The traditional methods of project evaluation such as NPV, IRR, and EVA have been used for many years as the primary methods for IT project approvals in many large corporations. The assumption using in these methods is extremely valid and should be taken into consideration when analysing a project. However, financial indicators are only one factor to be considered when making such decision. Cost reduction is one common benefit and tangible result that often is used to justify a capital investment in any IT project. The BPR Columbus project is no different. Several cost savings can be gained, from efficiencies that the new system can provide. In addition, new capabilities and new business opportunities can be uncovered which typically are not captured in these traditional financial indicators. In other cases, some IT projects, like the Columbus project, some tangible and clear benefits can be measured, which are not based on cost savings, but in creating value, such as increasing sales, increasing brand awareness, etc. It’s crucial, therefore, to evaluate whether the Columbus BPR project will provide such benefits in addition to cost savings.
Columbus BPR context
The first step of the analysis is to understand the background of the Columbus project, and the reasons that kicked off the Columbus project. From an external stand point; the Royal Bank of Scotland was in a favourable situation with profitable results. The senior management strongly believed that the market was changing, and the dynamics of how banks were going to operate in the future would be changing in the near future. For that, a drastic change in the business process would have to be implemented. And the new technology, most specifically the client server technology, was proposed as a key enabler of the change. The primary goal was for the Royal Bank of Scotland to become the UK’s best bank by 1997. In order to achieve that, there were six key objectives defined for...
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