Why does IFM emphasize NPV (Net Present Value) instead of ROI (Return on Investment)?
A fundamental premise of IFM is that it treats software development as a value creation exercise. The most effective way to quantify that value is to measure the cash flow generated from the value creation exercise. This is best summarized using Discounted Cash Flow techniques to create a Net Present Value for the proposed development sequence. Return on Investment models for software development have become increasingly discredited because justifying software development on ROI considerations alone often results in an impractical investment model and fails to take into account the critical value of cash flow during the development period.
