Customer Reviews

The Valuation of Information Technology: A Guide for Strategy Development, Valuation, and Financial Planning

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As a 20 year veteran of in-house software engineering and development, I was recently challenged with creating a business case for developing shrink-wrapped software for global sale. A daunting prospect that better have some serious market anaysis and ROI numbers behind it to satisfy the board of directors. I purchased 4 books on the topic before I found Chris Gardners book, and I breathed a sigh of relief flying to headquarters as a studied and highlighted endless passages in the text. I have since read this book end-to-end; and it was worth every penny I paid for it. If you need formula's for valuation this book has them like several others; if you need a book that takes you end-to-end, from marketing considerations to valuation, this is the book for you. I have a multi-million dollar deal sewn up because my business case looked so good. The COO has even told me it was the most impressive software development business case he has ever seen. I used this book to design a marketing approach and build my business case from the ground-up; and it worked. This book will pay for itself a thousand times over if you really need to understand technology valuation. And you know what; you don't need an MBA to understand it or six months off work to read it.

Despite the huge interest in technology stocks and their incredible market volatility in recent years, there have been few sources available for would-be investors wanting to make responsible decisions.

But here's one. Chris Gardner takes you through the bedrock of responsible valuation, discounted cash flow analysis, using an extremely detailed case study of AT&T's acquisition of TCI. He provides the entire AT&T spreadsheet on his website so you can play with it on your own time.

For myself, as an internet equity analyst, the most interesting part of the book was the guide to market research. Gardner has very detailed suggestions on how to decide what to sell, survey what customers want, and estimate how much they'll buy. He cuts some slack for struggling dotcoms looking for customers: "Developers of commercial Internet services have had to rely on their instincts during these early years of the Internet, since market research could not provide much guidance on their prospects."

If you're already in the business, this book provides a good review course in valuation methods; if you're not, it's a good place to start.

Technology and Innovation are proven business drivers for corporate value. Trouble is, not many of us, on or off Wall Street, know how to construct a predictive valuation model, for a technology investment, with any degree of confidence.

Gardner attacks the challenge by presenting a thoughtful approach that synthesizes marketplace business drivers with information system planning; deriving an insightful and sound valuation model.

The book's valuation framework is both comprehensive and detailed (abundant formulas, graphs), but remains accessible to motivated readers by providing problem and solution examples, photographs, and numerous easy-to-understand charts.

Gardner's shareholder value perspective takes technology valuation away from soft metrics, gut feel and elevator pitches, and brings it into the harsh light of financial reality; on this count, the book is most certainly ground-breaking.

Highly insightful, practical and instructive! ....

Dont order this book for business insight, nor for useful high-level frameworks with which to think about technology valuation, because there isn't much of that.

The book is a somewhat academic approach to valuation, most of which anyone who has taken a basic finance course would already know. The treatment of DCF and basic finance reads a little like a physics text book. If the reader is looking for a clear tutorial on valuation and financial planning they would probably be much better off reading a book like Higgins, Analysis for Financial Management.

To be fair there is some quite extensive material beyond just the basics of DCF, such as an intro to statistical analysis of technology utilization and some basics on market research. But for the most part there is not much of practical use, and the author is prone to diverge from his core material and condescend the reader with basic descriptions of things like "multimedia", or the "difference between a PC and a server".

Anyone with a management consulting or investment banking background is likely to be disappointed with this book. It was an utter waste of the 2 hours I spent flicking through it, trying to find the good bits.

The Valuation of Information Technology by Christopher Gardner is a book of limited resource. Only so many readers from very limited backgrounds can truly utilize what this book has to offer as far as valuation goes. Those that would enjoy Gardner's book would most likely be suppliers, customers, computer programmers, etc. For instance, I, as an accountant, found very little information useful in this reading. This is because its title is quite a bit misleading. Instead of offering various methods on the valuation of information technology, this book provides general definitions of information technology and strategies for potential customers. It also involves the objective of an information technology system, gauging a demand estimate, and obtaining feedback upon implementation. This obviously sounds like a tool that someone who was considering a future information technology investment might use. Although there is a small section on a single valuation model that provides an actual valuation of information technology, it leaves much to be covered. It simply considers the cost of a potential system, as well as, the present value of cashflows provided to shareholders. The author himself states that this method utilizes many assumptions, shortcuts, etc. So obviously there is a lot of inherent risk involved in this process. This leaves those wishing to appraise information technology with numerous questions. Accordingly, my recommendation to read this book only extends to those who are wishing to learn more about what information technology is and how to locate that information technology that would be especially suited for their business.

Overall, the book is very serious and contains some very good stuff.

However, it tends to focus on quite specific valuation problems and technology fields (for example, very good case on evaluating a new technology deployment for cable). And it really focus into de minor details.

So if you are involved on these fields and you want to tackle valuation with a very technical approach, this book is for you.

Otherwise, for more general approaches, there are other (not many) alternatives out there (such as Boer, Mum, etc.)

The information and writing style is very old. Mr. Gardner need to doctor the book with modern language and new examples that are applicable to current technology.

The Valuation of Information Technology by Christopher Gardner was one the books assigned me to read in my accounting course. From the title of the book, I expected some topics often discussed in the accounting course, such as valuation of intangible properties on financial statements. However, this book had very limited relevance to such topics. In terms of "valuation", all it talked about was to calculate the net present value of future cash flows generated by an information technology system.

The book focused more on market research and system designing to develop an information technology system that would generate shareholders' value. Through an intensive market research, a customer segment to be served and its need were found, and an information technology system would be designed in such a way that the customers' need and the design of the system were "aligned". According to the book, an information technology system aligned to customers' need is more likely to generate future cash flows and thus shareholders' value.

A shortcoming of this book was the fact that the "valuation" was based solely on the shareholders' value or the appreciation of share price as a result of cash flows generated by an information technology system. As a result, the "valuation" ignored the benefits to other stakeholders and non-cash-flow-generating benefits. In today's business environment, shareholders may be the most important, but not the only, stakeholders of a company; therefore, impact on other stakeholders must be considered to evaluate an information technology system. Also, non-monetary benefits such as improved efficiency from a new information technology system should be as important as monetary benefits such as cash flows generated by the system. One book cannot cover everything, but other stakeholders' perspective and non-monetary benefits are too critical in an evaluation of an information technology system to be just ignored.

This book was not beneficial for me as an accounting-major student, but the valuation process presented in the book may be useful in convincing someone that a new information technology system is worth implementing. You can state the intended customers, how the system is designed to serve the customers best, and how much positive impact the system has on the share price. It will make the discussion more convincing.

The book is structured in a way to lead me to integrate the analysis of an IT business from a holistic approach. It provides an analytical framework to link all operational details which are integral to the strategic objective.