Why Justify EC Investments? How Can They Be Justified? Using Metrics in EC Justification metric A specific, measurable standard against which actual performance Is compared key performance indicators(KPl) The quantitative expression of critically important metrics Electronic Commerc Prentice Hall 2006
Electronic Commerce Prentice Hall © 2006 11 Why Justify EC Investments? How Can They Be Justified? • Using Metrics in EC Justification metric A specific, measurable standard against which actual performance is compared key performance indicators (KPI) The quantitative expression of critically important metrics
Difficulties in Measuring and Justifying EC Investments The ec justification Process The EC justification process varies depending on the situation and the methods used In its extreme, it can be very complex Electronic Commerc Prentice Hall 2006
Electronic Commerce Prentice Hall © 2006 12 Difficulties in Measuring and Justifying EC Investments • The EC Justification Process – The EC justification process varies depending on the situation and the methods used – In its extreme, it can be very complex
Exhibit 15,1a model for EC Project justification Intangibles Strategic Considerations Competitive Advantage Strategic Objectives of Investment in IT Services to Society Support for Corporate Strategy Job Enrichment Top Management Support Quality Improvement Competitive Performance Objectives Improve Customer Relationship Long-term Costs and Benefits Enhance Confidence Future Business Tactical Considerations Risk of Not Investing in IT Teamwork Performance Indicators Justification of Good Image Generating Data Evaluation Methods Investment in IT Projects Tangibles Security Involvement of Senior Managers Financial Budgets Operational Considerations Priority of Investment ROI Existing IT System Product Cost Data Migration Market Alternative Technol Software Profit Level Users' Perception Revenue Servers Non-Financial System Integration Lead-time Existing Operations System Invento abor Absence Defective Rate of Products Set-up Time Electronic Commerc Prentice Hall 2006 3
Electronic Commerce Prentice Hall © 2006 13 Exhibit 15.1 A Model for EC Project Justification
Difficulties in Measuring and Justifying EC Investments Difficulties in Measuring Productivity and Performance gains Data and Analysis Issues EC Productivity Gains May Be Offset By Losses in Other areas Incorrectly Defining What Is Measured Other Difficulties Electronic Commerc Prentice Hall 2006
Electronic Commerce Prentice Hall © 2006 14 Difficulties in Measuring and Justifying EC Investments • Difficulties in Measuring Productivity and Performance Gains – Data and Analysis Issues – EC Productivity Gains May Be Offset By Losses in Other Areas – Incorrectly Defining What Is Measured – Other Difficulties
Difficulties in Measuring and Justifying EC Investments Relating IT Expenditures to Organizational Performance The relationship between investment and performance is indirect Factors such as shared IT assets and how they are used can impact organizational performance and make it difficult to assess the value of an IT (or EC) investment Electronic Commerc Prentice Hall 2006 5
Electronic Commerce Prentice Hall © 2006 15 Difficulties in Measuring and Justifying EC Investments • Relating IT Expenditures to Organizational Performance • The relationship between investment and performance is indirect • Factors such as shared IT assets and how they are used can impact organizational performance and make it difficult to assess the value of an IT (or EC) investment