‘Special’ Project Valuation Models

‘Special’ Project Valuation Models are ‘special’ in a sense that they are developed for corporate objects that are commonly called ‘cost centers’. Which means that they generate no revenues, although do provide valuable services. Internal Value Centers (covered in the appropriate section of this guide), functional units (departments) and corporate processes are all examples of these ‘special cases’. That still generate value for your company (and hence are called ‘value centers’).

How do they do it? By saving you money. How do they save you money? By providing services of the same (or, better yet, superior) functionality and quality that the outsourcing option. Which in our super-diversified and super-globalized economy is always available. Oh, and now you can outsource not only services (accounting, marketing, IT), but manufacturing of goods as well.

Hence, the valuation model for your ‘special’ case has a very simple structure:

+ Outsourcing Costs
- In-House Costs
= Cost Savings

The latter, obviously, must be positive – or your IVC, functional unit or process, will be a primary candidate for outsourcing.