View
214
Download
0
Category
Preview:
Citation preview
MBA / MIS 513 Class 2 – August 28
Tonight: Guest Speaker – Michael Duncan
Review of your ExpectationsCase Assignments – by team
Quick Reviews of several IT concepts
IT Budgeting Issues
Mike Duncan President – SageIsland Communications
Sage Island is an integrated marketing agency offering the full range of online and offline services. We provide
marketing strategy, graphic design, custom programming and Internet marketing, and we do it with an integrated approach that leverages the power and measurability of the Internet. Whether it's a single graphic design or an
integrated campaign that spans multiple media, our exceptionally creative team of marketing professionals
comes together to deliver the Ultimate Design.
This was a good class:Strategy/Implementation
Suggestions on Time Sensitivity of IT Projects & their importance
How to make IT project cost effective and add value
Implement/understand data management systems
What an IT Department actually does
How to actually develop and implement an IT strategy (including one who said to ‘save’ their company)
How to utilize IT in order to increase efficiency and reduce costs for mid sized companies
Better planning for IT
How to get the resources I need from management
This was a good class:Use it at work
Applicable!! Use info at work
Techniques to improve corporate acceptance (chg mgt)
How to persuade a boss afraid of technology that makes your job more effective
General overview of IT field for a non IT person to use at the workplace
Background of IT
How to develop an effective website ..
Newest technology
How to manage data
Get IT departments to better facilitate management of IT systems
This was a good class:Sharing of ideas
Inter-departmental coloration of MBA & MS CSIS students
Hear from individuals working directly in the IS field
Input from ‘experienced’ students in the class
How many different types of firms use IT
This was a good class:Justification
How to justify data mining
New items to consider when calculating ROI
IT information analysis
Justify IT projects
Understand direction of full applications of IS systems
Rank IT projects
Justify technology purchases
This was a good class:Unsure which category
How to get around the filter for fantasy football at work
Class on Tuesday 9/2Will be in Cameron Hall 101
Tech Tools / Web /Practical Info
Google Analytics http://csbapp.csb.uncw.edu/ncecondata/
Finish up Chapter 1 concepts
12
IT Strategy Implementation Levels
Automating / Optimizing Existing Processes
Re-engineering Core Processes
Transforming with new Processes
Embedding IT in Products/Services
Automate Internal Ordering
RFID enables auto ordering
Provide Vendors Production Info
Adding RFID to track Inventory
13
Creating Value – “Effects”
Automation IT Assets for
Human Assets
Information
Transformation Support
Innovation
Decision Making
14
Strategic Alignment with Business
Business Strategies Capitalize
on IT Capabilities
IT Supportsthe
Business
15
Business of IT
Technology People
IntellectualCapital Relationship
Conversion Efficiency
Innovation
SolutionsDelivery
Products &Services
Provisioning
Suppliers
Customers
16
Chapter 1 Summary!
17
Key points for non IT managersabout technology
Computers are CRITICAL to every business
IT should not be left to the “techies”
The Business Manager (BM) owns the process
The BM is the information technologist’s customer and needs to be treated as a customer
Intranets/Extranets/Internets change the way organization’s operate.
18
MIS Facts MIS has no money
MIS uses other people’s money
MIS must have customers
Customers expect value for money invested
Questions / Comments / Experiences
Case Assignmentshttp://csbapp.csb.uncw.edu/MBA513/cases.pdf
Quick Review of Termsused in Chapters 2 /3
An Information Technology System deals with data
Specifically means for automating:
data, voice, multimedia
information flows
22
IT Phases (1960-2008)+ Data Processing (large mainframes)
Micro Computers (PC ‘s and Apples and Macs)
Networking (client / server )
Web 2.0 – Provide the right information for each user on their desktop, mobile device
Data as information … as knowledge
23
IT Services – TodayWhat should an IT Dept do?
