ICT Service management (2021) - chapter 15, 16, 17 and 18 extensive notes

Extensive notes of chapter 15, 16, 17, and 18 combined in one document [D0I69A]. NOTE: This document is not a summary. It contains the information of the slides supplemented with extensive lecture notes. Notes may contain typos.

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Chapter 15 - Financial Management

2 main things:
1/ cost benefit analysis of IT projects => analysis is not fundamentally different of other projects.
2/ IT services – cost calculation: how can you calculate the cost of a single unit of the cost of each of the IT
services that you deliver. IT project cost-benefit analysis Lots of things in IT => done through projects. For
each of those: usually necessary to have a cost-
benefit analysis => before project: look at the total cost of your project. If you are doing an investment => need
some benefits.
Chapter 15, 16, 17 and 18
Compare costs and benefits of IT projects Three steps
Determine the cost of the project, of the development. Usual y the upfront costs in the first phases of the project
=> development of a system => build a system
2/ benefits: what benefits is this new system going to bring our organization?
1/ Costs:
Idea: determine the cost per year over the total useful lifetime. Usually the costs are high at the beginning:
develop software for example, new servers, installation, organize training… lower during the operational phase
of the system (period system is used). Difficult to estimate total lifetime. Usually: 5-7 years, although many
systems that have a long eco lifetime.
Suppose you are project manager & you have to create a cost-benefit analysis => your problem is that you have
to create this C-B analysis before a single euro is spend. You don’t know what is going to developed, but stil
have to make an estimate of the cost. How can you do that? => several ways.
Example: compare to other projects: knows what a typical ERP system wil cost.
Compare current systems: often if you develop a new IT system, this new system replaces an existing IT system
=> might have an estimate in the books of the total money spend on the existing system.
Cost studies in literature: look into books, articles… => find cost studies: typical implementation of software
costs, divide software into function points and you know that one function point is about one day of
development => these metrics that have been measured in the literature => use them to estimate the total cost
of your project.
Previous approaches = top-down: you start from general idea of what such a project costs.
Bottom-up = TCO = total cost of ownership = you look at all the different phases of your project, you know the
lifecycle (conception, architecture…) and for each of these => look at the detailed costs that you expect.
Architecture for example have to pay an architect for that many months; development: programmers, testing,
developers…
Chapter 15, 16, 17 and 18
Estimate all these costs and efforts => add them up and gives you the TCO = total cost of project. Lot of work
but might be most detailed way of budgeting the cost of project. What wil be the benefits of the IT system that we are developing?
Same approach: you determine the benefits per year over the total useful life.
Only have benefits during the operational phase.
How? IT systems have three kinds of benefits
1/ operational: increases in operational efficiency => staff reductions: if we have this new system => wil need 10
staff members less for example. We don’t have to pay the salary of these staff members.
2/ tactical: increased customer satisfaction… => organization is able to reach its goals more efficiently.
Not al benefits = quantifiable = not expressible in money.
Tactical benefits: more different. Increasing revenue ok => 2%; but if you say ‘our customers wil be more
satisfied because our salespeople can inform our customers better about lead times, prices…’ how much
money yield that me? Difficult to estimate. Can try to estimate.
Essential: per year, you have an estimate in money of the benefits of your projects. Chapter 15, 16, 17 and 18