Deck 9: The Business of Information Technology

Question 1

Mary is recommending IT investments in the neighborhood of $250 million for her company. However, the board is hesitant since it's such as capital-intensive project. If the project fails, the company could go out of business. What financial calculation should they use?

A) ROI
B) NPV
C) EVA
D) IRR
E) FV

Answer 1

C

Question 2

According to the research by Peter Weill, a firm that boosts investments in infrastructure is typical of those firms with a focus on (1) _______ and a firm that boosts investments in transaction systems is typical of those firms with a focus on (2) ______

A) (1) transactions (2) connections
B) (1) savings (2) expansion
C) (1) cost (2) ability
D) (1) agility (2) cost
E) (1) ability (2) agility

Answer 2

D

Question 3

Which financial calculation provides a percentage rate that measures the relationship between the amount the business gets back from an investment and the amount invested?

A) IRR
B) ROI
C) Payback
D) NPV
E) EVA

Answer 3

B

Question 4

A local marketing firm is considering launching a new and extensive social media marketing campaign. This investment of resources is being looked at for the duration of the project since it is anticipated to last at least 5 years. What financial calculation should be used to compute the investment's value, taking into account the time value of money?

A) ROI
B) NPV
C) EVA
D) IRR
E) TCO

Question 5

Activity-based costing _____________

A) groups costs into meaningful buckets that are then distributed based on the activity or product they support.
B) is useful for allocating small project work.
C) charges all costs to "cost centers."
D) considers only initial capital investments.
E) calculates ongoing maintenance costs.

Question 6

Building a business case for an IT investment:

A) Allows management to establish priorities for investing in different projects.
B) Helps gain commitment for the IT investment from business managers.
C) Creates a basis for monitoring the investment.
D) Identifies the benefits of the investment.
E) All of the above.

Question 7

To justify an IT investment and receive necessary support and approval, a manager must often create a(n):

A) IT portfolio.
B) community plan.
C) business case.
D) workflow diagram.
E) business technology plan.

Question 8

Joe works for a company where the IT department charges him for the number of CRM login accounts that are in his department. What type of IT funding model is his company deploying?

A) Allocation
B) Corporate budgeting
C) Usage
D) TCO
E) Chargeback

Question 9

A company that seeks an IT portfolio that lowers costs as the primary business objective will be more likely to increase spending on ___________ because these applications can help automate processes.

A) strategic systems
B) infrastructure
C) informational systems
D) transactional systems
E) social media

Question 10

The responsibility of the IT organization is to:

A) Manage core business functions like selling, accounting and manufacturing.
B) Partner with business managers to ensure the right IS exists to support the business strategy.
C) Set the business strategy.
D) Have sole responsibility for building information systems for the organization.
E) Design business processes.

Question 11

Scorecards provide a summary of information gathered over a period of time. Another common IT monitoring tool is the:

A) baseline
B) metrics
C) portfolio
D) dashboard
E) monitor

Question 12

A CIO must spend part of the day performing _____ tasks and some part of the day working on operational tasks. Rarely can a CIO focus on just one task in any given day.

A) Administrative
B) Strategic
C) Database
D) Financial
E) Technology

Question 13

Which dimension of the balanced scorecard answers the question "How do customers see us?"

A) Customer perspective
B) Innovating and learning perspective
C) Internal business perspective
D) Financial perspective
E) Supplier perspective

Question 14

In the early days of IT, the CIO would report to the ____ as IT was seen as a way to control costs. As technology has become more strategic and able to deliver a competitive advantage, CIOs now report directly to the ____.

A) CFO; CEO
B) CEO; CFO
C) CFO; COO
D) COO; CEO
E) CEO; CTO

Question 15

Denise works for a company where the IT department charges her department for actual usage of a SharePoint server, determining how often users log in and how much storage space her department consumes. What type of IT funding model is the company deploying?

A) Allocation method
B) Corporate budget method
C) Usage method
D) Distributed method
E) Chargeback method

Question 16

Which of the following plans is designed to counter a manmade or natural disaster that could cripple an enterprise?

A) Business Continuity Plan
B) Disaster Recovery Plan
C) Business Disaster Plan
D) Disaster Business Case
E) Business-IT Maturity Model

Question 17

Which method of IT funding is the most equitable, as the costs associated with IT are based on use?

A) Allocation
B) Corporate budgeting
C) Usage
D) Distributed
E) Chargeback

Question 18

Sam has just purchased 10 new high speed color laser printers for his company. He is very excited because he got a 40% discount and paid only $2,990 for each unit. His boss, Joe, wants to know things such as operating costs, support, overhead, etc. for the printers. Joe wants to know which value?

A) RCO
B) TCO
C) ROI
D) NPV
E) EVM

Question 19

Critical to the business case is the identification of both _________ and ________.

