Chapter 14 - Evaluating AIS investments. After reading this chapter, you should be able to: Articulate similarities and differences between major IT initiatives and other capital investments, explain the major steps in the economic justification of an IT initiative, explain potential benefits of IT initiatives and how to evaluate them,. | Chapter 14 Evaluating AIS Investments Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 Learning Objectives 14-2 LO#1 Articulate similarities and differences between major IT initiatives and other capital investments LO#2 Explain the major steps in the economic justification of an IT initiative LO#3 Explain potential benefits of IT initiatives and how to evaluate them LO#4 Assess potential costs of IT initiatives and how to evaluate them LO#5 Describe potential risks of IT initiatives and corresponding risk mitigation techniques LO#6 Apply capital budgeting techniques to assess the value of an IT initiative Large IT Projects Require Economic Justification Worldwide IT spending forecast to exceed $4 trillion by 2015 (according to the Gartner Group in January 2013) IT projects require large amounts of capital and capital is limited Selecting one project often means foregoing others IT projects often involve changes in business processes that will affect substantial portions of the organization Capital budgeting techniques provide a systematic approach to evaluating investments; yet, many organizations find it difficult to evaluate IT projects using traditional techniques. 14-3 LO# 1 Business Case for IT Initiatives Should answer these questions: Why are doing this project? How does it address key business issues? How much will it cost and how long will it take? What is the return on investment and payback period? What are the risks of doing the project? What are the risks of not doing the project? What are the alternatives? How will success be measured? 14-4 LO# 2 The Economic Justification Process 14-5 LO# 2 Assessing Business Requirements Refer to information on the balanced scorecard in Chapter 13 IT initiatives should reduce one or more gaps between the firm’s current and desired performance levels as indicated by the firm’s strategy map IT alone is usually | Chapter 14 Evaluating AIS Investments Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 Learning Objectives 14-2 LO#1 Articulate similarities and differences between major IT initiatives and other capital investments LO#2 Explain the major steps in the economic justification of an IT initiative LO#3 Explain potential benefits of IT initiatives and how to evaluate them LO#4 Assess potential costs of IT initiatives and how to evaluate them LO#5 Describe potential risks of IT initiatives and corresponding risk mitigation techniques LO#6 Apply capital budgeting techniques to assess the value of an IT initiative Large IT Projects Require Economic Justification Worldwide IT spending forecast to exceed $4 trillion by 2015 (according to the Gartner Group in January 2013) IT projects require large amounts of capital and capital is limited Selecting one project often means foregoing .
