Small company, fortune 500 company) o Nature of Product IT Spending as a Percentage of Revenue Limitations of this table: ? Size of companies varies in each industry ? Changes in revenues and IT spending from year to year ? only surveyed companies that are fairly large ? Industry determines how much a company will spend on IT ? more information content – more spending on IT ? IT spending as a percentage > ratio depending on the direction of revenue vs. IT spending (% can be based on increase/decrease of revenue, not IT spending) The Beautiful Hypothesis ?
IT spending can be used to either reduce costs (expenses) or add value to a product in order to increase sales (Revenue)…either way this makes a profit ? This hypothesis, summarized in the above Figure, indicates that when IT spending is `processed’ (goes through the black box) within the firm, it leads to higher profits either through higher revenue or lower cost. The Productivity Paradox ? There is no identifiable association between expenditures on IT and profitability ? Beautiful hypothesis is not true Interpretation: ?
Spending lots of money on IT does not necessarily mean that the return on equity will also increase ? This provides support to the Productivity Paradox which states that IT spending and Profitability have no correlation Causality – The relationship between cause and affect Return on Investment (ROI) = (Gains) – (Investments) / (Investments) The Input-Process-Output Model ? ? Black box: companies’ ability to use strategies, planning and policies in order to manage risk and achieve performance outcomes Maximizing the payoffs from IT investments is not an easy process.
Neverthless, nobody can deny that the spending and revenues have a significant influence on our society. Our living standard is associated with government actions. As a result, it is meaningful to compare the government spending and revenues in China and America. Without doubt, the revenues of government is the root of spending of government. In addition, it gives the government the power and the ...
It requires “deliberate strategies, planning, and policies in order to manage risk and achieve performance outcomes, compliance, and accountable delivery of value” Payoffs: Effective Implementation ? The Standish Group Study categorizes projects into three resolution types: o Successful: Project is completed on time and on budget, has all features and functions originally specified. o Challenged: The project is completed and operational, but over-budget, over the time estimate, and with fewer features and functions than initially specified. ? Failed: The project is cancelled before completion or never implemented Used factors such as: budget, time took to complete the project, and time the project is supposed to be launched, features and functions of the project What is user involvement and why is it important? ? User involvement is Input from the user of the product (Customers) ? Allows the firm to know the needs, wants and expectations of the customer who they are selling their product/service to What is and Why executive management Support matters? ? A team can only spend as much as executive management will allow the team to spend on IT ?
Amount of resources and money all depends on executive management ? Likelihood that the project will success will also change with more involvement from executive management ? If executive do not show support, what message is it sending? Financial support, align with strategy of firm, sends message to user because the stakes are much higher (work harder to make the project a success) What are the implication of the findings of the Standish Group for the association between IT spending and payoffs? ? little or no relation between investment in IT and financial performance ? Obviously, users will not be able to extract value out of an
IT project that either failed during the implementation or offers only a fraction of its originally planned functionality Payoffs: Use (IT Capability) ? A firm that can mobilize and deploy IT based resources (ex, flexible IT infrastructure, human IT resources, and intangible IT enabled resources such as knowledge, synergy, and customer orientation) in combination with other resources and capabilities is an IT capable firm. ? 2 factors: o mobilize and deploy IT based resources o In combination with other resources and capabilities IT Infrastructure – Physical assets such as computers and communication technologies.
Chapter 3 introduces the Logical Framework Approach (LFA), explaining its role in project design with a simple project example. It explains how sustainability / quality factors can influence a project’s chances for success, and indicates the range of Where to tools that are available to take account of these factors. It also explains how you can find what? use the logframe matrix to develop ...
For example, university have IT infrastructure such as servers running D12 and routers Human IT Resources – refers to a firm’s technical IT skills and managerial IT skills Technical IT Skills – includes programming, systems analysis and design, and competencies in emerging technologies Managerial IT Skills – includes abilities such as the effective management of IS functions, coordination and interaction with user community, and project management and leadership skills “… in combination with other resources and capabilities … ” What does this mean? Have complimentary resources and capabilities which allow you to make the necessary changes when needed ? Other investments that have been made ? Additional changes that can be made to take full advantage of a firm’s IT technology ? For example, self-checkouts are a complimentary resource to the point of sale system Overall conclusion: “Therefore, firms that spend in IT but fail in the implementation or are unable to develop an IT capability will continue experiencing the `IT productivity paradox. ‘ For these firms the mere acquisition of IT assets will not materialize in the form of superior financial performance.
