Understanding the Business Value of Systems and Managing Change Chapter 13

Below is my newest list of Misleading Myths about teaching, learning, and technology. This was prepared for the "forum" that I ran yesterday [Monday ] for Chief Academic Officers at the League 2002 Conf. on Info. Tech. 1. Technology saves money. 2. Technology increases revenues. 3. Technology cannot save money. 4. Lifelong learning is for "them" - not for us. 5. Everyone can learn new uses of technology in the same way at the same pace. 6. Most faculty, administrators,... will, on their own initiative, soon take advantage of most of the capabilities of new uses of technology. 7. Technology can fully record and reproduce what happens face-to-face. 8. Running a college or university is just like running a business. 9. Running a college or university is nothing like running a business

Assumptions and Perspectives  Value is contextual and processual  Contextual means in certain situations, technology for example, has more value than other situations  Processual means in certain stages of a process, technology has more value than other stages

Understanding the Business Value of IS  Traditional capital budgeting models  Strategic considerations  Portfolio Analysis  Balanced scorecard evaluation

Traditional Capital Budgeting Models  The payback method  The accounting rate of return on investment (ROI)  The cost-benefit ratio  The net present value  The profitability index  The internal rate of return

Result of the Capital Budgeting Analysis  Take into account the time value of money  Only on the financial side of projection on the future cash inflows and outflows  Has not considered the operational issues  Has not considered the competitive issues..

Portfolio Analysis  Selection among alternate projects  Using two factors: Project risk Potential benefits to firm  Take into consideration of only company’s own strengths and weaknesses

Balance scorecard method  Take into consideration financial and non- financial factors  The most important outcome is the logic of coming up with the criteria for judging system value and performance requirements  The logic and criteria from examining contextual conditions can be used to benchmark the changes of assumed conditions

Real Options Pricing Model  Model for responding to future problems and opportunities  Taking into the processual effects  Real options for stocks is different from those for technology investments (TI) in that TI is so closely related to a firm’s own contextual conditions

Real Options Pricing Models  Processal developments Management learning over time Inflation or deflaction over time in technology and in general pricing. For example, recently price in technology assets went down; the interest rate was going down also; however, it may go up some time?

IT investments and Productivity How do they relate together?

Sector differences?  Why is it easier to see the increase in productivity in manufacturing sectors?  Why is it more difficult to see the increase in productivity in service sectors?  How does one measure the output of a law firm?  How does one measure the output of learning?

Profitability and Competitive environment  Does increase in productivity mean increase in profitability?  When other banks have ATM, how does it affect a bank that does not have ATM?  When all other applicants can use Access, how does it affect an applicant who have no idea about what Access is?

IT and Vulnerability  Does IT create dependency?  Why are many people unable to add and multiple without using a calculator?  Why are most people unable to use both hands equally?  When a disaster occurs, will it increase a company’s vulnerability?

IT investments and BPR  In order to take full advantage of IT, a company need to re-engineer its business process  When a business process is re- engineered, the entire organization has to learn the new way of doing things.

Essay question  Why should the returns of IT investments be analyzed within the competitive context of the firm, the industry, and the specific way in which information technology is being applied?