Download presentation
Presentation is loading. Please wait.
Published byViolet Riley Modified over 9 years ago
1
Chapter 4 Making the Case for IT
2
Overview We spend a lot of Money on IT – Why? How do we defend IT spending. What are the benefits
3
IT Spending We spend over $2 trillion annually on IT Seek a competitive advantage Was once Proprietary software, but was there an advantage? Infrastructure has value when shared What is the value of proprietary email systems What would be the value of a proprietary web format How would Carr’s argument hold up in the AHS case?
4
People and the culture are the key to obtaining benefit from IT IT management skills are still in short supply Most executives view IT as a budget expense item To be minimized Managed on a budget-cycle basis The Scarce Resource
5
Evolution of the InternetInternet Open standards allow for easy creation of new applications Until1993 the internet was restricted to government and educational uses Internet based electronic commerce began to take of in 1997 Business-to-business commerce is also a large part of ecommerce The Internet
6
Keys to Internet adoption It is global and utilizes open standards Will work with any computer, operating system or compatible application software No government or organization “owns” it Does not limit the type of information which can travel in a packet Widespread expertise for connecting to the network Internet
7
Value from the Internet Reusable infrastructure Data/information standardized Infrastructure IT operations (data center, network, call centers) Supporting enterprise processes (procurement, HR, finance, enterprise resource planning)
8
IT Infrastructure Most was assembled over time and piecemeal Legacy systems were inefficient and incompatible In 2000, at the height of the economic recession, firms continued to spend over 50% of their capital budgets on IT equipment and projects Global IT expenses in 2002 were over $2 trillion Maintenance can be over 80% of the yearly IT budget Some IT infrastructure is outsourced or offshored while other firms seek to improve their IT infrastructure in-house Are there other benefits to in-house vs. sending infrastructure outside of the firm?
9
Options Value Views IT investment as a purely financial transaction Security Option – the right, but not the obligation to buy or sell at a given price IT Option – the right to pursue IT-enabled business opportunities Given the cost reduction from offshoring and outsourcing Why not offshore or outsource all IT functions? What is the value of in-house IT What is the risk of offshoring or outsourcing How do you insource once your outsource?
10
Financial Analysis What are the risks of a purely financial evaluation of the costs/benefits of II How do you value spin-off applications How do you capture all of the benefits What is customer/supplier service worth How do you value goodwill How do you value costs not encountered
11
Proprietary Assets Give advantages which are difficult to replicate Can provide IT options Often not integrated with the rest of the industry May not follow industry standards May not be acceptable to some firms or governments
12
Chapter 4
13
Questions on Chapter 4?
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.