2. INTRODUCTION TO INFORMATION TECHNOLOGY PAYOFF Pertemuan 1-2 Matakuliah: A0814/Investment Analysis Tahun: 2009

3. REASONS FOR IT PAYOFF MEASURES How will one know if and when the payoff was realized? It is measurable? How do we know if there is a payoff at all? Is it due to other factors, such as a strong economy, poor performance of the competitors, or just better product – and not due to investment in technology? Bina Nusantara University 3

4. Competing Investment Most executives must understand the strategic role that technologies play All other functions compete with IT to get a piece ot the budget piel. Given that the pie is usulally a fixed amount, the representatives of each function preset its case Bina Nusantara University 4

5. Duration of Payoff How long it will take to see return on investment? Near term profitability Risk reduction Tangible business enabling IT Bina Nusantara University 5

6. Overall Economic Picture Unease Economic factor Market condition Bina Nusantara University 6

7. HOW HAS INVESTMENT IN IT BEEN MEASRED THUS FAR? Profitability Productivity Customer Value Bina Nusantara University 7

8. Productivity Cost benefit analysis Return on Investment Bina Nusantara University 8

9. Productivity Cost benefit analysis –Cost benefit analysis entails examining the difference between the costs incurred and the benefits obtained fromt the investment. Cost are determined as a sum of expenses in the development of the system including hardware, software, and consulting. Also added are costs such as training, maintenance, customer support, licensing fees, future upgrades, and interfacing with existing systems –Benefits are assessed by the return the system generates back to the organization. Benefits can be in the profitability, productivity, or consumer value areas. While profitability is easier to measure, productivity gains and particularly consumer value becomes increasingly more difficult to quantify. Bina Nusantara University 9

10. Profitability Return on Investment –Is measured by the total investment and the benefit obtained, except that the benefits are asumed to be incurred over time. –The return, or benefit, is then calculated for a specific time period to generate a percentage on the investment. Bina Nusantara University 10

11. Productivity Measures vary depending upon the nature of the work and the industry. –Efficiency Efficiency metrics measure the output of an operation vis-a-vis the resources consumed. –Quality Improved quality of work that reduces rework of the product or service can impact productivity. Bina Nusantara University 11

12. Customer Value Customer satisfaction Customer loyalty Long term retention Bina Nusantara University 12

13. Customer Value In 1999, the University of Notre Dame implemented a high-speed network called ResNet to access the campus network throughout its residential halls. –Tangible benefit : saving of dial-in phone lines and modems that dormitory studnets no longer needed to use FedEx’s investment in online package tracking gave the customers online tracking ability. Hyatt hotel customers can track their charges from their hotel rooms. Bina Nusantara University 13