A) costs; risks
B) costs; benefits
C) advantages; disadvantages
D) assumptions; risks
E) benefits; detriments

Question 20

Which of the following should a manager expect from the IS organization?

A) Promoting enterprise security.
B) Participating in setting and implementing strategic direction.
C) Innovating current processes.
D) Managing data, information and knowledge
E) All of the above

Question 21

All of the following are new roles found in an IT organization today EXCEPT:

A) Chief Mobility Officer
B) Chief Social Media Officer
C) Chief Knowledge Officer
D) Chief Privacy Officer
E) Chief administrative assistant

Question 22

TCO, discussed by Gartner, stands for Technology Chief Officer

Question 23

The business side of IT is very different from the business itself.

Question 24

Valuing an IT investment is difficult for of many reasons. One reason is:

A) Many IT investments are necessities and payback is hard to calculate.
B) Increased customer satisfaction is not valued enough to justify costs.
C) IT investments often add no real business value.
D) IT managers do not see the need to value an investment whose payback period is relatively short.
E) IT is seen as "a necessary evil."

Question 25

Four asset classes of IT investments include:

A) Financial Systems
B) Marketing systems
C) Control systems
D) all the above
E) none of the above

Question 26

A CIO must have a strong understanding of technology and a limited understanding of the business.

Question 27

There are three main ways to handle funding for IT, including chargeback to users, allocation of costs to users, and providing IT services from a corporate budget.

Question 28

The allocation method is the most equitable funding method used by many IT organizations.

Question 29

The balanced scorecard:

A) Is a tool used to communicate the organizational metrics using a traffic light approach (red/yellow/green).
B) Is a method used to evaluate the health of an organization by looking at all value drivers such as the customers, the workforce, the financials, and business processes.
C) Focuses its attention on an organization's financials.
D) Is used to communicate the TCO for an IT investment.
E) Is one of many metrics used to evaluate the value of an IT investment.

Question 30

Labor costs associated with an IT infrastructure far outweigh the actual capital investment cost.

Question 31

Often the customer of an IT organization is not an external customer but rather an internal customer.

Question 32

While a relatively simple method for funding, corporate budgeting:

A) helps control the costs of IT.
B) may result in an IT organization that is less end-user oriented.
C) encourages sharing of funding resources between IT and business units.
D) levies charges on specific users or business units.
E) gives business managers sole control over IT decisions.

Question 33

All of the following are methods used to value an IT investment EXCEPT:

A) Payback analysis
B) ROI
C) NPV
D) CTO
E) IRR

Question 34

All of the following are qualities of a dashboard EXCEPT:

A) Highly summarized
B) Key metric driven
C) Raw data
D) Effective Visualization
E) Alerts

Question 35

Walmart, the world's largest retailer, uses RFID tags to track movement of goods across its intense supply chain. One identifiable benefit is that pallets of goods no longer need to be manually logged by a worker when received. Instead, an information system automatically logs the goods as they arrive. This benefit is identified as which type of business change?

A) Innovation
B) Efficiency
C) Cessation
D) Work force reduction
E) Doing new things

Question 36

The scope of responsibilities for an IT organization seems to expand with increased IT maturity.

Question 37

An IT dashboard provides:

A) Summary information gathered over a period of time.
B) Statistics on system usage.
C) A distraction from where more IT attention should be focused.
D) Current and critical measurements for the organization in an easy to read manner.
E) A snapshot of a firm's financial data at any given point in time.

Question 38

Corporate budgeting is a wise choice for funding newer technologies and innovation.

Question 39

Which dimension of the balanced scorecard answers the question "How do we look to shareholders?"

A) Customer perspective
B) Innovating and learning perspective
C) Internal business perspective
D) Financial perspective
E) Supplier perspective

Question 40

Financial measures are the sole means for making management decisions.

Question 41

The term____________ is used to describe a person who aligns business and IT strategies and uses technology to create a competitive advantage.

Question 42

Why is it particularly difficult to determine the value of an IT investment?

Question 43

The____________ is the senior-most executive in the enterprise responsible for IT vision and leadership for IT initiatives.

Question 44

List some soft costs one would anticipate when implementing an IT solution.

Question 45

Describe at least one new role emerging in organizations today as a result of social business.

Question 46

Managing a global IT organization has challenges that extend beyond managing a global team. What are the specific issues a global IT organization has to consider?

Question 47

A____________ model is helpful in teasing out the differing needs for managing IT at different levels of sophistication of the IT function.

Question 48

Two methods for communicating metrics are dashboards and _______.

Question 49

Why is TCO so difficult to define? What are some of the challenges of determining TCO?

Question 50

The ____________costing technique looks beyond the initial capital investment of an IT solution and includes costs associated with technical support, administration, training, and system retirement.

