BADM 7050 Exam 2 Questions with
Verified Answers
What method of IT funding is the most equitable? - ANSWER-Chargeback systems:
IT costs recovered by charging individuals, departments, or business units based on
actual usage and cost
- Seen as more equitable bc costs are distributed based on usage or consumption of
resources, ensuring that the largest portion of the costs are paid for by the group or
individuals who consume it the most.
What is the difference between ROI, IRR, NPV, EVA< and payback - ANSWER-ROI
(return on investment)- Tells you if you will gain from the investment of interest
IRR (internal rate of return) - represents the rate that is earned on an investment.
The rate is compared to a target that is determined by corporate policy
NPV (net present value) - accounts for the time value of money. NPV discounts the
cash flows from future periods as being worth less than immediate cash flows.
EVA (economic value added) - determines the amount of benefit of an investment
that exceeds the costs of the capital used for the initial investment.
Payback period - computes how long a firm estimates it must wait until all costs are
finally recouped.
What are the common types of IT monitoring tools? - ANSWER-The balanced
scorecard and IT dashboards
Balanced scorecard: focuses attention on the organization's value drivers.
Companies use scorecard to assess the full impact of their corporate strategies on
their customers and workforce as well as their financial performance. Provide
summary information gathered over a period of time
IT dashboards: summarizes key metrics for senior managers in a manner that
provides quick identification of the status of the organization
provides a snapshot of metrics at any given point in time
What should a manager create to justify an IT investment? And what should be
included in this? - ANSWER-Business Case
Executive summary
Overview and intro
Assumptions and rationale
Project summary
,Financial discussion and analysis
Benefits and business impact
Schedule and milestones
Risk and contingency analysis
Conclusion and recommendations
Appendices
In the early days of IT, who would the CIO report to? And why? And who does the
CIO report to now? And why? - ANSWER-In the early days, the CIO reported to the
CFO- The role was predominantly responsible for controlling IT costs.
Now, CIO reports to the CEO or the Board of Directors due to the role being an
official "C-Suite" level position- Involved with operational and strategic tasks related
to IT. Responsible for all IT responsibilities throughout the organization
Why is valuing an IT investment difficult? - ANSWER-The systems are complex, and
calculating the costs is an art, not a science.
Because many IT investments are for infrastructure, calculating a payback period
may be more complex than other types of capital investments.
Many times the payback cannot be calculated because the investment is a necessity
rather than a choice without any tangible payback
What are the four asset classes of IT investments? (4) - ANSWER-1. Transactional
systems: Streamline or cut costs on the way business is done (equivalent to Level 1
in the Business Maturity Model)
2. Infrastructure systems: Provide the base foundation of shared IT services used for
multiple applications such as servers, networks, tablets, or smartphones (equivalent
to Level 2 in the Business Maturity Model)
3. Informational systems: Provide information used to control, manage,
communicate, analyze, or collaborate (equivalent to Level 2 in the Business Maturity
Model)
4. Strategic systems: Gain competitive advantage in the marketplace (equivalent to
Level 3 in the Business Maturity Model)
What mechanisms are used to create and ensure good IT governance? (3) -
ANSWER-1. Policies: useful for defining the process of making a decision under
certain situations, but when environment is complex, policies may be too rigid
2. Review Board: committee that is formally designated to approve, monitor, and
review specific topics
3. IT steering committee: also called an IT governance council. Such a committee is
composed of key stakeholders or experts who provide guidance on important IT
issues.
What is a balanced approach to managing a company's IT organization? -
ANSWER-Federalism - Structure between Centralized and Decentralized (p208)
, What type of organization management does IT use to control most of its
infrastructure in one location? - ANSWER-Centralized IS organization - does not
refer to IT architectures but to decision‐making frameworks
What type of organizational management should a company use if it is attempting to
obtain the advantages derived from both centralized and decentralized
organizational paradigms? - ANSWER-Federalism- a structuring approach that
distributes power, hardware, software, data, and personnel between a central IS
group and IS in business units.
What are the benefits of federalism? - ANSWER-Economies of scale
Control of standards
Critical mass of skills
Users control IT priorities
Business units have ownership
Responsive to business unit's needs
IT vision and leadership
Group-wide IT strategy and architecture
Strategic control
Synergy ???
In the 1960's, what technology dictated a centralized approach to governance? -
ANSWER-Mainframes- because the mainframe resided in one physical location and
represented a considerable investment. Centralized decision making, purchasing,
maintenance, and staff kept these early computing behemoths running.
In the 1980's, what technology allowed companies to shift to a decentralized
governance? - ANSWER-Personal Computer (PC)
What is the difference between centralized and decentralized governance? -
ANSWER-Centralized: bring together all staff, hardware, software, data, and
processing into a single location.
Advantages- common data, one voice for negotiating supplier contracts, faster
decision making less people, access to large capacity, economies of scale and
shared cost structure
Disadvantages: technology may not meet local needs, slow support for strategic
initiatives, lack of business unit control, schism between business and IT org., lack of
business unit control of overhead
Decentralized: scatter these components across different locations to address local
business needs.
Advantages- technology customized to local business needs, close partnership
between IT and business units, greater flexibility, business unit control of overhead
costs,
Disadvantages- difficulty in maintaining global standards, higher infrastructure costs,
difficulty in negotiating preferential supplier agreements, loss of control
Know the different archetypes of governance (i.e. IT monarchy, federal, feudal,
business monarchy, and IT duopoly) - ANSWER-Business Monarchy- C-exec
Verified Answers
What method of IT funding is the most equitable? - ANSWER-Chargeback systems:
IT costs recovered by charging individuals, departments, or business units based on
actual usage and cost
- Seen as more equitable bc costs are distributed based on usage or consumption of
resources, ensuring that the largest portion of the costs are paid for by the group or
individuals who consume it the most.
