Week 10: Valuing Information Systems Investments. MIS 2101: Management Information Systems. Learning Objectives. Discuss how organizations can use information systems to help create a strategic advantage Describe how to create a business case for an information system
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MIS 2101: Management Information Systems
Information systems can be used in three ways to add value to an organization:
Loan processing comparison for 3 methods (from the moment the customer takes the application until the applicant is notified of decision)
Manual loan process – 25 days
Technology-supported process – 5 days
Fully automated process – 1 hour
Computer-based loan system identifies peak times during the year when specific loans are processed
Organizational strategies define the way in which a company plans to gain/sustain competitive advantage
Best-made product on the market
Superior customer service
Achieving lower costs than rivals
Having proprietary manufacturing technology
Having shorter lead times in research and development projects
Having a well-known brand name and reputation
Giving customers more value for their money
Can you think of other examples?
Where does SouthWest Airlines fit?
How do you identify opportunities to use information systems for competitive advantage?
Porter’s Value Chain
Porter’s Five Forces Model
Tool used by managers to identify opportunities for gaining competitive advantage
What are specific examples of how these IS functions
add value and help create competitive advantages?
Why might it be important for systems supporting
these activities to function at an enterprise level?
Examples of situations where IT has increased buyer power?
Examples of situations where IT has increased supplier power?
Examples of situations where IT has increased the threat of substitutes?
Examples of situations where IT has affected the threat of new entrants?
Identification of benefits that the proposed information system will bring to the organization
Easy to identify costs with developing an IS
Difficult to identify productivity gains
Why hasn’t productivity increased at the rate of IS investments?
Information systems may be used in unintended ways
Qualitative Arguments about:
No consideration for costs
Arguments based on the notion that if system is not implemented:
Company loses to a competitor
Goes out of business
Arguments based on:
Contrast expected costs and benefits
Consider the timing of costs and benefits
Why does timing matter?
Total cost of ownership (TCO)
Cost of acquisition
Cost of use
Cost of maintenance
Recurring vs. Non-recurring costs
Tangible vs. Intangible costs
5% increase in sales
Reduction of order entry errors
Improvement to customer service
Improvement in overall perception of a firm