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AACS3034 Managing Information Systems CHAPTER 3Page 1 of 10CHAPTER 3 Strategic Case for IT Investment Learning Outcomes After learning this chapter, student will be able to: •Describe different types of costs and benefits •Evaluate models for assessing the business value of ISs. •Obviously, the justification for an IT investment is that it will increase income, either through cost savings or by increased revenues. •Thus, determination on costs & benefits of an investment is essential, and can be determined by using cost/benefit analysis. •3 steps process: To estimate the anticipated development and operation costs. To estimate the anticipated financial benefits Calculate the detail estimates of costs and benefits 3.1 Cost categories•Development Costs– those costs that are incurred during the process of development •Development costs categories: Salaries and wages Equipment and installation Software and licenses Consulting fees and payments to third parties Training Facilities Utilities and tools Support staff Travel and miscellaneous •Operational Costs– those costs that are incurred after the outcome is put into production. •Once the new product is up and running, normal operating costs are incurred every year. •Generally it included only the costs that are directly related to the new system and its maintenance. •Operation costs categories: Connectivity Equipment for maintenance Costs to upgrade software licenses Computer operations Programming support
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