IT S u pply IT De m and IT D em an d

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Appendix 1: The business information planning pyramid

IT in fr as tr u c tu re

T a rgets, proj ect p o rt fo li o an d m igra ti on p a th B u sin e ss O p e ra ti o n IT s y stems Organi sati on o f th e IT f a c ilit ie s

P o lic ie s A rchi tecture s

Physical furnishing, solution, ‘that’s the way we’re going to do it’

Logical design, ‘that’s how we want it’

What are the requirements, what are the organisational principles? What has to change to reach our goals? How will we change?

what is the challenge?

B u si ness s tra tegy

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Appendix 2: The business information planning pyramid; a reference framework

Business operationIT systemsIT infrastructureOrganisation of IT facilities Starting points regarding Business operationStarting points regarding IT systemsStarting points regarding IT infrastructureStarting points regarding Organisation of IT

business strategy (mission, in and external developments, competences, goals, strategic choices, focus) Migration strategy Plateau planning priorities Projects plan

importance risk

products/services model products

market

Blue print IT infrastructure standards physical IT infrastructure Brands models

Information model Meter to Bill Logical information domains/ components IT systems model solutions

company process model Client to client processes

IT Organisation Activities, roles and responsibilities projects time

Targets regarding. Business operationTargets regarding. IT systemsTargets regarding. IT infrastructureTargets regarding. Organisation of IT Physical gas tr. Meter to bill

Comm. Disp. Asset Int. Support

Blue print IT organisation Activities, roles and responsibilities •Technology roadmap •Technology forecast

Starting points regarding BU strategy

usiness plan Business plan model Business plan steps Targets regarding. BU strategy

IT paragraph

Business issues Business Plan IT paragraph

Business Information Plan

Business Plan Business Plan incl. IT paragraph

IT S u pply IT De m and IT D em an d

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Appendix 3: Project organisation

Dire ct ie Gas u n ie (o pdr acht ge ver ) Te am T & S Te am G T A Tea m Co rp or at e

Te am G T S

St uur gr oe p Pr oj ec tl ei di n g

Co rp . GT A GT S

T&S

Eddie Lycklamaa N.

A d vi se ur Busin ess In for m a ti e P lan n ing

S ecr et ar iaat

BI Te am on der st eu n in g en in te gr atie

EricDam (vz)

Henk Dijkgraaf Hans Krol

T eam Inf rast ruct u u r

Per team: •BS team •Business team •BI team

Opdr ac htnemer BS

JohanStäbler

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Appendix 4: Financial techniques for IT investment decision-making (Schniederjans et al., 2004)

Technique Description Type of

criteria

Evaluation timing

Accounting rate of return

Compare the average after-tax profits with initial investment cost

Tangible Ex ante or ex post

Break-even- analysis

Compare the present value of costs with the present value of the benefits

Tangible and intangible

Ex ante, most often

Cost benefit analysis

Compare costs with benefits that can be directly attributed to the system

Ex ante or ex post

Cost benefit ratio Calculate the ratio of costs of an IT investment to its benefits measured in monetary terms and compare to a threshold ratio

Tangible Ex ante and ex post

Cost revenue analysis

Compare costs with benefits that can be directly attributed to the system

Tangible Ex ante, most often

Internal rate of return

Calculate the return that equates the net present value of an investment to zero

Net present value analysis

Discount cash inflows and compare then to cash outflows

Payback period Calculate the time required to recoup initial cost

Tangible Ex ante, most often

Profitability index Calculate the per euro contribution of an investment

Return on investment

Calculate the return of an investment

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criteria

Evaluating timing

Analytical hierarchy process

Calculate the score of decision makes’ pair wise comparisons

Ex ante

Decision / Bayesian analysis

Calculate the expected value of investing in alternative investments

Ex ante

Delphi evidence Obtain consensus of experts’

opinion concerning the best alternative investment

Ex ante and ex post

Game playing Calculate payoff of investment based on actions of the competition, mathematics, and economic theory

Ex ante

Multi-objective, multi-criteria approaches

In general, develop a measure of utility provided by an IT investment

Ex ante and ex post

Simulation Model how an investment will perform and impact the organisation

Ex ante and ex post

Appendix 5: Operations research / management science techniques for IT investment decision-making (Schniederjans et al., 2004)

criteria

Application benchmark technique

Construct a computer program to be run by vendors so as to determine the run time of individual computer system configurations

