Information Technology Investment : Decision-Making Methodology
by Schniederjans, Marc J.; Hamaker, Jamie L.; Schniederjans, Ashlyn M.Edition: 2nd
Format: Hardcover
Pub. Date: 2010-05-30
Publisher(s): World Scientific Pub Co Inc
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Summary
From the individual to the largest organization, everyone today has to make investments in IT. Making a smart investment that will best satisfy all the necessary decision-making criteria requires careful and inclusive analysis. This textbook provides an up-to-date, in-depth understanding of the methodologies available to aid in this complex process of multi-criteria decision-making. It guides readers on the process of technology acquisition — what methods to use to make IT investment decisions, how to choose the technology and justify its selection, and how the decision will impact the organization. Unique to this textbook are both financial investment models and more complex decision-making models from the field of management science so that readers can extend the analysis benefits to enhance and confirm their IT investment choices. The wide range of methodologies featured in the book gives readers the opportunity to customize their best-fit solutions for their unique IT decision situation. This textbook is especially deal for educators and students involved in programs dealing with technology management, operations management, applied finance, operations research, and industrial engineering.
Table of Contents
| Preface | p. vii |
| List of Tables and Figures | p. xvii |
| Introduction to Information Technology Investment Decision-Making Methodology | |
| Introduction to Information Technology Investment Decision-Making | p. 3 |
| Introduction | p. 4 |
| Types of IT Investment Decision-Making Problems | p. 5 |
| What are IT Investment and Decision-Making Methodologies? | p. 8 |
| Limitations of Methodologies | p. 10 |
| Why Study IT Investment and Decision-Making Methodologies? | p. 13 |
| Organizational Strategic Planning in IT Investment Decision | p. 14 |
| How This Book is Organized to Help You Learn | p. 21 |
| Summary | p. 24 |
| Needs Analysis and Alternative Information Technology Investment Strategies | p. 29 |
| Introduction | p. 30 |
| What is Needs Analysis? | p. 32 |
| Determining IT Processing Capacities and Specifications | p. 35 |
| Alternative IT Investment Strategies | p. 40 |
| What is IT Outsourcing? | p. 42 |
| An IT outsourcing strategy | p. 45 |
| Final comment on IT outsourcing | p. 47 |
| Summary | p. 47 |
| Measuring Information Technology Investment Performance | p. 53 |
| Introduction | p. 54 |
| The Economics of Information | p. 54 |
| Examples of economic theories of information | p. 55 |
| Why Measure IT Performance? | p. 57 |
| Measures of IT Business Value | p. 59 |
| Financial Performance Measures of IT | p. 60 |
| Business performance measures of IT | p. 62 |
| Strategic performance measures of IT | p. 64 |
| Costs of IT | p. 65 |
| Measures of IT effectiveness value | p. 66 |
| Measures of IT efficiency value | p. 73 |
| Summary | p. 75 |
| Financial Information Technology Investment Methods | |
| Basic Financial Methods | p. 83 |
| Introduction | p. 84 |
| What are the Basic Financial Methods? | p. 84 |
| What is Breakeven Analysis? | p. 86 |
| A statistical approach to non-quantifiable benefits | p. 89 |
| What is Payback Period Methodology? | p. 90 |
| What is Accounting Rate of Return Methodology? | p. 95 |
| Summary | p. 99 |
| Other Financial Methodologies | p. 109 |
| Introduction | p. 110 |
| What Types of Methodologies Support IT Investment Decision-Making? | p. 110 |
| Financial techniques for IT investment decision-making | p. 111 |
| Operations research/management science techniques for IT investment decision-making | p. 112 |
| Techniques specifically designed for IT investment decision-making | p. 114 |
| Other techniques for IT investment decision-making | p. 119 |
| What is Present Value Analysis Methodology? | p. 121 |
| Net present value analysis methodology | p. 123 |
| Computer-based solutions | p. 126 |
| Unequal investment sizes | p. 126 |
| Unequal investment lives | p. 127 |
| What is Return on Investment Methodology? | p. 129 |
| ROI strategy for enterprise resource planning systems | p. 130 |
| What is Internal Rate of Return? | p. 132 |
| Computer-based solutions | p. 135 |
| A word about cash flows | p. 136 |
| Summary | p. 136 |
| Cost/Benefit Analysis | p. 143 |
| Introduction | p. 144 |
| What is Cost/Benefit Analysis? | p. 144 |
| Define problem | p. 145 |
| Identification and quantification of cost and benefit | p. 146 |
| Compare alternatives | p. 150 |
| Sensitivity analysis | p. 156 |
| What is Cost/Effectiveness Analysis? | p. 158 |
| Summary | p. 158 |
| Multi-Criteria Information Technology Decision-Making Methods | |
| Critical Success Factors, Delphi Method and the Balanced Scorecard Method | p. 167 |
| Introduction | p. 168 |
| What are Critical Success Factors? | p. 168 |
| What is the Delphi Method? | p. 174 |
| What is the Balanced Scorecard Method? | p. 176 |
| Balanced scorecard components | p. 177 |
| Illustration of the balanced scorecard method | p. 184 |
| Final word on balanced scorecards | p. 187 |
