Executive Summary

Information Technology (IT) investment decision-making impacts all

industries but sometimes in different ways. Research on IT investment
decision making highlights the importance of the use of IT investment
evaluation techniques and the major differences in their use require a
substantial need for understanding a wide variety of IT investment
methodologies to satisfy decision-making needs. To provide useful decision-
making in IT investments today requires a broad understanding of the varied
tools IT investment methodologies. The term paper is mainly focused on the
IT investment pattern and decision making in EXIM BANK a renowned
financial organization in Bangladesh. The term paper shows the way EXIM
BANK has structured its IT investment policy and the methodology they
follow for the evaluation of any IT investment decision. At last a brief
process is written about the pattern and method of IT investment decision
makings in EXIM BANK.

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IT Investment is a term that applies to investing in equipment, applications, servers and
basic technologies. According to Weill and Olson IT Investment are the expenses associated
with acquiring computers, communications, software, networks and personnel to manage and
operate a management information system.

There are several methodologies that are used in the case of IT Investment Decision makings.
The methods have both advantages and disadvantages, but they are frequently used by an
organization to take the right decision in terms of IT Investment. Some of the Methodologies
are:

Analytical Hierarchy Process: The process calculates the overall score of decision-makers
pair wise comparisons.

Balanced Scorecard: This method evaluate investment from the users, business value,
efficiency, and innovation/learning perspectives.

Critical Success Factors: This method obtains, compare and rank factors critical to business
success and based on these rankings, deduce investment priorities.

Accounting Rate of Return: This method compare average after-tax profits with initial cost.

Delphi Method: This method Obtain consensus of experts opinion concerning the best
alternative investment.

Game Theory: This method Calculate payoff of investment based on actions of the
competition, mathematics and economic theory.

Payback Period: This method calculates time required to recoup initial cost.

Information Economics: Calculate the overall value of an investment based on enhanced

ROI, business domain, and technology domain criteria.

Satisfaction and Priority Surveys: Survey and compare user and MIS professionals
opinions on the effectiveness and importance of installed systems.

Decision Theory: Calculate the expected value of investing in alternative investments.

It is important to know where IT investment and decision-making methodologies fit into the
general planning framework of an organization. To understand their role there is a basic MIS
hierarchical planning stage which helps to form a well understood strategy to go ahead for an
IT Investment. There are three basic stages of planning in all organizations and in all
functional areas.

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After the strategic planning stage there comes the implementation stage. In this case there are
several implementation strategies. Some of them are:

Direct Conversion: If there is only capacity or space allowed for one system to operate at a
time or that the existing system is too costly, or dysfunctional to ongoing operations.

Parallel Conversion: If the cost of shutting down the existing system in prohibitive.

Phased Conversion: If the architecture of the existing system will permit the gradual updating
of new modules or the costs of a completely new system are beyond the resources of the firm.

Pilot Conversion: If the system has features that need to be examined in use or the risk of
converting entire system is too risky or expensive.

The Implementation Stage is mainly done in order to check against the goals and objectives
set at all the strategic, tactical and operational planning stages. It is a final check to make that
the cost and benefits observed in step 6 and 7 and expected in the new system benefits are
achieved in the end that was developed over all nine steps in the MIS planning process.

Besides all of these there are also some qualitative and qualtitive measurements are used to
evaluate and measure the IT Investment performances. Some of them are:

Profitability Measures:

Return on equity: Measures profitability of the investment to the owners.

Return on Assets: Measures profitability and how efficiency assets were utilized.

Return on Investment: Measures profitability based on total investment, both debt and
equity.

Return on sales: Measures earnings per share value.

Earnings per Share: Measures earnings per share value.

Revenue Growth: Measures growth in revenue over the prior period.

Efficiency measures:

Sales by Total Assets: Measures how efficiently assets were used to generate sales.

Sales by Employee: Measures sales ability effectiveness.

Inventory Turnover: Measures the liquidity of inventory and how fast it is sold.

By the aggregation of all these processes an organization evaluates there IT Investment

Decision Making process.

