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Information Technology For Management 6th Edition

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Chapter 14 Economics of IT Information Technology For Management 6th Edition Turban, Leidner, McLean, Wetherbe Lecture Slides by L. Beaubien, Providence College – PowerPoint PPT presentation

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Title: Information Technology For Management 6th Edition


1
Chapter 14
Economics of IT
  • Information Technology For Management 6th Edition
  • Turban, Leidner, McLean, Wetherbe
  • Lecture Slides by L. Beaubien, Providence College
  • John Wiley Sons, Inc.

2
Learning Objectives
  • ???????????????? ? ???????????????????????????????
    ???????????????????????
  • ??????????????????????????????????????????????????
    (productivity paradox) ??? IT
  • ??????????????????????????????????????? IT
    ????????????????????????
  • ??????????????????????????????????????????????
    (intangible benefits) ???????????????
  • ??????????????????????????????? IT
    ?????????????????????
  • ??????????????????????????????????????????????????
    ???????????? IT (chargeback).
  • ???????????? ????????????? outsourcing.
  • ????????????????????????????????????? EC ???
    Web-based technologies ???????????? EC
  • ????????????????????????????????????????
    ????????????????????

3
Justifying IT investment in the state of Iowa
  • Problem
  • ???? ? ???????????????????????????????????????????
    ?? IT ???????????????????? Iowa ????????? ???? ?
    ??? ?????????????????????????? ?
    ?????????????????????????????????????????????
  • ????????? ????????????????????? ????????????????
    ? ????????????? ?????????? ??? ???????????????????
    ????????????????????
  • ????????????????????????? 1999 ?????????????
    ??????????????????? ??????????????????????????????
    ?????????????????????????????????????????????????
    IT

4
  • Solution
  • Iowa ???????? IT value model ?????????????????????
    ? ????????? performance-based government
    ????????????????????????????????????? ? ??????
  • ????????? ??????????????? IT ???? ?
    ??????????????????????? ????????????????? IT
    ??????
  • ???????????? ???? IT ?????????????????????????????
    ?????????????????????????????????? ??????????? ?
    ??????????????????????????? ????????
    ??????????????????????????????????????????????????
    ?? ????????????????????????????????????? ?
    ??????????????????
  • ?????????????????????????????????
    ??????????????????????????????????????????????????
    ??????????????????????????????????????????????????
    ?????

5
  • ??????????????????????????? 5-15 ?????
    ???????????????????????????????????????????????
    100 ????? ????????????????????????????????????????
    ??????????????????????????????????????????????????
    ?????????????????????????????????
  • ?????????? ???????????????????????????????????????
    ????????
  • ??????????? ROI ??????????????????????????????????
    ?????????????????????????????????????
    ??????????????????????????????????????????????????
    ???????????????????????????????????????????????
    ???????? 2001 ????????????????????????????? ERP
    ???????????? ???? E-Procurement, HRM ???????? IS
    Dept. ?????????????????? ERP ?????????????????????
    ???? ????????????????????????

6
  • Results
  • ??????? Iowa ?????????????????????????????????????
    ??????????????????????????????????? IT
    ??????????????????????????????????????????????????
    ????????? ? ????

7
14.1 Financial and Economic Trends and The
Productivity Paradox Computing Power vs. Benefits
  • ??????????????????????????????????????????????????
    ???????? ?
  • ????????? ????????????????????????????????????????
    ??????????????????????????????????????????????????
    ?????
  • ???????????? ?????????????????????????????????????
    ????????????????????????????? ?
    ??????????????????????????????????????????????????
    ??????????????????????????????????????????????
  • ?????????????????????????????????????????????????
    IT?
  • ????????????????
  • ????????????
  • ?????? (productivity)
  • ?????????????? ?
  • ??????
  • ????????????????????????? information technology

8
 Moores Law
9
Productivity Paradox
  • ?????? (Productivity) ????????????????????????????
    ???????????????????? ?????????????????????????????
    ???? ???????????? ????????????????????????????????
    ????????????????????????????? IT
    ???????????????????????????????????? ???????
    ???????????????????????????????????????????? IT
    ??????????????????????????????????????????
    ???????? ???????????????????? (productivity
    paradox)
  • ???????????????????????????????????????? ????
  • ?????????????????????????????? ?
    ???????????????????????????????? IT
  • ??????????????????? IT ???????????????????????????
    ??????????? ?
  • ????????????????? IT ?????????????????????????????
    ???????????????? IT ???

