Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Early history of private equity wikipedia , lookup
Corporate venture capital wikipedia , lookup
Socially responsible investing wikipedia , lookup
History of investment banking in the United States wikipedia , lookup
Investment management wikipedia , lookup
Investment banking wikipedia , lookup
Environmental, social and corporate governance wikipedia , lookup
It Payoff : A Dialog Bob Graham has been the chief information officer (CIO) of a $ 2 billion manufacturing conglomerate corporation for 5 years. He is getting ready for a meeting with the CEO, Patricia Donahue, to request approval for a $ 14 million project leading the corporation’s seven strategic business units (SBUs) and the corporate office into the next generation of telecommunications and computer networking. With the profit margins decreasing, Bob proposes to cut computing costs by centralizing financial and planning operations, along with information services, to the corportate office. However, Patricia is concerned with the return on investment (ROIs). Times are getting tough; reenue is increasing but profitability continues to shrink. Recently she read about companies outsourcing their IT to manage increasing costs of IT operations. Intuitively, she knows that investment in information technology is strategic and will pay off in the long run, but she is wondering how she will get the Board to approve this request given that it approved a $ 4 million system upgrade just 2 years ago. At he next board meeting, she is also taking capital expenditure proposal to upgrade current computer-assisted manufacturing systems for one SBU and a customer relationship management (CRM) system for another. “Pat, I recognize that we have not done a good job of demonstrating ROI. I also know that there are changes in our business coming down the pike, and I am asking for this funding so we are prepared for the future,” empathizes Bob. Pointing to the number at the bottom of the top page, Bob makes his case: “This investment will allow hifh-speed access to financial applications for all our SBUs while giving the corporate officers data to continue company-wide oversight. With the development and maintenance functions at the corporate office, we can spread the overhead across our member oganizations (MO) and improve quality and reduce costs. “ “How long will it take to implement this system?” asked Pat “Eighteen to 24 months for the development and implementation,” replied Bob “And when will the corporation see the impact of spending, given that we will continue to incur costs of our existing system until the new system is fully operational?” Loiking puzzled, Bob replied “Well, it depends upon how long it takes the finance department to train the SBUs, and how quickly the marketing department can utilize this information to negotiate favorable contracts. “Do you have an ROI on the $ 4 million infrastructure upgrade project we did 2 years ago?” asked Pat. “We know that the speed issue has been resolved and SBUs can run reports much faster than they used to. The number of complaints is down. In addition, we are doing a lot more Web applications through our Internet,” replies Bob, sensing the uphill battle. While nodding her head in agreement, Pat cannot help but think about the Board members aking her the question, “How has this helped business productivity, profitability, or added value to our customers?” at almost the same time Bob was thinking, “I wonder why information resources is being asked to justify the value of the investment. We are the conduits that enable business processes. It is the functional areas that need to develop a strategy, improve processes, and justify that they are working smart.” Does this soudn familiar? If you have not been in on this conversation, chances are you will. Each one of us involved in using or deploying IT will probably face the question of this justification issue in one form or other. It is really no different than the questions we ask ourselves wen buying a home PC, or that Palm Pilot htat we want to invest in after we missed a new appointments. In business organizations, the stakes can be significantly higher and those asking these questions do not buy the argument that it would be nice to have this new information technology. Technology solution providers and consultants also confront IT payoff by their clients who expect to see evidence of benefits from new information systems. An enterprise resource planning (ERP) software vendor or a consulting company has to convince the client that the investment is likely to pay off. Clients will ask for projected benefits to justify the expense. These scenes are played in the mahogany row and strategy rooms in many organizations. Business are looking at IT investments, holding them up to the same scrutiny as other lines of business or acquisitions, looking for ROI. The budgetary belt has been tightening in a capital-constrained business environment. Conflicting fundings on IT payoff combined with recent shakedown in ebusinesses has further expedited reevaluation of the investment in IT and the resulting payoff. What are the reasons for the senior management to question the IT payoff? Is this a recent phenomenon? How can one frame the correct questions to get to the heart of the question? Is it worth investing in information technology? Or does information technology make a difference?