Tangible Ex ante

Application transfer team

Conduct a study to determine exact requirements of the IT and to support the business case

Ex ante

Automatic value points

Calculate the degree of automation based on a set of

Ex ante and ex post

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criteria concerning the contribution of IT to the overall business

Bedell’s method Calculate the contribution of an IT system by multiplying an importance score by the level of quality improvement made by the system

Ex post and ex ante

Benefit/Risk analysis

Determine the overall risk of an investment through the use of a risk questionnaire and judge whether the benefits outweigh the risk

Intangible Ex ante

Buss’s method Determine investment priority by ranking alternative

investments and those with the highest frequency have highest priority

Ex ante

Cost-value technique

Total all costs associated with a system and deduct an earned value (established euro value of desirable feature minus vendor charge for desirable feature)

Tangible Ex ante

Executive planning for data/processing

Conduct a comparison of costs and benefits of existing

systems and examine areas for future investment

Ex ante

IT assessment Calculate financial and non- financial ratios and compare them to benchmark ratios

Ex ante and ex post

Information economics

Calculate the overall value of an investment based on enhanced ROI, business domain, and technology domain criteria

Ex ante

Information systems investment

Make a financial comparison between the organisation and

Ex ante

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7 strategies its competitors, examine the

portfolio of existing applications and prepare the business case for areas with expected high returns

Investment mapping Calculate evaluation criteria scores and plot investment alternatives on a grid

Ex ante and ex post

Investment portfolio Calculate contribution of IT systems to business and technology domain and calculate financial

consequences (NPV) of the system

Ex ante

Knowledge based system for IS evaluation

Obtain an overall quantitative rank based on traditional capital budgeting techniques and an overall qualitative rank of projects based on rules established by MIS planning groups and MCDM models

Ex ante

MIS utilisation technique

Calculate the overall success of an IT investment based on 48 performance criteria

Ex post

Process quality management

Analyse mission, critical success factors and key business processes to identify areas for IT investment

Ex post

Requirements costing technique

Calculate total cost of an investment as cost of the mandatory features plus additional costs for desirable but not included features

Tangible Ex ante (mostly for vendor selection decisions) Return on

management

Calculate the return of an investment that can be attributed to management productivity

Tangible Ex post, most often

SESAME Compare the cost of a Tangible Ex ante and

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computer system with the cost of performance without a computer system

ex post

SIESTA Assess benefits and risks of the fit between IT technology strategy/infrastructure and business strategy infrastructure

Mostly intangible

Ex ante and ex post

Strategic application search and systems investment

methodology

Analyse the extent of existing systems and identify the most productive areas for future investments

Intangible Ex ante, most often

Value analysis Establish value of a system (and/or prototype) by asking management simple value- related questions and compare that value to investment cost

Ex ante

Ward’s portfolio approach

Assess risk of investment and risk of the portfolio of

investments after undertaking investment

Ex ante and ex post

Zero-based budgeting

Partition projects into smaller projects, assess each smaller project based on the same evaluation framework, and select the most important smaller projects assuming limited funding

Ex ante

Appendix 6: Techniques specifically designed for IT investment decision-making (Schniederjans et al., 2004)

criteria

Balanced scorecard Evaluate an investment from the user’s, business value, efficiency, and

innovation/learning perspectives

Ex ante and ex post

Boundary Calculate the ratio of IT cost Tangible Ex post, most

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9 values/spending

ratios

to a known aggregate value (total sales, total assets, etc.)

often

Cost displacement/

avoidance

Compare cost of IT investment to the current costs displaced by the IT system plus the projected costs avoided by the system

Tangible Ex ante

Cost effectiveness analysis

Compare the effectiveness of a system with its cost and selects the system with the lowest cost, best

effectiveness, or the optimal combination of both

Ex ante and ex post

Critical success factors

Obtain, compare, and rank factors critical to business success, and based on these rankings, deduce investment priorities

Intangible Ex ante

Hedonic wage Based on employee activity time allocation, calculate the marginal value of each employee and use these values to estimate the value of IT investment benefits

Tangible Ex ante and ex post

Real options valuation

Calculate the additional value of an investment that exists because it provides the option for a second investment

