Chapter 14Information Systems ValueSlide 3Senior Management QuestionsInformation Systems Value and Financial StrategyThe IT Value IssueThe IS Value IssueIT Value Can Become A Major Issue IfSlide 9IS Value and Financial StrategyIs the Value Issue Unique to Information Systems?Slide 12The Value of ITSlide 14IS Value and Financial StrategySlide 16Slide 17As You Progress Up the IS Value ChainSlide 19Information Systems Do Not Produce Value DirectlyWho Should Answer the IT Value Question?Industry IT SpendingSlide 23Slide 24Slide 25National Semiconductor Annual IT CostsSlide 27Difficulty of IT Benefit AnalysisEvolution of IS StrategyIn the Beginning There are BudgetsIS Business CaseBusiness CaseCharge-Out SystemCharge-Out System ObjectivesSlide 35What to Charge For?Pricing MethodologySlide 38A Management ProcessManagement ProcessSlide 41Major Factors to Be AddressedInformation Systems Value?National Institutes of HealthSlide 45IS Financial StrategyProductivity ChallengeSlide 48MeasurementsSix Year ResultsHewlett-Packard Test Measurement Organization (Agilent) IS Value Case StudyIS as a Business within a BusinessA Critical FactorTo move up the curve. . .Guiding PrinciplesValue PropositionsThe New TMO IT StrategyInitial Three Year ObjectivesSlide 59Information Systems Organization of Manufacturing CompanyAcceptable Proposition?Clinching ArgumentConsiderationsIS Financial Strategy ConclusionsMore ConsiderationsChapter 14Chapter 14Information Systems Value Information Systems Value and and Financial StrategyFinancial Strategy• Logical to Address• Necessary to Articulate• Controversial Because “It Can’t Be Measured.”• A Management Process--Not Techniques or Methodologies.• The Reason for Significant Management Consulting.Information Systems ValueInformation Systems Value““The Question”The Question”What are we getting for that?• What have I received for past information technology investments?• How can we maximize the positive impact of information technology on the business?• What is the right amount of investment for the future?• How can I track the returns on continuing investments in IT?Needed: A process for measuring and tracking benefits realized from Information Technology. Senior Management QuestionsSenior Management QuestionsInformation Systems Value and Information Systems Value and Financial StrategyFinancial Strategy"You have got to get me a lot more comfortable "You have got to get me a lot more comfortable with the fact that you are spending $400 million a with the fact that you are spending $400 million a year on information systems. Meanwhile, you year on information systems. Meanwhile, you are not getting any more."are not getting any more." CEO to Information Systems Vice PresidentCEO to Information Systems Vice PresidentThe IT Value IssueThe IT Value Issue1. The applications development process costs too much and takes too long.2. Integrated systems connectivity and compatibility have major cost implications.3. A lack of ease of use negatively impacts user productivity.4. All of the above impact the ability to articulate IT value.The IS Value Issue The IS Value Issue 1. A Big Deal – The topic is receiving significant attention and increases in IS spending are unlikely. 2. A Medium Deal - Being talked about but taking a back seat to other business issues. 3. No Deal - Not a current issue and there is no need to make it a priority within the Information Systems organization.IT Value Can Become A IT Value Can Become A Major Issue Major Issue IfIf1. The business is experiencing major cost reduction pressures.2. IT expenditures are viewed as a significant cost of running the business. (now or in the future)3. There is a growing sentiment that a better job could be done in managing IT expenditures.Senior Management Feels Too Much is Spent on IT0% 5% 10% 15% 20% 25% 30%Disagree StronglyDisagree SomewhatNeutralAgree SomewhatAgree StronglyIS Value and Financial StrategyIS Value and Financial StrategyLess than favorable publications:1. “The Elusive IT Payback.”2. “The Dreaded ROI Question.”3. “IT Spending: Is It Out of Control? Service Sector’s Huge IT Infrastructure Weakens Competitiveness”4. “Office Automation: Making It Pay Off.”5. “New Metrics for MIS.”6. “Banks Reassess IT Spending.” 7. “ROI in Real Time.”Is the Value Issue Unique to Is the Value Issue Unique to Information Systems?Information Systems?What about?Advertising?Research and Development?Public Relations Programs?IS Value and Financial StrategyIS Value and Financial StrategyThe heart of the matter is not how to quantify the contribution of information systems, but how to satisfy management that this support resource is contributing to the success of the business.The Value of ITThe Value of ITIS executives should be prepared to develop and provide high-level metrics that demonstrate the value of IT to the rest of the organization. While mathematical precision is not entirely possible or even desirable, it is possible to arrive at some meaningful estimates. Using information they can quickly access, IT executives should develop these "dashboard" metrics based on key business processes that IT supports, and communicate them in business language.We can find no indication of any positiveimpact on national productivity despiteenormous investments in informationtechnology.Lester Thurow, DeanSloan School of ManagementMITIS Value and Financial StrategyIS Value and Financial StrategyThe U.S. service sector has spent $862 billion on IT over the past decade--a figure that is equal to the GNP of France--without any meaningful improvement in productivity.We have seen a very serious problem for the past fifteen years not because of any inherent deficiencies in the machines or the software, but because of management ineptitude in applying technology to productive endeavors.Stephen RoachEconomistMorgan Stanley & Co.IS Value and Financial StrategyIS Value and Financial StrategyInformation Systems Information Systems Value ChainsValue ChainsTechnologyTasksActivitiesProgramsGoals System Individual Department Organization EnterpriseAs You Progress Up the IS Value ChainAs You Progress Up the IS Value Chain•Financial benefits would be greater but more difficult to measure.•The time horizon to implement a new application would be longer.•The organizational level for approval of a new project
View Full Document
Unlocking...