Professional Documents
Culture Documents
Information Technology
Economics
• Evaluate
• the productivity
• the benefits
• the costs
• other economic aspects of information technology
• Evaluating IT Investments
• Value of Information in Decision Making
• Traditional Cost-Benefit Analysis (tangibles)
• Scoring Matrix or Scorecard (intangibles)
Value of information = Net benefits with information - Net benefits without information
• Two methods:
• Benchmarks - objective measures of performance. These measures are often
available from trade associations or annual statement analyses.
• Metric benchmarks provide numeric measures of performance, for example:
• IT expenses as percent of total revenues
• percent of downtime (time when the computer is unavailable)
• CPU usage as a percentage of total capacity
• percentage of IS projects completed on time and within budget.
• Best-practice benchmarks emphasis is on how information system activities are
actually performed rather than on numeric measures of performance.
Management by Maxim - brings together corporate executives, business-unit managers,
and IT executives in planning sessions to determine appropriate infrastructure
investments for the corporation.
Management by Maxim
Irrespective
Irrespective of
of the
the potential
potential for
for failure
failure IT
IT has
has the
the potential
potential to
to
completely
completely transform
transform the
the economics
economics of of an
an industry.
industry.
MSIS 5623 Chapter 13 26
MANAGERIAL ISSUES
• Constant growth and change. The power of the microprocessor chip doubles every two
years, while the cost remains constant. This ever-increasing power creates both major opportunities
and large threats as its impacts ripple across almost every aspect of the organization and its
environment. Managers need to continuously monitor developments in this area to identify new
technologies relevant to their organizations, and to keep themselves up-to-date on their potential
impacts.
• Shift from tangible to intangible benefits. Few opportunities remain for automation
projects that simply replace manual labor with IT on a one-for-one basis. The economic justification
of IT applications will increasingly depend on intangible benefits, such as increased quality or better
customer service. In contrast to calculating cost savings, it is much more difficult to accurately
estimate the value of intangible benefits prior to the actual implementation. Managers need to
understand and use tools that bring intangible benefits into the decision-making processes for IT
investments.
• Not a sure thing. Although IT offers opportunities for significant improvements in organizational
performance, these benefits are not automatic. Managers need to very actively plan and control
implementations to increase the return on their IT investments.