1. Managing IT Investment

2. 2
• Hardware cost
• Software cost
• Network cost
• People cost
• Transition cost
• Opportunity cost and risk cost
• Maintenance and Support cost
• $1 of initial development cost --> $4 maintenance cost
over the life time of the system
• Don’t forget the intangible cost
Understand What It
Takes!

3. 3
• Tangible Benefits
• Intangible Benefits
• Efficiency gains
• Effectiveness gaines
• Transformation effects
• Make concrete connection to your firm’s
strategy
• Total value of ownership
Understand the Benefits

4. 4
Facts,
Faith,
Fear!
Three Bases of
Argument

5. 5
• “The system will eliminate the need for
hiring two positions for an annual savings of
$100K.”
• Justify using hard data, quantitative,
structured feasibility assessment
• Target Audience:“Sensing”
Arguments of Fact

6. 6
• “IS is infrastructure.We need it to support
our growth and stability.”
• Justify by vision. Investment X will lead to
benefitY.
• Target Audience:“iNtuitives”
Arguments of Faith

7. 7
• “If we don’t do this we may be eaten alive by
our competition.”
• Justify by perception of events.
• Target Audience:“iNtuitives”
Arguments of Fear

8. 8
 New System or Modification?
 Enabling Infrastructure
 Networks, Servers, backup systems, etc.
 Support Activities (process re-
engineering)
 Accounting, HR, etc.
 Business Applications
 Sales Tools, Inventory Mgmt, etc.
Increased
Funding
Difficulty
Types of IT Projects

9. 9
Short-term
Profitability
Long-term
Profitability
Shared
Infrastructure
Business
Application
Process
Improvements
(Discounted
cash flow)
Standardization
(Discounted
cash flow)
Experiments
(Options)
Transformation
(Options)
Manage your IT
resources

10. 10
• Costs are easy to establish, but benefits are
often elusive.
• Technology superiority does not necessarily
lead to business value.
• Emphasis on intangible benefits are hard to
sell after dot.com bust.
• IT governance structure is not clearly
established.
Why is IT Investment
Decision Hard?

11. 11
• IT investment decision is not a simple
technical decision.
• IT investment decision is not a simple
financial decision.
• IT investment decision is related to the
firm’s (or it’s senior executives’) IT value
frame.
• IT investment decision is related to the
firm’s IT governance structure.
What isYourValue
Frame?