information technology economics
TRANSCRIPT
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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?