Chapter13: Understading the business value of systems and managing change

13.1 © 2003 by Prentice Hall

13

UNDERSTANDINGUNDERSTANDING

THE BUSINESSTHE BUSINESS

VALUE OF SYSTEMSVALUE OF SYSTEMS

AND MANAGINGAND MANAGING

CHANGECHANGE

Chapter


• How can our company measure the business How can our company measure the business benefits of our information systems? What benefits of our information systems? What models should be used to measure that models should be used to measure that business value?business value?

• Why do so many system projects fail? What are Why do so many system projects fail? What are the principal reasons for system failures?the principal reasons for system failures?

• How should the organizational change How should the organizational change surrounding a new system be managed to surrounding a new system be managed to ensure success?ensure success?

Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change

OBJECTIVES


• Are there any special challenges in Are there any special challenges in implementing international information implementing international information systems?systems?

• What strategies can our organization use to What strategies can our organization use to manage the system implementation process manage the system implementation process more effectively?more effectively?

OBJECTIVES



• Determining benefits of a system when they Determining benefits of a system when they are largely intangibleare largely intangible

• Dealing with the complexity of large-scale Dealing with the complexity of large-scale systems projectssystems projects

MANAGEMENT CHALLENGES



Capital budgetingCapital budgeting

• Process of analyzing and selecting Process of analyzing and selecting various proposals for capital expendituresvarious proposals for capital expenditures

UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS


Traditional Capital Budgeting Models


• Do not express the risks and uncertainty Do not express the risks and uncertainty of own cost and benefits estimatesof own cost and benefits estimates



Limitations of Financial Models


The ProblemThe Problem

• No automated way of tracking billable No automated way of tracking billable hourshours

• No secure method for communicationNo secure method for communication

• No client databaseNo client database

• No system to track costsNo system to track costs



Case Example: Primrose, Mendelson, and Hansen


The SolutionThe Solution

• Local area networkLocal area network

• Lotus Notes to handle client accounting, Lotus Notes to handle client accounting, document management, group document management, group collaboration, and e-mailcollaboration, and e-mail







Costs and Benefits of the Legal Information System

Figure 13-1




Financial Models

Figure 13-2


The Payback MethodThe Payback Method

• Measure of time required to pay back the initial Measure of time required to pay back the initial investment on a projectinvestment on a project

Accounting Rate of Return on Investment Accounting Rate of Return on Investment (ROI)(ROI)

• Approximates the accounting income earned Approximates the accounting income earned by the investmentby the investment





Present valuePresent value

• Value of a payment or stream of payments Value of a payment or stream of payments to be received in dollarsto be received in dollars

Net present valueNet present value

• Amount of money an investment is worth Amount of money an investment is worth





Cost-benefit ratioCost-benefit ratio

• Calculates returns from capital Calculates returns from capital expenditure expenditure

Profitability indexProfitability index

• Compares profitability of alternative Compares profitability of alternative investments by dividing the present value investments by dividing the present value of total cash inflow by initial costof total cash inflow by initial cost





Internal Rate of Return (IRR)Internal Rate of Return (IRR)

• Rate of return or profit an investment is Rate of return or profit an investment is expected to earnexpected to earn

Results of the Capital Budgeting Results of the Capital Budgeting AnalysisAnalysis

• Cash flow positive over the time period Cash flow positive over the time period and returns more benefits than it costsand returns more benefits than it costs





Portfolio AnalysisPortfolio Analysis

• Analysis of portfolio of potential Analysis of portfolio of potential applications within a firm applications within a firm

• Determines risks and benefitsDetermines risks and benefits

• Selects among alternatives for information Selects among alternatives for information systemssystems



Strategic Considerations


Scoring ModelsScoring Models

• Method for deciding among alternative Method for deciding among alternative systems based on a system of ratings systems based on a system of ratings

Real Options Pricing ModelsReal Options Pricing Models

• Models for evaluating information Models for evaluating information technology investments with uncertain technology investments with uncertain returns returns







A System Portfolio

Figure 13-3


Knowledge Value–Added ApproachKnowledge Value–Added Approach

• Focuses on knowledge input into a Focuses on knowledge input into a business process business process

