Information Systems: the Foundation of E-Business (CIS 108)

Information Systems: the Foundation of E-Business (CIS 108) Exploring the business of value of IS and Managing Change Lecture NINE (14th March 2005) Amare Michael Desta

LEARNING OBJECTIVES • EVALUATE MODELS DETERMINING BUSINESS VALUE OF INFORMATION SYSTEMS • ANALYZE PRINCIPAL CAUSES OF INFORMATION SYSTEM FAILURE • ANALYZE REQUIREMENTS FOR BUILDING SUCCESSFUL SYSTEMS • SELECT STRATEGIES TO MANAGE SYSTEM IMPLEMENTATION *

MANAGEMENT CHALLENGES • UNDERSTANDING BUSINESS VALUE OF INFORMATION SYSTEMS • CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS & FAILURE • MANAGING IMPLEMENTATION *

UNDERSTANDING BUSINESS VALUE OF INFO SYSTEMS • CAPITAL BUDGETING MODELS • PORTFOLIO ANALYSIS • REAL OPTIONS PRICING MODELS *

CAPITAL BUDGET: • PAYBACK METHOD: How long will it take to pay back the investment? • RETURN ON INVESTMENT: Does return during useful life of an item exceed the cost to borrow money? • COST-BENEFIT RATIO: Does the ratio of cost exceeds benefit? *

CAPITAL BUDGET: • PROFITABILITY INDEX: What is the ratio of present value of cash inflow to initial investment? • NET PRESENT VALUE: Accounting for cost, earnings & time value of money what is the investment worth? • INTERNAL RATE OF RETURN: Accounting for the time value of money, what is the return rate of an investment? *

COSTS & BENEFITS: COSTS: • HARDWARE • SOFTWARE • SERVICES • PERSONNEL *

COSTS & BENEFITS: TANGIBLE BENEFIT: • INCREASED PRODUCTIVITY • LOW OPERATING COSTS • REDUCED WORK FORCE • LOWER COMPUTER EXPENSES • LOWER VENDOR COSTS • LOWER CLERICAL/PROFESSIONAL COSTS • REDUCED GROWTH OF EXPENSES • REDUCED FACILITY COSTS *

COSTS & BENEFITS: INTANGIBLE BENEFIT: • IMPROVED ASSET USE; RESOURCE CONTROL; PLANNING • INCREASED FLEXIBILITY • MORE TIMELY INFORMATION • INCREASED LEARNING • ATTAIN LEGAL REQUIREMENTS • ENHANCED EMPLOYEE GOODWILL, JOB SATISFACTION, DECISION MAKING etc…. • HIGHER CLIENT SATISFACTION • BETTER CORPORATE IMAGE

CAPITAL BUDGETING MODELS LIMITATIONS: • Assume all relevant alternatives have been examined; cost & benefits can be expressed as $$ • Ignore intangible benefits *

PORTFOLIO ANALYSIS: ANALYSIS OF POTENTIAL APPLICATIONS TO DETERMINE RISKS & BENEFITS • DETERMINE DESIRABLE FEATURES, ACCEPTABLE RISKS OF REQUIRED SYSTEM • GENERATE PORTFOLIO OF CHARACTERISTICS, RISKS FOR EACH ALTERNATIVE • SCORING MODEL *

SCORING MODEL: • IDENTIFY DESIRABLE FEATURES • LOOK AT EACH ALTERNATIVE: • WHICH FEATURES ARE PRESENT? • TO WHAT EXTENT (as an amount)? • SCORE THE ALTERNATIVE • RANK-ORDER THE ALTERNATIVES • SELECT HIGHEST RANKED OPTION *

REAL OPTIONS PRICING MODELS • USEFUL UNDER UNCERTAIN CONDITIONS • INCLUDE ESTIMATES FOR MANAGEMENT LEARNING, VALUE OF DELAYING DECISION, VOLATILITY OF COSTS & REVENUES

CHANGE MANAGEMENT WHAT PROCESSES ARE BEST TO CHANGE: • DESIGN • DATA • COST • OPERATIONS *

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

IMPLEMENTATION STAGES APPROACHES ADOPTION MANAGEMENT ROUTINIZATION ACTORS' ROLE XXXX XXXX STRATEGY XXXX ORGANIZATIONAL XXXX XXXX FACTORS IMPLEMENTATION ALL ACTIVITIES LEADING TO ADOPTION, MANAGEMENT, ROUTINIZATION OF INNOVATION

ACTOR CHARACTERISTICS & DEMOGRAPHICS SOCIAL STATUS EDUCATION SOPHISTICATION INNOVATIVE BEHAVIOR ACTOR ROLES PRODUCT CHAMPION BUREAUCRATIC ENTREPRENEUR GATEKEEPER INNOVATION PROCESS

Source: Yin (1981) ACTIONS & INDICATORS FOR SUCCESSFUL SYSTEM IMPLEMENTATION • SUPPORT BY LOCAL FUNDS • NEW ORGANIZATIONAL ARRANGEMENTS • STABLE SUPPLY & MAINTENANCE • NEW PERSONNEL CLASSIFICATIONS • CHANGES IN ORGANIZATIONAL AUTHORITY *

Source: Yin (1981) ACTIONS & INDICATORS FOR SUCCESSFUL SYSTEM IMPLEMENTATION • INTERNALIZATION OF TRAINING PROGRAM • CONTINUAL UPDATING OF THE SYSTEM • PROMOTION OF KEY PERSONNEL • SURVIVAL OF SYSTEM AFTER TURNOVER • ATTAINMENT OF WIDESPREAD USE *