Question 51

It is determined that a mobile application needed to support the Sales, Marketing, and Finance departments will cost $60,000. The Sales department has 20 employees and all employees will need the application. Likewise, all 10 of the Marketing department employees will need the application. Only one-third of the Finance department is interested in the mobile application. The Finance department has 30 employees. The CIO has decided to fund the mobile application using either the allocation method or chargeback method.
Which funding method does each department wish the CIO will choose to use and why?

Question 52

IT leaders must be part of the business strategy discussion.

Question 53

An airport is in the process of implementing a new baggage claim system that tags each passenger's baggage with RFID. Readers are installed around the airport to track bags and see that the baggage is delivered to the right plane or the right carrousel. The airport is considering different funding models to see if the airlines, the airport or the passengers will be charged. Use the three funding models to explain how this new IT could be funded.

Question 54

The process called "true-up" is used to balance true expenses against payments made for the____________ funding method.

Question 55

TCO stands for____________ .

Question 56

Traditional valuation methods such as ROI, NPV, and IRR cannot be applied to information technology because they are technical, not business-oriented.

Question 57

Avon uses a ____________to monitor the status of its IT projects, knowing that a red-coded item indicates a serious problem.

Question 58

Besides financial metrics, what metrics help an IT organization manage its IT investments?

Question 59

CIO stands for____________ .

Question 60

Why would an organization use the balanced scorecard and focus its metrics on more than just financials?

Question 61

Match each IT organizational activity with its related level of maturity (based on the Business-IT maturity model). Remember that Level 3 is more mature than Level 1.
$$\begin{array} { | l | l | } \hline \text { Level 1 } & \text { Develop and maintain systerns } \\\hline \text { Level 1 } & \text { Operate the data center } \\\hline \text { Level 2 } & \text { Irrovate curent processes } \\\hline \text { Level 1 } & \text { Provide general support } \\\hline \text { Level 3 } & \text { Anticipate new techrologies } \\\hline \text { Level 3 } & \begin{array} { l } \text { Participate in setting and implementing strategic } \\\text { goals }\end{array} \\\hline \text { Level 3 } & \text { Inteprate the use of social IT } \\\hline\end{array}$$

Question 62

Match the three levels of Business-IT maturity to the term that best describes the level of maturity. Remember that Level 3 is more mature than Level 1.
$$\begin{array} { | l | l | } \hline \text { Level 1 } & \text { Functional use of IT to gain efficiencies } \\\hline \text { Level 2 } & \begin{array} { l } \text { Business process view focused on infornation } \\\text { intepration across the orgarization }\end{array} \\\hline \text { Level 3 } & \text { Inter-enterprise information intepration } \\\hline\end{array}$$

Question 63

Match the activity an IT organization provides with its description.
$$\begin{array} { | l | l | } \hline \begin{array} { l } \text { Pronoting enterprise } \\\text { security }\end{array} & \begin{array} { l } \text { Maintain the integrity of the } \\\text { enterprise infrastructure including the } \\\text { infornation assets. }\end{array} \\\hline \begin{array} { l } \text { Operating the data } \\\text { center }\end{array} & \begin{array} { l } \text { Maintain and nin large mainfrane } \\\text { computers, rows of servers or other } \\\text { platforns on which conpary data } \\\text { and applications reside }\end{array} \\\hline \begin{array} { l } \text { Manage data, } \\\text { infornation and } \\\text { knowledge }\end{array} & \text { Database adrinistration } \\\hline \begin{array} { l } \text { Integrating the use of } \\\text { social IT }\end{array} & \begin{array} { l } \text { Provide custorner-, supplier-, and } \\\text { enployee-facing applications for } \\\text { engagement, collaboration, and } \\\text { innovate }\end{array} \\\hline\end{array}$$

Question 64

Peter Weill's produced a study that identified the 4 main categories that make up a company's IT portfolio: the IT infrastructure, transactional systems, informational systems, and strategic systems. Weill's research shows that most companies spend a majority of their IT portfolio on the 1.______ and the least amount of money is spent on the 2. __________. A company that is seeking to be highly agile should spend more money on the 3. __________ to provide a nimble platform and less money on the 4. _________, which tends to lock in current business processes.
$$\begin{array} { | l | l | } \hline 1 . & \text { Infrastructure } \\\hline 2 . & \text { Strategic systems } \\\hline 3 . & \text { Infrastructure } \\\hline 4 . & \text { Transactional systerns } \\\hline\end{array}$$

Question 65

What can a manager expect from the IT organization?