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IT Investment Decision Making in EXIM Bank:

EXIM Bank- Export Import Bank of Bangladesh Ltd. was named at first as BEXIM Bank
BEXIM stands for Bengal Export Import of Bangladesh. This commercial Bank was opened in
August 03, 1999 with some new innovative visions in customer services. The Bank received
the certificate of incorporate no.C-37864 (2164)/99 under the commencement of the business
on the same day by the section 150(2) under companies Act. A part from the head office in
Dilkusha C/A, it started its first local branch in Motijheel C/A simultaneously in order to
provide all kinds of Banking support to the clients. On December 02, 1999 the second
branches both in Dhaka City and other cities. Slogan of the EXIM Bank: Local Bank Global
Network

Vision:

The gist of the banks vision is Together towards Tomorrow. Export Import Bank of
Bangladesh Limited believes in togetherness with its customers, in its march on the road to
growth and progress with service. To achieve the desired goal, there will be pursuit of
excellence at all stages with climate of continuous improvement, because, in Exim Bank, the
line of excellence is never ending. Banks strategic plans and networking will strengthen its
competitive edge over others in rapidly changing competitive environment. Its personalized
quality services to the customers with trend of constant improvement will be the cornerstone
to achieve our operational success.

Mission:

The Banks mission gives emphasis to:

Provide quality financial services especially in Foreign Trade

Continue a contemporary technology based professional banking environment
Maintain corporate & business ethics and transparency at all levels
Sound Capital Base
Ensure sustainable growth and establish full value to the honorable stakeholders
Fulfill its social commitments and
Above all, to add positive contribution to the national economy

Corporate Culture:

Organizational culture is considered as an essential component of business corporations as it

has the ability to bind organizational members together. The culture and values of Exim bank
have been proved as a source of competitive advantage for us and are acting as a key
component to establish the relationship between the bank and its employees and , in turn ,
between its employees and its customers. The banks culture and values also encourage
customers and employees to join us and stay with Exim Bank.

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ICT Policy of Exim Bank:

Information & Communication Technology (ICT) plays a vital role in achieving the business
objectives of any organization in this turbulent and ever volatile business environment. For
this reason, many organizations have already automated their business processes fully to
provide cost effective sophisticated electronic services to their customers. It enhances
customer satisfaction with the ultimate result of increased number of more loyal and trusted
customers at lower cost.
Science banks play with different kinds of information, ICT has bought a major change in the
banking industry. Instead of providing the service through bank counter, customers are
encouraged to enjoy the service through various electronic delivery channels like ATM, POS,
Internet, cell phone etc. All information are collected, processed, stored, and propagated through
ICT enabled devices. This paperless banking system enables the bank personnel to use computer
and other digital devices to complete their day-to-day work where systematic procedure and
policies are very much important to guide the users of the system to achieve the mission and
vision of the bank and to ensure proper usage of customer information along with the proper
protection of the Information System assets.

For these major reasons Exim Bank has made a serious step towards achieving its goals and
objectives by investing in the IT.

Computerization Strategy:

Currently Exim Bank is maintaining a wide area network (WAN) using the network of
Metronet Bangladesh and the network of Advance Data Networks. All branches of Dhaka city
are connected with Head Office through Metronets optical fiber network and all the branches
outside of Dhaka are connected with Head Office through ANDs VSAT network. The
centralization of banking software is going on. After implementing this centralization project,
the bank will be able compete with its competitor more favorably. Gradually the bank will
move towards paperless banking transactions. All the information will be collected, processed,
stored and disseminated electronically. There will be no manual register or books for
information processing and storage in the long run.

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ICT Infrastructure:

The bank is now using a centralized Core Banking system where all the branches are
connecting to the banking software through Wide Area Network (WAN). Head office divisions
are also using the same core banking software. Each branch and Head Office is using Local
Area Network (LAN) for internal connection. These LANs are connected with each other
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using CISCO routers through 3 party networks. The branches are now conducting all sorts of
any branch banking services. The banking software is using Oracle database. The IT division
has developed a number of support software using Oracle database some of which are
running individually in the branch (CL/CIB, IPO Collection etc) and Head Office (CL/CIB,
Inventory, etc) and others are running centrally in the Head Office (Payroll, LC Reporting
system etc).
The bank has taken a comprehensive automation plan where all the where all the branches will
be connected through a Data Center (DC) and a Disaster Recovery Center (DRC) through at
least two telecommunication lines. These DC and DC will be the central storage and
processing house of all information of the bank. The communication infrastructure will consist
of internet technology. All the modern electronic delivery channels like Internet, Mobile banking,
ATM/POS service etc. will be provided from these DC &DRC.