Ex ante

Quality engineering Translate perceived value and risk into a quality score

Intangible Ex ante and ex post Satisfaction/priority

surveys

Survey and compare user and IS professionals’ opinions on the effectiveness and importance of installed systems

Intangible Ex ante and ex post

Structural models Create a model to analyse how an information system affects the costs and

Ex ante and ex post

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revenues of the particular business function or line of business it is intended to serve

Time savings times salary

Calculate the value added of an IT investment by

estimating the percentage of time the system will save workers and multiply by the cost of the workers

Tangible Ex ante

Value chain analysis Assess how an IT investment can provide competitive advantage in each phase of the chain

Ex ante and ex post

Method of Novius Base the evaluation on the criteria business value and risk. Link the Business Information Planning with IT appraisal

Ex ante

McFarlan's strategic matrix

Focus on four quadrants;

Strategic, High potential, Key operational and Support

Ex ante

IT performance management grid

Use a portfolio technique that discerns IT demand and IT supply

Intangible Ex ante

Appendix 7: Other techniques for IT investment decision-making (Schniederjans et al., 2004; Wiggers, 2004; Van Grembergen, 2001)

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Appendix 8: Investment proposal template part 1 DESCRIPTIONS OF:

Name: Name of project

Final owner of the application Name of the department that is responsible for the benefit realisation of the IT solution.

Time period of the project implementation

Time period in which the project is carried out.

Description of functionality Description of the ‘must-have’ and ‘nice-to-have’ functionality. Description of business needs/problems that will be solved. Approximately 100 words.

Description of technology Description of the technology that will be used for implementing the IT solution. Proven technology? Approximately 100 words.

ESTIMATIONS OF:

Resources Required resources (use table).

Capacity Capacity of resources (if necessary use table). Approximately 30 words.

Planning Timeframe and phases of project including expected full-life-cycle of the application (use table).

Costs Cost of hardware, software, project team and implementation. Approximately 100 words or 5 calculations (use table).

(Strategic ) benefits Quantitative and qualitative estimation of expected benefits based on:

• Strategic match – the extent to which the investment matches the strategic business goals.

• Competitive advantage – the extent to which the investment contributes to an improvement of positioning in the market.

• Management information support – the extent to which the investment will inform management on core activities of the company.

• Competitive response – the extent to which not investing implies a risk. A timely investment contributes to strategic advantage.

Assign performance indicators to benefits realisations. Approximately 100 words, 2/3 calculations (use table) and 1/2 performance indicators.

Payback period Calculate payback period: the amount of time required to recover the cost of the initial investment. For example, initial investment = 1million euro. Yearly benefits minus costs = 200k euro. Payback period = 5 years.

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Appendix 9: Investment proposal template part 2 ASSESSMENT OF:

Relation to other (future) project implementations?

Relation to current project implementations and description of created opportunities for future projects. Approximately 50 words.

What is not invested in? Risks associated with the organisation not investing in the IT solution. Approximately 50 words.

Risk Risk assessment of the project using the following risks:

1. Assessment risk – the risk Gasunie is exposed to when assess the underlying business case. Insufficient information causes the organisation to make poorly underpinned decisions (approximately 15 words).

2. Technical risk – the degree in which the system and the envisioned capability are not feasible with the current technology (approximately 15 words). 3. Project risk – the IT capability that a firm seeks to develop is too large or too

complex, or overwhelms the staff’s technical skills. The implementation of IT may be less than smooth. Additional implementation time can add very large cost burdens. The lack of a contingency plan might cause high additional costs (approximately 15 words).

4. Internal politics – an IT investment can be undermined by vested interests in the innovating organisation. Reacting to a perceived threat to their positions in the current environment, staff or divisions of the company may not cooperate in the development or may be slow to adopt an implementation (approximately 15 words).

5. External environmental risk – the sources of the risk are unanticipated responses from competitors, customers or regulatory bodies (approximately 15 words).

6. Investment risk – the degree to which other, non-project investments are required to make the project successful (approximately 15 words).

APPROVAL FROM: Approval to the business case with respect to contents and postulated objectives.

Business sponsor Approximately 10 words including signature and date of approval.

BI Approximately 10 words including signature and date of approval.

BS Approximately 10 words including signature and date of approval.