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Date

Topic

Class Activities

9/4

[T0]  Class Introduction

Syllabus and Class Overview,

9/6(W)

9/11(M)

[T1] Does IT Matter? (IT Productivity (Payoff) Parodox
       IT has been relentlessly employed by firms since 50's. However, the business value of IT investment has remain very elusive to any empirical investigation. This phenomenon has been known as so-called IT productivity paradox. Does IT Matter? Nick Carr's 2003 Harvard Business Review article, IT Doesn't Matter, set off a fierce debate among technologists and managers in corporations throughout the world. Carr asserted that IT has become so ubiquitous that it should be managed as a commodity like electricity rather than as a potential source of strategic advantage. Smart businesses, he said, would refrain from devoting large portions of their capital budgets to the latest, greatest technology because overspending is far riskier than underspending--it siphons resources away from your ability to make products, deliver services, and satisfy customers. Among those who argue that Carr is wrong is renowned technology strategist John Hagel. Hagel agrees that IT by itself has rarely ever conferred strategic differentiation. Rather, he says, it is the application of a technology that creates advantage, and the ability to leverage the potential of technology is not ubiquitous--it is a scarce and valuable asset. No two people can advance the two sides of this argument more cogently or compellingly than Carr and Hagel.  Visit this site for this interesting debate.

Required Readings:

1.       IT Doesn't Matter, Nicholas G. Carr, Harvard Business Review, May 2003 (PDF file)

2.       More articles on Carr’s claim

3.       Why IT Still Matters, Jeanne G. Harris and Jeffrey D. Brooks. Does IT Corrode Competitive Advantages? (Howard Smith)

4.       Return on Investment for Information Technology Providers: Using ROI as a Selling and Management Tool, Thomas Pisello, Information Economics Press, 2001 (Section Introduction and Section I) (PDF file)

Reference Book:

l       Does IT Matter? Information Technology and the Corrosion of Competitive Advantage, (Nicholas G. Carr)

l       IT Doesn’t Matter. Business Processes Do (Howard Smith & Peter Fingar, August 2003)

l       Time Well Spent

l       Trouble with Computers

l       Productivity Growth and Information Technology (McKinsey and Co (October 16, 2001, pdf file from the instructor)                                                    

[Case #1]  Case Discussion on Strategic Value of IT
Read the required reading to understand so-called “computer paradox” and prepare your debate on the strategic value of IT investment based on the article  “IT Doesn't Matter, (Nicholas G. Carr) and “Why IT Still Matters” that summarizes the heated debate stirred by the original article. You prepare your position paper (at least 2 page long) where you explain:

i.                     Which side are you with? IT does matter or doesn’t? Justify your argument logically with some evidences?

ii.                   Why statistics does not support the value of IT investment?

 Submit the report on 9/6 (W) in before the class (Hard copy)

Case #1 Report

09/13 (W)

09/18 (M)

 9/20 (W)

[T2]  MisInformation Systems – What Went Wrong?

    In order to garner the full potential of IT, it takes a team sprit of managing full life cycle of IT investment: Selecting IT projects with high potential of business value, Making them right, Use them strategically. The management practice for this full cycle is called as IT governance. In this section, we review the value creation process, often ill-defined status of IT investment management.

Required Readings:

1.       How IT Creates Business Value: A Process Theory Synthesis, ICIS, Soh and Markus, 1995  (PDF File)

you do not need to read this all. Skim through but understand Figure 6 on Page 36.

2.       Smart Practices in Capital Planning, The Federal CIO Council, October 2000 (PDF file) and excel file for assessment (PDF and Excel File)

3.       Chapter 1 of Textbook [KD]

4.       Six IT Decisions Your IT People Shouldn’t Make, J. W. Ross and P. Weill, HBR, November 2002

Reference Book:

[IT ROI Project - Step1 ]: Evaluate Capital Planning (4 Students Maximum)

Use the evaluation excel file from the reading material [T2.2] to evaluate the current status of Capital Planning Practice of a firm (IT department). You interview as many as possible from a site and prepare your evaluation report with PPT file format. You may supplement other insights from your interview. Your main focus is identifying problem areas in capital planning practice in Korean firms. 

