1 Aspects of IT investment decision process Pertemuan Matakuliah: A Evaluasi Efektivitas Sistem Informasi Tahun: 2006

2 Introduction Are IT investment decisions fundamentally different to other investment decisions? Organization only invests if benefit gained is worth the expense IT need only achieve some lower rate of return IT risks are higher. Expected ROI needs to be higher before investment can be justified

3 Must do IT investment Consider : 1.Core business 2.Prestige projects 3.IT projects

4 Core business investment decision Relatively few options Decision-makers are ‘at home’ relevant issues Comparatively simple to cost and the benefits are relatively obvious Cost of not undertaking the expenditure is obvious, though probably not costed

5 Investment in prestige project Large number of options Decision-makers are probably driving the project Not straightforward to cost and few obvious financial benefits Cost of not undertaking the project is not obvious Intangible benefits will probably carry the case

6 Investment Matrix Must-Do Low Risk Low Profit Core Medium Risk Medium Profit Cornseed Very High Risk High Profit Prestige High Risk High Profit HighLow High Low Risk/Visibility Profitability

7 Characteristics of IT decisions Large number of options Decision makers will not probably understand the details of the project, but the process to be automated Not straightforward to cost, low confidence in estimates Difficult to estimate benefits Cost of not undertaking the project not understood/accepted Intangible benefits will not be quantified

8 Making the decision IT is high risk, high cost Expenditure on IT Rapid pace of change of technology Trusted record

9 Modern IT Overall business strategy Position in marketplace Financial situation Current level of IT expertise Analysis of current IT trends and standards