Information Technology Investment: Decision-Making Methodology

Information Technology Investment: Decision-Making Methodology......Page 4
Preface......Page 8
Contents......Page 12
Lists of Tables and Figures......Page 20
Part I Introduction to Information Technology Investment Decision-Making Methodology......Page 28
Introduction......Page 30
Types of IT Investment Decision-Making Problems......Page 32
What are IT Investment and Decision-Making Methodologies?......Page 35
Limitations of Methodologies......Page 37
Why Study IT Investment and Decision-Making Methodologies?......Page 40
Organizational Strategic Planning in IT Investment Decision-Making......Page 41
How This Book is Organized to Help You Learn......Page 48
Discussion Questions......Page 51
References......Page 52
Introduction......Page 56
What is Needs Analysis?......Page 58
Determining IT Processing Capacities and Specifications......Page 62
Alternative IT Investment Strategies......Page 67
What is IT Outsourcing?......Page 69
An IT outsourcing strategy......Page 72
Final comment on IT outsourcing......Page 73
Summary......Page 74
Discussion Questions......Page 75
References......Page 76
Introduction......Page 80
The Economics of Information......Page 81
Examples of economic theories of information......Page 82
Why Measure IT Performance?......Page 84
Measures of IT Business Value......Page 86
Financial Performance Measures of IT......Page 87
Business performance measures of IT......Page 89
Strategic performance measures of IT......Page 91
Costs of IT......Page 92
Measures of IT effectiveness value......Page 93
Measures of IT efficiency value......Page 99
Summary......Page 101
Concept Questions......Page 103
References......Page 104
Part II Financial Information Technology Investment Methods......Page 106
What are the Basic Financial Methods?......Page 108
What is Breakeven Analysis?......Page 110
A statistical approach to non-quantifiable benefis......Page 113
What is Payback Period Methodology?......Page 115
What is Accounting Rate of Return Methodology?......Page 120
Summary......Page 124
Discussion Questions......Page 125
Concept Questions......Page 126
Problems......Page 127
References......Page 131
Introduction......Page 132
What Types of Methodologies Support IT Investment Decision-Making?......Page 133
Financial techniques for IT investment decision-making......Page 134
Operations research/management science techniques for IT investment decision-making......Page 135
Techniques specifically designed for IT investment decision-making......Page 138
Other techniques for IT investment decision-making......Page 142
What is Present Value Analysis Methodology?......Page 144
Net present value analysis methodology......Page 146
Computer-based solutions......Page 148
Unequal investment sizes......Page 149
Unequal investment lives......Page 150
What is Return on Investment Methodology?......Page 152
ROI strategy for enterprise resource planning systems......Page 154
What is Internal Rate of Return?......Page 155
Computer-based solutions......Page 158
Summary......Page 159
Discussion Questions......Page 160
Problems......Page 161
References......Page 164
Introduction......Page 166
Define problem......Page 167
Identification and quantification of cost and benefit......Page 169
Compare alternatives......Page 173
Sensitivity analysis......Page 179
Summary......Page 181
Discussion Questions......Page 182
Problems......Page 183
References......Page 186
Part III Multi-Criteria Information Technology Decision-Making Methods......Page 188
Introduction......Page 190
What are Critical Success Factors?......Page 191
What is the Delphi Method?......Page 197
What is the Balanced Scorecard Method?......Page 199
Balanced scorecard components......Page 200
Illustration of the balanced scorecard method......Page 207
Final word on balanced scorecards......Page 210
Review Terms......Page 212
Concept Questions......Page 213
References......Page 214
Introduction......Page 216
What are Multi-Factor Scoring Methods?......Page 217
Types of multi-factor scoring methods......Page 218
Summary of multi-factor scoring methods solution procedures......Page 221
Sensitivity analysis of multi-factor scoring methods......Page 222
Spreadsheet and computer solutions......Page 224
What is the Analytic Hierarchy Process?......Page 225
The AHP procedure......Page 226
Spreadsheet and computer solutions......Page 248
Summary......Page 250
Discussion Questions......Page 251
Problems......Page 252
References......Page 259
Introduction......Page 260
Decision theory problem/model elements......Page 261
Types of decision environments......Page 263
A Network Topology Problem......Page 264
A New IT Service Product Problem......Page 266
Decision-Making Under Certainty......Page 267
Maximin criterion......Page 268
Decision-Making Under Risk......Page 269
Origin of probabilities......Page 270
Expected opportunity loss criterion......Page 271
Decision-Making Under Uncertainty......Page 272
Laplace criterion......Page 274
Maximin criterion......Page 275
Minimax criterion......Page 276
Multi-Objective Programming Methodology......Page 278
Goal programming problem/model elements......Page 280
Goal Constraints......Page 281
A PC Selection Problem......Page 283
Types of Objective Functions......Page 286
Non-Negativity and Given Requirements......Page 289
GP problem/model formulation procedure......Page 290
LAN Leasing Problem......Page 292
Outsourcing Computer Service Problem......Page 296
Computer-based solutions for goal programming......Page 299
GP complications......Page 303
GP model assumptions......Page 305
Review Terms......Page 306
Discussion Questions......Page 307
Problems......Page 308
References......Page 312
Part IV Other Information Technology Investment Methods......Page 314
Introduction......Page 316
What is Benchmarking?......Page 317
A benchmarking procedure......Page 319
A benchmarking methodology: Gap analysis......Page 321
What is Game Theory?......Page 323
Basic structure of game theory problem/model......Page 324
Objectives and assumptions......Page 326
Game theory problem/model formulation procedure......Page 327
An IT ROI Investment Problem......Page 328
Technology Gaming Problem......Page 329
Rational choice method: A saddle point solution......Page 331
The minimax solution method......Page 336
A Minimax Solution for a Mixed Strategy Problem......Page 338
A computer-based solution for a mixed strategy problem......Page 340
Summary......Page 342
Concept Questions......Page 343
Problems......Page 344
References......Page 347
Introduction......Page 348
Ward's Portfolio Approach......Page 349
Evaluating individual investments......Page 354
Setting priorities......Page 355
Investment Mapping Methodology......Page 361
Mapping the investment portfolio......Page 362
Evaluating IT investments......Page 366
Managing benefits......Page 370
Other Investment Portfolio Methodologies......Page 371
Review Terms......Page 372
Concept Questions......Page 373
References......Page 374
Introduction......Page 376
What is Value Analysis Methodology?......Page 377
What is Benefit/Risk Analysis Methodology?......Page 382
Summary......Page 390
Concept Questions......Page 391
References......Page 392
Macro Economic View......Page 394
Micro Economic View......Page 396
Strategies for Making the Right IT Investment Decisions and Avoiding IT Costs......Page 401
“So What’s the Good News?”......Page 404
References......Page 407
Index......Page 410