While contacting your project sponsor you may obtain a recent IT investment proposal or investment evaluation report as well for your next mini project. In addition, do not forget to get their support for your term project as well. But Read the subsequent steps of this project and inform your sponsor site what comes next.

 IT ROI Project Step 1 Report Presentation

9/25 (M)

9/27 (W)

[T3] What to Measure, How to Measure and Why?

What to measure for good IT capital planning? Why measurement matters? What are the criteria for good business case (IT project proposal)?  A general framework of Value Measuring Methodology and Overview of Measurement Methodologies.

Required Readings:

1.         Chapter 2-6 of Textbook [KD]

2.         ROI and the Value Puzzle, Capital Planning and IT Investment Committee, Federal CIO Council, April 1999 (PDF file)

3.       Section II, Return on Investment for Information Technology Providers: Using ROI as a Selling and Management Tool, Thomas Pisello, Information Economics Press, 2001 (PDF)

References

10/2 (M)

10/4 (W)

 (No class)

[T4] Writing a Good Business Case (IT Investment Proposal)

One of  IT ROI goals is to get approval of project funding. We will characterize the good business case. 

Chapter 1,2, 7 and 9 [KN]

[IT ROI Project – Step2 ]: Evaluating IT Investment Proposal

Get a sample IT Investment Proposal from your project sponsor. Interview with them to find out

l       Who have involved in the proposal preparation and what role of the participants do? (including internal and external people)

l       Who verifies data?

l       What’s the logic behinds the evaluation of benefits?

l       How is it different from the sample that we discussed in the class?

 Report in PPT format and present in the class (10 Minutes)

IT ROI Project Step2 Presentation

10/9 (M)

10/11(W)

10/16 (W)

[T5] Costs & Budgeting of IT

Statistics of IT spending by Korean firms are much lower than those in advanced countries. This is because either they actually invest less (or more efficiently), or cost is under-reported. Explicit and indirect (hidden) cost components of IT will be identified, and problems of IT cost accounting will be also discussed. Many hardware and software have different years of use. Hence, for different purposes of IT, IT spending budget must be converted into cost data. We will find about how to calculate more accurate cost from IT capital spending. 

[IT ROI Project – Step3 ]: IT Cost Identification

Get IT Budget Data from your project sponsor

l       Identify the cost items.

l       Compare them with the cost classifications we discussed in the class.

l       Re-estimate the total budget according to the standard cost items we learn from the class.

l       Draw implications.

Present your report in PPT format (10 Minutes per team)

10/18 (M)

10/23 (M)
10/25 (W)

10/30 (M)

[T6A] Identifying “Value Chain” of IT Investment

Before any economic judgment of IT investment, we have to find its benefits, costs and risks associated with the investment. We will focus on the first element of these three dimensions. The two most challenging tasks in accounting all the benefits of IT are identifying causal chain of value web, and quantifying intangible benefits. Often the most confusing definition of benefits are so-called strategic values.  Then, to measure it, “strategic” Information System should be defined first. In this section, we discuss what qualifies so-called strategic IS.  To grab the gist of  the logic of value chain, we first do a case study of Dell Computer.

Read the following articles:

l       Information Technology, Process Reengineering and Performance Measurement: A Balanced Scorecard Analysis of Compaq Computer Corporation (William F. Wright, Rodney Smith, Ryan Jesser, Mark Stupeck),

l        Refining and Extending the Business Model With Information Technology: Dell Computer Corporation (Kraemer et.al.)

l       Execution without Excuses, Harvard Business Review, March 2005

[Case #2] IT Investment Value Identification

Answer to the following questions in your case report.

