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Funding Information Systems (Business case (a formal document providing…
Funding Information Systems
Three approaches
Chargeback
disadvantages
maintaining detailed costings creates significant direct and indirect costs
direct
staff
auditing
physical resources
indirect
tracing mechanisms
resolving disputes
Characteristics
direct billing to dept using the IS resources
grounded in pay-per-se principle
e.g. dept is charged based on volume of traffic it intiates
budgets typically devolved to individual departments - take responsibility
budget can be determined by head count
treats IS as a cost centre
advantages
tracking consumption yields better allocation of scarce resources by managers
it influences user beahviour
motivates cost savings through consolidation and optimization
perceived as fair by the organization
Allocation
Characteristics
calls for direct billing of IS resources and service
based on fairly stable indicators
number of users
size
revenues
examples
retail allocate on a per room basis
service-based firm allocates on an employee basis
seeks to strike a balance between pay-per-use fairnesss and the high cost of the chargeback method
allocation approach creates more predicateble department expenses, often preferred by operational managers
Disadvantages
users often dissatisifed because they feel they are relatively paying too much
users have no incentive to limit their use of IT products or services
less control than the chargeback method
Overhead
IT as a business
provides service orientation
problems
there may ne no single owner for issues resolution
IT objectives and it's strategies
thus strategic alignment may diverhe rather than converhe over time
the Budgeting process
requires trade-offs between diverging interest and the prioiritization of projects
based on 2 decisions
determining the appropriate budget for ongoing operational expenses
evaluating large capital expenditure
a prerequisite to budgeting is an appreciation of the role of ISs in teh firm
Business case
a formal document providing the rationale for pursuiong new projects and opportunuities
prepared by general or functional managers and presented to the executive team or board
designed toarticulate the project and provide evidence that it will pay off
often used to evaluate ongoing spendong deciisions and to evalute existing systems
skeptics suggest that business cases strictly based on facts wil often inviolve too much spculation and too many assumptipnos
formal business cases will favour automation inititaives over business or technicak innovations
financial projectsiont are much more difficult for projects that have "soft" beenfits