Managing Information Systems and Technology Investments

Prof. Rushen Chahal

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Agenda
Investment issues Evaluating IS/IT investment Setting priorities for applications Benefit management IT service charging

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Investment Issues
Justification & evaluation of IS/IT in terms of benefits Determining the priority in terms of benefits Realization of benefits Risk assessment

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Evaluating IS/IT Investment

Types of IS Types of benefits Relationship of IS & benefits IS & financial benefits

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Types of IS
Substitute for efficiency (do thing right) Complementary for effectiveness (do right thing) Innovative for competitive edge

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Types of Benefits
Cost/benefit analysis Value linking: improvement in business performance not cost saving Value acceleration: time dependency of costs and benefits in other dept. of system improvement Value restructuring: productivity resulting from organizational change & change of job roles Innovation evaluation: new business practice levered from IS/IT
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Relationship of IS & Benefits - I

High potential (innovative): cost/benefit, value linking, value acceleration, value restructuring, & innovation evaluation) Strategic (innovative & complementary): cost/benefit, value linking, value acceleration, & value restructuring

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Relationship of IS & Benefits - II

Key operational (complementary & substitute): cost/benefit, value linking, & value acceleration Support (substitute): cost/benefit, value linking, & value acceleration

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IS & Financial Benefits - I

High Potential: fund R&D exploring potential value & cost (risk money) Strategic: enable achievement of business objectives via explicit critical success factors (low)

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IS & Financial Benefits - II

Key operational: disadvantage/risk if it is not done (critical failure factors) & quantified performance improvement (medium) Support: net cost reduction through quantified saving (high)

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Setting Priorities for Applications

Assessment factors
Objectives (critical success factors) Benefits (tangible & intangible) Resources (financial, technology & human) Risks (time, size, duration, technology, user expectation & availability)

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Benefit Management
Objectives: Organizing and managing business activities to realize the potential benefit Process
Identify and structuring of benefits Planning benefits realization (business improvement by stakeholders) Executing the benefits realization plan Evaluating and reviewing results Potential for future benefits

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Risk Management
Types of IS failure Success factors of IS Success factors & IS Types of risk

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Types of IS Failure
Business environment Organizational User Data Technical

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Success Factors of IS
Time Quality or benefits Cost

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Success Factors & Application

Strategic: time (h), quality (m), cost (l) Key operational: time (m), quality (h), cost (m) Support: time (l), quality (m), cost (h)

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Types of Risk
People: management, user, technical, & communication Size: person-years Project control: time, quality and cost Complexity of system: business functions Novelty: business change & technical solution Stability of requirement
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IT Service Charging
Types of service charging Service charging and IS

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Types of IT Service Charging

Service center Cost center Profit center Hybrid center

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Service Center
Pros
Stimulate experimentation Avoid conflict Promote use of service

Cons
Uneconomic usage No accountability Excessive demand No priority setting

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Cost Center
Pros
Justify request Control on IS/IT User aware of costs Enable priority setting

Cons
Deter use of IT Focus on cost not benefit Unsatisfactory in practice

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Profit Center
Pros
IS/IT controls its costs IS/IT becomes proactive Encourage user decision making

Cons
User may go external Create under-used IS/IT resources IS/IT specialists in profitable work

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Hybrid Center
Pros
Allow different stages of IS/IT development Accommodate innovation & new technology Pricing can be used as a policy to achieve strategy

Cons
Confusing to user Complex accounting system Incomplete control of IS/IT resource Need continuous review of charging policy Conflict in IS/IT department

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Service Charging and IS

Service center (no charge out & leading edge: high potential Cost center (average cost & scarce resource): support Cost center (standard cost & monopoly): key operational Profit center (market price & free market): support & high potential Hybrid center (flexible & centrally planned): strategic and potential
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Points to Remember
Investment issues Evaluating IS/IT investment Setting priorities for applications Benefit management IT service charging

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