How Dell’s business model is different from her rivals? What are the sources of its competitive advantages? How e-Business enables such innovations? What’s the concept of choice board?  Will its globalization strategy will work (especially in China or Korea) with the same model? Describe Dell’s business model. Search how Dell’s Inventory Turnover has been improved so far (Use search engines such as  google.com with search keyword “Dell & Inventory Turnover”).  As a CEO, you ask your organization to improve Inventory Turnover by 5% next year. What must  business processes changed? How did Compaq rationalize their IT investment? How is it different from your company or your project sponsor company?

[T6B] Unraveling Value Chain of IT Investment (BSC)

Guest Speaker on BSC/PDT (PWC Consultant or IBM)

Reference Readings

1.       Chapter 1,2, 7 and 9 [KN]

2.       Linking the Balanced Scorecard to Strategy, R.S. Kaplan and D. P. Norton, California Management Review, Vol. 39, No.1, Fall 1996

3.       Measuring the Strategic Readiness of Intangible Assets, Kaplan and Norton, HBR, February 2004 (for quick summary)

4.       From Value to advantage: Exploiting Information, Gartner (PDF file)

IT ROI Project Step 2& 3 Presentation

Case 2 Report

IT ROI Project Step 2& 3 Presentation

11/1(W)

[T7] Risk of IT Investment- Adjusting Cost or Benefits

IT Investment is often risk business. There are many different sources of risks which will either inflate costs or deflate benefits. Hence, we may estimate ranges (distribution) of costs or benefits rather than point estimates of them. 

l       Managing Business Risk of Information Technology, R. L. Nolan and R. D. Austin, HBS Case #9-604-004 (Revised June 10, 2004) – CASE #3

[Case #3] Business Risk of IT Investment - Cancelled

Read article [Managing Business Risk of Information Technology], and identify business risk of IT investment. Research other dimensions of risk. Prepare one page summary of your research. We will discuss it in the class. Submit the report on 11/1 (W) in before the class (Hard copy)

Case 3 Report

- Cancelled

11/6 (M)

11/8(W)

11/13(M)

[T7] Economic Value Calculation

Upon counting all benefits, costs and risks of any IT project, we now determine bottom-line of it.

1.       Value Made Visible, CIO Magazine, May 1, 2000  (for methodology overview)

2.       Financial Reader for I.T. Executives, The Information Economics Press, 2003

3.       Section II, Return on Investment for Information Technology Providers: Using ROI as a Selling and Management Tool, Thomas Pisello, Information Economics Press, 2001 (PDF)

4.       Economic Value Added, David Young, INSEAD, 1998

5.       Note On Economic Value Added, Hatch JE; Manning J; McCartney J; Richard Ivey School of Business, 1/26/2001

[BSC Project] Strategic IT and BSC Application – 11/6

The enrollment of MIS/Telecom MBA programs has decreased seriously for the last few years. That triggered to the birth of Graduate School of Information, Telecommunication and Media Management.  Device a strategic map for growth of this new program using BSC strategic map following the procedure and tools that we learn from the class

Exam on ROI Calculus – covers basic terms of financial value analysis and actual calculation of a simple sample investment.

11/6 BSC Project Presentation

Exam

11/15(W)

[T8] IT ROI In Action (Theories and Consulting)
Guest Speaker (Samsung SDS, Mr. Hong-Geun Moon)

Once costs and benefits are identified, how IT ROI is calculated? It is not that simple. What is the benefit of a mainframe system or network investment? Some of investments are for infrastructure of IT which will be used by many business applications. The business value are mostly realized and linked to business applications. Then, what should we do when we buy a mainframe? Or system operating systems?

In addition, we will differentiate valuation of single project and valuation of IT division (portfolio of IT systems).

