11.1 © 2002 by prentice hall c h a p t e r 11 understanding the business value of systems and...

11.11.11 © 2002 by Prentice Hall

c h a p t e r

1111 UNDERSTANDING UNDERSTANDING

THE BUSINESS THE BUSINESS VALUE OF VALUE OF

SYSTEMS AND SYSTEMS AND MANAGING MANAGING

CHANGECHANGE


LEARNING OBJECTIVESLEARNING OBJECTIVES• EVALUATE MODELS DETERMINING BUSINESS EVALUATE MODELS DETERMINING BUSINESS

VALUE OF INFORMATION SYSTEMSVALUE OF INFORMATION SYSTEMS

• ANALYZE PRINCIPAL CAUSES OF ANALYZE PRINCIPAL CAUSES OF INFORMATION SYSTEM FAILUREINFORMATION SYSTEM FAILURE

• ANALYZE REQUIREMENTS FOR BUILDING ANALYZE REQUIREMENTS FOR BUILDING SUCCESSFUL SYSTEMSSUCCESSFUL SYSTEMS

• SELECT STRATEGIES TO SELECT STRATEGIES TO MANAGE SYSTEM MANAGE SYSTEM IMPLEMENTATIONIMPLEMENTATION

**

© 2002 by Prentice Hall


MANAGEMENT CHALLENGESMANAGEMENT CHALLENGES

• UNDERSTANDING BUSINESS VALUE UNDERSTANDING BUSINESS VALUE OF INFORMATION SYSTEMSOF INFORMATION SYSTEMS

• CHANGE MANAGEMENT IN CHANGE MANAGEMENT IN INFORMATION SYSTEM INFORMATION SYSTEM SUCCESS & FAILURESUCCESS & FAILURE

• MANAGING MANAGING IMPLEMENTATIONIMPLEMENTATION

**


• CAPITAL BUDGETING MODELSCAPITAL BUDGETING MODELS

• PORTFOLIO ANALYSISPORTFOLIO ANALYSIS

• REAL OPTIONS PRICING MODELSREAL OPTIONS PRICING MODELS

**

UNDERSTANDING BUSINESS UNDERSTANDING BUSINESS VALUE OF INFO SYSTEMSVALUE OF INFO SYSTEMS


CAPITAL BUDGET:CAPITAL BUDGET:• PAYBACK METHOD:PAYBACK METHOD: How long will it take How long will it take

to pay back the investment?to pay back the investment?• RETURN ON INVESTMENT:RETURN ON INVESTMENT: Does return Does return

during useful life of an item exceed the during useful life of an item exceed the cost to borrow money?cost to borrow money?

• COST-BENEFIT RATIO:COST-BENEFIT RATIO: Does the ratio of Does the ratio of benefit versus cost exceed 1?benefit versus cost exceed 1?

**


CAPITAL BUDGET:CAPITAL BUDGET:• PROFITABILITY INDEX:PROFITABILITY INDEX: What is the ratio of What is the ratio of

present value of cash inflow to initial present value of cash inflow to initial investment?investment?

• NET PRESENT VALUE:NET PRESENT VALUE: Accounting for cost, Accounting for cost, earnings & time value of money what is the earnings & time value of money what is the investment worth?investment worth?

• INTERNAL RATE OF RETURN:INTERNAL RATE OF RETURN: Accounting for Accounting for the time value of the time value of money, what is the return money, what is the return rate of an investment?rate of an investment?

**


COSTS:COSTS:

• HARDWAREHARDWARE

• SOFTWARESOFTWARE

• SERVICESSERVICES

• PERSONNELPERSONNEL

**

COSTS & BENEFITS:COSTS & BENEFITS:


TANGIBLE BENEFIT:TANGIBLE BENEFIT:

