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

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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

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Creating Value – “Effects”

Automation IT Assets for

Human Assets

Information

Transformation Support

Innovation

Decision Making

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Strategic Alignment with Business

Business Strategies Capitalize

on IT Capabilities

IT Supportsthe

Business

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Business of IT

Technology People

IntellectualCapital Relationship

Conversion Efficiency

Innovation

SolutionsDelivery

Products &Services

Provisioning

Suppliers

Customers

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Chapter 1 Summary!

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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.

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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

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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

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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

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Strategy involving Databases

IT Services - Today

Data Management

Data Security

Conformity to standards / laws

HIPPA

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IT Services - OverallOperations

Applications

End User Support

Planning & Architecture

Emerging technologies impact on strategy

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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