1.
ABC (acronym): activity-based costing
2.
activity-based costing: counts the actual activities that go into making a specific product or service
3.
activity-based costing is an alternative to traditional accounting methods which account for...: ... direct and indirect (overhead) costs
4.
advantages of corporate budget method: simple, gives IT managers more control over budget, encourages exploration of new technologies
5.
advantages of using TCO: gives full picture of where IT dollars go; results can be evaluated over time against industry standards; helpful for decision making
6.
agility focused firm spends more on this category of IT portfolio: infrastructure (solid foundation for fast, new changes)
7.
allocation funding method: recovers IT costs by charging based on criteria other than usage (e.g. revenues, number of employees)
8.
balanced scorecard: measures organizational performance based on value drivers
9.
both chargeback and allocation methods...: distribute the costs back to the users
10.
business case: structured document that gives all information needed to make a decision on an IT investment
11.
categories in the TCO component framework: hardware, software, network, data
12.
categories of benefits in business case: observable, measurable, quantifiable, financial
13.
categories of soft costs: tech support, administration, training
14.
chargeback funding method: recovers IT costs by charging individuals, departments, or business units based on actual usage and cost
15.
components of total data cost: removable media, onsite backup storage, offsite backup storage
16.
components of total hardware cost: desktops, servers, mobile platforms, printers, storage, tech support, admin, training, informal support, retirement
17.
components of total network cost: LAN, WAN, modems, tech support, admin
18.
components of total software cost: OS, office suite, database, proprietary, tech support, admin, training, informal support
19.
corporate budget funding method: corporate allocates funds to IT at annual budget session
20.
cost focused firm spends more on this category of IT portfolio: transactional (automate processes, lower operational costs)
21.
dashboard: summarizes key metrics at any given point in time
22.
dashboards help to determine: where to focus attention
23.
disadvantage of ABC and TCO: difficult to implement
24.
disadvantages of corporate budget method: competes with all other budged items for funds
25.
distinguishing feature of corporate budgeting: doesn't link IT costs with any specific user
26.
EVA (acronym): economic value added
27.
example of activity based costing: If an accountant divided up the cost of an ERP over the activities it supports by calculating how much of the system is used by each activity. A product that took up 1/12 of the system's capacity to control manufacturing would be allocated 1/12 of the system's costs.
28.
financial: have a way to express benefit in financial terms
29.
four asset classes that make up IT portfolio: transactional systems, informational systems, strategic systems, infrastructure systems
30.
four perspectives in the balanced scorecard: customer, internal business, innovation/learning, financial
31.
in activity-based costing, costs reflect: the products and services of the business
32.
in traditional accounting, costs reflect: the organization structure or the processes of a given department
33.
informational systems: provide information used to control, manage, communicate, analyze, or collaborate
34.
infrastructure systems: servers, networks, databases, laptops, etc.
35.
IRR (acronym): internal rate of return
36.
IT portfolio management: process of evaluating and approving IT investments
37.
measurable benefits: have an existing way to measure it
38.
NPV (acronym): net present value
39.
observable benefits: can only be measured by opinion or judgment
40.
options pricing: risk-hedging strategy to minimize negative impact of risk when you can wait to see what happens
41.
overall goal of IT portfolio management: company funds and invests in most valuable initiatives and gets maximum benefits
42.
problems with charging systems: hard (and expensive) to build them, hard to decide on pricing
43.
quantifiable benefits: have a way to measure size or magnitude of the benefit
44.
reasons to analyze cost of informal tech support: costs of it may be higher (e.g. capable manager spending time helping with email), can be indirect measure of efficiency of IT support
45.
ROI (acronym): return on investment
46.
scorecards vs. dashboards: scorecards give summary information, dashboards give snapshots
47.
strategic systems: used to gain competitive advantage
48.
TCO (acronym): total cost of ownership
49.
TCO component framework: framework to assess cost of IT infrastructure components
50.
three main funding methods (for IT): chargeback, allocation, corporate budget
51.
total cost of ownership: costing model that includes costs associated with technical support, administration, training, and system retirement.
52.
transactional systems: streamline or cut costs on the way business is done
53.
true-up process: when IT managers using an allocation process balance expenses with payments to figure out the actual cost of IS for the year
54.
two main advantages of the allocation funding method: simpler (and cheaper) to implement because usage does not need to be captured; predictable monthly costs
55.
two main complaints about allocation funding method: free-rider problem (heavy users pay same as light users), difficult to determine how to allocate costs
56.
types of benefits that can be identified in a business case: innovation (do new things), improvement (do things better), cessation (stop doing things)
57.
types of risk in risk analysis: technical, financial, organizational
58.
typical IT portfolio investments: (descending order) infrastructure, transactional, informational, strategic
59.
when chargeback methods are most appropriate: when there is a wide variation in usage among users or when actual costs need to be accounted for by the business units
60.
why chargeback systems are popular: fairest method; users can see exactly how much usage costs
61.
why ROI is hard do for IT investments: because benefits aren't that tangible, difficult to quantify, observe, or long-term
