Evaluation of Business Performance (CIS412)

Lecture Notes

How to Measure Business Performance with Information Technology

by Tara Duggan

Using information technology to measure business performance involves IT systems gathering data and
analyzing it. Business performance management systems allow managers to examine details about
organizational activities. Once you identify the metrics you want to track, compare values over time to
evaluate how your business functions. Obtaining metrics like sales, average time to resolve support
incidents and operational costs typically involves linking multiple IT systems. Use IT functions to identify
measures as lagging (reports past performance) and leading (predicting future performance) such as
customer satisfaction or website traffic, in order to make strategic business decisions.

1. Identify your organizational mission, goals and objectives for each company department. Aligning your
business performance measurement strategy with your corporate plans allows you to produce reports
that provide comprehensive coverage of company functions. Typically, measuring business activities
involves extracting, transforming and loading large amounts of data--usually on a nightly basis--into other
systems for validation and analysis. Identifying the right data is essential to measuring business
performance accurately.

2. Develop a balanced scorecard (a structured report of financial and nonfinancial information) as a

business performance measurement system by gathering reporting data from each functional database.
Evaluate the metrics inputs, calculations and outputs requirements. Identify the rules governing how the
data collection occurs and how often updates occur. Use applications such as Oracle's Hyperion, SAP's
BusinessObjects or HostAnalytics performance management software to set targets and allocate the
resources to achieve your goals.

Additionally, use business intelligence software such as IBM's Cognos or SAS Business Intelligence to
examine operational data.

3. Set up business activity monitoring. Using IT solutions, for example, Mentisys' ProcessOne system or
Categoric's products, allows you to manage to business operations workflow processes, including
scheduling tasks and resources. These applications produce real-time data about processes and
transactions. Analyzing results helps you improve efficiency and productivity in your business operations.

4. Establish event alerting and management. With computer programming, trigger alarms when
predefined conditions occur. For example, banks often transfer money automatically. Failure to receive
confirmation of transfer transactions causes email alerts to support personnel, who intervene and
investigate any delays. Event alerting and management IT solutions provide measurement details
preventing costly problems. Other business analytical tools such as Adeptra services or Omniture's
SiteCatalyst improve your understanding of customer contact issues. For example, measure website
activity such as page views and keyword search terms.

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Programming code include on each web page sends customer usage information to a data warehouse
that you can view, filter and analyze. Using this kind of data when making business decisions helps your
company respond to customer needs more effectively and improve business performance.

References
• Kellen: Business Performance Measurement
• Oracle: Hyperion
• SAP: SAP BusinessObjects Portfolio
• IBM: Cognos Business Intelligence and Financial Performance Management
• HostAnalytics: Business Planning Software

Resources
• Omniture: Web Analytics
• Mentisys Process One
• SAS: Business Intelligence
• Categoric: Products Overview
• Adeptra: Welcome to Adeptra

The Three Fundamental Roles of Information Systems in Business

by Julie Davoren

Organizations strive to be market leaders in their given industry. In climates where factors such as
recession, inflationary pressures and increased competition can hinder the achievement of this goal,
companies look for strategies that lead to competitive advantages. One such strategy is the adoption of
information systems within the company. Information systems help a company make adequate use of its
data, reduce workload and assist with compliance with various mandatory regulations.

Information Storage and Analysis

At the date of publication, many companies no longer manage their data and information manually with
registers and hard-copy formats. Through the adoption of information systems, companies can make use
of sophisticated and comprehensive databases that can contain all imaginable pieces of data about the
company. Information systems store, update and even analyze the information, which the company can
then use to pinpoint solutions to current or future problems. Furthermore, these systems can integrate
data from various sources, inside and outside the company, keeping the company up to date with internal
performance and external opportunities and threats.

Assist with Making Decisions

The long-term success of a company depends upon the adequacy of its strategic plans. An organization’s
management team uses information systems to formulate strategic plans and make decisions for the
organization's longevity and prosperity. The business uses information systems to evaluate information
from all sources, including information from external references such as Reuters or Bloomberg, which
provide information on the general economy. This analysis of and comparison to market trends helps
organizations analyze the adequacy and quality of their strategic decisions.

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Assist with Business Processes

Information systems aid businesses in developing a larger number of value added-systems in the
company. For example, a company can integrate information systems with the manufacturing cycle to
ensure that the output it produces complies with the requirements of the various quality management
standards. Adoption of information systems simplifies business processes and removes unnecessary
activities. Information systems add controls to employee processes, ensuring that only users with the
applicable rights can perform certain tasks.

Further, information systems eliminate repetitive tasks and increase accuracy, allowing employees to
concentrate on more high-level functions. Information systems can also lead to better project planning
and implementation through effective monitoring and comparison against established criteria.

Considerations when Implementing Information Systems

Implementing information systems within an organization can prove to be costly. Implementation costs
include not only installation of the systems but also employee training sessions. In addition, employees
may see the adoption of information systems as an unwarranted change and, thus, may resist this change.
Resistance to change can hinder business operations and can cause employee turnover.

Companies should have leadership in place to assess the adequacy of the decision to have an information
system and to guide the company through the transition phase and weigh information systems cost
against the potential benefits.

