By the numbers
- By Wilson P. Dizard III
- Jul 16, 2003
Federal IT investment planners don't usually wear black tie and sip dry martinis as they evaluate systems purchases. But they can use a statistical technique named after an exclusive gambling center when planning projects.
The CIO Council recommends using value-measuring methodology to calculate costs, benefits and values of IT investments. In evaluating projects' costs and risks, the methodology uses Monte Carlo simulations, named after the city in Monaco known for its casinos.
The simulations are similar to those governing the possible outcomes from slot machines. They provide numerous scenarios by repeatedly picking random values for uncertain variables, such as the individual cost elements of a project.
A Monte Carlo simulation typically consists of 2,500 to 10,000 versions of the calculation.