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IT 496 > Test 2 Study Guide > Flashcards

Test 2 Study Guide Flashcards

1
Q

What are the five factors that play into maturity for an IT Function?

A

The five main factors that contribute to the maturity of an IT function are:

  • Uniqueness
  • Commonality
  • Standardization
  • Commoditization
  • Like a Utility
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2
Q

What does it mean for an IT function to be unique?

A

A unique IT function is one that provides strategic advantages and benefits, and might even be proprietary.

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3
Q

What does it mean for an IT function to be common?

A

A common IT function plays to common organizational needs. It doesn’t do much to help the business stand apart from competition, but it’s necessary.

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4
Q

What does it mean for an IT function to be standardized?

A

A standardize IT function is one that not only provides common tasks and activities, but also sticks to an external standard.

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5
Q

What does it mean for an IT function to be commoditized?

A

A commoditized IT function is one that is considered in the same light as regular commodities are, such as network services, backup services, storage capacity, etc.

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6
Q

What does it mean for an IT function to be like a utility?

A

An IT function that is treated like a commodity, but is delivered by a centralized and consolidated source.

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7
Q

What are the four key IT sourcing options?

A

The four key IT sourcing options are:

  • In-House
  • Insource
  • Outsource
  • Partnership
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8
Q

Define Insourcing

A

Insourcing is the opposite of outsourcing. It’s when a company announces that it’s done with contracting out a business function and is going to do it internally.
It can also be defined as bringing a third-party employee to work inside a company’s facility.

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9
Q

What is the difference between outsourcing and offshoring?

A

Outsourcing is moving a business function to a contract agency. Offshoring is moving it abroad.

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10
Q

What does in-house sourcing entail?

A

In-house sourcing is when a company performs an activity or operation within itself, instead of outsourcing.

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11
Q

What are the four criteria to take into account when deciding what sourcing method to take?

A

The four criteria for selecting sourcing are:

  • Flexibility
  • Control
  • Knowledge Enhancement
  • Business Exigency
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12
Q

What does flexibility mean in terms of sourcing?

A

Flexibility in sourcing refers to the speed at which a function can be delivered, and the range of what can be delivered.

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13
Q

What does control mean in terms of sourcing?

A

Control, in terms of sourcing, refers to how well delivered results meet requirements, and how secure intellectual assets are.

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14
Q

What does knowledge enhancement mean in terms of sourcing?

A

In sourcing, knowledge enhancement refers to the amount of work it will take to capture and train the necessary knowledge to perform the function.

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15
Q

What does business exigency mean in terms of sourcing?

A

In sourcing, business exigency refers to the ability to respond to unforeseen crises or opportunities.

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16
Q

What are the five components of a properly thought-out sourcing strategy?

A

The five components of a well-thought-out sourcing strategy are:

  • Identify your core IT functions
  • Create a function sourcing profile
  • Evolve full-time IT personnel
  • Encourage exploration of all sourcing options
  • Combine sourcing options if beneficial
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17
Q

What is a sourcing strategy?

A

A sourcing strategy is basically a way to determine what IT functions are core to the business and shouldn’t be trusted to be outsourced.

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18
Q

What is a risk mitigation strategy in regards to sourcing?

A

A risk mitigation strategy is a way that, when considering sourcing, you find a way to share the risk between both yourself and your vendor, so both parties have incentive to perform.

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19
Q

Why is it important to understand cost structures?

A

It is important to understand cost structures when making sourcing decisions so that you can make ongoing cost comparisons, which is a motivator.

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20
Q

What is the historical view of IT-based risk? How has it changed?

A

The historical view of IT-based risk is one of a low-risk field, focused on delivering projects and keeping apps running. Today, IT-based risk is complex and broad, and is a central part of any tech-based work.

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21
Q

What are the three main effects of IT risk incidents ?