10
(No Transcript)
11
Conclusion Does the productivity paradox matter ?
12
(No Transcript)
13
14.2 Evaluating IT Investment Benefits, Costs,
and Issues
  • IT investment categories
  • ???????? ???????????????? ?????????????????????
    (infrastructure) ??? ????? ???????????????????????
    ????????? (specific applications)
  • ???????????????? IT ?????????????????????????????
    ???????? ??????????? ? ????????????? ? ???
    ???????????????
  • ???? IT applications ?????? ?????????????????????
    ? ? ??????????????????????? ??????????????
    ?????????????????? ???? ??????????????????????????
    ????????????????????

14
 The Value of Information in Decision Making
??????????????????????????????????????????????????
????????????????????????????????????????
????????????????? (value of information)
????????????????????? net benefits (benefits
adjusted for costs) ??????????????????????????????
??????????? net benefits ?????????????????????????
????????????
It is generally assumed that systems that provide
relevant information to support decision making
will result in better decisions, and therefore
they will contribute toward the return on
investment. However, this may not always be the
case.
15
Evaluating IT Investment by Traditional
Cost-Benefit Analysis Evaluating the Benefits
  • ???????????????????????????????
    ?????????????????????????????????
    ?????????????????????????????????????????
    ????????????????????????? ??????? ???
    ???????????? Tangible benefit ????????????????????
    ??????????????????????? ?????? ????
    ???????????????????? ?????? ???????? Intangible
    cost
  • ?????????????????????? (Intangible benefits)
    ???????????????????? IT ?????? ???????????????????
    ?????????? ???????????????????????????????????????
    ???? ???? ??????? IT ???? ????????????????????????
    ?????????????? (???? ???????? Fax ) ????? 1
    ??????? ???????????????????? ??????? Tangible
    benefit ?????????????? ????? ?????????????????????
    ?????????? ???????????? Intangible benefit
  • ??????????????????? ???????? total benefits of
    ownership

16
Conducting Cost-Benefit Analysis
  • ???????????????????
  • ????????????? NPV (Net Present Value) ???????
    cost-benefit Analysis. ???????????????? NPV
    ?????????????????????????????????????????????????
    ??????????????????????????????????????????????????
    ??? ??????????????? ??? organizations cost of
    funds
  • ??????? Return on investment (ROI)
    ?????????????????????????????????????
    ??????????????? ??????????????????????????
    (?????????????????????????)

17
Costing IT Investment
  • ??????????????????? IT ?????????????????
  • ??????????? (Fixed costs) ??? ????????????????????
    ?????????????????????????????? ?????????
    ????????? IT ???? ?????????? ?????????????????????
    ???????????????????? IT (???? ?????????? leased
    line ???????????????????????????? ???????) ???
    ????????????????????????????????? IT (????
    ???????????? ??????? ???????)
  • ??????????????? (Variable costs) ??????????????
    ?????????????????????????????? ???????????????
    ????????????? ??? run ???????? ?????????????????
    ???? ?????????? ????????????????????????
  • ??????????? ?????????????????????????????? Total
    cost of ownership
  • Total cost of ownership (TCO) ???
    ???????????????????????????????????? ????????????
    IT (HW/SW) ??????????????????? IT (Operation
    cost) ???????????????? IT (Control cost)

18
Opportunities and Revenue Generated By IT
Investment
19
???????? Revenue Model generated by IT and Web
  • Sale
  • Transaction fees
  • Subscription fees
  • Advertising fees
  • Affiliate fees (commission ???????????????????
    Web)
  • Other revenue sources (???? ??????? ?? TV ???
    Real time ???? Web)

20
  • ???????? Revenue
  • ???? product or service ????? large global market
  • ????? margin ???????? internal cost ????
    ??????????????????? value added ????????????
  • ?? online portal ?????????? (??????
    ???????????????????????)
  • Value-added content sold from selling searches,
    access to data ??? e-document

21
  • ????? Transaction cost ?????????????
  • 1) Search cost ???????????????????????????????????
    ?????????
  • 2) Information costs ?????????????????????????????
    ??????????????????
  • 3) Negotiation costs ????????????????????????
  • 4) Decision costs ???????????????????????
  • 5) Monitoring costs ???????????????????
    (?????????????)

