Smart Data: Enterprise Performance Optimization Strategy

CASE STUDY: IT CAPITAL BUDGETING USING A KNAPSACK PROBLEM

An example of more efficient and cost effective information technology (IT) support performance is demonstrated in the case example IT Capital Budgeting using a Knapsack Problem [9]. The knapsack problem addresses combinatorial optimization. It derives its name from the maximization problem of choosing the best essentials that can fit into one bag to be carried on a trip. Given a set of items, each with a weight and a value, determine the number of each item to include in a collection so that the total weight is less than a given limit and the total value is as large as possible.

Presenting this case utilizes the IDEF lexicon. The activities are proposed heuristic solution procedures. The inputs are the data for the simulation. Controls consist of the performance of the two ranking methods. Outputs are the higher after-tax profits. Finally, the mechanism is the simulation method used to solve the problem.

In SOE, much of the smart data is heuristics, algorithms, and mathematical methods to implement these improvements. For example, the capital budgeting problem is an activity that decision makers face when selecting a set of capital expenditures that satisfy certain financial and resource constraints. In this example an information technology capital budgeting (ITCB) problem is described and it is shown that the ITCB problem can be modeled as a 0–1 knapsack optimization mechanism. Two different simulated annealing (SA) heuristic ...