Finance for IT Managers

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This book offers valuable finance concepts to IT Managers and Project Managers so that they can carry out cost benefit analysis, develop a business case to justify ROI of a project, secure funding and execute the project. NPV, IRR, Payback Period, ROI, TCO, Capital vs. Operating Expense, Depreciation & Amortization, Outsourcing & Offshoring, Cost Benefit Analysis and Business Case are presented in detail. This book presents wide array of examples in each chapter with easy to understand diagrams. In the end, the reader will be comfortable with IT Finance concepts. This book covers the following.


Chapter 2 – Time Value of Money – This chapter covers interest rate, present value (PV), Future Value (FV), Net Present Value (NPV) and Payment. It explains how NPV is used for deciding IT Projects.


Chapter 3 – Internal Rate of Return (IRR) – This chapter explains IRR. It presents several examples of IRR. It presents how IRR is used for deciding IT projects as well as the limitations of IRR.


Chapter 4 – Opportunity Cost – This chapter explains the economic value of the best alternative given up by making a decision.


Chapter 5 – Sunk Cost – This chapter explains how the money spent does not impact future decision on a project.


Chapter 6 – Cost of Capital – This chapter explains the concept behind cost of capital and how to calculate one. This rate is used for discounting cash flows for IT projects.


Chapter 7 – Payback Period – This chapter explains the payback period is. It presents a detail example of payback period.


Chapter 8 – Expected Value (EV) – This chapter describes what EV is and presents examples to calculate EV of a project based on different outcome.


Chapter 9 – Expected Annual Cost (EAC) – This chapter presents how to compare machines of unequal lives.

Chapter 10 – Capital vs. Operating Expense – This chapter explains what these are. It presents IT costs and categorizes them into Capital vs. Operating Expense. SDLC Waterfall and Agile methodology are presented and a phase within each life cycle is categorized into Capital vs. Operating Expense. Purchase of package software, customization of package software, software development, equipment purchase and maintenance cost are categorized into Capital vs. Operating Expense with plenty of examples.


Chapter 11 – Depreciation and Amortization – This chapter explains how hardware is depreciated while software and goodwill are amortized with examples.


Chapter 12 – Total Cost of Ownership (TCO) – This chapter explains what the concept behind TCO is. It presents TCO for a server, a web site, an ERP system, a Data Warehouse System and a mobile app.


Chapter 13 – Chargeback – This chapter explains how to develop a chargeback model. It presents examples of chargeback model for a Load Testing CoE, Incident Management System and Private Cloud.

Chapter 14 – Financing vs. Leasing – This chapter explains the concepts behind financing and leasing. It presents examples to explain the concepts.


Chapter 15 – Cost Benefit Analysis (CBA) – This chapter explains the concepts behind cost benefit analysis. It presents examples to explain the concepts. It explains how NPV and IRR play a role in deciding a project from among multiple competing projects.


Chapter 16 – Off-Shoring and Outsourcing – This chapter explains the concepts. It presents various scenarios to understand costs associated with off shoring and out-sourcing.


Chapter 17 – Business Case – This chapter presents how to develop a business case. It presents a mobile app project and the sales volume and income statement. In the end, the analysis calculates IRR from the cash flow.

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