SUCCEEDING AT IT PAYOFF MEASUREMENT: AN ACTION PLAN Pertemuan Matakuliah: A0814/Investment Analysis Tahun: 2009

Challenge to Calculate IT Payoff The challenge of managing and evaluating information technology has become more complicated as the investment has continued to grow. The IT function will have to stand on its own and demonstrate business and strategic value While it is easier to calculate payoff for operational information technology, it is far more challenging and critical to measure and show value of strategic IT investments Bina Nusantara University 3

An Action Plan (1)What metrics should be caputer (2)How to implemented a measurement system so that the metrics can be captured, analyzed, and used in corporate decision making. Bina Nusantara University 4

OPERATIONAL IT MANAGERIAL ITSTRATEGIC IT InvestmentFinancial investment in : FTEs (employees) Equipment Consulting Financial investment and budgeting for : Applications Training\ Education Financial investment and budgeting for: Collaboration technologies Electronic Data Interchange ERPs Bina Nusantara University 5

OPERATIONAL ITMANAGERIAL ITSTRATEGIC IT IT AssetsNumber of : Workstations Automated check-in counters (airlines) Assembly machines (manufacturing) Toll processing stations (toll road) Modems (Insrance adjuster in the field) Information kiosks (theme parks) Computer-based training Physical space Telecommunications infrastructure Help Desk Number of Process redesign projects Extent of process redesign measured by number of person hours invested and departments involved Change management initiatives Managerial reporting such as cost accounting applications Number of Hubs and routers Imaging technology Knowledg-based applications Teams working on strategic systems Industry and vendor partnerships Decision makers IT payoff measurement process Bina Nusantara University 6

OPERATIONAL ITMANAGERIAL ITSTRATEGIC IT IT ImpactsNumber of Customer serviced Hits on the web site High-quality pieces produced Problems resolved Satisfied customers Returning customers Customer referred by other customers Order processed per day Wait times Sales per employee Mean loan approval days Impact on inventory Number of Escalations Missed deadlines Extension of project and dates Reporting errors Technology substitution Mid-Project process redesigns Adverse Event Episode detecetion Product recalls Average length of stay Number of Actual usage by period by user Extent of integration of it intro corporate decision making Bina Nusantara University 7

OPERATIONAL ITMANAGERIAL ITSTRATEGIC IT Organizational Impacts Profitability ROI ROA Employee turnover Maintenance expense Downtime Mortality rate Market share Ranking Industry awards Customer service rating Stock price Financial rating Bina Nusantara University 8

How to Implement a Measurement System Securing organizational and management commitment Building data partnership with constituencies inside and outside the organization –Partnership is the operative word in gaining access to meaningful data. –Partnership also means that the provider of the data also has a stake in the outcome of the analysis Bina Nusantara University 9

Communication plays a critical role in facilitating the proeject to tis sccessful conclusion. An effective communications plan should: –Demonstrate organizational commitment to a project –Specify the intent or need for the project –Introduce the project team –Direct various departments to share data with the project members –Quell fears o negative outcomes –List of timetable of when and how the results of the study will be shared with the organization Bina Nusantara University 10

For partnership, analysts or project leader should proper to : –Sign a nondisclosure agreement (NDA)? –Exclude any references that would identify the partners or their clients –Disguise the actual numbers and coefficients by multiplying or dividing them with constants Bina Nusantara University 11

Gathering Data Generate a timeline of the events beginning with when the investment need was felt and how long it took to develop a systematic approach to invest, implement, and use the IT assets Identify the users of the IT, people who maintain the IT and understand how to track the data, and those who are responsible for keeping the data. To mnimize the up-fron effort, request samples of each of the data sets available Bina Nusantara University 12

The key data sources will depend upon the type of IT (strategic, managerial, or operational), how it is being used (customers, employees), and the objective of the technology (improve productivity, profitability, or customer value). Bina Nusantara University 13

Analyzing Data Analytical plan to ensure that the data are sufficient to answer the questions of interest. Analytical help can be sought from individuals in finance, quality assurance or other departements that are well- versed in data analysis approaches Bina Nusantara University 14

Capitalizing on The Cascading Effect of IT Payoff The cascading effects of the payoff analysis were further capitalized upon when the design and manufacturing departments at various units began interpersonal netwrking to share best practices and learn from each other. When developing the action plan, explore additional uses of the information generated by the payoff analysis of an information technology Bina Nusantara University 15

Building an Infrastructure for Ongoing IT Payoff Analysis Organizations should strive to build the measurement into the systems and the culture of the organization. Clear measurement of the costs and benefits are easier to capture when data tracking and analysis is built into the system, in most cases the infrastructure for capturing the data is built around existing systems. Bina Nusantara University 16

Integrating IT Payoff Results in Managerial and Strategic Planning and Decision Making After the infrastructure for data collection and analysis is established, using the results for planning and decision making constitutes the “rubber meets the road” test. Some steps are critical in accomplishing the integration : –The results should be communicated to the managers within the organization –Cross-trained individuals should be ready and willing to assist managers in understanding the meaning of the findings and demonstrating how they can be tied to their decisions –The internal consulting activities should be backed up with information systems that deliver payoff outcomes on an ongoing basis. Bina Nusantara University 17