22
The problem of Intangible Benefits
IT projects ?????????? intangible benefits ????
??????????? ??????????????????????
??????????????????????? ?????????????????????
?????????????????????????? ???????????????????????
????????? ???????Intangible benefits
????????????????????????????????????????????
  • ???????????? Intangible Benefits
  • ???????????? intangible benefits
    ????????????????????? ? ??????? NVP ????
    financial analysis ????? ? ??? ????????????????
  • ???????????????? Scoring Matrix or Scorecard

23
Handling Intangible Benefits Sawhneys Method of
Handling
  • ??????????? ? ????????????????????
  • ??????????????????????????????????????????????????
    ????????????????????? ???? ????????
    ????????????????????????????????????????? ???????
  • Pay your freight first. (????????????????)
  • ?????????????????????????????????????????
    ????????? pay the freight ??????????????????????
    ????????
  • ????????????????????????????????????????????
    (Follow the unanticipated)
  • ?????????????????????????????????? (payoff) ???
    IT ??? e-business projects ????????????????

24
Business Case Approach
  • ??????????????????????????????????????????????????
    ??? ? ??? ????????????????? business case
    ?????????????????????????????????????????????
    ???? ???????????? ????????????????????????????????
    ?????????????????????? ??????????
    ??????????????????????????????????????????????????
    ?????????????????? ?????
  • business case ??????????????????
  • ??????????????????????????????????????????????????
    ??
  • ??????????????????????????????
  • ?????????????????????????
  • ?????????????????????? IT project ????? ?
    ????????????????????????

25
A Model for Investment Justification
26
14.3 Methods for Evaluating and Justifying IT
Investment
  • ???????????????????????????? IT
    ???????????????????????????????????????
    ????????????????? ????????????????????????????????
    ?????? IT ?????? intangible ??????????????????????
    ????????????? ???????????IT??????????????????? ?
    ??????????????? ?
  • ???????????????????????????? 4 ??????? ? ??????
  • 1) ?????????????????? (Financial (NPV ROI)
    methods) ?????????????????????????????????????????
    ??????????????????????????????????????????????????
    ?????????????
  • 2) ???????????????????????? (Multicriteria
    (Information economics and Value analysis)
    appraisal methods) ???????????????????????????????
    ??????????????????????????????????????????????????
    ??????????????????????????????????????????????????
    ???????????
  • 3) ??????????????????? (Ratio (IT expenditures
    vs. total turnover) methods) ?????????????????????
    ???????????????????????????? IT
  • 4) Portfolio methods ??? portfolios (???? grids)
    ????????????????????? ? ??????????????????????????
    ??????????????????????????? (decision-making
    criteria)

27
Methods for Evaluating IT Investments
28
Total Cost of Ownership (TCO) ??? Value Analysis
???????????????????? ? ???????????????????????????
??????????????? IT
  • Total cost of ownership (TCO ???
    ???????????????????????????????????? (cost of
    owning) ???????????? (operating) ??? ?????????
    (controlling) ???? IT ?????????
    (?????????????????????????????????????????????????
    ????) ???????????????????
  • ?????????????????? (hardware and software)
  • ??????????????????????? (maintenance, training,
    operations, )
  • ??????????????????? (standardization, security,
    central services)

29
  • ????????????????????? (Value analysis)
    ??????????????????????????????????????????????????
    ?????????? ???????????????????????????????????????
    ?????????????????????????????????

30
Information Economic
  • Information economics ????????????????????????????
    ????????? ? ????????? ????????????? intangible
    benefits ???? Information economics
    ???????????????????????????? ? ?????????????????
    ???????????????????? ? ???????????????????????
  • ??????????????? (scoring methodology)
    ???????????????????????????? ? ???????????????????
    ??????????????????????????????????????????????????
    ?????????????? ?????????
  • ??????????????????????????????????????????????????
    ??????????
  • ???????????????????????????????????
  • ??????????????????????????????????????????????????
    ??????????????? 0 ??? 100 ???? 0 ??? 10
  • ??????????????????????????????????????????????????
    ??? ??????????????????????????????????????????????
    ???