Architecture (think ERP)
Overall strategy to meet information needs of a firm
Infrastructure
Communications and Data Bases
24
Strategy involving Databases
IT Services - Today
Data Management
Data Security
Conformity to standards / laws
HIPPA
26
IT Services - OverallOperations
Applications
End User Support
Planning & Architecture
Emerging technologies impact on strategy
27
Chapter 2 – Book AChapters 2/3 – Book B
Two Spending CyclesVicious –
Money is spent on current operations only
‘Commodity’
Gartner –‘dead spending’“Gartner Says Eight of Ten Dollars
Enterprises Spend on IT is "Dead
Money”
Two Spending CyclesVirtuous –
Money is spend on innovative approaches to solve new or existing problems
Gartner – only 20% on innovation
Not in the cyclesDisruptive Technologies
Spending % Revenue
Reached a peak in 1999/2000
7.5%
Recently around 3% of revenues
Progressive IT agendas spend 4 to 5 %
Growth of IT Spending
Gartner Group
IT Budget Issues
Where are the costs reflected in your organization for IT?
In the IT Department
In the Business Units
At the Corporate Level
Capability Maturity Framework
1. Chaos
2. Managed Costs
3. Systematic Cost Reduction
4. Expanded Funding Options
5. Sustainable Economic Model
No clear owner of projects
Budget established
By dept / div
Supply Chain Partners
Balance maint w/ innovation
+ Initial baseline
+ Impact of previous investments
+ Uncontrollable increases
+ New investments
- Cost savings
+/- Target for expansion
Baseline Budget Model
2. Managed Costs
Renegotiating / changing suppliers
SLA (Service Level Agreements)
Increase automation
Manage/retire older systems
Systematic Cost Reduction
3. Systematic Cost Reduction
Expanded Funding Options
4. Expanded Funding Options
Corporate funding The traditional source of funding from the corporate budget
Business unit funding Funds from the business unit that will benefit from the investment
Outsourcing On Shore and Off Shore
Expanded Funding Options
4. Expanded Funding Options
Vendor or external service provider funding
Cost-sharing or discounts from a contractor motivated by experience gained for future projects
Revenue creation Selling IT services or solutions on the market with a margin to create revenue and profit
Leasing Avoiding capital expenditures by renting equipment
Chapter 3 “The Financials”
Measuring IT Business Value
No Process TCO
ROI/Simple Financials
Investment Performance
Portfolio Mgt (set priorities
basis)
Total Cost of Ownership (TCO)
What should we consider?Category Initial Costs Operation Costs Upgrade / Scaling Total % of Total
User Costs / Training 20 50 15 85 10%
Hardware 50 37.5 20 107.5 13%
Software 40 40 25 105 13%
IT Personnel 70 250 70 390 48%
Total Cost of Communication (TCC) 15 75 10 100 12%
Miscellaneous 5 10 8 23 3%
Total 200 462.5 148 810.5
% of Total 25% 57% 18%
TCC (Total Cost Connectivity)
Voice costs Data costsMobile/cell phone Corporate connectivity
Wired LANDesk phone Wireless LAN Home connectivity
Teleconference bridges PSTN remote access VPNCalling cards Broadband Remote Connectivity
Hotel calls Pager Wireless WAN (2.5/3G)Desk phone Wireless hot spots WiMAX (broadband wireless)
Simple Measurement Tool - ROI
How do we calculate ROI?
ROI = Total Benefits – Total Costs
Total Costs
What’s the simple ROI for a project with a 3 year life?
Cost of software (1 time)
Increased storage/processing costs / annually (leased)
Each employee can process 12.5 applications / hr vs. 10 / hr
Employees are paid $20/hour currently, will receive $22 / hour after due to increased skills
Estimated applications this year: 50,000
$16,000
$5,000
Calculations: Labor Benefits (excluding hardware/software)
Old Basis: New Basis
Annual Labor Cost Savings (Benefit) =
3 Year ROIROI = Total Benefits – Total Costs
Total Costs
Should we invest with a 16.1%ROI for 3 years ?
Other financial ratios ROI
+ easy to calculate
- time value of money (discount rate)
Payback Period
Other financial ratiosDiscounted Cash Flows
NPV
IRR
Other financial ratios Profitability Index
NPV (excludes the year 0) / Investment (year 0)
Helps in ranking as it incorporates overall investment
Assumes smaller investments are less risky as the denominator is smaller)
Intangible Benefits – will discuss in future
Other Measurement Techniques
Formulas & explanations
Investopedia.com – click on dictionary and enter a term like NPV
http://www.investopedia.com/
NPV, IRR, Payback
Goals for Project Justification
Set dollar goals for all IT projects
Use the ratios that the organization uses for all projects
Compare IT projects using a variety of ratios
Build in the ‘agreed upon’ intangible value of projects
Review / Report the benefit of implemented projects on the same basis
Recommended