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MBA/MIS - 513

Class #3

September 2, 2008

IT Business Value

Financial Justification

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Tonight’s Agenda

Brief Presentation on International Experience – Thom Porter

Finish up Chapter 2 of Book A

ROI Homework Q&A

Book B – Chapters 1 and 3

Information Technology Business Value

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Book BMeasuring the Business Value of

Information Technology

Information Technology Business Value (ITBV)

Chapter 1

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Overall GoalsMove the IT department / process from a ‘cost center’ to a strategic partner to achieve overall goals

Prove ‘business value’

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What to measure?

Direct contribution to market position or revenues

Deliverables that support solving customer business needs and challenges

Direct cost savings

Technology investment that advance the industry

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Standards in Measurement

Standard metrics developed

Common valuation techniques with other corporate projects

Business value portfolio with values determined by business unit managers

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Grow your IT Success Framework

Balance the budget needs while moving towards a ‘profit center’

What are the roles for the Bus Mgr versus the IT professional?

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Chapter 1 Summary

What are the implications for the Business Unit Manager pertaining to IT?

What are the implications for IT Professionals pertaining to assisting the business?

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Chapter 2 (Book B) Methods to determine

Business Value

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Establish metrics and then monitor

Notice these are not IT Metrics

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Suggested metrics should be corporate goals

Hospital (from text)

Utilization of beds

# of people for specific lab

Discharges by noon

Diversions

Patient Satisfaction

Staff Satisfaction

Doctor Satisfaction

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UNCW Metrics?

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Others?

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Once you have metricswhat do you do?

(as it pertains IT?)

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Replacing Human Capital with IT Capital

BV Dial DefinitionHeadcount Growth

Solutions that enable reduction in human resources or absorb business growth without growing headcount. The company can either move employees to areas of greater return (with job-search time and support provided for eligible employees) or put teams on new projects.

Sample Calculation: (Number of headcount reduced or avoided) × (Average burden rate for region and job type)

Employee Turnover

Solutions that reduce undesired employee turnover. Significant cost savings are realized when hiring, training, and interviewing are avoided.

Sample Calculation: (35% of annual burden rate and region and job type) × (number of headcount turnover avoided)

Employee Productivity

Gains in headcount efficiencies or effectiveness. Headcount is expected to produce more through these gains due to the additional time-based efficiencies.

Sample Calculation: (Number of employees affected) × (time) × (average burden rate) × (50%)

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Productivity (Potential Gains)

Removal of an activity a user performs

Reduction in the time to complete an item

Reduction in user errors

Reduction in time to train new users

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Other ‘quantifiable’ items(suggestions, can you use for your project?)

Reduce ExpensesMaterial Discounts

Scrap Reduction

Hardware / Software Avoidance vs. System End of Life Considerations

Factory Uptime

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Other ‘quantifiable’ items(suggestions, can you use for your project?)

Reduce Expenses / Working CapitalDays of Inventory

Days of Receivables

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Other ‘quantifiable’ items(suggestions, can you use for your project?)

Increase RevenuesReduce time to market

Open a new market

Cross Selling

Vendor of Choice

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Steps for IT project justification