Estimating Opportunity Costs
When estimating ROI on a business case, one item that is often forgotten is the opportunity cost. What else could be done with the resources if this project wasn’t done: the cost (sacrifice) incurred by choosing one alternative over another.
What could those resources do to improve the corporation?
What if those resources were not deployed at all but cost savings increased corporate profit?
Which project might produce more value to the corporation than this one?
One good question to ask is What would happen if we did nothing?
Another is: Even if we can afford this project and obtain the business value, do we need that business value?
I am excited to see SEER’s Estimate by Comparison function provide estimates of value, opportunity costs, and other considerations. This can certainly help. But the most important part of this is to get management and people doing the analysis to think of this question.
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Project Prediction Infographic