A

The three main effects of IT risk incidents are:

  • Harm to constituencies both inside and outside of companies.
  • Damage to corporate reputations
  • Dampening of an organization’s competitive ability.
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22
Q

Where do external IT risks primarily come from?

A

External IT risks primarily come from three areas:

  • Third parties, such as partners, vendors, etc
  • Hazards, like disasters or political upheaval
  • Legal or regulatory issues, and failure to comply with law
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23
Q

Where do internal IT risks primarily come from?

A

Internal IT risks primarily come from five areas:

  • Information - Privacy, quality, etc.
  • People
  • Cultural - Risk aversion vs. Risk Awareness
  • Control
  • Governance
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24
Q

Where do criminal IT risks primarily come from?

A

IT criminal risks primarily come from:

  • Viruses
  • Hackers
  • Organized Crime
  • International Spies
  • Terrorists
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25
Q

What are the three factors of holistic risk management?

A

In holistic risk management, there are three factors:

  • Focusing on What’s Important
  • Expecting Changes Over Time
  • View Risks from Multiple Levels & Perspectives
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26
Q

What does it mean in risk management to “focus on what’s important”?

A

Focusing on what’s important in risk management means to not try and anticipate all risks, but to reduce significant ones so they’re manageable. Risk management is about accepting risk properly.

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27
Q

What does it mean in risk management to “expect changes over time”?

A

Expecting changes over time in Risk Management involves understanding that risk management is a continuous process, with mandatory and regular risk assessments.

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28
Q

What does it mean in risk management to “view risks from multiple levels & perspectives”?

A

Viewing risks from multiple levels & perspectives in risk management refers to doing a root-cause analysis of any incidents, shoring up the walls, so to speak, and refining understanding. Risk, security, and compliance are not the same thing, and should be seen as individual topics.

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29
Q

What is the goal of a risk management framework?

A

A risk management framework is designed to ensure that the right risks are being addressed at the right levels. It guides the development of risk policies and standards.

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30
Q

What are the main components of a risk management framework?

A

There are six components to a risk management framework:

  • Risk Category
  • Risk Ownership
  • Risk Type
  • Risk Reporting & Monitoring
  • Risk Mitigation
  • Policies and Standards
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31
Q

What is risk category, in reference to a risk management framework?

A

Risk category, in a risk management framework, is the general area of enterprise risk, such as criminal, operations, etc.

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32
Q

What are policies and standards, in regards to a risk management framework?

A

Policies and standards in a risk management framework are the standards and principles that guide risk decision making.

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33
Q

What is risk type, in regards to a risk management framework?

A

Risk type, in regards to a risk management framework, is the generic name and definition of a risk, ideally associated with a business impact.

34
Q

What is risk ownership, in regards to a risk management framework?

A

Risk ownership, in regards to a risk management framework, is the owner/stakeholder who has clear responsibilities and accountability in regards to a type of risk.

35
Q

What is risk mitigation, in regards to a risk management framework?

A

Risk mitigation, in regards to a risk management framework, is the means by which risks are managed consistently and effectively.

36
Q

What is risk reporting and monitoring, in regards to a risk management framework?

A

Risk reporting and monitoring, in regards to a risk management framework, is the metrics that are reported on risk, and the ongoing process of monitoring the data that builds those metrics.

37
Q

What are the main actions that improve risk management capabilities? List and describe six.

A

There are nine main actions that improve risk management capabilities:

  • Look beyond technical risk
  • Develop a common language of risk
  • Simplify the presentation
  • “Right size”
  • Standardize the technology base
  • Rehearse
  • Clarify roles and responsibilities
  • Automate where appropriate
  • Educate and communicate
38
Q

How are information delivery and information management related to IT?

A

Information delivery is one of the core components of IT, whereas information management requires the partnership of IT and business. IT is involved in management, but it is a business-focused thing.

39
Q

What are the three drivers of information management?

A

The three drivers of information management are:

  • Compliance
  • Operational Effectiveness and Efficiency
  • Strategy
40
Q

What is an information management policy?