• INCREASED PRODUCTIVITYINCREASED PRODUCTIVITY

• LOW OPERATING COSTSLOW OPERATING COSTS

• REDUCED WORK FORCEREDUCED WORK FORCE

• LOWER COMPUTER EXPENSESLOWER COMPUTER EXPENSES

• LOWER VENDOR COSTSLOWER VENDOR COSTS

• LOWER CLERICAL/PROFESSIONAL COSTSLOWER CLERICAL/PROFESSIONAL COSTS

• REDUCED GROWTH OF EXPENSESREDUCED GROWTH OF EXPENSES

• REDUCED FACILITY COSTSREDUCED FACILITY COSTS

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INTANGIBLE BENEFIT:INTANGIBLE BENEFIT:• IMPROVED ASSET USE; RESOURCE CONTROL; PLANNINGIMPROVED ASSET USE; RESOURCE CONTROL; PLANNING• INCREASED FLEXIBILITYINCREASED FLEXIBILITY• MORE TIMELY INFORMATIONMORE TIMELY INFORMATION• INCREASED LEARNINGINCREASED LEARNING• ATTAIN LEGAL REQUIREMENTSATTAIN LEGAL REQUIREMENTS• ENHANCED EMPLOYEE GOODWILL, JOB SATISFACTION, ENHANCED EMPLOYEE GOODWILL, JOB SATISFACTION,

DECISION MAKING, OPERATIONSDECISION MAKING, OPERATIONS• HIGHER CLIENT SATISFACTIONHIGHER CLIENT SATISFACTION• BETTER CORPORATE IMAGEBETTER CORPORATE IMAGE

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LIMITATIONS:LIMITATIONS:

• Assume all relevant alternatives have Assume all relevant alternatives have been examined; cost & benefits can been examined; cost & benefits can be expressed as $$be expressed as $$

• Ignore intangible benefitsIgnore intangible benefits

**

CAPITAL BUDGETING CAPITAL BUDGETING MODELSMODELS


PORTFOLIO ANALYSIS:PORTFOLIO ANALYSIS:

ANALYSIS OF POTENTIAL APPLICATIONS ANALYSIS OF POTENTIAL APPLICATIONS TO DETERMINE RISKS & BENEFITS TO DETERMINE RISKS & BENEFITS

• DETERMINE DESIRABLE FEATURES, DETERMINE DESIRABLE FEATURES, ACCEPTABLE RISKS OF REQUIRED SYSTEMACCEPTABLE RISKS OF REQUIRED SYSTEM

• GENERATE PORTFOLIO OF CHARACTERISTICS, GENERATE PORTFOLIO OF CHARACTERISTICS, RISKS FOR EACH ALTERNATIVERISKS FOR EACH ALTERNATIVE

• SCORING MODELSCORING MODEL

**


• IDENTIFY DESIRABLE FEATURESIDENTIFY DESIRABLE FEATURES

• PROVIDE WEIGHTS FOR EACH PROVIDE WEIGHTS FOR EACH (ADD TO (ADD TO 1.00)1.00)

• LOOK AT EACH ALTERNATIVE:LOOK AT EACH ALTERNATIVE:

– WHICH FEATURES ARE PRESENT?WHICH FEATURES ARE PRESENT?

– TO WHAT EXTENT (as an amount)?TO WHAT EXTENT (as an amount)?

– SCORE THE ALTERNATIVESCORE THE ALTERNATIVE

• RANK-ORDER THE ALTERNATIVESRANK-ORDER THE ALTERNATIVES

• SELECT HIGHEST RANKED OPTIONSELECT HIGHEST RANKED OPTION

**

SCORING MODEL:SCORING MODEL:


REAL OPTIONS PRICING REAL OPTIONS PRICING MODELSMODELS

• USEFUL UNDER UNCERTAIN USEFUL UNDER UNCERTAIN CONDITIONSCONDITIONS

• INCLUDE ESTIMATES FOR INCLUDE ESTIMATES FOR MANAGEMENT LEARNING, VALUE MANAGEMENT LEARNING, VALUE OF DELAYING DECISION, OF DELAYING DECISION, VOLATILITY OF COSTS & VOLATILITY OF COSTS & REVENUESREVENUES


CHANGE MANAGEMENTCHANGE MANAGEMENT

WHAT PROCESSES ARE BEST TO WHAT PROCESSES ARE BEST TO CHANGE:CHANGE:

• DESIGNDESIGN

• DATADATA

• COSTCOST

• OPERATIONSOPERATIONS

**


CHANGE AGENTCHANGE AGENT

DURING IMPLEMENTATION, DURING IMPLEMENTATION, INDIVIDUAL ACTS AS CATALYST INDIVIDUAL ACTS AS CATALYST DURING CHANGE PROCESS TO DURING CHANGE PROCESS TO ENSURE SUCCESSENSURE SUCCESS