On the other hand firms that are successful in creating superior IT capability will enjoy superior financial performance by bolstering firm revenues and/or decreasing firm costs” Measuring IT Payoffs Du Pont Analysis: ? ROA = Profit Margin * Asset Turnover ? Profit margin = Net Income / Sales ? Asset Turnover = Sales / Total Assets ? ? Research has shown all ratios according to Profitability and Cost Measure, IT capable firms have a competitive advantage versus non-IT capable firms Compare firms with o Low capability vs. igh capability o IT implementation vs. No It implementation Firm with IT and Competitive Advantage vs. Firms with NO IT and Competitive Advantage (Refer to pg. 24 of textbook) ? According to the Du Pont Analysis: o Firms with an IT-enabled competitive advantage have a higher ROA versus their competitors and this superiority is due to a combination of profitability and efficiency o On the other hand firms with a non-IT based competitive advantage have higher ROA versus their competitors but this is due to profitability only.
Networking and Telecommunications Team B Assignment Terry Anderson Mary James Russell Thee NTC 360/ Network and Telecommunication Concepts Table of Contents Introduction Technology Involved Telephone System Network SetupCostSampling of Companies Possible Future Trends Global Implications Conclusion Introduction We have been hired to design a small network for a company that will utilize the newest ...
There is no difference in efficiency o In other words IT capable firms can leverage IT to improve both profitability and efficiency Investment in Enterprise Resource Planning (ERP) Systems ? Prior to the Y2K period, firms used legacy systems which did not support information sharing (no synergy) ? As a result, Many companies used the Y2K as an opportunity to replace their costly and rigid legacy systems with an enterprise resource planning (ERP) system that had the potential to integrate the entire organization through a common database ? ccounting conventions do not allow the investment to be recorded as an asset, resulting in an increase of shareholder value ? synergy becomes a problem when departments are separated and use different systems > therefore, changed so that all systems can communicate with each other and improve efficiency (invested in ERP) ? Y2K (Year 2000) – when companies use last two digits of the year ? Have access to how much companies spend on Y2K – required by government o more spending = more IT capable and more profitable o look at market value of company – investment show future potential of company ?
Findings: o example: in year 2002, B1 was $30 > a dollar spent in Y2K will result in $30 increase in market value ? Alignment between business strategy and IT budget o how much you spend depends on a company’s strategy (should be consistent) Market Value = f (Book Value, Earnings, Y2K spending) Market Value = Bo + B1(Y2K) + B2(Book Value) + B3(Earnings) ? ? ? ? Market Value: stock price times # of shares Book Value: proxy for invested capital Earnings: proxy for profits generated by firms resources Y2K: Estimates of all costs associated with dealing with Y2K problems This table show that the multiple on Y2K spending of 62. 0 for March 31, 1999. This means that about $60 of firm value was associated with each $1 of Y2K spending Overall Conclusion: “These results are surprising in light of conventional wisdom that companies overspent on Y2K. At face value, the relation between shareholder value and Y2K spending suggests that improved productivity due to Y2K initiatives far outweighed their costs. Based on this the authors conclude that businesses actually under-invested in new IT during this period, thus presenting a new paradox that is the reverse of the initial productivity paradox” Alignment between Business Strategy and IT Budget ? firm is under-spending if the actual is less than the predicted budget firm is over-spending if the actual is larger than the predicted budget Does budgeted IT spending that is consistent with contextual factors (i. e. , firm’s external and internal environment, firm strategy etc…) generate higher performance than budgeted IT spending that is not? ? firms that incorporate environmental, organizational, and technological input in order to determine optimum organizational structure and processes are more likely to achieve higher performance levels
Budget is a foundation of economic management of a country, and therefore, in the context of developing countries, it is primarily an issue of development. It is often pointed out that the Philippine budget institution is characterized by its high degree of politicization. Such politicization is said to be one of the major causes of corruption, opaque plutocratic policy-makings, and frequent ...