Hello my name is Gautam Ray and welcome to the IS/IT Governance Course. According to the Society for Information Management Survey, in the US, firms spend about 6 percent revenue on IT. So, for a billion dollar company, they spend about $60 million per year on IT. However, the returns from these investments have been less than stellar. On average, a typical project is 45 percent over budget, seven percent behind schedule, and it receives only 44 percent of the expected benefits. The IS/IT Governance Course is designed to address this basic question, how to make good IT investment decisions and realize the value from these investments? In this course, we have four modules. The first module is called IT Alignment, in this module we will discuss how to align IT Investments with business schools and strategies. In module 2, we will evaluate IT Investments, that is we will evaluate an individual IT investment and then we will incorporate some risk in this evaluation. In module 3, we will continue to evaluate IT Investments. We will first discuss how do we evaluate a portfolio of IT Investments, and then we will discuss IT Chargeback, that is how do we allocate IT costs back to the user? In module 4, we will discuss Change Management, the idea here is firms do not realize any value from an IT investment if users don't use the new system. In module 4, we will discuss how to make sure that the users use the new system. Let's discuss module 1, that is IT Alignment, IT Alignment is about making sure that IT investments are aligned with business goals and strategies. This is an issue of IT Governance that is leadership, organizational structures, and processes that ensure that the enterprises information technology supports the organization's strategies and objectives. So, we will discuss what decisions need to be made? Who makes those decisions and how they make those decisions to make sure that the investments are aligned with the organization's goals and strategies? A very important concept in aligning IT with business goals and strategies is the concept of operating model. That is how standardized the processes of a firm are across the different divisions or business units of the firm, and how much data is shared across the different business units of a form. The Operating Model is determined by process standardization and data integration across the different divisions or business units of a firm. The Operating Model is important because the operating model influences the enterprise architecture. Where the Enterprise Architecture is the definition of how the organization performs different activities and what is the standardization of applications, data and infrastructure services across the different divisions or business units of the organization. We will discuss the concept of the maturity of the enterprise architecture. The maturity of the enterprise architecture determines what IT investments, what capabilities are appropriate in each stage of the maturity of the enterprise architecture and what governance mechanisms are appropriate in each stage of the maturity of the enterprise architecture to make sure that the IT Investments are aligned with the goals and strategies of the organization. So that is about module 1. Next, we will discuss module 2, in module 2, we will evaluate individual IT investments. So we will discuss the three broad categories of estimates. Order of magnitude, budget, and definitive estimates. These estimates are appropriate at different stages in the IT Investment process. We will spend a great deal of time in going over a budget estimate that is made before an IT Investment is approved. We will go through an excel example of doing a budget estimate for a proposed system. IT Investments have operational, tactical, and strategic benefits. Operational and tactical benefits are tangible and quite easy to estimate. However, strategic benefits of an IT system are intangible. For example, an IT system may lead to a strong brand for a company. We will discuss how to assess and evaluate the strategic that is intangible benefits of an IT system. Large IT projects have risks associated with them. An IT project may have development organizational or market risk. In this module, we will discuss how the options approach can be used to incorporate the risk in the IT Investment decisions. So here, the key idea here is that the uncertainty or the risk in an IT Investment can be resolved by waiting or by conducting a small experiment, and then based on the outcome of the small experiment, we can decide whether to pursue an IT project and take advantage of the opportunities or terminate the project and limit our losses. So we will use the options approach to discuss how to incorporate risk in the IT Investment decision. Finally, in module 2, we will also discuss what is the appropriate way to evaluate an IT Investment based on the strategic objective of the investment and based on the technology that is involved in the investment. Is this an application investment or is this an infrastructure investment? Next, let's discuss Module 3. In module 2, we evaluated individual IT investments. In module 3, we will evaluate a collection of IT investments. So any large company does not make one single IT Investment in a given year. They make multiple investments in a given year. In module 3, we will discuss how to select the right set of IT Investments in a given year. We will use the concept of an IT Investment portfolio for this discussion. The main idea here is a firm typically makes four different kinds of investments. These four different kinds of investments have different goals and they have different risk return portfolio. So based on the strategy of the organization, they will emphasize different investments differently. So an organization may invest more in transactional Systems whereas another organization may invest more in strategic Systems. So, we will discuss how to make