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Return on IT investment

Farrokh Alemi, Ph.D. Return on IT investment. Importance of Return on Investments. Importance of Return on Investments. Importance of Return on Investments. Morgan Stanley: “US firms lost $130 billion in unwanted IT systems”. The problem is with our methods.

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Return on IT investment

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  1. Farrokh Alemi, Ph.D. Return on IT investment

  2. Importance of Return on Investments

  3. Importance of Return on Investments

  4. Importance of Return on Investments

  5. Morgan Stanley: “US firms lost $130 billionin unwanted IT systems” The problem is with our methods Problems are so widespread that it could not be due to mismanagement

  6. List of Costs & Savings • Underestimates affected business processes • Assumes IT increases revenue • Assumes unused buildings have no costs • Training & maintenance costs ignored • Impact on productivity and quality ignored

  7. Proposed Analysis

  8. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  9. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  10. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  11. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  12. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  13. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  14. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  15. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  16. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  17. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  18. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  19. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  20. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  21. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  22. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  23. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  24. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

  25. Investment In DoIT Numerous units were merged into DoIT in this time period. DoIT organization defined based on 2002 operation and budget reconstructed.

  26. IT Investment & University Revenue

  27. Example: Evaluation of DoIT The Division of Instructional & Technology Support Services includes: • Audio Visual Services • Academic Computing Labs, • Electronic Classrooms, • GMU-TV, • Instructional Resource Center, • Johnson Center Technology • Student Technology Assistance Resource Center. A key service provided by DoIT is the WebCT course delivery system

  28. Possible Sequence of Events

  29. Possible Sequence of Events

  30. Possible Sequence of Events

  31. Correlations

  32. Possible Sequence of Events

  33. Conclusion of Analysis

  34. Objective Analysis of ROI Take Home Lesson

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