**


APPROACHES ADOPTION MANAGEMENT ROUTINIZATION

ACTORS' ROLE XXXX XXXX

STRATEGY XXXX

ORGANIZATIONAL XXXX XXXXFACTORS

IMPLEMENTATION STAGESIMPLEMENTATION STAGES

ALL ACTIVITIES LEADING TO ADOPTION, MANAGEMENT, ALL ACTIVITIES LEADING TO ADOPTION, MANAGEMENT, ROUTINIZATION OF INNOVATIONROUTINIZATION OF INNOVATION

IMPLEMENTATIONIMPLEMENTATION


INNOVATION PROCESSINNOVATION PROCESSACTOR CHARACTERISTICS & DEMOGRAPHICS

SOCIAL STATUS

EDUCATION

SOPHISTICATION

ACTOR ROLES

PRODUCT CHAMPION

BUREAUCRATIC ENTREPRENEUR

GATEKEEPER

INNOVATIVE

BEHAVIOR

© 2002 by Prentice Hall


ACTIONS & INDICATORS FOR ACTIONS & INDICATORS FOR SUCCESSFUL SYSTEM SUCCESSFUL SYSTEM


• SUPPORT BY LOCAL FUNDSSUPPORT BY LOCAL FUNDS• NEW ORGANIZATIONAL ARRANGEMENTSNEW ORGANIZATIONAL ARRANGEMENTS• STABLE SUPPLY & MAINTENANCESTABLE SUPPLY & MAINTENANCE• NEW PERSONNEL CLASSIFICATIONSNEW PERSONNEL CLASSIFICATIONS• CHANGES IN ORGANIZATIONAL AUTHORITYCHANGES IN ORGANIZATIONAL AUTHORITY

**

Source: Yin (1981)


ACTIONS & INDICATORS FOR ACTIONS & INDICATORS FOR SUCCESSFUL SYSTEM SUCCESSFUL SYSTEM


• INTERNALIZATION OF TRAINING PROGRAMINTERNALIZATION OF TRAINING PROGRAM• CONTINUAL UPDATING OF THE SYSTEMCONTINUAL UPDATING OF THE SYSTEM• PROMOTION OF KEY PERSONNELPROMOTION OF KEY PERSONNEL• SURVIVAL OF SYSTEM AFTER TURNOVERSURVIVAL OF SYSTEM AFTER TURNOVER• ATTAINMENT OF WIDESPREAD USEATTAINMENT OF WIDESPREAD USE

**

Source: Yin (1981)


FACTORS IN IMPLEMENTATION FACTORS IN IMPLEMENTATION OUTCOMEOUTCOME

CAUSES OF SUCCESS OR FAILURE:CAUSES OF SUCCESS OR FAILURE:

• USER INVOLVEMENT & INFLUENCEUSER INVOLVEMENT & INFLUENCE

• MANAGEMENT SUPPORTMANAGEMENT SUPPORT

• LEVEL OF COMPLEXITY / RISKLEVEL OF COMPLEXITY / RISK

• MANAGEMENT OF MANAGEMENT OF IMPLEMENTATION PROCESSIMPLEMENTATION PROCESS

**


USER-DESIGNER USER-DESIGNER COMMUNICATIONS GAPCOMMUNICATIONS GAP

DIFFERENCES IN BACKGROUNDS, DIFFERENCES IN BACKGROUNDS, INTERESTS, PRIORITIESINTERESTS, PRIORITIES

IMPEDE COMMUNICATION AND PROBLEM IMPEDE COMMUNICATION AND PROBLEM SOLVINGSOLVING

AMONG END USERS AND INFORMATION AMONG END USERS AND INFORMATION SYSTEMS SPECIALISTSSYSTEMS SPECIALISTS

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USER CONCERNS:USER CONCERNS:

WILL SYSTEM DELIVER INFORMATION I WILL SYSTEM DELIVER INFORMATION I NEED?NEED?

HOW QUICKLY CAN I ACCESS DATA?HOW QUICKLY CAN I ACCESS DATA?

HOW EASILY CAN I RECEIVE DATA?HOW EASILY CAN I RECEIVE DATA?