FACTORS IN IMPLEMENTATION OUTCOMECAUSES OF SUCCESS OR FAILURE: • USER INVOLVEMENT & INFLUENCE • MANAGEMENT SUPPORT • LEVEL OF COMPLEXITY / RISK • MANAGEMENT OF IMPLEMENTATION PROCESS *

USER-DESIGNER COMMUNICATIONS GAP DIFFERENCES IN BACKGROUNDS, INTERESTS, PRIORITIES IMPEDE COMMUNICATION AND PROBLEM SOLVING AMONG END USERS AND INFORMATION SYSTEMS SPECIALISTS *

USER CONCERNS: • WILL SYSTEM DELIVER INFORMATION I NEED? • HOW QUICKLY CAN I ACCESS DATA? • HOW EASILY CAN I RECEIVE DATA? • HOW MUCH CLERICAL SUPPORT WILL I NEED FOR DATA ENTRY? • HOW WILL SYSTEM OPERATION FIT INTO MY DAILY BUSINESS SCHEDULE? • *

DESIGNER CONCERNS: • HOW MUCH DISK SPACE WILL MASTER FILE CONSUME? • HOW MANY LINES OF PROGRAM CODE WILL THIS FUNCTION TAKE? • HOW CAN WE REDUCE CPU TIME? • WHAT IS THE MOST EFFICIENT WAY OF STORING THIS DATA? • WHAT DATABASE MANAGEMENT SYSTEM SHOULD WE USE? • *

LEVEL OF COMPLEXITY & RISK • PROJECT SIZE • PROJECT STRUCTURE • EXPERTISE WITH TECHNOLOGY *

STRUCTURE TECHNOLOGY LEVEL SIZE RISK HIGH LOW LARGE LOW HIGH LOW SMALL VERY LOW HIGH HIGH LARGE MEDIUM HIGH HIGH SMALL MEDIUM-LOW LOW LOW LARGE LOW LOW LOW SMALL VERY LOW LOW HIGH LARGE VERY HIGH LOW HIGH SMALL HIGH CONTROLLING PROJECT RISK

CONSEQUENCES OF POOR PROJECT MANAGEMENT • COST OVERRUNS • TIME SLIPPAGE • TECHNICAL SHORTFALLS • FAILURE TO OBTAIN BENEFITS *

CAUSES OF POOR PROJECT MANAGEMENT • IGNORANCE & OPTIMISM • MYTHICAL MAN-MONTH: Many tasks sequentially linked, require training • FALLING BEHIND: Bad news travels slowly upward *

CHANGE MANAGEMENT CHALLENGES • ENTERPRISE SYSTEMS: High risk of failure, replacing legacy systems, myriad interconnections • BUSINESS PROCESS REENGINEERING: 70% failure rate, deeply rooted in old processes, employees often unprepared *

CHANGE MANAGEMENT CHALLENGES • MERGERS & ACQUISITIONS: Decline in shareholder value, difficult to integrate company systems, organizational change, worker morale *

MANAGING IMPLEMENTATION: CONTROL RISK FACTORS: Gear tools, methodologies to level of risk INTERNAL INTEGRATION TOOLS: • FORMAL PLANNING TOOLS • FORMAL CONTROL TOOLS *

FORMAL PLANNING TOOLSEXAMPLES: • PROGRAM EVALUATION & REVIEW TECHNIQUE: Diagram of project activities, sequential and concurrent, shows interactions of activities • GANTT CHART: Shows activities as bars along a time line, with beginning, end of each task THESE PROVIDE SCHEDULES *

FORMAL CONTROL TOOLS: BUDGET: Time, money, resources • MONITOR PROGRESS: Completion of tasks, fulfillment of goals • CONTROL RISK FACTORS: Cost/benefits *

EXTERNAL INTEGRATION TOOLS • LINK ALL USERS THROUGHOUT ORGANIZATION • USE END USERS AS TEAM MEMBERS • SHARE INFORMATION & PROGRESS • INCLUDE TRAINING • AVOID COUNTERIMPLEMENTATION *

ORGANIZATIONAL FACTORS • JOB DESIGN • STANDARDS & PERFORMANCE MONITORING • ERGONOMICS: Interaction of people & machines; jobs, health, interface *

ORGANIZATIONAL FACTORS • EMPLOYEE GRIEVANCE RESOLUTION PROCEDURES • HEALTH & SAFETY • GOVERNMENT REGULATORY COMPLIANCE *

ORGANIZATIONAL FACTORS MONITOR PROGRESS: Completion of tasks, fulfillment of goals CONTROL RISK FACTORS: Cost / benefits *

ORGANIZATIONAL FACTORS ORGANIZATIONAL IMPACT ANALYSIS: How will system impact structure, attitudes, decision-making, operations SOCIOTECHNICAL DESIGN: Explore group structures, task allocation, job design for human factor *

“FOURTH-GENERATION” PROJECT MANAGEMENT • EMERGING TECHNIQUES TO DEAL WITH COMPLEXITY • ENTERPRISE-WIDE FOCUS • DRIVEN BY STRATEGIC VISION & TECHNOLOGY • MAY REQUIRE SEPARATE PROGRAM OFFICE

Information Systems: the Foundation of E-Business (CIS 108)