INFO2010 - L5 Business value of IS Flashcards
Value of ISs
IT can provide a temporary competitive advantage to businesses.
Over a longer time, a consistently strong IT infrastructure can play an important strategic role in the life of a firm.
IT/IS can permit businesses simply to survive; eg government regs might require these survival investments.
Limitations of financial models
Assumtpions of Financial models
- that all relevant alternatives have been examined
- that all benefits and costs are known
- that these costs and benefits can be expressed in a common metric - money
Do no allow for Intangible benefits or Intangible costs - cause these are difficult to quantify.
COSTS - TANGIBLE
hw
comms
sw
peeps
Cost savings Increased productivity Low operational costs Reduced workforce Lower computer expenses Lower outside vendor costs Lower clerical and professional costs Reduced rate of growth in expenses Reduced facility costs Increase in sales or profits Decrease in Information processing costs (Elimination of unnecessary procedures and documents) Decrease in required investment (Reduction in inventory carrying costs) Decrease in required investment Increased operational ability and efficiency (improvement in prod. ability and efficiency; eg. less spoilage, waste and idle time)
COSTS - INTANGIBLE
hw
comms
sw
peeps
Improved asset utilisation
Improved resource control and org planning
Increased org flexibility & org learning
More informative & timely info
Increased legal reqs attaind
Enhanced employee goodwill=incr.job satisf.
Improved decision making, improved operations
Higher client satisfaction
Better corporate image
More timely and accurate info
New types of info (analytical modeling)
Improved abilities in computation & analysis
(more timely service response)
Improved customer service & employee morale (Elimination of boring & burdensome tasks)
Improved management decision making (better info & decision analysis)
Improved competitive position
Systems which lock in customers and suppliers
Improved business and community
Progressive image as perceived by customers, suppliers and investors
IS as a Capital Project
Very high rate of technological change means payback needs to be shorter and the rates of return higher
When using financial models for IT, use cautiously and put results into a broader context of biz analysis
Non Financial and strategic considerations
Portfolio analysis
Biz in high IT intensive industries - have a few high risk, high benefit projects to ensure they stay current with technology
Biz in non-IT intense ind - should focus on high benefit, low risk projects
Project risk vs potential benefits matrix
High Risk High Benefit - Cautiously Examine
High Risk Low Benefit - Avoid
Low Risk High Benefit - Identify & Develop
Low Risk Low Benefit - Routine Projects
Non Financial and Strategic Considerations
General Risks
Benefits might not be obtained
Costs of implementation may exceed budgets
Implementation time frames exceeded
Technical performance less than expected
System is incompatible with existing hw or sw
Risks not bad as long as:
Benefits are ok Three factors increase risk of a project; - project size - organisational experience - project task complexity
Project risk evaluation
Project might be successful in terms of function it delivers and still not deliver the forecast benefits
MUST: Identify the risk of not achieving benefits
VITAL to minimise or avoid most important risks and to assign responsibility for those actions
This involves additional project costs
Risk appraisal
Manage identified risks:
High degree of judgement
based on experience and perception
Same with evaluation of intangible benefits
Risk evaluation and scoring
Name the risk How probable is it (5/10) Severity of it (2/5) Score 10/50 Action to prevent/manage risk
Scoring models - an example
Line up systems and in columns assign scores for rows of features multiplied by a weighting factor for each feature
Best overall strategy
Has to be one that is consistent with both the org and its environment
