Managing IT Investments - Buisness Management - Lecture Slides, Slides of Business Management and Analysis

Download Managing IT Investments - Buisness Management - Lecture Slides and more Slides Business Management and Analysis in PDF only on Docsity! Managing IT investments • Allocation of resources to selected projects • Application portfolio contains list of potential systems • Limited resources mean that systems must be evaluated in terms of their business potential – justifying investment – allocating priorities – determine how the expected benefits will impact the business overall (+review of these) Docsity.com Evaluating IS investment • Little consensus on how to do it • Total consensus that it is not done properly – 70% of organisations have no formal process – only 30% of projects’ outcome are reviewed • Variety of types of benefits suggests that multiplicity of methods id required • Old fashion financial oriented methods less and less appropriate 80% of IT directors admit that cost/benefits analyses are “a fiction” in relation to IT projects Docsity.com Generic Methods • Traditional cost/benefit analysis - good at measuring improvements in efficiency • Value Linking - good to estimate improvements in business performance • Value acceleration - to model the positive (non £) consequences of saving time in business processes • Value restructuring - to plan for the productivity resulting from a combination of better systems and other fundamental change • Innovation evaluation - to take into account the additional revenues that can be obtained from extension of business to new activities See figure 10.1Docsity.com Examples of targets for these Methods • Traditional cost/benefit analysis • Value Linking • Value acceleration • Value restructuring • Innovation evaluation Savings resulting from automation More accurate billing means less time spent in correcting mistakes Acceleration of order processing internally means more time for negotiating with suppliers for the buyers Support given by systems in implementing change IT based plan to develop totally new activities Docsity.com Summary • Costs and benefits should be appraised in both IT and business domains • 5 different categories of benefits have been put forward • Overall value of project is combination of all these • Long term and short terms benefits must be included • Not possible to convert all intangibles to financial figures (spurious) • However crucial to establish how intangibles will be measured and monitored • Portfolio Analysis can be used as guide Docsity.com Support • Given the aim to improve efficiency, financial evaluation should be used • benefits should be quantified and a financial argument made • Additional arguments might be relevant (eg: staff morale) - other methods to be used for those • Potential benefits must be evaluated before any resource is committed • To compete against other projects, a support application must show a good return on investment especially when scarce resources are involved Docsity.com Key operational • Some important arguments cannot be converted into financial arguments • Not suitable to estimate all benefits prior to any resource allocation or cost determination • most economic solution may not be the most effective • Critical failure effect if systems do not do enough • Some freedom must be given to each business unit to initiate such projects even when the economic rationale is not obvious to an outsider • But design and implementation must be undertaken by central IS/IT Docsity.com Strategic Applications • Very important applications - critical in achieving future business objectives • Cost / benefits should be evaluated in terms of their order of magnitude • Reasons to go ahead will remain intangible (linked to CSFs) • Attention of top management is required to ensure that objectives are met and resources are available • Centralised processes is best with a task force approach Docsity.com