Week 13 - Epilogue

In the last two weeks our focus has been on the value of IT investments and how to ensure that we maximize the value from these investments. Another topic that deserves attention is that of IT budgets and IT portfolio management. Investment like the one undertaken by WHR constitute a substantial request for financial and human resources. Therefore, one of the  final course objectives will be to review corporate budgets (pros and cons), the IT budgeting process & factors affecting levels of IT budgets, and IT portfolio management.

We will close the course with a look at some of the basic principles behind IT governance.

Topics and Readings for Week 13

Theory: Chapter 9 (IT budgets and IT portfolio management) and Chapter 10 (IT Governance).

Seminar: There is no seminar this week.

Assignments for Week 13

There is no online quiz. I will post a practice quiz based on material from Chapters 9 and 10.

Week 12 - Risk Analysis and Monitoring of IT Investments

The NPV (expected payoffs) of a technology investment depends on the assumptions made by managers involved in the adoption of the new technology. These assumptions reflect their expectations regarding implementation (budget, time, and functionality), expectations regarding users’ ability to extract value from the new technology (increase sales or contain cost), as well as expectations regarding reactions of competitors and trading partners.

In previous chapters, we focused on factors that may affect these assumptions, such as business and IT strategy, IT capability, stage of technology adoption, and industry structure. This week, we shift our focus to implications of failure to meet these assumptions (risk analysis) on NPV. We will use this risk analysis to make recommendation on  how to monitor the progress during implementation and value extraction. The aim of the monitoring process is to introduce an element of accountability and ensure that proper action would be taken to ensure the maximization of the value of the technology investment.

Topics and Readings for Week 12

Theory: We will focus on Chapter 8 (monitoring IT investments). The primary focus of this chapter is on the idea of causality (cause and effect) as the foundation for the creation of a balanced scorecard for technology implementation and use.

Seminar: We will use the Whirlpool case study to review the NPV analysis and  perform a risk analysis (sensitivity analysis). We will use data based on different scenarios to generate predictions regarding the expected effect of these scenarios on the NPV of the project.

Assignments for Week 12

The online quiz will be a based on chapters 8  and material covered in the seminar. The quiz will be available on Friday at 12:30 pm.

The team project is due on Monday at 8:30 am. Please upload your project file as well as your data and R-script in the appropriate Learn dropbox.

The peer evaluation for the Team Project will become available on Tuesday - July 19 and remain open till July 26th. Please read the syllabus and make sure you understand the implications of the peer evaluation on the grade of your peers before you submit your evaluation. The submission of peer evaluation is a course requirement.

Prof. Stratopoulos

Week 11 - Evaluation of IT Investments

We started our course with the discussion about a firm (WHR) that wants to perform capital budgeting analysis of a major information technology investment. An investment in an enterprise system. Our objective has been on how to approach this evaluation from a strategic standpoint. We started by looking at technology innovation adoption and how the position that a firm takes will affect the expected payoffs (chapter 1). We combined Rogers’ innovation adoption theory with Gartner’s Hype cycle to estimate expected payoffs and duration of competitive advantage (chapter 2).

We learned that technological innovations have the potential to disrupt the competitive landscape and it is important for a firm to consider its technology related investments in the context of its strategic priorities (chapter 3). We used information generated in financial reports to make sense of business strategy and industry structure, and looked at how technology adoption (such as data analytics) can shape the competitive position of adopting firms (chapter 2, 3, and 4).

For firms to leverage data analytics they must have access to data, and this justified the need to have at a minimum a basic understanding of database theory (chapter 5). We used the examples of database schemas capturing business processes of different firms as a way of envisioning the foundation of an enterprise system (chapter 6). This brought the realization that even though enterprise systems constitute a mature technology today, they are critical for any firm that wants to leverage data analytics, because they are the source of all internal data (chapter 6).

Understanding the importance of implementing or upgrading a firm’s enterprise systems, brought us back to the place we started, i.e., perform the capital budgeting analysis for WHR (chapter 7), which is the topic of Week 11.

Topics and Readings for Week 11

Theory: We will focus on Chapter 7 (evaluation of IT investments). The primary focus of this chapter is on the expected benefits from IT investments and use of Real Options in assessing the value of multistage projects.

Seminar: We will use the mini-case of BlueBikes in order to understand the foundation of the capital budgeting setting used in the WHR case. Read carefully the part of the chapter that will help you understand the BlueBikes case so you can replicate the WHR case. While we will spend most of our time doing the capital budgeting analysis, I will reserve some of the seminar time to show you how to leverage some of the advanced functionality in R (e.g., neural networks) to forecast sales based on Compustat data.

Assignments for Week 11

The online quiz will be a based on chapters 7, the WHR case,  and material covered in the seminar. The quiz will be available on Friday at 12:30 pm.