In order to complete the ICT policy of Exim Bank following policies have been developed to
effectively maintaining the ICT system of Exim Bank:

ICT management policy

Risk Management policy
IT Security policy
Computer & Network usage Policy
Antivirus Policy
Internet and E-mail Policy
Business Continuity and Disaster Recovery policy

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ICT Management Policy:
In order to attain the goals and objectives of Exim Bank the ICT Policy of Exim bank has
given the following guide lines:

1. An organogram should be prepared and maintained according to the need of the

ICT system.
2. The organogram should be reviewed once in a year.
3. The IT division and Internal IT Audit department should be properly staffed
with experienced and qualified persons having relevant academic background.
4. Each and every employee under IT division should be given specific job
responsibility.
5. Fallback plan should be given to the support personnel for each of the key
support activities.
6. Whole IT tasks of Exim Bank should be maintained in the following way.

In order to properly manage the ICT system of Exim Bank, the IT division should be divided
into the following departments segregating the duties and responsibilities of the personnel of
the division:
Helpdesk management department
Hardware department
Software Development & Database Administration department
Banking Software Solutions department
Network and Communications department
IT Security Management department

Risk Management Policy:

Banks are increasingly using sophisticated digital technology for banking activities with a
view to achieve more customer satisfaction with less cost. In addition, it increases the
efficiency of the banking and payment system, benefiting consumers and merchants leading to
bringing additional risks. These risks must be balanced against benefits i.e. must be controlled.
Under this advanced and highly technical ICT environment banks must ensure that critical
systems are not threatened by the risk exposures the banks take. For this purpose, a risk
management process consisting of assessing risks, controlling risk exposure, and monitoring
risks should be in place.

The risk management process includes:

1. Effective risk management system shall be in place for any new processes and systems
as well as a post-launch review.
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 2. Use of software and programs for security risk assessment analysis shall be
restricted and controlled.
3. The risk management function shall ensure awareness of and compliance with the itand
IT security policy and to provide support for investigation of any IT related frauds and
incidents.
IT Security policy:

This portion describes the Information Technology security Policy of Export Import Bank of
Bangladesh Limited. All concerned either in the branches or in the Head Office divisions of
the bank shall observe and follow the guidelines provided in this document.
The policy statements are developed for all levels of users acting in different roles in the ICT
system of the bank including general users of different software used in the bank, all officers
and executives of IT division responsible for maintaining the system, and the members of the
top management of the bank. In order to quickly identify the responsibility of different group
of roles for each policy statement, a tag is attached to the end of each policy statement (section
6 to section 13) for ease of identification. Multiple tags can be attached to a single policy
statement if that statement is applicable to multiple roles.

Computer and Network Usage Policy:

Bank deals with the sensitive customer information along with other business information.
Availability, integrity, confidentiality and ethical use of the information depends on the habit
of the users of the ICT system of the bank through which electronic banking services are
provided to the customers.

Since ICT leverages each individuals ability to access and process information from remote
sources, users must be careful about the sensitive customer information, other business
information, maintaining healthy information infrastructure of the bank. This Usage Policy
codifies what is considered appropriate usage of computers, networks, wireless device and
other related digital devices used in corporate Intranet of Exim Bank. The purpose of this
Policy is to help ensure a healthy information infrastructure that supports trouble free
electronic banking services to the customers.

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Antivirus Policy:
All Windows computers (clients and servers) connected to Exim Banks network (herein referred
to as "the network") or networked resources shall have anti-virus software (preferably the most
current version) correctly installed, configured, activated, and updated with the latest version of
virus definitions before or immediately upon connecting to the network. If deemed necessary to
prevent viral propagation to other networked devices or detrimental effects to the network,
computers infected with viruses or other forms of malicious code (herein collectively referred to
as "virus" or "viruses") shall be disconnected from the network until the infection has been
removed.

If a Windows computer does not have anti-virus software installed, it shall be installed according
to one of the two following methods:
If the installation source is a CD-ROM, the anti-virus software shall be installed before
establishing any connection to the network. Upon establishing the initial network connection, the
virus definitions shall be updated to the most current version immediately and before loading or
installing any other software or data.
If the installation source is a banks server, the computer shall be connected to the network for
the sole purpose of installing anti-virus software from that server. The installation shall be
performed immediately upon establishing the initial network connection and virus updates
downloaded and installed before loading or installing any other software or data.