A

An information management policy is a policy that lays out accountability, quality guidelines, security, privacy, risk tolerances, and basically covers everything about how information will be managed. It needs senior management involvement.

41
Q

What is information stewardship?

A

Information stewardship is being responsible for information, its meaning, accuracy, timeliness, privacy, etc. Information stewards should be businesspeople.

42
Q

Why are information standards important?

A

Information standards ensure that there’s quality, accuracy, and consistency to information. They also help reduce information redundancy.

43
Q

What is a standard made up of?

A

A standard requires:

  • A unique name and definition
  • Data elements, examples, and character length
  • Implementation requirements
  • Spacing and Order
44
Q

What are the key issues in Information Management?

A

The key issues in information management are:

  • Culture & Behavior
  • Information Risk Management
  • Information Value
  • Privacy
  • Knowledge Management
  • The Knowledge-Doing Gap
45
Q

How does culture and behavior impact information management?

A

Culture and behavior impact information management in that a lack of integrity, formality, and control can play havoc. Other factors that are important are transparency (willingness to admit error), sharing, and proactiveness.

46
Q

How is information value relevant to information management?

A

First off, information value is hard to quantify, as it takes a while for good IM management to pay off. Moreover, information management value is subjective (like all value).

47
Q

How does privacy impact information management?

A

In information management, privacy is often enforced via regulations, which will impact the actions a company can take.

48
Q

What is knowledge management? What makes up knowledge?

A

Knowledge management is the act of converting information into knowledge. Knowledge itself is information, with added context, judgement, and a splash of intuition. Knowledge is known as “the ability to take action”.

49
Q

What is the knowledge-doing gap?

A

The knowledge-doing gap is the assumption that with better information, you will get better decisions, and the fact that this isn’t always true, which leads to the gap between the knowledge we have, and the lack of its use in decisions.

50
Q

How would you calculate Return on Equity (ROE) using the DuPont equation?

A

Return on equity is calculated by dividing Net Income by Equity.

51
Q

How would you calculate Profit/Operating Margin?

A

Profit margin is calculated by dividing Net Income by Sales. This is earnings before interest and taxes. Higher is better.

52
Q

How would you calculate Asset Turnover?

A

Asset Turnover is calculated by dividing Sales by Assets. It’s a measure of how well a company uses its assets.

53
Q

How would you calculate Leverage Factor?

A

Leverage Factor is calculated by dividing Assets by Equity. This gives a measure of financial leverage; when it’s high, liabilities are high, which suggests high leverage.

54
Q

Porter identified five factors that act together to determine the nature of competition within an
industry. List and describe these forces.

A

Porter’s five forces are:

  • Bargaining Power of Customers (Greater when there are more customers, and they’re informed)
  • Rivalry Among Existing Firms
  • Threat of New Entrants - How attractive the industry and the barriers to getting into it (economies of scale, switching costs).
  • Bargaining Power of Suppliers
  • Threat of Substitute Products
55
Q

What is a barrier to entry? List 3 examples from the article or my lecture

A

A barrier to entry is an advantage that an existing business has that a new one would not. A few are:

  • Supply-side economies of scale.
  • Demand-side benefits of scale (people like to buy things a lot of people buy)
  • Customer switching costs
  • Capital requirements
  • Government restrictions
  • Unequal access to distribution (gotta get on shelves)
56
Q

What is a switching cost? List 3 examples from the article or my lecture.

A

A switching cost is a fixed cost a buyer faces when they try to change suppliers.

  • Altering product specifications
  • Retraining employees
  • Modify systems or processes
57
Q

Porter list several factors that are not forces. List and describe 4 of these factors.

A

Industry growth rate - A growing market attracts new entrants, but does not guarantee profitability.
Technology & Innovation - Neat tech does not create an attractive industry by itself, as sexy as it might be.
Government - It’s neither good nor bad for profitability.
Complementary products & Services - Computer hardware & software together, but the fact that they compliment isn’t good or bad for profitability… it just is.

