will grow to €150. By calculating the ROI using the formula (€150 – €120) / €120 * 100, you find the ROI is 30%. It’s important to note that ROI is always expressed as a percentage.

Many organisations rely on ROI during the project selection process. An Information Week survey found that 41% of organisations use ROI calculations for IT investments and projects.

Payback Analysis

When using payback analysis, you look at the amount of money the project will make each year and see how many years it will take to earn back the initial investment. This helps you know how quickly you will get your money back.

Payback analysis is practical when you want to know how soon you can recover your investment and start making a profit. It helps decision-makers choose projects that offer quicker returns and align with their financial goals.

Using a weighted scoring model

A weighted scoring model is a way to compare different projects by assigning scores to them based on their importance. It helps in decision-making by considering various factors and their relative significance.

Here are the simplified steps for creating a weighted scorecard in project management:

• Identify criteria: Determine the critical factors for your project’s success.
• Assign weights: Decide the relative importance of each criterion by assigning weights or percentages.
• Define scoring scale: Create a scale to score how well each project meets each criterion.
• Score each project: Evaluate and score each project based on the criteria.
• Calculate weighted scores: Multiply scores by weights and add them for each project.
• Compare and prioritise: Compare the weighted scores to determine that the best project meets your criteria.

Following these steps, you can use a weighted scorecard to objectively compare projects and prioritise them based on their performance against essential criteria.

Implementing a balanced scorecard

The balanced scorecard includes non-financial elements to provide a holistic view of organisational performance. To implement a balanced scorecard, teams can follow these steps:

• List all current projects.
• Map projects to the balanced scorecard.
• Identify gaps and add relevant projects.
• Remove tasks that don’t contribute to the business strategy.
• Prioritise projects based on the business vision.

There are four perspectives in the balanced scorecard: financial, customer, internal, and learning and growth. The balanced scorecard helps teams evaluate projects based on these four perspectives in project management. It clarifies project vision and objectives, identifies performance indicators, and eliminates potential roadblocks.

Closing Notes:

Project selection is crucial for organisations, and there are various techniques to choose from. It’s essential to consider multiple factors and explore different methods to make the best decision for the company. At Markup Company, we help leaders succeed in project management through independent product development and digital transformation services. 

By utilising our proven techniques and disciplined approach, we assist clients in meeting their digital business strategy objectives. Understanding these techniques is valuable for project managers in justifying and selecting potential IT projects.