Business Continuity and Disaster Recovery Policy:

Exim Bank provides electronic banking services to its valued customers. All Information
collection, processing, storage and dissemination are done in the computers using networking
devices. If it is not properly planned, these electronic banking services will be hampered when
any trouble occurs in the ICT system of Exim Bank. Business continuity planning is a proactive
planning process that ensures these services during any disruptions in the ICT system of Exim
Bank. It includes:

1. Plans, measures and arrangements to ensure the continuous delivery of critical IT

services, which permits the bank to recover its facilities, data and assets.
2. Identification of necessary resources to support business continuity, including personnel,
information, equipment and the IT infrastructure.

Mainly these are the main policies that influences the IT Investment Decision Making activity in
Exim Bank.

IT Investment Decision making approach for Exim Bank:

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Exim Bank uses Cost/Benefit Analysis in the case of any IT Investment decision making
problem. Exim bank generally likes to have a close look over the intangible costs and benefits of
the investment so they prefer the Cost/Benefit Analysis which is a good method for evaluating
both tangible and intangible costs and benefits of any investment. Now the overall process is
shown below:

Defining Problem

Identify Costs and

Benefits

Quantify Costs and

Benefits

Compare Alternatives

Perform Sensitivity
Analysis

Figure: Exim Banks Approach to Cost/Benefit Analysis

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Cost/benefit analysis involves the estimation and evaluation of the net benefits associated with
alternative courses of action. This technique often entails comparing the present value of benefits
associated with an investment to the present value of the costs if the same investment.

Exim Bank generally goes through the following steps to make an IT Investment decision:

Defining Problem:
Defining problem is extremely important in any type of decision making including IT investment
decision-making. Exim Banks process of problem definition involves generating all possible
alternatives and then if necessary narrowing this list down by eliminating unacceptable
alternatives.

Identification of Costs and Benefits:

After defining the problem the next stage Exim Bank goes for identifying the relevant costs and
benefits.

A cost is any expenditure that must be incurred to procure, Install and maintain an IT. For IT
Investment decision-making costs have traditionally been viewed as both tangible and directly
attributed to the system. Exim Bank , on the other hand see intangible costs which dont show
any direct affect rather show an indirect one.

In this step EXIM Bank generally find out some of the tangible and intangible expenses some of
them are:

Tangible Expenses:

Hardware, Software, Telecommunications, Needs specification and updates, Services like:

installation, programming, Personnel like: hiring, training etc.

Intangible Expenses:

Resistance to Change, Inability to Change, Organizational restructuring, Integration of new

system into current situation, Temporary loss of productivity etc.

A benefit is a positive consequence of undertaking an IT investment. Benefit often arises from

making an improvement in the way an organization performs necessary tasks. EXIM Bank
generally looks at the benefits at this way:

1. If The bank saves cost or avoid cost

2. Reduces the error
3. Improves their operational performance
4. Increases their flexibility
5. Improves in the planning and control

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Quantification of Cost and Benefits:
In this step Exim Bank generally goes for the quantification of intangible costs. In this regard
Exim Bank generally follows either of these 2 approaches:

One is to they conduct a surrogate measure analysis

Another they conduct a shadow price technique.

Comparing the Alternatives:

Once all costs and benefits are identified and quantified into a common unit of measure, EXIM
Bank goes for the evaluation of the IT investment under the following criteria:

1. Maximize the ratio of benefits over costs

2. Maximize net present value of net benefits
3. Maximize internal rate of return
4. Shortest payback period

If the bank follows the first criteria then they indentify the cost benefit ratio of the alternatives
they like to invest. After finding the ratios the alternative with highest one gets selected.

In the second criteria the bank fins the NPV of the alternatives and then selects the most eligible
one from the alternatives.

Exim bank hardly uses the IRR techniques but uses the shortest payback period technique.

Sensitivity Analysis:
After taking the decision EXIM Bank do a sensitivity analysis to find out the reliability of the
decision generated from cost/benefit analysis.

At last it can be said that making the right decision in the field of IT Investment is not an easy
task for an organization. This comment also applies for Exim Bank. By following Cost/Benefit
analysis Exim Bank takes the decision about their any of the IT Investment projects. With this
decision making pattern Exim Bank feels comfortable.

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