Information Technology in Business: CHAPTER 4 : MEASURING INFORMATION TECHNOLOGY'S SUCCESS

Key performance indicator – measures that are tied to business drivers
Metrics are detailed measures that feed KPIs
Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals

EFFICIENCY AND EFFECTIVENESS

· Efficiency IT metric – measure the performance of the IT system itself including throughout speed and availability

· Effectiveness IT metric – measures the impact IT has on business processes and activities including customers satisfaction conversion rates and self-through increases

BENCHMARKING – BASELINING METRICS

· Regardless or what is measured, how it is measured and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – beseline values the system seek to attain

· Benchmarking – a process of continuously measuring system results, comparing those results to optimal system performance and identifying to improve system performance

THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS

· Efficiency IT metrics focus on technology and include :

ü Throughput - the amount of information that can travel trough a system at any point

ü Transaction speed - the amount of time a system takes to perform a transaction

ü System availability – the number of hours a system is available for users

ü Information accuracy – the extent to which a system generates the correct results when executing the same transaction numerous times

ü Web traffic – includes a host of benchmarks such as the number of page views, the number of unique visitors, and the average time spent viewing a Web page

ü Response time –the time it takes to respond to user interactions such as a mouse click

· Effectiveness IT metrics focus on an organization’s goals, strategies, and objectives and include:

ü Usability – The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the numbers of clicks required to find desired information.

ü Customer satisfaction – Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.

ü Conversion rates – The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.

ü Financial – Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).

· Security is an issue for any organization offering products or services over the Internet.

· It is inefficient for an organization to implement Internet security, since it slows down processing

v However, to be effective it must implement Internet security

v Secure Internet connections must offer encryption and Secure Sockets Layers (SSL denoted by the lock symbol in the lower corner of a browser) .

· Web Site Metrics:

ü Abandoned registrations – Number of visitors who start the process of completing a registration page and then abandon the activity.

ü Abandoned shopping carts – Number of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.

ü Click-through – people who visit a site, click on an ad, and are taken to the site of the advertiser.

ü Conversion rate – potential customers who visit a site and actually buy something.

ü Cost-per-thousand (CPM) – sales dollar generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.

ü Page exposures – average number of page exposure to an individual visitor.

ü Total hits – number of visits to a web site, many of which may be by the same visitor.

ü Unique visitor – number of unique visitors to a site in a given time. This is commonly used by Nielsen/Net ratings to rank the most popular Web site.

SUPPLY CHAIN MANAGEMENT METRICS

ü Back order – an unfilled customer order.

ü Customer order promised cycle time – the anticipated or agreed upon cycle time of a purchase order.

ü Customer order actual cycle time – to actually fill a customer’s purchase order.

ü Inventory replenishment cycle time – measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.

ü Inventory turns ( inventory turnover ) – the number of times that a company’s inventory cycles or turns over per year.

CUSTOMER RELATIONSHIP MANAGEMENT METRICS