Measuring IT Innovation Benefits. Evaluation of IT innovation Why measure IT benefits? A new IS/IT system is an investment; it must be strategically/financially.

Slides:



Advertisements
Similar presentations
Options appraisal, the business case & procurement
Advertisements

Achieve Benefit from IT Projects. Aim This presentation is prepared to support and give a general overview of the ‘How to Achieve Benefits from IT Projects’
Business Process Management.  A method of evaluating the financial consequences of business investments, decisions, or actions.  A high ROI means that.
ICS 442 Software Project Management
Chapter 3 Program Management and Project Evaluation Professor Hossein Saiedian McGraw-Hill Education ISBN
CHAPTER 8 PLANNING FOR IT SYSTEMS Knowing Where You‘re Going.
What is it? What use is it? How do you do it? What is it? What use is it? How do you do it? Richard Harrison-Murray Research consultant
Economic Analysis Concepts. 2 Is the project justified ?- Are benefits greater than costs? Which is the best investment if we have a set of mutually exclusive.
REJ - 1 REJ from Microsoft Chris Gibbs November 5 th, 2007 MBA 731.
Moving from Analysis to Design
CISB444 - Strategic Information Systems Planning
Return On Investment Integrated Monitoring and Evaluation Framework.
Project Estimation Describe project scope, alternatives, feasibility.
F29IF2 : Databases & Information Systems Lachlan M. MacKinnon The Domain of Information Systems Databases & Information Systems Lachlan M. MacKinnon.
The use of information systems to add value to the organization is strongly influenced by organizational structure, culture, and change Identify the value-added.
Lec 21, Project Evaluation Part 1: Impact analysis General characteristics of benefits and costs Estimates of economic costs and benefits A framework for.
The Analyst as a Project Manager
CISB444 - Strategic Information Systems Planning
PROJECT EVALUATION. Introduction Evaluation  comparing a proposed project with alternatives and deciding whether to proceed with it Normally carried.
Strategy Arc STRATEGY Environment Firm
Strategy Arc STRATEGY Environment Firm Search for resources and capabilities that provide the firm with sustainable competitive advantage.
Project Detailed Business Case
The Library Balanced Scorecard: The Results Please! Joe Matthews American Library Association June 2007.
Economic Aspects of Information Systems Updated 2015 MIS 2000 Information Systems for Management Instructor: Bob Travica.
Chapter 5 Initiating and Planning Systems Development Projects
Financial Services Marketing services: an offering in which the dominant part is intangible, which is the case in most financial services. Marketing: the.
Initiating and Planning Systems Development projects
Constructing West Midlands Martin Merrix Divisional Manager, Urban Design.
University of Sunderland CIFM02 Unit 3 COMM02 Project Evaluation Unit 3.
PEIP National workshop in Montenegro: developing environmental infrastructure projects in the water sector Feasibility Study Preparation Venelina Varbova.
Investment Portfolio Methodologies Pertemuan Matakuliah: A Strategi Investasi IT Tahun: 2009.
Outcomes based approach to measuring the impact of new technology Vikas Arya HSCI 740 Spring 2004 May 22,2004.
The Systems Analysis Toolkit
COST BENEFIT ANALYSIS- PUBLIC SECTOR INVESTMENTS Lucky Yona.
Chapter 10 Managing Information Systems and Technology Investments.
Chapter 5 : Initiating and Planning Systems Development Projects.
Evaluating Investments in Information Technology Shannon Crump December 9, 2002 ISM 6021.
TOWARDS AN APPROACH TO MEASURE AND JUSTIFY INVESTMENTS IN A TECHNOLOGY INFRASTRUCTURE.
Systems Analysis and Design Fourth Edition Introduction  A project is economically feasible if the future benefits outweigh the costs  The Systems Analyst’s.
…and how to give it to them What CEOs Want Patti Phillips, Ph.D.
Ghent University – Department Agricultural Economics Project Management Financial and economic analysis of investment projects.
Bengin Offerings, Strategy and Focus Working papers Draft – Version 1.0 Draft, not for Distribution bengin Offerings Structure V1.0_e.ppt.
MANAGEMENT ISSUES IN SYSTEM DEVELOPMENT Andreas Rio, M.Eng.
McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8 Moving from Analysis to Design.
Impact Evaluation in Education Introduction to Monitoring and Evaluation Andrew Jenkins 23/03/14.
CHAPTER 13 Acquiring Information Systems and Applications.
1 ISA&D7‏/8‏/ ISA&D7‏/8‏/2013 Project Planning Activities Project Schedule Risks Management and Project Feasibility Financial Calculations Tangible.
Chapter 4 Issues and Techniques for IT Project Evaluation Management of Computer System Performance.
Principles of Information Systems, Sixth Edition Information Systems in Organizations Chapter 2.
Strategies for IT Adoption in the Building Industry © 2002 Prof. C.M. Eastman & Dr. R. Sacks Economic Evaluation of IT Impacts.
Lecture 4. IS Planning & Acquisition To be covered: To be covered: – IS planning and its importance Cost-benefit analysis Cost-benefit analysis Funding.
Can Financial Innovation Promote Energy Efficiency? An Impact Analysis for China November 13, 2009 Hiroyuki Hatashima Independent Evaluation Group-IFC.
Chapter 11 Managing Application Development. Agenda Application management framework Application management issues Criteria for development approach Development.
Strategy Arc STRATEGY Environment Firm Search for resources and capabilities that provide the firm with sustainable competitive advantage.
1 UNEP/IETC EST Initiative Proposed Cooperation Framework 4 December 2003 Otsu, Japan.
Kathy Corbiere Service Delivery and Performance Commission
Cost benefit analysis (COBA) is a technique for assessing the monetary social costs and benefits of a capital investment project over a given time period.
ORGANIZATIONAL EFFECTIVENESS
Lecture 51 Project Costing Lecture 52 Objectives Define economic feasibility Identify the cost considerations that analysts consider throughout the SDLC.
Continual Service Improvement Methods & Techniques.
Thepul Ginige Lecture-7 Evaluation Approaches of Information System Thepul Ginige.
Slide 1 Software Construction Software Construction Lecture 3.
The Business Case Help research funders and institutions make an informed decision regarding future investment in harmonisation of research information.
MGT 325 Entire Course FOR MORE CLASSES VISIT MGT 325 Week 1 DQ 1 Strategic Advantage MGT 325 Week 1 DQ 2 Public Activity MGT 325.
Slide 1 Systems Analysis and Design with UML Version 2.0 An Object-Oriented Approach, Second Edition Chapter 3: Project Initiation.
Factors to consider System component costs Methods
Strategic Information Systems Planning
BEST PRACTICES IDENTIFICATION
Helene Skikos DG Education and Culture
Capital Investment Appraisal: Appraisal process and methods
Presentation transcript:

