Section 5.5: Bullet Text Study Guide

Management Issues

Creating and managing a coherent IT infrastructure raises multiple challenges:

  • Dealing with scalability and infrastructure change: How can a firm remain flexible when most of the investments in IT infrastructure are fixed cost purchases and licenses? How well does the infrastructure scale? Scalability refers to the ability of a computer, product, or system to expand to serve a large number of users without breaking down.

  • Management and governance: Who will control and manage the firm's IT infrastructure and information systems groups?

  • Making wise infrastructure investments: IT infrastructure is a major investment for the firm, and spending too little, or too much, on purchased and rented components and software can have strong consequences for a firm.

Although each firm will have unique needs and solutions for investing in IT infrastructure, several guidelines can be used in determining whether a firm's investment in IT infrastructure is adequate. In the competitive forces model for IT infrastructure, six factors to evaluate include:
  1. Market demand for (and satisfaction with) the firm's services to customers, suppliers, and employees
  2. The firm's business strategy
  3. The firm's IT strategy, infrastructure, and cost
  4. Assessment of the firm's current information technology
  5. Services of competitor firms
  6. Competitor firm IT infrastructure investments and returns on investments

Figure 5-15


There are six factors you can use to answer the question, “How much should our firm spend on IT infrastructure?”

The total cost of ownership (TCO) model can be used to analyze direct and indirect costs of implementing specific technology. Costs include hardware and software acquisition, installation and training, support and maintenance, infrastructure, downtime, and costs of space and energy.

When all these cost components are considered, the TCO for a PC might run up to three times the original purchase price of the equipment. Hardware and software acquisition costs account for only about 20 percent of TCO, so managers must pay close attention to administration costs to understand the full cost of the firm's hardware and software, and hidden costs such as costs for support staff, downtime, and additional network management

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