Do you take ‘opportunity’ cost into account in IT investment decisions

TechRepublic blogger Patrick Gray who writes about challenges in IT management recently wrote of the inappropriate use of IT to solve problems http://www.techrepublic.com/blog/tech-manager/dont-try-to-avoid-hard-work-by-automating/6776?tag=nl.e106 one of the stories he told was of a company spending a massive amount on an IT project to automate a $500 problem. 

I have experienced this myself. I was once confronted by a sales manager who wanted a process his PA did automated so that the PA did not need to do it any more, claiming it was a waste of her time. My team had a look at the IT changes needed to replace the manual work and came up with a couple of months work. Concerned that this was going ahead without any ROI analysis I reviewed the actual work that the PA was doing that was to be replaced and discovered it took up around one day of the PA’s time a month. Doing the wage maths that translated to the manual work costing the company about $4k per month. The IT solution was estimated at $40k, on a discounted cash basis that is about 12-13 years to break even. So the project was canned.

There was one additional question that was not asked and that was what the ‘opportunity cost’ of the work the PA was doing. If the 2 days could be replaced by work that exceeded $40k value to the business a year then the company’s hurdle rate of 12 month payback for the IT investment would have been met. This is a brief example of the way IT investments need to be looked at both from an economic and whole of company perspective. Have you had a similar experience?