References
• "Database Systems: Design, Implementation, and Management, 9th edition"; Carlos Coronel, et al.; 2011
• "Introduction to Business Information Systems"; Rolf T. Wigand, et al.; 2003

What Are the Advantages of Information Technology in Business?

by Tim Zimmer

With the advent of the internet and management information systems (think computers, phones, and
software), businesses have been able to transform from local mom and pop shops to international
household names. In order to keep up with competition as a result of internet commercialization,
companies are increasingly turning to information technology (IT) -- or hardware, software, and
telecommunications networks -- to streamline services and boost performance. As such, IT has become
an essential feature in the business landscape that has helped companies cut costs, improve
communication, build recognition, and release more innovative and attractive products.

IT Streamlines Communication

Efficient communication is critical to company success. In an increasingly connected and dispersed

business landscape, recruiting, retaining, and leveraging employees requires ongoing communication and
collaboration. A key advantage of information technology lies in its ability to streamline communication
both internally and externally. For example, online meeting and video conferencing platforms such as
Skype, GoToMeeting, and WebEx provide businesses the opportunity to collaborate virtually in real-time,
significantly reducing costs associated with bringing clients on-site or communicating with staff who work
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remotely. In addition, IT allows organizations to connect almost effortlessly with international suppliers
and consumers.

IT Facilitates Strategic Thinking

One of the fundamental advantages of IT is its ability to enhance a company's competitive advantage in
the marketplace, by facilitating strategic thinking and knowledge transfer. Accessing and leveraging social
networks and subscription databases, for instance, has enabled companies the ability to assemble,
interpret and transfer information like never before. This has given businesses unparalleled access to
customers and consumers, enabling organizations to deliver new and enhanced products. Therefore,
when used as a strategic investment rather than as a means to an end, IT provides organizations with the
tools they need to properly evaluate the market and to implement strategies needed for a competitive
edge.

IT Stores and Safeguards Valuable Information

The storage, preservation, and maintenance of information -- known as information management -- is

another domain in which IT shines. Information management is essential to any business that must store
and safeguard sensitive information (such as financial data) for long periods of time. IT affords companies
the ability to store, share, and backup files for later use, as well as protecting information from
unauthorized individuals. As a result, IT gives businesses the peace of mind that the information they
collect and analyze can be properly stored and safeguarded for future use.

IT Cuts Costs and Eliminates Waste

Although IT may seem expensive when first implemented, in the long run, however, it becomes incredibly
cost-effective by streamlining a company's operational and managerial processes. The implementation of
online training programs is a classic example of IT improving an organization's internal processes by
reducing costs and employee time spent outside of work. In effect, IT enables companies to do more with
less, without sacrificing quality or value.

References
• The Role of Information Technology in the Business Sector
• Impact of Information Technology and Internet in Businesses
• The Business Advantages of Information Technology
• Information Technology
• The Changing Role of IT in The Future of Business
• The Evolving Role of Information Systems and Technology in Organizations: A Strategic Perspective

How to Measure the Business Value of IT

by Eileen Rojas

Information technology departments that invest the time and effort to measure the business value of
their services can show how IT contributes to the strategic success of their companies. When IT's value is
measured through management and shareholder benefits, return on investment, net present value and
employee productivity gains, the department is able to demonstrate its vital role in ensuring the

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company's success. The use of quantitative or financial information helps to demonstrate IT's impact on
the company’s bottom line.

Management and Shareholder Benefits

IT investments should support company objectives and focus all of their efforts on the end users'
requirements. When determining business value, it is important to note and measure the benefits
provided to the business, such as increased revenue, faster access to information and better customer
service. For example, IT services can enhance the customer's experience by providing a positive
interaction through a well-designed website that provides excellent customer service. Comparing the cost
of maintaining the website to the revenue it provides can directly show the service IT contributes to the
company.

Determining ROI

Calculating an IT project's ROI can show management what they can expect to gain when they support
new or ongoing IT investments. When costs are easily identified, ROI can be calculated by taking the
investment's estimated revenue and subtracting the investment's cost. The result is divided by the
investment's cost and multiplied by 100. The end result is a percentage that shows the rate of return on
the IT project.

Determining NPV

To eliminate some of the uncertainty of investing in a long-term IT project, use NPV to arrive at a current
cost figure. To calculate the NPV, you must use reasonable cost, revenue and discount rate estimates. A
time period for the investment must also be determined. Use a time value of money table or the NPV
formula available in most spreadsheet programs to calculate an IT project's NPV. The end result is the cost
in today's dollars of future net cash inflows or outflows related to the IT project.

Employee Productivity

Measuring employee productivity presents a challenge to an IT department trying to quantify this benefit
to an organization. For example, computer chip maker Intel identifies improvements in employee
productivity by measuring time-based efficiencies gained by employees who are able to produce more.
The company's formula takes into account the number of employees affected, the amount of employee
time gained and average indirect employee costs. Finance and other participating business departments
can provide the IT depar tment with the information and assistance to measure productivity correctly.

References
Intel: Measuring IT Success at the Bottom Line
GSA: Measuring the Value of IT Investments, One Business Case at a Time
Intel Press: Measuring the Business Value of Information Technology
Baseline: How to Measure IT's Business Value

Evaluation of Business Performance

Compiled by: Stefan A. D. Flores, MBA
Ref. no. 2018-2019 ver. 01