31
Assessing Investments in IT Infrastructure
  • ??????????????????????????????????????????????????
    ?????????????????????????????????????????????
    specific IS application ???????? ?????????????? ?
    ???????????????????????????? intangible
    ??????????????????????????????????????????????????
    ????????????????
  • ??????????????????
  • Benchmarks ?????????????????????????????????????
    ?
  • ????????? benchmarks ?????????????????????????????
    ????????? ????
  • ????????????? IT ???????????????????????????????
  • ?????????????? downtime (?????????????????????????
    ????????????)
  • ????????? CPU ????????????????????????????????????
    ????????
  • ????????????????????? IS ?????????????????????????
    ?????????????????????????

32
  • ??????????? Best-practice ??? benchmarks
    ??????????????????????????????????????????(???????
    ) ??????????????????????????????????????
  • ????????????? IT (IT Metrics)
  • ????????????? ????????????????????????????????????
    ?????????????????????????????????????
  • ???????? (value) ?????????????? business model
  • ??????????????????????????????????????????????????
    ????????????????????
  • ??????????????????????????????????????????????????
    ??????????????????
  • ????????????????????????? ???? ???????? ? ???????
    enterprises strategic objectives.

33
Real Option Valuation of IT Investment
  • ???????????????????????????????????? IT ???
    ??????????????????????????????????????????????????
    ??????? ?????????????????????????????????? ????
    NPV ??????????????? ????????????????????????
    capital projects ?????????????????????????????????
    ?????????????? cash flows ????????????????????????
    ????????????????????? real options
  • Common types of real options include
  • ????????????????????????????? ? (????? cash flow
    ???????????????????????????)
  • ???????????????????????????????????????? (?????
    minimize loss ??????????????????????)
  • ??????????????????????????????????????????????????
    ?

34
The balanced scorecard and similar methods
  • ?????????? balanced scorecard ????????????????????
    ????? overall health ??????????????????????? ?
    ??????????????????????????????????????????????????
    ???????????????????? ???????????????????? 4
    ???????
  • ?????????? ?????????????????????????????????
  • ?????? (????????????????????????????)
  • ???????????????????? (?????????????????????)
  • ??????????????????????? (?????????????????????????
    ???????????)
  • Activity-based costing (ABC) ?????????????????????
    ????????????????????????????? ?
    ???????????????????????????? ?
  • Expected value (EV) ??????????????????????????????
    ??????????????????????????????????????????????????
    ? (probability of its occurrence)

35
14.4 IT Economics Strategies Chargeback and
Outsourcing
  • ?????????????????????????????????? IT
    ?????????????????????????????????????
    ???????????????????????????????????????? IT
    ???????????????????????? ?????????????????????????
    ? IT ??????????????????????????????????? ?
  • ?????????????????????????????????????????????? IT
  • Chargeback
  • ?????????????????????????????? overhead account
    ???????????? IT ?????? free ????????????????????
    ??? ??????????????????????????????????????????????
    ?????????????????? ? ????????????????
  • Cost recovery ?????????????????????? IT
    ??????????????????????????????????????????????????
    ??????????
  • Behavior-oriented chargeback ?????????????????????
    ??????????????? IT ???????????????????????????????
    ?????????????? ???????????????????????????????????
    ??????????????

36
  • Outsourcing
  • ???????????????????????????????????????????????
    IT ???????????????????????????????????????????????
    ?????????????????????IS ????? ??????????????????
    ????
  • ????????????????????????? Offshore outsourcing
  • ASPs and Utility Computing. Application service
    provider (ASP) ??????????????? software-based
    services ??? solutions ???????????(???????????????
    )???????????????????
  • ASP ??????? Agent ???? vendor ????????????????????
    ??? ???????????????????? ???????????????????????
    outsourced development, operations, maintenance,
    ??? other services
  • Management service provider (MSP) ??? vendor ????
    remotely manages ??? monitors enterprise
    applications.

