Business Value of IT

Question 1

Explain the IT Productivity Paradox

Answer 1

Even though technology has increased productivity in some areas the average productivity hasn’t increased. So, the economy hasn’t risen as a result of the emergence of computers.

Question 2

Does IT create value on its own?

Answer 2

No.
IT creates value only when certain other factors are being invested in such as culture, policies, knowledge, processes and routines.

Question 3

Explain the difference between direct and indirect value of IT Investments

Answer 3

IT investments can create direct or indirect value.
- Output value (direct):
• Better products and services.
- Intermediate value (Indirect): Improved process efficiency etc.
• Multi-level: IT-based value manifest itself on/across multiple levels in the organization. Personal, team, silo.
• Non-deterministic: Technology is not a competitive advantage on its own:
o BUT is necessary to survive (ERP/SAP)).
o AND IT helps build up resources and capabilities which is a source of profit (Resource based view)
• Latency: Time lag between investment and value. Value is only created when in production.

Question 4

Which mediating factors should be taken into account when investing in IT?

Answer 4

Change mgmt
Alignment of business strategy and IS.
Information management capabilities.

Question 5

Confounding factors influence the valuation of IT, but what are confounding factors?

Answer 5

What to measure the value of IT by.
Value can be contextual, relational, or situational.
Additional effort; Decom of old systems, training of employees in new system etc.

Question 6

Which of the following is NOT a category of IT/IS resources suggested by Wade and Hulland (2004)?

• Design Resources
• Spanning Resources
• Inside-Out Resources
• Outside-In Resources

Answer 6

Design Resources

Question 7

Which of the following factors can be a confounder* to value creation from IT?

*confounder = any factor that affects cause and effect of a relationship.
(in our case: IT investments and business value).

• Contextual factors
• Situational factors
• Relational factors
• All of the above

Answer 7

All of the above

Question 8

True or False?

The term “non-determinism” describes the uncertainty around the value of an IT investment and the value created from that investment.

Answer 8

True

Question 9

True or False?

The idea of “latency” describes that the effect on value creation from an IT investment can be delayed.

Answer 9

True

Question 10

Name a factor of your choice that could conceivably mediate* the relationship between an IT investment and creating value from that investment.

*mediator = an intermediate factor that influences the strengths of the relationship between a cause and an effect (in our context: IT investment and value creation from it).

Answer 10

Mediating Factors:
- Alignment of business strategy and IS (lecture 5)
- Organisational and process change
- Information management capability (e.g., integration with tasks, team,
purpose, etc.)

Question 11

Which levels are described under intermediate value - multi level?

Answer 11

Industry; Organisation; project; Individual/team/ department