11/20 (M)

11/22 (W)

[T9] Probabilistic Approach: Applied Information Economics)

Guest Speaker: 강현수 대표 (Decision Science, Expert Choice Korea)

1. A Case Study of the Applied Information Economics Methodology For an Infrastructure IT Investment, Federal CIO Council, September 2001
2. More Information from http://www.hubbardresearch.com/ and http://expertchoice.co.kr/

[[IT ROI Project – Step4 ]: IT Benefit Identification

Get IT Proposal from your project sponsor

l       Identify the cost items.

l       Identify the benefit items

l       Calculate ROI and other financial measures

Present your report in PPT format (10 Minutes per team)

ROI Project Step 4

11/27 (M)

11/29 (W)

[T8] Taking Account of Organizational Capability of Making Most of IT (Information Orientation)

1. Information Orientation: The Link to Business Performance, D. A. Marchand, W.J. Kettinger, and J.D. Rollins, Oxford University Press, 2001
2. From Value to Advantage: Exploiting Information, CIO Signature, June 2004
3. Extracting the business value of IT: It is usage, not just deployment that counts, D. A. Marchand, Journal of Financial Transformation,
4. After the e-Business Shakeout, Back to Basics: See, Measure and Manage Information Capabilities, D. A. Marchand,  Perspectives for Managers, No. 82, May 2001
5. Lessons From the Dark Side of Information Use, D. A. Marchand,  Perspectives for Managers, No. 96, May 2002

[Case #5 ]: IO Case

l       TBA

Case 5 Report

12/4(M)

[T9] Considering Risk (Real Option)

12/6 (W)

12/11(M)

[T10] IT Portfolio Management  (DEA & AHP)

You may have budget constraints but each project has different values and risks. How to select a best set of projects?


 

12/13n(W)

[T15] Outsourcing and SLA

Guest Speaker

Outsourcing has been promoted as a ultimate solution to ever rising cost of IT. However, many evidences show that often outsourcing efforts fail. We will discuss pros and cons of outsourcing of IT services.

1. A Crash Course in Outsourcing, Lauren Keller Johnson, HBR, 2003
2. The Winner's Curse in IT Outsourcing: Strategies for Avoiding Relational Trauma, Thomas Kern, Leslie P. Willcocks, and Eric van Hoeck, California Management Review, Vol. 44, No.2, Winter 2002
3. The Economics of Outsourcing in the Information Economy, Paul Strassmann, The Information Economics Press, 2004
4. Collaboration Fundamentals: Avoiding Client/Vendor Process Mismatch, "IT Outsourcing Essentials" Research Series, Volume 1, IT Consulting International, 2004 (available from http://www,itci.com)
5. Outsourcing IT: The Global Landscape in 2004, F.W. McFarlan, B.J. Delacey, HBR Case #9-304-104
6. Offshoring at Global Information Systems, Inc, HBR Case #9-204-144
7. General Dynamics and Computer Sciences Corporation: Outsourcing the IS Function (A+B, Abridged), HBR Case #9-193-178

[Case #6] IT Outsourcing Case (Individual)

Read article [General Dynamics and Computer Sciences Corporation: Outsourcing the IS Function ] and answer the following questions. 

(i) As a member of GD's management, why would you want to outsourcing?

(ii) What perspective as a member of the management would you bring to the outsourcing negotiations?

(iii) What are the key issues that should be addressed in an outsourcing agreement?

(iv) For a successful outsourcing, as a CIO of GD, what should be prepared in advance?

Submit your case report by 04/07 in the class. We will briefly discuss the issue.

Case #6 Preparation

12/18 (M)

[IT ROI Project – Step5]: Suggestions for IT Investment Management for Your client

Get IT Budget Data from your project sponsor

l       How accounting should be remedied?

l       What skills/personnel should be developed?

l       Any change in IT governance?

l       Any tools and systems recommended? Why?

Present your report in PPT format (10 Minutes per team)

 IT ROI Project – Step5

12/20 (W)

Conclusion