1. MBA/MIS - 513 Class #3 September 2, 2008 IT Business Value Financial Justification 1

2. Tonight’s Agenda Brief Presentation on International Experience – Thom Porter Finish up Chapter 2 of Book A ROI Homework Q&A Book B – Chapters 1 and 3 Information Technology Business Value 2

3. Book B Measuring the Business Value of Information Technology Information Technology Business Value (ITBV) Chapter 1 3

4. Overall Goals Move the IT department / process from a ‘cost center’ to a strategic partner to achieve overall goals Prove ‘business value’ 4

5. What to measure? Direct contribution to market position or revenues Deliverables that support solving customer business needs and challenges Direct cost savings Technology investment that advance the industry 5

6. Standards in Measurement Standard metrics developed Common valuation techniques with other corporate projects Business value portfolio with values determined by business unit managers 6

7. Grow your IT Success Framework Balance the budget needs while moving towards a ‘profit center ’ What are the roles for the Bus Mgr versus the IT professional ? 7

8. Chapter 1 Summary What are the implications for the Business Unit Manager pertaining to IT? What are the implications for IT Professionals pertaining to assisting the business? 8

9. Chapter 2 (Book B) Methods to determine Business Value 9

10. Establish metrics and then monitor 10 Notice these are not IT Metrics

11. Suggested metrics should be corporate goals Hospital (from text) Utilization of beds # of people for specific lab Discharges by noon Diversions Patient Satisfaction Staff Satisfaction Doctor Satisfaction 11

12. UNCW Metrics? 12

13. Others? 13

14. Once you have metrics what do you do? (as it pertains IT?) 14

15. Replacing Human Capital with IT Capital BV Dial Definition Headcount Growth Solutions that enable reduction in human resources or absorb business growth without growing headcount. The company can either move employees to areas of greater return (with job-search time and support provided for eligible employees) or put teams on new projects. Sample Calculation:(Number of headcount reduced or avoided) × (Average burden rate for region and job type) Employee Turnover Solutions that reduce undesired employee turnover. Significant cost savings are realized when hiring, training, and interviewing are avoided. Sample Calculation:(35% of annual burden rate and region and job type) × (number of headcount turnover avoided) Employee Productivity Gains in headcount efficiencies or effectiveness. Headcount is expected to produce more through these gains due to the additional time-based efficiencies. Sample Calculation:(Number of employees affected) × (time) × (average burden rate) × (50%) 15

16. Productivity (Potential Gains) Removal of an activity a user performs Reduction in the time to complete an item Reduction in user errors Reduction in time to train new users 16

17. Other ‘quantifiable’ items (suggestions, can you use for your project?) Reduce Expenses Material Discounts Scrap Reduction Hardware / Software Avoidance vs. System End of Life Considerations Factory Uptime 17

18. Other ‘quantifiable’ items (suggestions, can you use for your project?) Reduce Expenses / Working Capital Days of Inventory Days of Receivables 18

19. Other ‘quantifiable’ items (suggestions, can you use for your project?) Increase Revenues Reduce time to market Open a new market Cross Selling Vendor of Choice 19

20. Steps for IT project justification 20

21. Upcoming Events This Thursday Avery Cloud – CIO, New Hanover Health System Chapter 4 – Employee Productivity (Book B) Next Monday ROI assignments (due 6PM) Upload to Entropy Read Building an IT Infrastructure of Agility Read Volkswagen of American (Mgt of Priorities) 21