But both approaches ignore the cost dynamic of software development, where costs are usually compounded. Assume that software development is 25% of the total IT budget in the first of five years and that every dollar of development generates 20 cents of operations and 40 cents of maintenance costs. Then, consider the following three scenarios:
So much for costs. What about the benefits of software development?
Post audits identify problems that need fixing, check the accuracy of forecasts, and suggest questions that should have been asked before the project was undertaken. Post audits pay off mainly by helping managers to do a better job when it comes to the next round of investments.
Most firms keep a check on the progress of large projects by conducting post audits after the projects have begun to operate.
Post audits may not be able to measure all cash flows generated (or expenses saved) by a project. It may be impossible to split the project away from the rest of the business.
Suppose your firm has just taken over a trucking company that operates a merchandise delivery service for local stores. You decide to revitalize the business by cutting costs and improving service. This requires three investments: buying five new diesel trucks; constructing a dispatching center; and developing a new software application to keep track of packages and schedule trucks.
A year later you conduct a post audit of the application. You verify that it is working properly and check actual costs of development, deployment, and training against projections. But how do you identify the incremental cash inflows generated by the new application?