sure that a firm's IT Investment portfolio is aligned with the goals and strategies of the organization. IT organizations develop projects, that is, they develop new systems and once a new system has been developed, they operate and maintain the new system. So, IT chargeback deals with how to allocate IT costs back to the user. So, in module three, we will discuss how to allocate IT costs to different users. So, there are three basic models of IT chargeback. Cost centers, service center, and profit center. So, we will discuss how to make sure that the users invest in IT that is worth the investment. Similarly, we will discuss how to make sure that the IT organization provides services, and it provides services in a very efficient manner. So, the IT chargeback is about how to provide incentives to the users to consume prudently and how to provide incentives to the IT organization so that the IT organization runs as efficiently as possible. Module four is called Change Management. The idea here is, a new system does not provide any value if the new system is not used. So, module four is about how to make sure that the new system that is developed and implement is actually used by the users so that the organization derives the value it is expecting. If a system threatens users in any way, that is, if the users feel that the new system will lead to loss of status, power, or revenue, they will resist. So, the point here is, if we understand why users resist, we will be able to implement strategies so that resistance is reduced and users use the system. There are two models of adoption of innovation. The first model of adoption is referred to as the demand driven model of adoption. The main idea here is, if the benefits of the new system are higher than the cost of using the system, then users will adopt. So, if the users believe that the new system is useful and it is going to help them be more productive, then they are more likely to adopt the system. However, if they believe that the new system is going to be very difficult to use, it's going to be very costly to learn to use and adopt the new system, then they are less likely to adopt the new system. The second model of adoption is the supply driven model of adoption. Here the idea is that users want to use the new system. However, they faced knowledge barriers. So, any mechanism, tools or methods, that can be used to reduce the knowledge barriers, will help improve the adoption of a new system. So, we will discuss the demand-driven and the supply driven model of user adoption. Here, managers have five levers to affect the adoption of innovation. We will discuss the five key levers that managers have in influencing the adoption of an innovation. Business vision and top management support, communication and employee involvement, peer support, training and change management support, and adequate use of external consultants, that is, external resources. So, we will discuss five key levers that managers have in influencing the adoption of a new system. So, we will discuss what these are and when they work and when they are more important. In this module, we will also discuss this idea that different systems require different strategies. That is, not all systems should be implemented the same way. Different systems need to be implemented differently. For example, an evolutionary change is the change that complies with the current values, norms, skills, structures, and incentive systems. So, an evolutionary system is a system where the company is doing well but it wants to implement a new system to improve processes. So, evolutionary change is a change that is consistent with current values, norms, skills, and structures. However, revolutionary change is the change that is designed to fundamentally change the values, norms, and work practices. So, revolutionary systems are systems that are designed to radically change how a company operates. So, we will discuss how a revolutionary system will be implemented and how that differs from how an evolutionary system is going to be implemented. Similarly, an organization may take a project management approach to implementing a new system. That is, an organization may think that a new system is a project. That is, it is a one time effort with a beginning and an end. So, an organization may think of implementing a new system as a project. When they think of a new system as a project, their approach to implementing the new system will be very different compared to an organization that has a learning approach to implementing a new system. In the learning approach, the organization thinks itself as in this continuous mode of learning to implement better ways of doing things. So, in the learning approach, an organization thinks that it is always trying to implement new and better ways of doing things. So, a new information system is just normal. So, this is what they always do. So, we will discuss how the information system implementation will differ based on whether the organization thinks of a new system implementation as a one time project versus when an organization has a learning approach to implementing a new system. So, what should you be able to do by the end of the IS/IT governance course? I'm very confident that at the end of this course, you will be able to ensure that a given IT investment that your firm makes is aligned with the goals and strategy of the organization. You will be able to design appropriate governance mechanisms to realize the value from the investment. You will be able to evaluate individual IT investment. You will be able to incorporate risk in the IT investment analysis. You will be able to evaluate the fit of the IT investment with the overall IT investment portfolio of the firm. You will also be able to design appropriate mechanisms to charge for the IT investment. Finally, you will be able to design a change management strategy to implement the proposed system. Thank you.
