it2 script - completed

8/9/2019 It2 Script - Completed

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Unit 1: Tech 2

Slide 2

Making the business case for IT. It still amazes me that IT managers and IT personnel

still do such a poor job making the business case and we’ll talk about that in this

module, what it takes to make a good business case. Quite often IT folks in general

focus on the technology and dont put it in terms of something that matters to the

organization. !hen we identify the benefits we can look at it that it’s going to automate,

it’s going to informate, or it’s going to gi"e a strategic benefits. !e ha"e to decide what

its going to do. The fact that it runs faster doesnt help managers. !e ha"e to put it in

terms that means something to them. #ne of the problems we ha"e with justifying

systems is it’s easy to identify the cost, identify the cost of de"eloping new system.


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Slide 3

$owe"er, its more difficult to identify the producti"ity gains. %ow there are definitely

limitations to identifying what the gains will be but we ha"ent seen producti"ity

increased at the rate of IT in"estments. &o we’"e spent lots of money, millions of dollars,

billions of dollars, as an industry, into IT producti"ity but we ha"ent seen the

tremendous benefits.


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Slide 4

In fact sometimes we see declines in producti"ity and we call this producti"ity parado',

information systems can and may be used in unintended ways. &o we gi"e e"eryone in

our organization Internet access and it’s slow and no one uses it because it is so slow

and we increase Internet access so that we ha"e this nice, robust Internet connection.

!hat happens( )eople might start doing online gaming, they may start doing more junk

and e*mail spamming, they may do personal shopping, they may be on blogs all day,

they may be doing +ouTube and acebook, e-ay, things like that. &o we run into a

producti"ity parado' that IT in"estment does not eual and parallel o"erall producti"ity.

This is a good place to talk about efficiency "ersus effecti"eness. !hich is more

important * to do things right or to do the right things. The answer is that they’re both

eually important.


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Slide 5

&o we ha"e to balance both efficiency and effecti"eness. #ne of the problems we ha"e

with measuring producti"ity is that its difficult to measure and sometimes we look at the

wrong things again. !e look at is the concept of efficiency "ersus effecti"eness.


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Slide 6

$ere’s a real world e'ample. /et’s look at call centers. !e historically ha"e e"aluated

call*center employees by their efficiency0 how many calls they take per hour minus the

number of calls that were abandoned, number of people that hung up waiting. &o, if Im

on the telephone and Marias on the telephone system and Maria takes 12 calls an hour

and I take three calls an hour Maria gets a higher score than I do. &he took more call.

&hes more efficient. %ow if Maria took 12 calls an hour that means that the time to pick

up the phone, log the call, talk with the customer, hang up and close the call was within

3 minutes. It’s possible that in 3 minutes time, an a"erage of 3 minutes, which means

that some people were longer, some people were shorter. $ello helpdesk. +es, I’m

ha"ing problems with my machine. 4o ahead and reboot and call us back. 5lick. That’s

probably not really going to help that person out but if I spent 12 minutes with your

problem, I would be more effecti"e than Maria would be. $owe"er that’s not how we’re

being measured. &o uite often we ha"e measurement problems. !e dont measure

whether we’re being more producti"e and not and just because we handled more calls,

we are more efficient, didn’t mean we’re more effecti"e.


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Slide 7

6nother problem is time lags. &ometimes theres a learning cur"e that happens. There’s

a delay between in"esting in IT and the systems gaining use, acceptance, and increase

in producti"ity. Imagine that we that we rolled out a new sales management system and

we had to train all of our people on it. /et’s say we ha"e offices in 78 states. $ow long

will it take to get e"eryone trained on the new system( $ow long will it take them for

them to be as comfortable with the new system as they were with the old system(

There are going to be some delays there. !hat if we buy the new system but it takes us

two years to customize it so that integrates with our other systems. &o theres a number

of reasons why we’d ha"e time delays. &ometimes a new information system may not

really increase our market share from new customers as it might bring back old

customers or steal customers for competitors.


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Slide 9

/astly, mismanagement. The best information technology system in the world cannot fi'

bad management. It can’t fi' bad processes. It can’t fi' things that dont work. &o we

end up with a creation of unanticipated bottlenecks, things that we didnt plan that would

happen. &o we ha"e to ha"e good management in the organization. If company 9 rolled

out "ersion : and it worked for them, it doesnt mean it’s going to work for us. !e ha"e

a different organization. !e ha"e different management. !e ha"e different employee.

There are lots of factors that ha"e to come into play here and we ha"e to include all of

these when we start looking at our producti"ity estimates of what this will do for our

organization.


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Slide 10

I started off telling you that I am still surprised how often IT managers and personnel

make bad business cases. They dont uantify the benefits of I&. It’s faster, its more

accurate, doesnt mean anything to managers. +ou’"e got to put it in terms that matter

for them. %ow IT does not ha"e and continues not to ha"e an unlimited budget. !e

continue to ha"e shrinking budgets and your competing against other IT projects as well

as other business projects as well. &o we ha"e to make a strong business case and we

can base it upon three things0 faith, fear, or facts. /et’s look at each one of these.


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Slide 12

6rguments based on fear. If we dont do this, we will go out of business, we will lose

market share, a competitor will buy us up. %ow there are times when you’d want to look

at arguments based upon fear. Markets that ha"e a higher uncertainty would be a good

place where you would want to use this. 6utomoti"e industry would be an e'ample. If

we dont do this our competitors will, so highly competiti"e markets are going to look for

things using fear.


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Slide 13

actors in I& decisions. ;ust a few of the things when presenting arguments based on

fear. &o industry factors, what are our competitors doing. The technology factors, if we

continue running on Microsoft !indows


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Slide 14

Michael )orters fi"e forces model is used to analyze competition within an industry. !e

look at the threat of new entrants, how easy is it for new people to come into our

market. In some markets thats "ery easy. #nline book selling0 easy to do. 5ommercial

banking0 more difficult. -argaining power of buyers. -argaining power of suppliers. !ho

holds the power( !ell if I go into !al*Mart I dont ha"e bargaining power as a buyer. I’m

going to go buy one shopping cart worth of stuff. !hat about !al*Mart( !e’re looking

at this looking per organization, per person. !al*Mart’s bargaining power is "ery, "ery

high because of the uantity that they buy in. Threat of substitutes0 products and

ser"ices. In the case of !al*Mart that’s high. I don’t ha"e to go to !al*Mart. I can go to

Target. I can go to 5>&. I can go to Tom Thumb. &o lots of different places. 6nd then

industry competition, ri"alry among e'isting firms. 6 good e'ample of that today would

be the cell phone industry, lots of ri"alry between e'isting cell phone companies. %ow

threat of new entrants there would be low, bargaining power of buyers would be low,

bargaining power of suppliers may be high, we dont know what is the bargaining power,

so put a uestion mark there. !e don’t know what the bargaining power of %okia and

&amsung and ?ricsson is to 6T@T and &print and >erizon. Threat of substitute products

is "ery low. )eople want a cell phone. 6 corded land phone is not a true substitution


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today. 6 te't pager is not a true substitution. -ut they’re going to ha"e high competition

here. &o we would use this based upon fear. !e don’t know for sure. !e dont ha"e the

facts.

Slide 15

6rguments based upon facts. &o data, uantitati"e analysis, we ha"e numbers,

indisputable factors, things that no one can dispute, things you can measure, that you

ha"e data for. )rimary tools0 we can do cost*benefit analysis, we can identify the cost,

we can identify the benefits, contrast the e'pected cost and the benefits. Then we came

up with the weighted multi*criteria analysis. This is another means to look at arguments

based upon fact. %ow I’ll gi"e you a practical e'ample of agreements based on fact.

6bout 72 years ago I was working for a bank and we were looking at upgrading the

teller system. %ow there was going to be a considerable cost to upgrade all the )5s for

tellers. %ow I could go in with all the reasons why we need to upgrade all the )5s and

all the network cards and say that we were going to run an a"erage of 12A faster. That

doesnt mean anything to a manager especially to a branch manager that is bank and

customer focused. !e are going to be able to do transactions a half a second to a

whole second faster. 6gain that doesnt mean anything to them. I ha"ent put it in terms

that mean something to them. $ow about, I can put an e'tra 32 cars through your dri"e*


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recurring "ersus non*recurring cost0 recurring cost are monthly costs. &o if e"eryone on

my enterprise needs a phone line to dial into their computer, that’s a recurring cost. If I

can ha"e a non*recurring cost and buy >)% solutions, "irtual pri"ate network

connections, so people can connect across the Internet and work from home, then I can

use the recurring cost as a justification.

Slide 17

Then the concept of tangible "ersus intangible cost, tangible "ersus intangible benefits.

It’s important to look at the different types of benefits and we look at in the terms of

tangible and intangible benefits, tangible and intangible cost. -ut if something is tangible

that means we can measure it, we can see it, we can obser"e it. !ell we know what a

3A increase of sales looks like. 6 3A increase of sales we can measure. !e can

measure that with numbers. 6 reduction of order entry errors, we can measure the

number of errors and if we had 822 errors last month and we ha"e B2C errors this

month, our errors ha"e gone down. !e ha"e cycle times. If cycle times used to be 83

seconds and now its B2 seconds, we ha"e an impro"ement. Those things are tangible

cause they can be measured. &o we ha"e tangible cost, tangible benefits. Intangible

benefits we cannot measure. Things like customer ser"ice. !hat’s an impro"ement in


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customer ser"ice( $ow do we measure that( $ow do we say that customer ser"ice is

better( #ur customers seem to be happier about our products. !ell, happier is hard to

measure because it’s a perception and anytime we look at perceptions it’s difficult to

measure. %ow in making our business cases we want to use tangible benefits as much

as possible. 6 tangible benefit, as we mention, can be measured. It’s harder to dispute

and it’s easier to justify your case if you ha"e pre"ious results. &o anytime that we ha"e

intangible benefits if there is a way we can con"ert that to a tangible benefit we want to

do so.

Slide 18

5ost*-enefit analysis. 6 couple of different methodologies we can use here when we

are looking at the e'pected tangible cost "ersus the tangible benefits. -reak*e"en

analysis identifies a point where the tangible cost euals the benefits. &o at what point

will the cost eual the benefit. &o if were producing a machine and the machine is going

to sa"e us D72,222 a year but it cost D32,222, that’s our cost, our break*e"en analysis

will be at fi"e years. That’s when we are going to break*e"en on that. If we’re only

planning to be in business three years or we’re only going to produce that product for

three years then a break*e"en analysis will not justify that e'penditure. %et*present

"alue analysis identifies the present "alue of future cash flows.


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Slide 19

!eighted multi*criteria analysis, this is a good method for showing multiple alternati"es.

%ow in my e'perience when I presented business plans to e'ecuti"e managers,

whether it be at banks or within the %a"y or within uni"ersities, always come back to

here are the alternati"es, here are the benefits of doing this. If you do this and you

present your results, you let the manager make the decision. The reason why you let

e'ecuti"e managers make the decisions is because then they own that decision. It

becomes their decision. &o we ha"e different alternati"es. $ere’s alternati"e 6,

alternati"e b, alternati"e c, and we’"e gi"en them ratings. %ow you can do this on any

number of things. +ou can do this for your ne't cell phone purchase in terms of cost, in

terms of weight, in terms of battery time, in terms of ring tone capacity, of picture

capacity, any number of things that you might want to add there. -ut want you want to

do is ha"e consistent ratings. 6nd unfortunately I ha"e seen people go through these

types of rating and if they really want a product then they’ll choose high ratings for this

one and they’ll gi"e really low ratings to another product. &o you want multiple

re"iewers and you want them to be unbiased in the results. The multi*criteria analysis

should not be used to help pick out or justify a product you already want. &o what’s the


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best thing to do, what’s the best product you should ha"e. The weight should always

eual 722 and you should look at the best score. In this case the best product here

would be alternati"e 5. #f course we don’t know what that is but you can use the same

e'ercise with your ne't cell phone. )ut the reuirements, gi"e them weights in terms of

importance. It maybe that cost is most important. It could be that weight is most

important to you. It could be that compatibility with other de"ices. If could be that you if

you ready ha"e &amsung or Motorola or %okia phones then maybe the car chargers

and adapters and e"erything else you already ha"e is "ery important . &o the multi*

criteria analysis "aries by indi"idual, it "aries by organization. ;ust because 9+E

5ompany did this multi*criteria analysis for a new order entry system doesn’t mean it’s

the same for our organization.

Slide 20

!hen you present the business case you ha"e to know your audience. I started out this

lesson telling you that it still surprises me how many IT managers and IT workers cannot

present a "alid business case and its true. I’"e seen organizations that ha"e had money

to gi"e out. I’"e seen departments that are ready to spend money but the IT groups

ha"e not been able to justify why they need the money. 6nd realize in todays world,

where budget’s are constrained, you’re not just competing against just your department,


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youre competing against the entire organization for prioritization, which projects can go

first, who gets the resources for them and who gets the money. &o you ha"e to know

your audience. +ou ha"e to know what’s the goal of the organization and the goal of the

group and you ha"e to look at the stakeholder groups. /et’s look at management first.

!hat’s management’s goal( Management’s goal is to make a profit and minimize cost.

%ow if your project is not positioned to help them with their goals it’s not going to get

funded. They’re looking at things of strategic "alue, long*term benefits to the

organization. &o we ha"e to be aware of that. The steering committee is going to decide

which projects get funded and when. %ow the te't mentions here, and it’s true, they

may ha"e their own agendas. 6 steering committee is made up usually of e'ecuti"e

managers from different areas of the organization. It’s possible that if your project is

going to take away resources from one of their projects it may not get funded. It may not

happen. The user department wants their project at all cost but realize that Im putting in

a system for marketing and purchasing needs their system first, they’re going to be

pulling for their system. Then an I& or IT e'ecuti"e, in terms of either a 5T#, chief

technology officer, or 5I#, chief information officer, the o"erall responsibility of

managing that project.


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Slide 21

#ne thing you want to do is con"ert benefits to monetary term. &ay the benefit is better

up time, we’ll ha"e our systems up more often. !ell how do I justify that( !e’ll reduce

down time by F minutes a year on a"erage. !ell what is F minutes worth( !ell what if

we calculate it in terms of salary, managers salary per hour, the number of managers

affected , the daily sa"ings then, the weekly sa"ings, and the annual sa"ings. %ow

we’"e con"erted it to a tangible idea. !e can do a break*e"en analysis on this. &hould

we upgrade the system so that we can sa"e an hour a week( The system is una"ailable

for one hour a week. )eople are incon"enienced. !e can sa"e D


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Slide 22

&o use pro'y "ariables whene"er possible. !e ha"e to do that when is not a clear*cut

measure. 6nd then measure what’s important to management. +our case becomes

more meaningful and you can focus on managements hot button issues. !hat’s

important to them( !ell customer ser"ice is important, efficiency’s important, e'panding

into new markets, capturing sales from competitors. ind out what it is and align the

technology with those goals and you’ll ha"e a better chance of presenting your case.

%ow in todays world with $I))6 and ?=-6 and &arbanes*#'ley and 4ramm*/each*

-liley, there are lots of compliance issues. &o right off the bat why we need to do this,

compliance is one of them. !e ha"e to be able to maintain a chain of custody, that’s

saying that the records were secured at all times within our organization, we ha"e to

pro"ide adeuate safekeeping for records. =egulatory and compliance "alue is one

thats "ery easy to justify a project with today. ?conomic "alue, what’s an economic

"alue of the system, what would it take to do it without the system. This is important

when we talk about disaster reco"ery. -ut when bad things happen how do we sur"i"e.

!hat’s the "alue of the architecture, what’s the "alue of the operation to us( 6nd lastly

we need to "iew I& as an asset and not as an e'pense. !hat is the "alue of ha"ing our

customer records( !hat’s the "alue of ha"ing information on our website that our


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customers can uickly and easily get information from(

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