Question 66

Match the title with its responsibility.
$$\begin{array} { | l | l | } \hline \begin{array} { l } \text { Chief Techrology } \\\text { Officer (CTO) }\end{array} & \begin{array} { l } \text { Track energing technologies and manage } \\\text { the IT architecture }\end{array} \\\hline \begin{array} { l } \text { Chief Infornation } \\\text { Officer (CIO) }\end{array} & \begin{array} { l } \text { Realize the benefits and marnage the costs } \\\text { and risks associated with IT while also } \\\text { being a visionary for IT }\end{array} \\\hline \begin{array} { l } \text { Chief Network } \\\text { Officer (CNO) }\end{array} & \begin{array} { l } \text { Build and maintain internal and external } \\\text { networks }\end{array} \\\hline \begin{array} { l } \text { Chief Social Media } \\\text { Officer (CSMO) }\end{array} & \begin{array} { l } \text { Be responsible for the effective use of } \\\text { online networking and collaborative } \\\text { ervironments }\end{array} \\\hline \begin{array} { l } \text { Chief Mobility } \\\text { Officer (CMO) }\end{array} & \begin{array} { l } \text { Oversee the viable use of smartphone } \\\text { applications }\end{array} \\\hline\end{array}$$

Question 67

A balanced scorecard is a method used by IT departments to measure overall health and success of an IT investment. Match a type of measurement an IT organization may report with the appropriate balanced scorecard category it supports.
$$\begin{array} { | l | l | } \hline \text { Customer Perspective } & \text { The percentage of repeat client business. } \\\hline \text { Intemal Perspective } & \text { The percentage of projects completed on time. } \\\hline \text { Intemal Perspective } & \begin{array} { l } \text { Uptime versus downtime of a critical } \\\text { infonnation system. }\end{array} \\\hline \text { Learning Perspective } & \begin{array} { l } \text { The number of employees trained on the use of } \\\text { collaborative techrologies. }\end{array} \\\hline \text { Custoner Perspective } & \text { Client satisfaction surveys. } \\\hline \text { Financial Perspective } & \begin{array} { l } \text { Percentage of projects completed on or below } \\\text { budget. }\end{array} \\\hline\end{array}$$

Question 68

Match the three levels of Business-IT maturity to the business organization's approach to IT. Remember that Level 3 is more mature than Level 1.
$$\begin{array} { | l | l | } \hline \text { Level 1 } & \text { Dernand for IT is for efficiency and cost savings } \\\hline \text { Level 2 } & \text { Focus of IT is on effective business processes } \\\hline \text { Level } 3 & \begin{array} { l } \text { IT's role is for innovation and rapid } \\\text { reconfipuration of business processes }\end{array} \\\hline\end{array}$$

Question 69

Match the funding model to its method by which costs are recovered.
$$\begin{array} { | l | l | } \hline \text { Corporate budget } & \begin{array} { l } \text { Costs are recovered using the corporate } \\\text { coffers }\end{array} \\\hline \text { Chargeback } & \begin{array} { l } \text { Costs are recovered by charging } \\\text { individuals, departments or business units } \\\text { based on actual usage and cost }\end{array} \\\hline \text { Allocation } & \begin{array} { l } \text { Costs are recovered based on something } \\\text { other thar usage and more on a fee or } \\\text { charge based on number of employees, } \\\text { logins, or reverues for a department }\end{array} \\\hline\end{array}$$

Question 70

Match the dashboard with its appropriate description.
$$\begin{array} { | l | l | } \hline \text { Service dashboard } & \begin{array} { l } \text { Shows the importarit metrics about the Is } \\\text { such as uptime, throughput, service tickets, } \\\text { bug, fixes, etc. }\end{array} \\\hline \text { Portfolio dashboard } & \begin{array} { l } \text { Provides status, problems, propress, and } \\\text { expenses for strategic projects. }\end{array} \\\hline \text { Business-IT dashboard } & \begin{array} { l } \text { shows relevant business metrics and the IT } \\\text { systems that support them. }\end{array} \\\hline \text { Improvement dashboard } & \begin{array} { l } \text { Monitors the progress toward inport goals } \\\text { of the IS orgarization itself }\end{array} \\\hline\end{array}$$

Question 71

Match the component of the business plan with its objective.
$\begin{array}{|l|l|}\hline \text { Financial discussion and analysis } & \begin{array}{l}\text { Details the costs, revenue and } \\\text { benefits as well as the TCO } \\\text { calculations. }\end{array} \\\hline \text { Benefits and business impacts } & \begin{array}{l}\text { Presents nonfinancial outcomes } \\\text { such as new business, } \\\text { innovations, competitive } \\\text { response, and the impact on the } \\\text { organization and the supply } \\\text { chain. }\end{array} \\\hline \text { Schedule and milestones } & \begin{array}{l}\text { Details expected metrics along } \\\text { the project's time line. }\end{array} \\\hline \text { Risk and contingency analysis } & \begin{array}{l}\text { Includes sensitive analysis on the } \\\text { proposed investment and the } \\\text { ability to manage anticipated } \\\text { consequences. }\end{array} \\\hline\end{array}$