| Summary | p. 189 |
| Multi-Factor Scoring Methods and the Analytic Hierarchy Process | p. 193 |
| Introduction | p. 194 |
| What are Multi-Factor Scoring Methods? | p. 195 |
| Types of multi-factor scoring methods | p. 196 |
| Summary of multi-factor scoring methods solution procedures | p. 198 |
| Sensitivity analysis of multi-factor scoring methods | p. 199 |
| Spreadsheet and computer solutions | p. 201 |
| What is the Analytic Hierarchy Process? | p. 202 |
| The AHP procedure | p. 203 |
| Summary of AHP solution procedure | p. 225 |
| Spreadsheet and computer solutions | p. 225 |
| Summary | p. 227 |
| Decision Analysis and Multi-Objective Programming Methods | p. 237 |
| Introduction | p. 238 |
| What is Decision Theory? | p. 238 |
| Decision theory problem/model elements | p. 239 |
| Types of decision environments | p. 240 |
| Decision Theory Formulation and Solution Methodologies | p. 241 |
| A decision theory problem/model formulation Procedure | p. 241 |
| Decision-Making Under Certainly | p. 245 |
| Maximax criterion | p. 245 |
| Maximin criterion | p. 245 |
| Decision-Making Under Risk | p. 247 |
| Origin of probabilities | p. 247 |
| Expected value criterion | p. 248 |
| Expected opportunity loss criterion | p. 249 |
| Decision-Making Under Uncertainty | p. 250 |
| Laplace criterion | p. 251 |
| Maximin criterion | p. 253 |
| Maximax criterion | p. 253 |
| Hurwicz criterion | p. 253 |
| Minimax criterion | p. 254 |
| Multi-Objective Programming Methodology | p. 255 |
| What is Goal Programming? | p. 257 |
| Goal programming problem/model elements | p. 258 |
| Goal Programming Problem/Model Formulation | p. 268 |
| GP problem/model formulation procedure | p. 268 |
| GP problem/model formulation problems | p. 269 |
| Computer-based solutions for goal programming | p. 277 |
| Goal Programming Complications and Model Assumptions | p. 282 |
| GP complications | p. 282 |
| GP model assumptions | p. 283 |
| Summary | p. 284 |
| Other Information Technology Investment Methods | |
| Benchmarking Techniques and Game Theory | p. 295 |
| Introduction | p. 296 |
| What is Benchmarking? | p. 296 |
| A benchmarking procedure | p. 298 |
| A benchmarking methodology: Gap analysis | p. 300 |
| What is Game Theory? | p. 303 |
| Basic structure of game theory problem/model | p. 304 |
| Objectives and assumptions | p. 306 |
| Game theory problem/model formulation procedure | p. 307 |
| Solution Procedures for Game Theory Problems | p. 310 |
| Rational choice method: A saddle point solution | p. 310 |
| The minimax solution method | p. 315 |
| A minimax solution for a mixed strategy problem | p. 317 |
| A computer-based solution for a mixed strategy problem | p. 319 |
| Summary | p. 321 |
| Investment Portfolio Methodologies | p. 329 |
| Introduction | p. 330 |
| What are Investment Portfolio Methodologies? | p. 330 |
| Ward's Portfolio Approach | p. 331 |
| Evaluating individual investments | p. 335 |
| Setting priorities | p. 337 |
| Investment Mapping Methodology | p. 343 |
| Mapping the investment portfolio | p. 343 |
| Evaluating IT investments | p. 348 |
| Managing benefits | p. 351 |
| Other Investment Portfolio Methodologies | p. 352 |
| Summary | p. 353 |
| Value Analysis and Benefit/Risk Methodologies | p. 357 |
| Introduction | p. 358 |
| What is Value Analysis Methodology? | p. 358 |
| What is Benefit/Risk Analysis Methodology? | p. 363 |
| Summary | p. 371 |
| Implementing IT Decision-Making | |
| Research Suggestions on Implementing IT Investment Methodology | p. 377 |
| Introduction | p. 378 |
| Organizational Impact of Information Technology Investment | p. 378 |
| Previous research on IT's impact on organizations | p. 378 |
| Measures of IT investment | p. 379 |
| Organizational impact of IT investment | p. 381 |
| Understanding Value and Instinct in IT Investment Decisions | p. 383 |
| Determining what's important | p. 383 |
| Defining value in IT investment | p. 384 |
| The role of intuition | p. 386 |
| Making the Best of IT Investment | p. 387 |
| IT investments: Goal and problem | p. 387 |
| Managerial causes | p. 388 |
| Strategies to solve the paradox | p. 390 |
| Summary | p. 392 |
| Implementing the Outsource or Insource Decision | p. 397 |
| Introduction | p. 398 |
| What is Outsourcing? | p. 399 |
| Why Use Outsourcing? | p. 399 |
| Why Use Insourcing? | p. 401 |
| Strategic Planning with Outsourcing and Insourcing | p. 402 |
| Outsourcing Methodologies | p. 404 |
| Outsourcing evaluation framework | p. 405 |
| Cost/benefit analysis | p. 406 |
| Critical success factors | p. 407 |
| Investment portfolio methodologies | p. 407 |
| Other methodologies | p. 408 |
| Post Outsourcing Decision Considerations | p. 409 |
| Service level agreement | p. 410 |
| Summary | p. 410 |
| Epilogue: The Costs of Not Making the Right Information Technology Decision (and Strategies on How to Avoid Them) | p. 415 |
| Macro Economic View | p. 415 |
| Micro Economic View | p. 417 |
| Strategies for Making the Right IT Investment Decisions and Avoiding IT Costs | p. 422 |
| "So What's the Good News?" | p. 425 |
| Index | p. 433 |
| Table of Contents provided by Ingram. All Rights Reserved. |
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