What is the difference between ROI, IRR, NPV, EVA< and payback - ANSWER-ROI
(return on investment)- Tells you if you will gain from the investment of interest
IRR (internal rate of return) - represents the rate that is earned on an investment.
The rate is compared to a target that is determined by corporate policy
NPV (net present value) - accounts for the time value of money. NPV discounts the
cash flows from future periods as being worth less than immediate cash flows.
EVA (economic value added) - determines the amount of benefit of an investment
that exceeds the costs of the capital used for the initial investment.
Payback period - computes how long a firm estimates it must wait until all costs are
finally recouped.
What are the common types of IT monitoring tools? - ANSWER-The balanced
scorecard and IT dashboards
Balanced scorecard: focuses attention on the organization's value drivers.
Companies use scorecard to assess the full impact of their corporate strategies on
their customers and workforce as well as their financial performance. Provide
summary information gathered over a period of time
IT dashboards: summarizes key metrics for senior managers in a manner that
provides quick identification of the status of the organization
provides a snapshot of metrics at any given point in time
What should a manager create to justify an IT investment? And what should be
included in this? - ANSWER-Business Case
Executive summary
Overview and intro
Assumptions and rationale
Project summary
,Financial discussion and analysis
Benefits and business impact
Schedule and milestones
Risk and contingency analysis
Conclusion and recommendations
Appendices
In the early days of IT, who would the CIO report to? And why? And who does the
CIO report to now? And why? - ANSWER-In the early days, the CIO reported to the
CFO- The role was predominantly responsible for controlling IT costs.
Now, CIO reports to the CEO or the Board of Directors due to the role being an
official "C-Suite" level position- Involved with operational and strategic tasks related
to IT. Responsible for all IT responsibilities throughout the organization
Why is valuing an IT investment difficult? - ANSWER-The systems are complex, and
calculating the costs is an art, not a science.
Because many IT investments are for infrastructure, calculating a payback period
may be more complex than other types of capital investments.
Many times the payback cannot be calculated because the investment is a necessity
rather than a choice without any tangible payback
What are the four asset classes of IT investments? (4) - ANSWER-1. Transactional
systems: Streamline or cut costs on the way business is done (equivalent to Level 1
in the Business Maturity Model)
2. Infrastructure systems: Provide the base foundation of shared IT services used for
multiple applications such as servers, networks, tablets, or smartphones (equivalent
to Level 2 in the Business Maturity Model)
3. Informational systems: Provide information used to control, manage,
communicate, analyze, or collaborate (equivalent to Level 2 in the Business Maturity
Model)
4. Strategic systems: Gain competitive advantage in the marketplace (equivalent to
Level 3 in the Business Maturity Model)
What mechanisms are used to create and ensure good IT governance? (3) -
ANSWER-1. Policies: useful for defining the process of making a decision under
certain situations, but when environment is complex, policies may be too rigid
2. Review Board: committee that is formally designated to approve, monitor, and
review specific topics
3. IT steering committee: also called an IT governance council. Such a committee is
composed of key stakeholders or experts who provide guidance on important IT
issues.
What is a balanced approach to managing a company's IT organization? -
ANSWER-Federalism - Structure between Centralized and Decentralized (p208)
, What type of organization management does IT use to control most of its
infrastructure in one location? - ANSWER-Centralized IS organization - does not
refer to IT architectures but to decision‐making frameworks
What type of organizational management should a company use if it is attempting to
obtain the advantages derived from both centralized and decentralized
organizational paradigms? - ANSWER-Federalism- a structuring approach that
distributes power, hardware, software, data, and personnel between a central IS
group and IS in business units.
What are the benefits of federalism? - ANSWER-Economies of scale
Control of standards
Critical mass of skills
Users control IT priorities
Business units have ownership
Responsive to business unit's needs
IT vision and leadership
Group-wide IT strategy and architecture
Strategic control
Synergy ???
In the 1960's, what technology dictated a centralized approach to governance? -
ANSWER-Mainframes- because the mainframe resided in one physical location and
represented a considerable investment. Centralized decision making, purchasing,
maintenance, and staff kept these early computing behemoths running.
In the 1980's, what technology allowed companies to shift to a decentralized
governance? - ANSWER-Personal Computer (PC)
What is the difference between centralized and decentralized governance? -
ANSWER-Centralized: bring together all staff, hardware, software, data, and
processing into a single location.
Advantages- common data, one voice for negotiating supplier contracts, faster
decision making less people, access to large capacity, economies of scale and
shared cost structure
Disadvantages: technology may not meet local needs, slow support for strategic
initiatives, lack of business unit control, schism between business and IT org., lack of
business unit control of overhead
Decentralized: scatter these components across different locations to address local
business needs.
Advantages- technology customized to local business needs, close partnership
between IT and business units, greater flexibility, business unit control of overhead
costs,
Disadvantages- difficulty in maintaining global standards, higher infrastructure costs,
difficulty in negotiating preferential supplier agreements, loss of control
Know the different archetypes of governance (i.e. IT monarchy, federal, feudal,
business monarchy, and IT duopoly) - ANSWER-Business Monarchy- C-exec