58
Q

(T/F) Enterprise resource planning (ERP) software is an example of a product with low switching costs.

A

False

59
Q

(T/F) New entrants are likely to fear retaliation from incumbents if industry growth is slow.

A

True, because there’s not a lot of growth to go around.

60
Q

(T/F) Price competition is likely to occur if fixed costs are high and marginal costs are low.

A

True, in this situation, firms will be tempted to cut as close to the marginal cost as they can to undercut one another.

61
Q

(T/F) If switching costs of changing vendors is low, the power of buyers is also low.

A

False, buyers have more power with low switching cost.

62
Q

(T/F) According to Porter, pilots’ unions exercise considerable supplier power over airlines partly because there is no good alternative to a well trained pilot in the cockpit

A

True, lack of substitutes contributes to supplier power.

63
Q

(T/F) According to our text, government can best be understood as a sixth force.

A

False, it is not a sixth force.

64
Q

(T/F) According to our text, should core IT functions be outsourced?

A

False.

65
Q

(T/F) Outsourcing is defined as bringing a third party outsourcer to work inside a company’s facility.

A

False. This is insourcing.

66
Q

(T/F) Growing firms tend to invest less in IT than mature firms.

A

False, growing firms tend to invest more.

67
Q

(T/F) If you can’t compete in-house, you should outsource.

A

True.

68
Q

With what outsourcing option are permanent IT staff providing the IT function?

A

In-House is where permanent staff provide the IT function.

69
Q

With the ______________________ sourcing option, IT personnel are brought into the organization to supplement existing permanent IT staff to provide the IT function

A

Insourcing

70
Q

With the ______________________ sourcing option, IT functions are provided by an external organization using its own staff and resources.

A

Oursourcing

71
Q

(T/F) Fiscal IT budgets are broken down into two major categories: capital expenditures and operating expenses.

A

True.

72
Q

(T/F) More uncertainty in a business’s external environment leads to larger IT budgets.

A

True

73
Q

(T/F) More concentration in an industry leads to larger IT budgets.

A

False

74
Q

(T/F) Historically, IT was viewed a low-key activity focused on delivering projects and keeping applications
up and running.

A

True

75
Q

Which of the following is not a source of external risk to IT?

a. Third parties (i.e., partners, software vendors, service providers, suppliers, customers).
b. Hazards (i.e., disasters, pandemics, geopolitical upheavals).
c. Information risks (i.e., privacy, quality, accuracy, and protection).
d. Legal and regulatory issues (i.e., failure to adhere to the laws and regulations).

A

C: Information Risks

76
Q

Which of the following is not a source of internal risk to IT?

a. People risks (i.e., poorly designed business process, failure to adapt business processes).
b. Cultural risks (i.e., risk aversion and lack or risk awareness).
c. Governance (i.e., ineffective structure, roles).
d. Legal and regulatory issues (i.e., failure to adhere to the laws and regulations).

A

D: Legal and Regulatory Issues

77
Q

(T/F) The goal of a risk management framework (RMF) is to ensure that the right risks are being addresses
at the right levels.

A

True

78
Q

(T/F) Although information delivery may be the responsibility of IT, information management (IM) requires
a true partnership between IT and the business.

A

True

79
Q

What does it mean to “evolve full-time IT personnel”? Why is it important?

A

We want to evolve full-time IT personnel because IT personnel are a major investment by a company, and it should be maximized or at the lease optimized. You can do this by hiring strategically to fill gaps of knowledge, and allowing attrition in fringe areas to open positions in more core areas.

80
Q

What is the maturity model for IT function delivery?

A

The maturity model for IT function delivery is an evolutionary progression through five stages:

  • Uniqueness
  • Commonality
  • Standardized
  • Commodity
  • Utility

IT 496 (3 decks)

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