Chapter 8 Questions Flashcards
Building a business case for an IT investment:
Allows management to establish priorities for investing in different projects.
Helps gain commitment for the IT investment from business managers.
Creates a basis for monitoring the investment.
Identifies the benefits of the investment.
All of the above.
All of the above.
This method of IT funding is the most equitable, as the costs associated with IT are based on use. However, it can be difficult and tedious to calculate the usage costs.
Allocation
Corporate budgeting
Usage
Distributed
Chargeback
Chargeback
Which of the following should a manager expect from the IS organization?
Promoting enterprise security.
Participating in setting and implementing strategic direction.
Innovating current processes.
Managing data, information and knowledge.
All of the above.
All of the above.
Corporate budgeting is a wise choice for funding newer technologies and innovation.
True
False
True
Labor costs associated with an IT infrastructure far outweigh the actual capital investment cost.
True
False
True
Sam has just purchased 10 new high speed color laser printers for his company. He is very excited because he got a 40% discount and paid only $2,990 for each unit. His boss, Joe, wants to know things such as operating costs, support, overhead, etc. for the printers. Joe wants to know this value:
RCO
TCO
ROI
NPV
EVM
TCO
Valuing an IT investment is difficult because of many reasons. One of the reasons is:
Many IT investments are necessities and payback is hard to calculate.
Increased customer satisfaction is not valued enough to justify costs.
IT investments often add no real business value.
IT managers do not see the need to value an investment whose payback period is relatively short.
IT is seen as “a necessary evil”
Many IT investments are necessities and payback is hard to calculate.
This financial calculation provides a percentage rate that measures the relationship between the amount the business gets back from an investment and the amount invested.
IRR
ROI
Payback
NPV
EVA
ROI
A CIO must spend part of the day performing _____ tasks and the some part of the day working on operational tasks. Rarely can a CIO focus on just one task in any given day.
Administrative
Strategic
Database
Financial
Technology
Strategic
Critical to the business case is the identification of both _________ and ________.
costs, risks
costs, benefits
advantages, disadvantages
assumptions, risks
benefits, detriments
costs, benefits
Denise works for a company where the IT department charges her department for actual usage of a SharePoint server, determining how often users log in and how much storage space her department consumes. What type of IT funding model is the company deploying?
Allocation method
Corporate budget method
Usage method
Distributed method
Chargeback method
Chargeback method
TCO, discussed by Gartner, stands for Technology Chief Officer
True
False
False
There are three main ways to handle funding for IT, including chargeback to users, allocation of costs to users, and providing IT services from a corporate budget.
True
False
True
All of the following are qualities of a dashboard EXCEPT:
Highly summarized
Key metric driven
Raw data
Effective Visualization
Alerts
Raw data
Financial measures are the sole means for making management decisions.
True
False
False
A local marketing firm is considering launching a new and extensive social media marketing campaign. This investment of resources is being looked at through the length of the project since it is anticipated to last at least 5 years. What financial calculation should be used to compute the investment’s value, taking into account the time value of money?
ROI
NPV
EVA
IRR
TCO
NPV
In the early days of IT, the CIO would report to the ____ as IT was seen as a way to control costs. As technology has become more strategic and able to deliver a competitive advantage, CIOs now report directly to the ____.
CFO; CEO
CEO; CFO
CFO; COO
COO; CEO
CEO; CTO
CFO; CEO
According to the research by Peter Weill, a firm that boosts investments in infrastructure is typical of those firms with a focus on (1) _______ and a firm that boosts investments in transaction systems is typical of those firms with a focus on (2) ______
(1) transactions (2) connections
(1) savings (2) expansion
(1) cost (2) ability
(1) agility (2) cost
(1) ability (2) agility
(1) agility (2) cost
The business side of IT is very different from the business itself.
True
False
False
Joe works for a company where the IT department charges him for the number of CRM login accounts that are in his department. What type of IT funding model is his company deploying?