HOW MUCH CLERICAL SUPPORT WILL I HOW MUCH CLERICAL SUPPORT WILL I NEED FOR DATA ENTRY?NEED FOR DATA ENTRY?

HOW WILL SYSTEM OPERATION FIT INTO HOW WILL SYSTEM OPERATION FIT INTO MY DAILY BUSINESS SCHEDULE?MY DAILY BUSINESS SCHEDULE?

**


DESIGNER CONCERNS:DESIGNER CONCERNS:

HOW MUCH DISK SPACE WILL MASTER FILE HOW MUCH DISK SPACE WILL MASTER FILE CONSUME?CONSUME?

HOW MANY LINES OF PROGRAM CODE WILL HOW MANY LINES OF PROGRAM CODE WILL THIS FUNCTION TAKE?THIS FUNCTION TAKE?

HOW CAN WE REDUCE CPU TIME?HOW CAN WE REDUCE CPU TIME?

WHAT IS THE MOST EFFICIENT WAY OF WHAT IS THE MOST EFFICIENT WAY OF STORING THIS DATA?STORING THIS DATA?

WHAT DATABASE MANAGEMENT SYSTEM WHAT DATABASE MANAGEMENT SYSTEM SHOULD WE USE?SHOULD WE USE?

**


LEVEL OF COMPLEXITY & RISKLEVEL OF COMPLEXITY & RISK

• PROJECT SIZEPROJECT SIZE

• PROJECT STRUCTUREPROJECT STRUCTURE

• EXPERTISE WITH TECHNOLOGYEXPERTISE WITH TECHNOLOGY

**


CONTROLLING PROJECT RISKCONTROLLING PROJECT RISK

LOW HIGH SMALL HIGH LOW HIGH LARGE VERY HIGH LOW LOW SMALL VERY LOW LOW LOW LARGE LOW HIGH HIGH SMALL MEDIUM-LOW HIGH HIGH LARGE MEDIUM HIGH LOW SMALL VERY LOW

STRUCTURE TECHNOLOGY LEVEL SIZE RISK HIGH LOW LARGE LOW


CONSEQUENCES OF POOR CONSEQUENCES OF POOR PROJECT MANAGEMENTPROJECT MANAGEMENT

• COST OVERRUNSCOST OVERRUNS

• TIME SLIPPAGETIME SLIPPAGE

• TECHNICAL SHORTFALLSTECHNICAL SHORTFALLS

• FAILURE TO OBTAIN BENEFITSFAILURE TO OBTAIN BENEFITS

**


CAUSES OF POOR PROJECT CAUSES OF POOR PROJECT MANAGEMENTMANAGEMENT

• IGNORANCE & OPTIMISMIGNORANCE & OPTIMISM

• MYTHICAL MAN-MONTH:MYTHICAL MAN-MONTH: Many tasks Many tasks sequentially linked, require trainingsequentially linked, require training

• FALLING BEHIND:FALLING BEHIND: Bad news travels Bad news travels slowly upwardslowly upward

**


CHANGE MANAGEMENT CHANGE MANAGEMENT CHALLENGESCHALLENGES

• ENTERPRISE SYSTEMS:ENTERPRISE SYSTEMS: High risk of High risk of failure, replacing legacy systems, myriad failure, replacing legacy systems, myriad interconnectionsinterconnections

• BUSINESS PROCESS REENGINEERING:BUSINESS PROCESS REENGINEERING: 70% failure rate, deeply rooted in old 70% failure rate, deeply rooted in old processes, employees often unpreparedprocesses, employees often unprepared

**


CHANGE MANAGEMENT CHANGE MANAGEMENT CHALLENGESCHALLENGES

• MERGERS & ACQUISITIONS:MERGERS & ACQUISITIONS: Decline in Decline in shareholder value, difficult to integrate shareholder value, difficult to integrate company systems, organizational company systems, organizational change, worker moralechange, worker morale

**


MANAGING MANAGING IMPLEMENTATION:IMPLEMENTATION:

CONTROL RISK FACTORS:CONTROL RISK FACTORS: Gear tools, Gear tools, methodologies to level of riskmethodologies to level of risk

INTERNAL INTEGRATION TOOLS:INTERNAL INTEGRATION TOOLS:

• FORMAL PLANNING TOOLSFORMAL PLANNING TOOLS

• FORMAL CONTROL TOOLSFORMAL CONTROL TOOLS

**


FORMAL PLANNING TOOLSFORMAL PLANNING TOOLSEXAMPLES:EXAMPLES:

• PROGRAM EVALUATION & REVIEW PROGRAM EVALUATION & REVIEW TECHNIQUE:TECHNIQUE: Diagram of project Diagram of project activities, sequential and concurrent, activities, sequential and concurrent, shows interactions of activitiesshows interactions of activities

• GANTT CHART:GANTT CHART: Shows activities as bars Shows activities as bars along a time line, with beginning, end of along a time line, with beginning, end of each taskeach task

THESE PROVIDE SCHEDULESTHESE PROVIDE SCHEDULES

**


FORMAL CONTROL TOOLS:FORMAL CONTROL TOOLS:

BUDGET:BUDGET: Time, money, resources Time, money, resources

• MONITOR PROGRESS:MONITOR PROGRESS: Completion Completion of tasks, fulfillment of goalsof tasks, fulfillment of goals

• CONTROL RISK FACTORS:CONTROL RISK FACTORS: Cost/benefitsCost/benefits

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EXTERNAL INTEGRATION EXTERNAL INTEGRATION TOOLSTOOLS

• LINK ALL USERS THROUGHOUT LINK ALL USERS THROUGHOUT ORGANIZATIONORGANIZATION

• USE END USERS AS TEAM MEMBERSUSE END USERS AS TEAM MEMBERS• SHARE INFORMATION & PROGRESSSHARE INFORMATION & PROGRESS• INCLUDE TRAININGINCLUDE TRAINING• AVOID COUNTERIMPLEMENTATIONAVOID COUNTERIMPLEMENTATION

**


ORGANIZATIONAL ORGANIZATIONAL FACTORSFACTORS

• JOB DESIGNJOB DESIGN

• STANDARDS & PERFORMANCE STANDARDS & PERFORMANCE MONITORINGMONITORING

• ERGONOMICS: ERGONOMICS: Interaction of people Interaction of people & machines; jobs, health, interface& machines; jobs, health, interface

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• EMPLOYEE GRIEVANCE EMPLOYEE GRIEVANCE RESOLUTION PROCEDURESRESOLUTION PROCEDURES

• HEALTH & SAFETYHEALTH & SAFETY

• GOVERNMENT REGULATORY GOVERNMENT REGULATORY COMPLIANCECOMPLIANCE

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MONITOR PROGRESS:MONITOR PROGRESS: Completion of Completion of tasks, fulfillment of goalstasks, fulfillment of goals

CONTROL RISK FACTORS:CONTROL RISK FACTORS: Cost / Cost / benefitsbenefits

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ORGANIZATIONAL IMPACT ORGANIZATIONAL IMPACT ANALYSIS:ANALYSIS: How will system impact How will system impact structure, attitudes, decision-making, structure, attitudes, decision-making, operationsoperations

SOCIOTECHNICAL DESIGN:SOCIOTECHNICAL DESIGN: Explore Explore group structures, task allocation, job group structures, task allocation, job design for human factordesign for human factor

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““FOURTH-GENERATION” FOURTH-GENERATION” PROJECT MANAGEMENTPROJECT MANAGEMENT

• EMERGING TECHNIQUES TO DEAL EMERGING TECHNIQUES TO DEAL WITH COMPLEXITYWITH COMPLEXITY

• ENTERPRISE-WIDE FOCUSENTERPRISE-WIDE FOCUS

• DRIVEN BY STRATEGIC VISION & DRIVEN BY STRATEGIC VISION & TECHNOLOGYTECHNOLOGY

• MAY REQUIRE SEPARATE PROGRAM MAY REQUIRE SEPARATE PROGRAM OFFICEOFFICE

**


c h a p t e r

1111 UNDERSTANDING UNDERSTANDING

THE BUSINESS THE BUSINESS VALUE OF VALUE OF

SYSTEMS AND SYSTEMS AND MANAGING MANAGING

CHANGECHANGE

11.1 © 2002 by prentice hall c h a p t e r 11 understanding the business value of systems and...

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