Information Technology Economics

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    Prof. Rushen Chahal

    Information Technology Economics

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    Agenda

    IT Organization

    IT Productivity

    IT Benefits

    Data Center Economics

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    IT Department

    CIO

    Operations SystemsDevelopment Support

    ComputerComputerfacilitiesfacilities

    operationsoperationsData entryData entry

    SystemsSystemsanalysis andanalysis and

    designdesignProgrammingProgramming

    DataDataadministrationadministration

    InformationInformationcentercenterInformationInformationtechnologytechnology

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    Agenda

    IT Organization

    IT Productivity

    IT Benefits

    Data Center Economics

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    Measuring Productivity

    Traditional measure

    Function point analysis

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    Traditional Measure

    Source lines of code (SLOC)

    Lines of executable code (LOEC)

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    Function Point Analysis

    Count number with Low, Average,

    and High complexity Multiply by function weight

    Sum to arrive at function points

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    Function Point Analysis

    5 functions are scored

    amount of input (forms / screens)

    A

    mount of output (reports / screens) number of end-user queries

    number logical files accessed / used

    number interfaces to other applications

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    Productivity Paradox

    Not all investments in IT will result

    directly in productivity gains or

    decreased costs Infrastructure

    Staging for future opportunities

    Delayed benefits E-commerce

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    Agenda

    IT Organization

    IT Productivity

    IT Benefits

    Data Center Economics

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    Measuring Benefits

    Whats important to management?

    Not always dollars

    Customer relations

    Employee morale

    Cycle time

    Ask, dont assume

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    Measuring Benefits

    Use Anchor measures

    Value of ratios for comparing across time

    and function

    Sales per employee

    Revenue per employee

    Revenue per customer

    Cost per transaction

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    Agenda

    IT Organization

    IT Productivity

    IT Benefits

    D

    ata Center Economics

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    Data Center Economics

    Budgeting

    Charge back

    Outsourcing

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    Budgeting

    33% Systems and Programming 85% maintenance

    15% new development decreasing

    10% Administration / Training

    57% IT Operations

    Systems operators

    Operate hardware

    Schedule application runs

    Input / output preparation

    Data-entry operators

    Maintenance technicians

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    Charge-back

    No operating budget

    Charge clients for services

    Clients can shop elsewhere

    Centers can spend what they collect- NO MORE!

    Increasing quality at decreasing cost Strategies

    Upgrade to latest equipment / software

    Consolidation

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    Outsourcing

    Reasons

    Overall business trend Global competition

    Need for technical specialists

    Employee costs (fringe benefits)

    Tax benefits

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    Outsourcing Types

    Professional services

    (consulting)

    Services (training / data entry)

    Temporary employees

    Contract programmers

    Transactions (credit reports)

    Systems integrators

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    When to Outsource

    Activity not strategic

    Save at least 15%

    Need technology specialists

    Increase financial flexibility

    Capital to operating expenses

    Free personnel for development

    Acquire new technologies quicker

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    What NOT to Outsource

    Strategy (IT Plan)

    Architecture

    Tied to firms culture

    Portfolio (What / When)

    Vendor management

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    Preventing Outsource

    Failures Vendor expertise and sophistication

    Improved delivery quality

    Cost reduction

    Increased focus on core

    competencies

    Transition to new technologies

    Good contract and lawyer

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    Raleys

    Prefer to acquire talented, retail-

    oriented staff

    Augments IT projects withconsultants, contractors

    Outsource professional services

    such as training and data entry

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    Raleys

    Main drawback of outsourcing is

    failure of outsourcing company tounderstand Raleys business goals

    objectives and objectives

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    Points to Remember

    IT Organization

    IT Productivity

    IT Benefits

    Data Center Economics

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    Discussion Questions

    What will happen in your organization if

    the IT is outage?

    Does your organization measure its IT Productivity?

    Benefits?