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Managing Information Systems For Strategic Advantage (Part 2)

Managing Information Systems For Strategic Advantage (Part 2). (Week 12, Monday 11/7/2006). BUS3500 - Abdou Illia, Fall 2006. LEARNING GOALS. Describe the methods organizations use to choose strategic IS projects Balanced scorecard Total cost of ownership (TCO) IS portfolio analysis

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Managing Information Systems For Strategic Advantage (Part 2)

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  1. Managing InformationSystems For Strategic Advantage (Part 2) (Week 12, Monday 11/7/2006) BUS3500 - Abdou Illia, Fall 2006

  2. LEARNING GOALS • Describe the methods organizations use to choose strategic IS projects • Balanced scorecard • Total cost of ownership (TCO) • IS portfolio analysis • Explain the concept of knowledge management and describe the technologies that comprise knowledge management systems.

  3. Choosing Strategic IS • IS face productivity paradox • It is difficult to attribute cost savings directly to a specific information system • It is difficult to prove that a specific IS led to certain financial outcomes • Chief Information Officer help choose strategic IS • By developing long-term IS strategy • By determining how to allocate IS budget • By aligning IS portfolio with company’s strategies • Tools used by CIO • Balanced scorecard • Total cost of ownership (TCO) • IS portfolio analysis

  4. Questions • Which of the following is true about the productivity paradox associated with investing in information systems? • We can determine the cost associated with investing in information systems • We can easily attribute observed cost savings directly to specific information systems • We can easily prove that a specific information system led to specific profits • All of the above • Which of the following is NOT among the kind of activities usually performed by a CIO? • Design and develop strategic IS • Manage IS portfolio • Align a company’s IS portfolio with its strategies in different areas • Determine a company’s long-term IS strategy • None of the above

  5. Vision& Strategy The Balanced Scorecard • Allows a company to address non-financial objectives that support its financial goals • Allows to investigate strategies in key areas and develop goals and measures for each

  6. Vision& Strategy The Balanced Scorecard • Could help align investments in strategic IS with overall corporate strategy Q1: What kind of Strategic IS is needed if the Balanced Scorecard shows thatImproving customer relationships is a major goal?Q2: What kind of Strategic IS is needed if the Balanced Scorecard shows thatDeveloping successful new products is a major goal?

  7. Total Cost of Ownership (TCO) • Estimating IS costs and benefits is a SWAG* • Costs include – Benefits include • Hardware • Tangible benefits • Software • Intangible benefits • Labor • Total cost of ownership (TCO) • Method to quantify long-term direct and indirect costs * Scientific Wild Guess

  8. TCO Analysis for PDA Purchase Initial cost: 100 PDAs @ $300 each, i.e. $30000Replacement cost: 10% of PDAs replaced per year, i.e. $3000/yearSupport cost: $7000/year

  9. The IS Portfolio Analysis • Treats investments in IS assets like a portfolio of investment assets to find redundancies and achieve balance in IS projects • Five steps • Create an IS projects database • Content:Project name, Description, Cost, Time line, staff assigned,… • Objectives: Identify conflicting projects, lack of staff, etc. • Prioritize the IS projects • Based on costs, benefits, chance of success • Categorize IS projects • Infrastructure:Keep the basic company’s info. Systems running • Upgrades:Bring certain systems up to date • Strategic initiatives:Have potential to give a strategic advantage • Automate the entire process • Enter new IS projects in database, Re-prioritize, Re-categorize • Perform a Modern Portfolio Theory analysis

  10. Sample IS Portfolio

  11. Questions • Which of the following tools or techniques could be useful in identifying conflicting IS projects assignments like two big projects assigned to the same manager during the same time? • Balanced Scorecard • IS portfolio analysis • Knowledge Work System • Project Analysis • Using the Balanced Scorecard, the CIO has determined that improving customer relationship must be one of the major goals for the company during the next five years. What kind of strategic IS the company should consider investing in? • Transaction Processing System • EDI • Knowledge Work System • SCM • None of the above

  12. Knowledge Management (KM) • Knowledge assets is key for long-term competitive advantage • Knowledge assets include • Tacit knowledge within the minds of employees • Explicit knowledge in a tangible form such as databases, documents, and reports • Knowledge management (KM) • Process by which organizations extract value from their knowledge assets to implement Knowledge Management Systems (KMS) • Chief Knowledge Officer • Designs and implements KMS

  13. KM Systems • Information systems that enable the exchange of knowledge among employees and the storage of knowledge in repositories • KMS components: • Expert directories • Knowledge repositories • Knowledge sharing technologies • Knowledge representation technologies • KMS usually available through company’s intranet and extranet

  14. KM Systems • Expert directory • Electronic Phonebook that includes employees’ contact information and domain of expertise • Knowledge repository • Includes a company’s explicit knowledge retrieved from reports, documents, etc. and put in a database management system • Provides tools for searching the database • Knowledge sharing technologies • Communications and collaboration tools for knowledge sharing • Emails, Instant Messaging, and discussion boards widely used • Knowledge representation technologies • Contain tacit knowledge retrieved from employees or experts mind • Include tools for processing that knowledge • Are mainly Expert Systems that help non-expert employees to make decisions in a specific domain of expertise

  15. Questions • What KMS component contains tacit knowledge retrieved from employees or experts’ mind as well as tools for processing that tacit knowledge? • Expert directory • Knowledge repository • Knowledge sharing technology • Knowledge representation technology

  16. Summary Questions

  17. Example of rules IFfamily is albatross ANDcolor is white THENbird is laysan albatross. IFfamily is albatross ANDcolor is dark THENbird is black footed albatross Expert System • Knowledge base: database of the expertise, often in IF THEN rules. • Inference engine: derives recommendations from knowledge base and problem-specific data • User interface: controls the dialog between the user and the system • Explanation system: Explain the how and why of recommendations User Domain Expert UserInterface Expertise System Engineer InferenceEngine Knowledge Engineer Encoded expertise Knowledgebase ExplanationSystem

  18. KMS Document Z Document Z Document Z Document Z Document Z Document Z Document Z Document Z Document Report Report Report Report Report Tacit knowledge Report Report Report Report Report Knowledge Management System Database 10 Input Process Output Database 10 Database 10 Database 10 Database 10 Database 10 Database

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