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Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
Session 12 it investment
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Session 12 it investment

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  • 1. Managing IT Investment
  • 2. 2 • Hardware cost • Software cost • Network cost • People cost • Transition cost • Opportunity cost and risk cost • Maintenance and Support cost • $1 of initial development cost --> $4 maintenance cost over the life time of the system • Don’t forget the intangible cost Understand What It Takes!
  • 3. 3 • Tangible Benefits • Intangible Benefits • Efficiency gains • Effectiveness gaines • Transformation effects • Make concrete connection to your firm’s strategy • Total value of ownership Understand the Benefits
  • 4. 4 Facts, Faith, Fear! Three Bases of Argument
  • 5. 5 • “The system will eliminate the need for hiring two positions for an annual savings of $100K.” • Justify using hard data, quantitative, structured feasibility assessment • Target Audience:“Sensing” Arguments of Fact
  • 6. 6 • “IS is infrastructure.We need it to support our growth and stability.” • Justify by vision. Investment X will lead to benefitY. • Target Audience:“iNtuitives” Arguments of Faith
  • 7. 7 • “If we don’t do this we may be eaten alive by our competition.” • Justify by perception of events. • Target Audience:“iNtuitives” Arguments of Fear
  • 8. 8  New System or Modification?  Enabling Infrastructure  Networks, Servers, backup systems, etc.  Support Activities (process re- engineering)  Accounting, HR, etc.  Business Applications  Sales Tools, Inventory Mgmt, etc. Increased Funding Difficulty Types of IT Projects
  • 9. 9 Short-term Profitability Long-term Profitability Shared Infrastructure Business Application Process Improvements (Discounted cash flow) Standardization (Discounted cash flow) Experiments (Options) Transformation (Options) Manage your IT resources
  • 10. 10 • Costs are easy to establish, but benefits are often elusive. • Technology superiority does not necessarily lead to business value. • Emphasis on intangible benefits are hard to sell after dot.com bust. • IT governance structure is not clearly established. Why is IT Investment Decision Hard?
  • 11. 11 • IT investment decision is not a simple technical decision. • IT investment decision is not a simple financial decision. • IT investment decision is related to the firm’s (or it’s senior executives’) IT value frame. • IT investment decision is related to the firm’s IT governance structure. What isYourValue Frame?

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