Value IT approach by sunny singh

1. What is IT investment?
An organizational investment employing or
producing IT or IT-related assets. Each
investment has or will incur costs for the
investment, has expected or realized benefits
arising from the investment, has a schedule of
project activities and deadlines, and has or will
incur risks associated with engaging in the
investment.

2. Why to do IT investment?
• Managing the deployment of Information
Technology and Systems.
• biggest driver of productivity
• performed better
• ITS is associated with a measurable
improvement in the financial performance
of the organization.

3. Financial Measures Aren’t
Enough
• There are too many to choose from.
• They imply a precision that doesn’t exist.
• They often fail to account for intangible
benefits
• They don’t account for future opportunities
• They fail to incorporate risk

4. The IT value imperative
Value
Customer
satisfaction
Senior executives ask: Business managers ask:
―What is the return we are ―Why can’t you run IT like a
getting from our investment business (and focus on me,
in IT?‖ your customer)?‖
The CIO asks: ―How can IT
meet the growing needs of its
customers (business units),
given the constraints placed on
its resources?‖
COST

5. Approaches to manage
1.Business Value Index (BVI)
2. Total Economic Impact™ (TEI)
3. Val IT
4. Applied Information Economics (AIE)

6. Val IT
• IT Governance Institute (ITGI), originators
of COBIT framework released Val IT as
the measurement of IT value
• Measure, monitor and optimize the
realization of business value from IT
investment
• Focuses on new IT investment

7. Three key process
• Value governance optimizes the value of
IT investments.
• Portfolio management ensures that the
overall portfolio is optimized
• Investment management optimizes
individual IT investment programs

9. Business Value Index(BVI)
• Intel IT developed the BVI methodology in
2001.
• Straight forward methodology for valuing IT
investments and measuring business value
• Business value measures both tangible and
intangible benefits
• IT efficiency measures its impact on the IT
organization.
• Financial criteria measure financial
attractiveness.
• Scores enable visual comparison of projects.

10. Continued…
BVI methodology helps in:
• Intel prioritize investment options
• Make data-driven decisions
• Monitor progress

11. Intel IT’s Business Value Chart

12. BVI Considerations
• Developed by Practitioners
• Has Long history
• Well documented and easily available
• But you are on your own for deployment

13. Total Economic Impact(TEI)
• Forrester’s methodology for valuing IT
investments.
• Fits between the simpler and more
qualitative BVI methodology and the more
complex and highly quantitative AIE.
It add more to BVI:
• for quantifying risk
• the value of flexibility.

14. Total Economic Impact(TEI)

15. TEI Approach

16. TEI methodology embraces
• traditional cost analysis and a best practice
approach to minimizing costs
• extends it by explicitly incorporating analysis
• quantification of both business benefits and
flexibility
Tempering these three categories with an
analysis of the risk effects

17. TEI Includes
• Costs — the impact on IT
• Benefits — impact on the business
• Flexibility — future option
• Risk
• TEI Considerations are;
– TEI requires a commitment
– TEI helps build a history of benefit
quantification

18. Applied Information
Economics(AIE)
• Highly quantitative methodology
• AIE has been in use for about 10 years to
• Improve cost/benefit analysis
• Develop quality assurance measurements
• Strategic plan development

19. AIE Basic Techniques And Tools
• Unit of measure definitions
• Systematic uncertainty analysis
• The calculation of the economic value of
information
• IT investments as an investment portfolio

20. Comparison

21. Case study
• In May 2010, Google commissioned
Forrester Consulting to examine the total
economic impact and expected return on
investment (ROI)
• Risk-adjusted ROI of 307%
• Risk-adjusted net present value (NPV) of
$10,039,612
• Payback (break-even) within seven
months

22. • Forrester employed four fundamental
elements of TEI in modeling the impact of
Google Apps
• Costs
• Benefits to the entire organization.
• Flexibility
• Risk

23. Benefits for Google Apps
Summary of findings
IT-impact benefits
End-user-impact benefits
Enabled-flexibility benefits
Costs

24. Basic model assumptions that
Forrester used
Adoption Assumptions - By Application

25. Continued..

26. Forrester’s case studies
• Showing
– Google App Case
– Adobe Case study, used six step approach
• Client: UK Media Organization
• The results:
• Reduced cost by 40%
• Delivered estimated 40% ROI in five year
cycle
• Achieved faster time to benefits
• Embraced changes in scope and included
new features within budget

27. Contd..
• Client: Australian Insurance Company
• The results:
• Improved time to benefit by over 50%
• Reduced cost by 33%
• Improved ROI to 29% from a negative
return on investment with alternative

28. Conclusion:
• Methodology for managing IT investing is very
important for every organization to perform better and
selection of the tools depend on number of factor so
organization must select tool properly as it is very
clear that which tool is more powerful .
• BVI is the simplest.
• TEI values flexibility.
• Val IT takes a governance approach.
• AIE offers the greatest rigor.
• Consistency, Credibility, And
Accountability are Key