37
(No Transcript)
38
Strategies for Outsourcing
  • ??????????????????????????????????
  • 1) ???????????????????????????????????????
    (???????????????????????)
  • 2) ???????????????????????????????????????????
    ??????? outsource ????
  • 3) ??????????????????????????????????????????
  • 4) ??????? Technical failure ????????????????
    ????????????
  • 5) ??????????????????????????????????????????????
    ???? ?????????????????????

39
?????????????????????????????????????????
Outsource
  • 1) ????????????????????????????? outsource
  • 2) ????????????????????????? (??????????????? ?
    ??????????????? ? ?????????????????????)
  • 3) Align incentives (?????????????????????????????
    ??????????)
  • 4) ????????????????? (????????????????????????????
    ? ????????????????)
  • 5) Control subcontracting
  • 6) ???????????????????????? outsource
    (??????????????? core competency ?????? Outsource)

40
14.5 Economics Aspect of IT and Web-based Systems
Web-based systems ????????????????
???????????????????????? ?????????????????????????
??????? EC ??????????????????????
????????????????????????? business case ???????
baseline ???????????????????? ????????????????????
??????????????????????????? business case
??????????????????????????????????????????????????
???????????? ???????????????????? e-business
????????????? ??????????????????????? Web-based
systems ??????????????????? ??????????????????????
??????????????????????????????????????????????????
???????????????????
41
Cost Reduction and Productivity Increase
??????????
????????? ???????
42
Reach versus Richness
  • ???????? economics impact ??? EC
    ?????????????????????????? (reach) ?????????????
    ????????????? ? ????????????????? ????????????
    (richness)

43
IT Failures and Runaway Projects
  • Information technology ???????????????????????????
    ?????????????????????? ? ????????????????????????
    ????????????????????????????? IS
    ??????????????????? ???? ?????????????????????????
    ????????????????????? ???????????????????????????
    ??????????????????????? ??????????????????????????
    ????economic issues ???? ????? cost-benefit
    analysis ??????????
  • ??????????????? IT at Work 14.2 A University
    Accounting System Failed page 583

44
MANAGERIAL ISSUES
  • Constant growth and change.
  • ??????? microprocessor chip ??????????????????????
    ?? ??????????????????? ???????????????????????????
    ??????????????????????????????????????????
    ????????????????????????? ? ??????????? ?
    ?????????????
  • Shift from tangible to intangible benefits.
  • ???? ? ???????????????????????????????????????????
    ????????????????? IT ????????????
    ???????????????? IT ?????????????????????????
    intangible benefits ???? ???????????
    ????????????????????????? ??????????????? cost
    savings ?????????????????????????????????????????
    ???????????????????????????????????????????? ?
    ??????????????????? intangible benefits
    ??????????????????????????????????????????? IT

45
MANAGERIAL ISSUES
  • Not a sure thing.
  • ?????? IT ????????????????????????????????????????
    ??????????????????? ??????????????????????????????
    ???????????????????????? ?????????????????????????
    ??????????????????????????????????????????????????
    ???????????????????????????????? IT
  • Chargeback.
  • ?????????????????????????????????????????? IT
    ??????????????????????????????????????? ???????
    ?????????? chargeback ????????????????????????????
    ????????????????????????????????????????????????
  • Risk.
  • ?????????? IT ????????????????????????????????????
    ???? ? ???????????????????????????????????????????
    ???????????????????????????? IT

46
MANAGERIAL ISSUES
  • Outsourcing.
  • ?????????????????????? IT ????????????????????????
    ???????? ?????????????????????????????????????????
    ???????? ????????????????????????????? outsource
    ?????????????? IT ??????????? ????????????
    ?????????? outsource ???? ???????????????????
    ????????? ? ???????????????????????????????????
  • Increasing returns.
  • ??????????????????? ? ??????????????? IT ???????
    IT ??????????????????????? ??????????? IT
    ????????? increasing returns ????????????
    ????????????????? ? ??????????????????????????
    (??? IT ????) ??? return ????? ???????????????????
    ???????????????? ? ???????????????????????????????
    ???????????????????????????????????????????
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