Investment decisions in the public sector, whether they involve IT or any other expenditure, take place in a context of political and policy influences. No matter how solid or technically sophisticated an ROI analysis may be, it will not likely be the sole determinant of an investment decision. It is useful in deciding how to prepare and present an ROI analysis, therefore, to take into account possible political and organizational factors. Such a consideration of external factors may help shape the style, emphasis, or presentation strategies employed to introduce ROI analysis into decision processes. Such considerations are discussed below and may also help in recruiting support for the conclusions of the analysis and guiding how the analysis process is described or defended.⁶ All of these considerations can be classified as different types of risks.

Public exposure of failure or error. Government’s business is public business. Most new ideas are implemented in full public view. Any investment-gone-wrong risks not only dollars, but the credibility of an agency and its leadership with legislators, executive officials, and the public. So government tends to reduce risks by relying on the "tried and true." Failure risk can be mitigated by taking care not to over promise the benefits of new projects and to ensure that there is adequate strategic planning to reduce the probability of failure. Undue caution can also risk a different kind of failure: missed opportunities for successful projects.

Divided authority. Public executives seldom have a clear line of authority over agency operations. Their decisions are circumscribed by existing laws, budget and financial controls, civil service systems, political constraints, and a variety of regulations imposed by both legislatures and the courts. These restrictions impede managing the complexities of multi-million dollar IT projects in a rapidly changing technical environment.

Multiple stakeholders. Stakeholders typically have competing goals. Customers, constituents, vendors, service providers, elected officials, professional staff, and others all have some stake in IT projects. Understanding how different choices may affect and be affected by each stakeholder group helps to prevent unexpected problems.

Annual budgets. Government budget cycles increase the uncertainty about the size and availability of future resources. This diminishes government agencies’ abilities to adopt or sustain new IT innovations successfully, especially those that have long development periods.

Highly regulated procurement. Regulations in the typical competitive bidding process are ill suited for the experimentation and learning that is often essential for successful IT investments. While promoting integrity and fairness, procurement regulations are often a source of problems and delays. These are especially troublesome when agencies write requests for proposals (RFP’s) that depend on the limited information they have been able to gain from inadequate experience and research.

Complex program networks. Government programs are connected in many complex ways to other programs in the same or other agencies, or to non-governmental entities. Sometimes the connections are explicit and formal. Often they are informal or unintended. Changing programs can have unintended consequences for several others, producing additional costs and problems for the investment project.

Misalignment of goals. Some parts of an organization may see the goal of an IT project in narrower, possibly conflicting terms. For example, an IT unit may become enamored with a database or office automation project because of its technical elegance. The end users of the system, however, may want capabilities that are not compatible with the new technology. Without some goal alignment a project is on the path to failure.

Lack of leadership support and organizational acceptance. Top management support for a technology initiative is critically important. Similarly support and acceptance throughout the organization, especially among the people who will use the technology or its products, are equally important, and often more difficult to achieve. Understanding and enhancing support reduces or limits risks.

Reality of the process. IT inventions are embedded in business processes. Failure to understand and account for this reality in project design and implementation introduces major risks. Systems are often created that do not serve business needs, are too expensive for the small productivity gains they provide, or are not flexible enough to meet changing demands.

Rapid change. Obsolescence is a risk as soon as a project chooses its technology. The pace of technological change makes it difficult for planners to keep up with the details of new developments and to understand comprehensively how each new technical tool works, or may be superceded. Technology choices guided by long term strategies and strong linkages to business goals can mitigate many of the risks produced by rapidly changing technology.

Technology interactions. A basic concept of system analysis is "you can’t do just one thing." New technologies interact with old technologies and work processes. The interactions may enhance the value of the older and newer technology, or interfere with both. A careful analysis of these interactions will identify risky situations and provide insights for avoiding problems and errors.

Scale and complexity. Risks increase directly with the scale and complexity of IT projects. Planning an incremental process of development, with careful contingency plans, can mitigate some of these risks and will avoid problems that cannot be anticipated on the path from small to large, complex systems.