1 / 18

IT Economic$

IT Economic$. Eloy Arjona | Jose A. Del Angel. Economic Trends in IT. Price-to-performance ratio Hardware capabilities 2x every 18 mo. (Moore’s Law). Economic Trends in IT. Productivity Paradox

ataret
Download Presentation

IT Economic$

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. IT Economic$ Eloy Arjona | Jose A. Del Angel

  2. Economic Trends in IT • Price-to-performance ratio • Hardware capabilities 2x every 18 mo. (Moore’s Law)

  3. Economic Trends in IT • Productivity Paradox • There is no hard data that demonstrates increases in productivity with the widespread of IT • Costs, investment and IT budgets have increased • Costs are higher than estimated when including total cost • Challenges • Support costs (27%) and Administrative (9%) • Wasted time—waiting for reports, programs, web-pages • Software development problems • Junk Computing—reports, presentations, email, personal time

  4. Evaluating IT Investment Value Vs. Cost • Basic IT Investment Categories • IT Infrastructure • IT Applications • IT Investment Categories by its Drivers • Transformation—Inadequate core infrastructure (e.g. ERP) • Renewal—Reduce cost, increase quality, obsolescence • Process Improvement—Business Case (e.g. HR, automation) • Experiments—New technologies, products, processes, or business models (e.g. EC, self-serve)

  5. Evaluating IT Investment • Value of IT in Decision Making • Value of Information = Net Benefits with Information – Net Benefits without Information • Traditional Cost-Benefit Analysis and ROI • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback Period

  6. Opportunities and Revenue • Opportunities • Infrastructure—WAN • Compliance—SOX • No Alternative—Computerized reservations • Direct & Indirect Returns—Online brokerage • Competitive Necessity—ATMs, EDI, EC • Revenue Increase and Cost Reduction • Sales, Transaction fees, Subscription fees, Advertising fees, etc. • Transaction Costs: search, information, negotiation, decision costs. • Reducing Risks: quality, financial transactions, tracking shipments

  7. Other Approaches • Intangible Benefits • What is the value of… • Speed to market • Employee satisfaction • Customer loyalty • Better control • Organizational agility • Easier distribution of products • Rough estimates • Strategic advantages • Quick wins vs. Long term • Think “out-of-the-box” for other benefits • The Business Case • Used for funding projects and even whole companies • Shows specifics on investment requirements, plans, and implementation steps

  8. MethodsforEvaluating and Justifying IT Investments • Fourtypes • Financialapproach • Monetary-valueonly; NPV, ROI • Multicriteria • Financial + Nonfinancial; infoeconomics, valueanalysis • Ratio Approach • IT expenditures vs. Total turnover, etc. • Portfolio Approach • Proposalscenarios

  9. TCO / TBO • Total Cost of Ownership • TCO = Acquisitioncost + OperationsCost + Control Cost • InvestmentPayoff = TBO - TCO

  10. TCO / TBO • Examples: • Acquisition • Hardware, Software • Control Costs • Centralization, Standardization • OperationCosts • Support, Evaluation, Installation/Upgrade, Training, Downtime, Futz, Auditing, Virus, Powerconsumption

  11. IT Metrics • Specific, Standard, Measurable Performance Metrics • ValueProposition of Business Model • Communication of Business Strategy • Accountability • Alignment of objectivesthroughouttheorganization

  12. IT Metrics • Expectedbenefits of metricsimplementation • Revenuegrowth • Costreductions • Customersatisfaction • Customerservice

  13. Chargeback and Outsourcing • Accuratelymeasurethecost of aninitiative / project • Chargeusersforsharedinvestments • Reduce swlicensestowhat’sactuallybeingused

  14. Chargeback • No incentive to control costifusers can accessresources at (seemingly) no expense • Chargecost of recovery • Assigncostleveldependingondesireduserbehavior • Issues: • Lack of understanding of whattheusers are beingchargedfor

  15. Outsourcing • IT functionshavedifferentlevels of relevance per company • IT isanenabler, butit can becomplex and expensive • Drivers • Focusoncorecompetencies, costreductions, improvedquality, speedtomarket, fasterinnovation

  16. Outsourcing http://www.deloitte.com/dtt/cda/doc/content/us_consulting_oaspovwhysettle_141207(1).pdf

  17. Outsourcing • 70% of respondentsachieved ROI targets • But… • 39% switchedvendors • 50% backsourced • 61% reportedscalationtoseniormanagement • Paradox of financialbenefit and relationshipconflicts • Unrealizedpotential: Settinggoalstoolow

  18. Outsourcing • Building a SolidFoundationforanOutsourcingInitiative • Business case / strategyassessmentiskey • ROI – hiddencosts, remotemanagement, severancecosts • Intangible benefits • Effective performance management: metrics, measures

More Related