Allocation
Corporate budgeting
Usage
TCO
Chargeback
Allocation
The balanced scorecard:
Is a tool used to communicate the organizational metrics using a traffic light approach (red/yellow/green).
Is a method used to evaluate the health of an organization by looking at all value drivers such as the customers, the workforce, the financials and business processes.
Focuses its attention on an organization’s financials.
Is used to communicate the TCO for an IT investment.
Is one of many metrics used to evaluate the value of an IT investment.
Is a method used to evaluate the health of an organization by looking at all value drivers such as the customers, the workforce, the financials and business processes.
The allocation method is the most equitable funding method used by many IT organizations.
True
False
False
Mary is recommending IT investments in the neighborhood of $250 million for her company. However, the board is hesitant since it’s such as capital-intensive project. If the project fails the company could go out of business. What financial calculation should they use?
ROI
NPV
EVA
IRR
FV
EVA
Traditional valuation methods such as ROI, NPV, and IRR cannot be applied to information technology because it is technical, not business-oriented.
True
False
False
Which dimension of the balanced scorecard answers the question “How do we look to shareholders?”
Customer perspective Innovating and learning perspective Internal business perspective Financial perspective Supplier perspective
Financial perspective
A company that seeks an IT portfolio that lowers costs as the primary business objective will be more likely to increase spending on _____ because these applications can help automate processes.
strategic systems infrastructure informational systems transactional systems social media
transactional systems
All of the following are methods used to value an IT investment EXCEPT:
Payback anaylsis ROI NPV CTO IRR
CTO
Four asset classes of IT investments include:
Financial Systems Marketing systems Control systems All the above None of the above
None of the above
An IT dashboard provides:
Summary information gathered over a period of time.
Statistics on system usage.
A distraction from where more IT attention should be focused.
Current and critical measurements for the organization in an easy to read manner.
A snapshot of a firm’s financial data at any given point in time.
Current and critical measurements for the organization in an easy to read manner.
The scope of responsibilities for an IT organization seems to expand with increased IT maturity.
True
False
True
Scorecards provide a summary of information gathered over a period of time. Another common IT monitoring tool is the _______.
baseline metrics portfolio dashboard monitor
dashboard
Often the customer of an IT organization is not an external customer but rather an internal customer/
True
False
True
The responsibility of the IT organization is to:
Manage core business functions like selling, accounting, and manufacturing.
Partner with business managers to ensure the right IS exists to support the business strategy.
Set the business strategy.
Have sole responsibility for building information systems for the organization.
Design business processes.
Partner with business managers to ensure the right IS exists to support the business strategy.
To justify an IT investment and receive necessary support and approval, a manager must often create a(n) ________________.
IT portfolio
community plan
business case
workflow diagram
business technology plan
business case
WalMart, the world’s largest retailer, uses RFID tags to track movement of goods across its intense supply chain. One identifiable benefit is that pallets of goods no longer need to be manually logged by a worker when received. Instead, an information system automatically logs the goods as they arrive. This benefit is identified as which type of business change:
Innovation
Efficiency
Cessation
Work force reduction
Doing new things
Cessation
IT leaders must be part of the business strategy discussion.
True
False
True
This is a plan designed to counter a manmade or natural disaster that could cripple an enterprise.
Business Continuity Plan
Disaster Recovery Plan
Business Disaster Plan
Disaster Business Case
Business-IT Maturity Model
Business Continuity Plan
While a relatively simple method for funding, corporate budgeting ______________
helps control the costs of IT.
may result in an IT organization that is less end-user oriented.
encourages sharing of funding resources between IT and business units.
levies charges on specific users or business units.
gives business managers sole control over IT decisions.
may result in an IT organization that is less end-user oriented.
Activity based costing _____________
groups costs into meaningful buckets that are then distributed based on the activity or product they support.
is useful for allocating small project work.
charges all costs to “cost centers”.
considers only initial capital investments.
calculates ongoing maintenance costs.
groups costs into meaningful buckets that are then distributed based on the activity or product they support.
IT leaders must be part of the business strategy discussion.
True
False
True
