Matakuliah
Tahun
: A0814/Investment Analysis
: 2009
INTRODUCTION TO INFORMATION
TECHNOLOGY PAYOFF
Pertemuan 1-2
REASONS FOR IT PAYOFF MEASURES
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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?
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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
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Duration of Payoff
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How long it will take to see return on investment?
Near term profitability
Risk reduction
Tangible business enabling IT
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Overall Economic Picture
• Unease
• Economic factor
• Market condition
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HOW HAS INVESTMENT IN IT BEEN
MEASRED THUS FAR?
• Profitability
• Productivity
• Customer Value
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Productivity
• Cost benefit analysis
• Return on Investment
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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
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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.
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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.
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Customer Value
• Customer satisfaction
• Customer loyalty
• Long term retention
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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.
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