Deck 7: Cost Recovery of Information Systems

Question 1

This 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 1

B

Question 2

The responsibility of the IT organization is to:

A) Manage core business functions like selling, accounting and manufacturing.
B) Partner with business managers to insure 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.

Answer 2

B

Question 3

This method of IT funding is the most equitable,as the costs associated with IT are based on use.However,it can be difficult and tedious to calculate the usage costs.

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

Answer 3

E

Question 4

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 5

Cloud computing providers often take responsibility for managing data and applications for a firm.These cloud computing provider's management of a firm's information must consider international transfer of information.This is an example of which global IT issue?

A) Political stability
B) Transparency
C) Sourcing
D) Data flow across borders
E) Business Continuity Planning

Question 6

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 7

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

Question 8

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

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

Question 9

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 10

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 11

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 12

In order to get support and approval for an IT investment,a manager must often create a(n) ________________.

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

Question 13

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 14

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 15

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

A) Promotion of enterprise security.
B) Participation in setting and implementing strategic direction.
C) Innovation of current processes.
D) Management data, information and knowledge
E) All of the above

Question 16

A CIO must spend part of the day performing _____ tasks and the 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 17

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 this value:

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

Question 18

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 19

This is a plan 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 20

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 21

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 22

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 23

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

Question 24

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

Question 25

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

A) Community manager
B) Chief Social Media Officer
C) Chief Knowledge Officer
D) Chief Privacy Officer
E) Database administrator

Question 26

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

Question 27

Valuing an IT investment is difficult because:

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 28

The scope of responsibilities for an IT organization has been expanding over the years.

Question 29

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

Question 30

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

Question 31

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 financial data at any given point in time.

Question 32

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

Question 33

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 34

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 35

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

Question 36

This model is helpful in differentiating the capabilities of IT and the demands of the business for IT relative to the value IT has in the organization's strategy.

Question 37

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 38

IT leaders must be part of the business strategy discussion.

Question 39

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 40

Financial measures are the sole means for making management decisions.

Question 41

What does TCO stand for?

Question 42

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

Question 43

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.

Question 44

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

Question 45

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 46

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

Question 47

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

Question 48

What can a manager expect from the IT organization?
Matching

Question 49

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

Question 50

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

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 1/3 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

Two methods for communicating metrics are dashboards and _______.

Question 53

What does CIO stand for?

Question 54

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.

Question 55

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 56

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

Question 57

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

Question 58

This 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 59

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.

Question 60

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

Question 61

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.

Question 62

Match the component of the business plan with its objective.

Question 63

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.

Question 64

Match the dashboard with its appropriate description.

Question 65

Match the title with its responsibility.

Question 66

Match the funding model to its method by which costs are recovered.

Question 67

Match the activity an IT organization provides with its description.