Measuring IT Innovation Benefits

Evaluation of IT innovation Why measure IT benefits? A new IS/IT system is an investment; it must be strategically/financially justified. To evaluate an already existing system: Were the targets achieved? To enable comparison of different proposals To learn and create tools for managing IT projects Are we being conned by IT salespeople?

Investments in IT are difficult to evaluate Both costs and benefits are difficult to quantify; intangible factors are likely to be significant. It is difficult to follow (and plan for) the extremely rapid developments in IT. Measuring IT benefits

An IT assessment should answer three main questions: 1.How does IT improve business performance? 2.How to decide the IT projects in which to invest? 3.How to assess the performance of systems after implementation?

IT project costs (examples)  Hardware  Software  Programming  Problem analysis  Project management  Training  Operation  ‘Hidden’ costs, such as users helping other users in the period after implementation, or troubleshooting

IT project costs “Companies spend ten times more money making a software work than on the software itself” Joe Levy President Quadragon Group Comdex 2002

Tangible benefits Tangible benefits can be measured directly. Tangible benefits of IT/IS are improved business processes (as we have discussed throughout the course). These translate directly into reduced cost, - and indirectly into more business.

Intangible benefits Better information and decision-making Better coordination and supervision Improved morale Ability to evaluate more alternative Organisational learning Intangible benefits are those that cannot be measured in monetary terms:

To consider...  IT is very often only one part of a larger BPR which may include changes in organisation, IT/IS, logistics, etc.  With falling prices of IT hardware and software, and similarity between products, IT can often be considered a commodity; - in some cases staff training may cost more than the implemented system

Traditional measurement methods Return on investment (ROI) Net present value (NPV) Cost-benefit ‘Informal’ methods  Traditional project appraisal methods evaluate financial ratios only (monetary value). Intangible benefits are ignored or converted to a monetary value.

There are at least 30 current available evaluation methods for IT benefits (Andreasen 1999). They can be split into: Objective methods, that quantify inputs and output Subjective methods, relying on attitudes and opinions of users and system builders Alternative measurement methods

Information Economics (IE) Return on Management (ROM) SESAME... etc.  These methods are rarely used in construction, due to little awareness of these methods and complexity of the methods

In construction... Research show that there is some awareness of alternative IT evaluation methods, but very few companies use them. A general lack of evaluation methodologies with focus on IT, many rely on ‘gut feel’. IT evaluation techniques are considered more costly than the value they generate.

Pittard 1995 Awareness of IT appraisal techniques used in sample of UK construction companies

Andresen 1999 Procedures used in sample of Danish construction firms

Measuring IT benefits There is a need for construction-specific tool/framework that enables all parties to communicate and exchange information on possible IT investments in a form that is readily recognisable within the culture of the construction sector.

IT benefits measurement One approach measures value in distinct areas in which IT innovation can benefit a business: Efficiency: Effectiveness: Output / planned output Performance: Level of new outputs enabled, i.e. ~ the strategic impact of IT

IT benefits measurement Efficiency  money Effectiveness  a score/index of improved operations Performance  qualitative evaluation of improved business performance (long term) The framework will measure value, but not only in quantifiable terms:

IT benefits measurement process

IT benefits measurement Construction business process Efficiency benefits Effectiveness benefits Performance benefits Business planning Marketing Information management Procurement Finance Client management Design Construction Operation & Maintenance Human resources

Example of typical benefits ProcessEfficiencyEffectiveness PerformancePerformance ConstructionReduced construction times Improved productivity Reduced waste Improved quality of output Reduced technology risks Ability to exchange data Improved idea- sharing among project teams Improved integration Improved project relationships with strategic partners

IT benefits measurement The method makes use of sets of tables that must be filled out before and after an IT project. Full paper available at:

‘Conclusion’ 1.Decide key targets; monetary as well as non- monetary performance indicators 2.Assign a manager responsible for evaluating benefits (a champion) 3.Evaluate results against targets 4.Evaluate the measurement method and feedback A simplified procedure for any IT innovation benefit measurement may be concluded as: