Information EconomicsMichael Andrianus – 1501175306Vincentius - 1501150966

Information Economics

•A concept that explains how useful the economics level of a system investment and information technology to the company.

• Information economy presents an approach that stressed the need for in-depth studies before an investment is made in the field of information technology

• Information economic is a combination of information system project and operations unit system of daily information.

Information Economics

•Information Economic (IE)

•New Information Economic (NIE)

Information Economics (IE)

•A tools to measure the value of the information systems on business

•The Economic theories that are used to define the value of the investment :

Cost benefit analysis traditionalReturn on investment

Basic Concept of Information Economics (IE) • The benefits expanded by

extending the concept of value.

• The concept of benefits is a measure of the economy, such as cost reduction or direct revenue production and it will benefit the business.

• The concept of values based on the effects of information technology investments that is shown in the company's business performance. 

• Ex : competitive advantage and increased market share.

• The cost concept can be interpreted in various way and the investments in IT can negatively affect the company

• Ex : The use of new IT will cause the need for training and preparation of organization.

New decision making process on investment in IT field•Based on the value of a business through

the performance of which may be generated

•Based on the cost of the technology

Changes that occurs

•The real benefits in IT obtained from the change in the procedures for doing business for ex : products, market, management style, organization sturcture.

•The way the company makes planning and managing IT also changed because of the target business is affected by the information.

Limitations and Scope of IE

•The concept is not a strategic plan, the development of the system of competition, or the traditional economy.

•Nor the solution of centralization or decentralization IT on of the company.

Stages using IE

•Cost Benefit Analysis

•IE Tools

•Value linking

•Value Restructuring

New Information Economic (NIE)•Practical methodology in conducting the

IT investment priorities and demonstrate, that the focus on new investments in order to obtain tangible results for business strategy and the best operating system will help maximize the impact on the business process layer bottom

Determine The Target

•Right ResultManage and control the cost of IT and at the

same time increase the process of low-class business

• Right DecisionDirect the needs of the management action

to produce the right outcomes

The Reality of NIE

•The investment in IT is only about 2%-15% from the total profit.

•The cost is for lights-on-budget and project budget

Scenario in NIE• The low-cost on lights-on and the effect on the

low business process has been decresed, the company can focus on budgetting without paying attention to others.

• The increase in lights-on budget but without the changing affects in low business process, the manager assume that lights-on budget will alwas increase as the increase of the application project.

• The increase in lights-on budget and effect on low business process.

Strategy toward the bottom layer of the value chain•Business planning process and effective

IT / IS

•Decision making of resources

•Planning and budgetting that is easy to do.

Common mistake

•No relation between management process, business planing, IT planning, priority, budget, and performance.

•The business unit are not connected

Common Problems• Business planning is not encourage the IT plan• IT planning only focus on the technology rather

than support directly to the strategic planning• Business manager can not see the IT giving support

to the strategic planning• IT project not support the business strategic.• Company budget nor represent the outcome in IT

planning• IT planning can’t give direction to the management

decision, company project and also budget• IT management can not lead IT as business

Critical Success Factor (CSF)• Business planning process and IT have to be connected• IT is capable of delivering innovation on the impact on business

planning and generating new business strategies and improve the way for implementation of business strategy at this time.

• Priority the investment in IT based on business strategic• Cost and investment in IT, include developing, operational,

maintain, service has to connect with strategic business• Business and it management team consistently do the

management processes and that contributions to IT on the performance of the lower layer to be real business unit

• IT business and performance can be track• Planning and management process focus on IT cost• IT manager and business,effectively participate on the process

Practice of NIE

Strategies Leading To The Lower Layer Of Value Chain

Question&

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