Sunday 9 September 2007

MIT CISR Research on IT Portfolios, IT Savvy and Firm Performance

While waiting for my next flight to Houston at Atlanta airport, I read the Research Briefings published by MIT CISR on their research on IT portfolios, IT Savvy and Firm Performance. The points that I found useful for my work, are noted below.

The investment in IT by firms can be viewed using the portfolio concept. MIT CISR has identified four asset classes in which firms make their IT investments. Based on their research, they have also given the breakup of IT investment across these asset classes for an average firm as per data collected in year 2005. The first asset class is Infrastructure, which typically accounts for 46% of total IT investment. Infrastructure systems provide IT capability to support the applications. The second asset class is Transactional, which accounts for 26% of average IT investment. Transactional systems utilize the infrastructure and are used to cut cost or increase throughput for the same cost. The third asset class, Informational accounts for 17% of average IT investment. The Informational systems typically summarizes the transactional systems and provide information for any purpose including to account, control, report, communicate, collaborate or analyze. They make use of both infrastructure and transactional systems. The final asset class, Strategic, accounts for 11% of average IT investment. Like Informational systems, Strategic systems use both infrastructural and transactional systems and are used for gaining competitive advantage or position in market place.

Beyond providing overall average figures, the research briefing also provides the average figures for industries. So if we know these figures for a particular firm, we can compare them with the industry average to gain some useful insights. The research briefing also provides average figures for firms having different business strategies such as cost focused, agility focused and balancing cost and agility.

Another interesting finding from MIT CISR research is that firms with more firm-wide IT savvy have better pay-off associated with all their IT investments. The IT savvy is defined as a set of practices and competencies that add value to each IT dollar invested. The researchers have identified five characteristics of such firms. The first three characteristics are practices related to IT use while the last two are the competencies needed for high IT savvy.
  1. More IT use for internal and external communication and work practices.
  2. More business transactions digitized.
  3. More use of Internet and open standards.
  4. Higher IT skills of both business and IT employees.
  5. More senior management and business unit involvement in IT decisions.
The research briefing provides one-page questionnaire for IT savvy self-assessment.

Obviously, this research briefing has many more interesting points to know and understand. But right now I am going to stop here because I am picking up only those points that are apparently useful for my work. On top of that, the departure time of my flight is coming nearer. -:) Anyway, if you wish to read the entire research briefing, then you can find it from the web site of MIT CISR.

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