Skip to 0 minutes and 5 secondsTo recap, last week, we looked at the restaurant ordering system. First, we looked at the manual scenario. Then we looked at the automated order-taking process. Is there something that we can do with this information that we capture? We're going to have a lot of information at our disposal after running this automated system for a while. This is how IT could come in to a manual process-based restaurant and improve the process. So most of the benefits that we got there were related to efficiency gains. Now, this week, what we're going to look at
Skip to 0 minutes and 43 secondsis something that takes that process further: informate. How do we take the information and use that to make better decisions? This is going to be the theme for week two.
The IT portfolio
Different kinds of IT investments provide different types of business value.
Researchers at the MIT Sloan School of Management investigated IT investments across 640 key US companies.
They identified four key types of IT investments that contribute to an ‘IT portfolio’ or investment spread. These include:
- Transactional investments: used to cut costs or increase throughput for the same cost.
- Informational investments: to provide information for accounting, reporting, compliance, communication or analysis.
- Strategic investments: used to gain competitive advantage by supporting entry into new markets or by helping to develop new products, services or business processes (initially automated teller machines (ATMs) were a strategic IT initiatives; they became transactional over time).
- Infrastructure investments: are the shared IT services used by multiple applications (such as servers, networks, laptops, customer databases). Depending on the service, infrastructure investments provide a flexible base for future business initiatives or reduce long-term IT costs via consolidation (Weill & Aral 2006).
Beyond just automating and information
Thinking of IT investments as a portfolio or a balanced set of investments provides a comprehensive approach to different types of business value returns accrued from ICT investments.
|IT Portfolio Investment Type||Business Value|
|Informational (typically 17% of investment)||Increased control; Better information; Better integration; Improved quality; Better cycle time|
|Strategic (typically 11% of investment)||Product innovation; Process innovation; Competitive advantage; Renewed service delivery; Increased sales; Market positioning|
|Transactional (typically 26% of investment)||Cut costs; Increase throughput|
|Infrastructure (typically 46% of investment)||Business integration; Business flexibility; Reduced marginal cost of business unit’s IT; Reduced IT costs; Standardisation|
Adapted from (Weill & Aral 2006).
Pick one of the four IT investments types that most interests you and do some further research and share any useful resources you find on it.
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