Ch8 Test Bank Answers The Business Of Information Technology

File: chapter8TestBank.docx, Chapter 8, The Business of Information Technology

Multiple Choice

1. Which of the following plans is designed to counter a manmade or natural disaster that could cripple an enterprise?

1. Business Continuity Plan
2. Disaster Recovery Plan
3. Business Disaster Plan
4. Disaster Business Case
5. Business-IT Maturity Model

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

a) Promoting enterprise security.

b) Participating in setting and implementing strategic direction.

c) Innovating current processes.

d) Managing data, information and knowledge

e) All of the above

3. According to the research by Peter Weill, a firm that boosts investments in infrastructure is typical of those firms with a focus on (1) _______ and a firm that boosts investments in transaction systems is typical of those firms with a focus on (2) ______

a) (1) transactions (2) connections

b) (1) savings (2) expansion

c) (1) cost (2) ability

d) (1) agility (2) cost

e) (1) ability (2) agility

4. The responsibility of the IT organization is to:

1. Manage core business functions like selling, accounting and manufacturing.
2. Partner with business managers to ensure the right IS exists to support the business strategy.
3. Set the business strategy.
4. Have sole responsibility for building information systems for the organization.
5. Design business processes.

5. 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.

1. strategic systems
2. infrastructure
3. informational systems
4. transactional systems
5. social media

6. Which method of IT funding is the most equitable, as the costs associated with IT are based on use?

1. Allocation
2. Corporate budgeting
3. Usage
4. Distributed
5. Chargeback

7. 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 which value?

1. RCO
2. TCO
3. ROI
4. NPV
5. EVM

8. Activity-based costing _____________

1. groups costs into meaningful buckets that are then distributed based on the activity or product they support.
2. is useful for allocating small project work.
3. charges all costs to “cost centers.”
4. considers only initial capital investments.
5. calculates ongoing maintenance costs.

9. Which financial calculation provides a percentage rate that measures the relationship between the amount the business gets back from an investment and the amount invested?

1. IRR
2. ROI
3. Payback
4. NPV
5. EVA

10. Scorecards provide a summary of information gathered over a period of time. Another common IT monitoring tool is the:

1. baseline
2. metrics
3. portfolio
4. dashboard
5. monitor

11. 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?

1. Allocation
2. Corporate budgeting
3. Usage
4. TCO
5. Chargeback

12. 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?

1. Allocation method
2. Corporate budget method
3. Usage method
4. Distributed method
5. Chargeback method

13. To justify an IT investment and receive necessary support and approval, a manager must often create a(n):

1. IT portfolio.
2. community plan.
3. business case.
4. workflow diagram.
5. business technology plan.

14. Building a business case for an IT investment:

1. Allows management to establish priorities for investing in different projects.
2. Helps gain commitment for the IT investment from business managers.
3. Creates a basis for monitoring the investment.
4. Identifies the benefits of the investment.
5. All of the above.

15. Critical to the business case is the identification of both _________ and ________.

1. costs; risks
2. costs; benefits
3. advantages; disadvantages
4. assumptions; risks
5. benefits; detriments

16. A local marketing firm is considering launching a new and extensive social media marketing campaign. This investment of resources is being looked at for the duration of the project since it is anticipated to last at least 5 years. What financial calculation should be used to compute the investment’s value, taking into account the time value of money?

1. ROI
2. NPV
3. EVA
4. IRR
5. TCO

17. 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?

1. ROI
2. NPV
3. EVA
4. IRR
5. FV

18. A CIO must spend part of the day performing _____ tasks and some part of the day working on operational tasks. Rarely can a CIO focus on just one task in any given day.

1. Administrative
2. Strategic
3. Database
4. Financial
5. Technology

19. 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 ____.

1. CFO; CEO
2. CEO; CFO
3. CFO; COO
4. COO; CEO
5. CEO; CTO

20. Which dimension of the balanced scorecard answers the question “How do customers see us?”

1. Customer perspective
2. Innovating and learning perspective
3. Internal business perspective
4. Financial perspective
5. Supplier perspective

21. Which dimension of the balanced scorecard answers the question “How do we look to shareholders?”

1. Customer perspective
2. Innovating and learning perspective
3. Internal business perspective
4. Financial perspective
5. Supplier perspective

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

1. Chief Mobility Officer
2. Chief Social Media Officer
3. Chief Knowledge Officer
4. Chief Privacy Officer
5. Chief administrative assistant

23. 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?

1. Innovation
2. Efficiency
3. Cessation
4. Work force reduction
5. Doing new things

24. Valuing an IT investment is difficult for of many reasons. One reason is:

1. Many IT investments are necessities and payback is hard to calculate.
2. Increased customer satisfaction is not valued enough to justify costs.
3. IT investments often add no real business value.
4. IT managers do not see the need to value an investment whose payback period is relatively short.
5. IT is seen as “a necessary evil.”

25. The balanced scorecard:

1. Is a tool used to communicate the organizational metrics using a traffic light approach (red/yellow/green).
2. 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.
3. Focuses its attention on an organization’s financials.
4. Is used to communicate the TCO for an IT investment.
5. Is one of many metrics used to evaluate the value of an IT investment.

26. All of the following are methods used to value an IT investment EXCEPT:

1. Payback analysis
2. ROI
3. NPV
4. CTO
5. IRR

27. An IT dashboard provides:

1. Summary information gathered over a period of time.
2. Statistics on system usage.
3. A distraction from where more IT attention should be focused.
4. Current and critical measurements for the organization in an easy to read manner.
5. A snapshot of a firm’s financial data at any given point in time.

28. All of the following are qualities of a dashboard EXCEPT:

1. Highly summarized
2. Key metric driven
3. Raw data
4. Effective Visualization
5. Alerts

29. While a relatively simple method for funding, corporate budgeting:

1. helps control the costs of IT.
2. may result in an IT organization that is less end-user oriented.
3. encourages sharing of funding resources between IT and business units.
4. levies charges on specific users or business units.
5. gives business managers sole control over IT decisions.

30. Four asset classes of IT investments include:

1. Financial Systems
2. Marketing systems
3. Control systems
4. all the above
5. none of the above

True/False

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

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

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

34. The scope of responsibilities for an IT organization seems to expand with increased IT maturity.

35. Financial measures are the sole means for making management decisions.

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

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

Ans; False (Medium)

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

39. There are three main ways to handle funding for IT, including chargeback to users, allocation of costs to users, and providing IT services from a corporate budget.

40. TCO, discussed by Gartner, stands for Technology Chief Officer

41. Traditional valuation methods such as ROI, NPV, and IRR cannot be applied to information technology because they are technical, not business-oriented.

42. IT leaders must be part of the business strategy discussion.

Short Answer

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

44. A model is helpful in teasing out the differing needs for managing IT at different levels of sophistication of the IT function.

Response: See page 167

45. Two methods for communicating metrics are dashboards and _______.

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

47. The costing technique looks beyond the initial capital investment of an IT solution and includes costs associated with technical support, administration, training, and system retirement.

48. TCO stands for .

49. CIO stands for .

50. The process called “true-up” is used to balance true expenses against payments made for the funding method.

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

Essay

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

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

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

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

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

57. 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 one-third 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?

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

59. 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.

60. 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?

61. What can a manager expect from the IT organization?

Matching

62. 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.

63. 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.

64. 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.

65. Match the activity an IT organization provides with its description.

66. Match the title with its responsibility.

67. Match the component of the business plan with its objective.

68. 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.

69. 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.

70. Match the dashboard with its appropriate description.

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