• Determines costs and benefits of changes Determines costs and benefits of changes in business processes from new in business processes from new information systemsinformation systems





Productivity Productivity

• Measure of firm’s efficiency in converting Measure of firm’s efficiency in converting inputs to outputsinputs to outputs

Information TechnologyInformation Technology

• Reduces costReduces cost

• Increases quality of products and servicesIncreases quality of products and services



Information Technology Investments and Productivity


System failureSystem failure

• Information system does not perform as Information system does not perform as expected, is not operational at a specified expected, is not operational at a specified timetime

• Poor design, inaccurate data, excessive Poor design, inaccurate data, excessive expenditure, breakdown in operationsexpenditure, breakdown in operations

IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE


Information System Problem Areas


THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE


Information System Problem Areas

Figure 13-4


ImplementationImplementation

• Organizational activities working towards Organizational activities working towards adoption, management, and routinization adoption, management, and routinization of innovationof innovation

Change agentChange agent

• Individual acting as catalyst to ensure Individual acting as catalyst to ensure successful organizational adaptation to a successful organizational adaptation to a new system or innovationnew system or innovation



Change Management and the Concept of Implementation


• Role of users in implementation processRole of users in implementation process

• Degree of management support for Degree of management support for implementation effortimplementation effort

• Level of complexity and risk of Level of complexity and risk of implementation projectimplementation project

• Quality of management of implementation Quality of management of implementation processprocess



Causes of Implementation Success and Failure




Factors in Information System Success or Failure

Figure 13-5


User–designer communications gapUser–designer communications gap

• Different backgrounds, interests, and Different backgrounds, interests, and priorities priorities

• Impedes communication and problem Impedes communication and problem solving among end users and information solving among end users and information systems specialistssystems specialists



User Involvement and Influence


• Project requires backing and commitment Project requires backing and commitment of management at various levels of management at various levels

• Perceived positively by both users and Perceived positively by both users and technical information services stafftechnical information services staff



Management Support and Commitment


• Project size:Project size: Larger project has greater Larger project has greater riskrisk

• Project structure:Project structure: Clear and Clear and straightforward requirements help define straightforward requirements help define outputs and processes outputs and processes

• Experience with technology:Experience with technology: Project Project risk rises if project team and information risk rises if project team and information system staff lack required technical system staff lack required technical expertiseexpertise



Level of Complexity and Risk


Improper management leads to:Improper management leads to:

• Cost overruns Cost overruns

• Unexpected time slippageUnexpected time slippage

• Technical shortfalls Technical shortfalls

• Failure to obtain anticipated benefitsFailure to obtain anticipated benefits



Management of the Implementation Process




Consequences of Poor Project Management

Figure 13-6


System Challenges of Mergers and System Challenges of Mergers and AcquisitionsAcquisitions

• Integrating systemsIntegrating systems

• Organizational characteristics Organizational characteristics

• Information technology infrastructuresInformation technology infrastructures



Change Management Challenges for Enterprise Applications, Business Process Reengineering (BPR), and Mergers and Acquisitions


Disparate Information Requirements Disparate Information Requirements and Business Processesand Business Processes

• Transborder data flow:Transborder data flow: Movement of Movement of information across international information across international boundaries in any formboundaries in any form

• Technology Hurdles:Technology Hurdles: Lack of standards Lack of standards and connectivity in hardware, software, and connectivity in hardware, software, and telecommunications and telecommunications



The Challenge of Implementing Global Systems


• Local User Resistance to Global Local User Resistance to Global Systems:Systems: Difficult to convince local Difficult to convince local managers to change their business managers to change their business processes processes



The Challenge of Implementing Global Systems


• Managing Technical Complexity:Managing Technical Complexity: Usage of internal integration tools to Usage of internal integration tools to ensure operation of implementation team ensure operation of implementation team

• Formal Planning and Control Tools:Formal Planning and Control Tools: Structures and sequences tasks, monitors Structures and sequences tasks, monitors progress towards fulfillment of goals progress towards fulfillment of goals

MANAGING IMPLEMENTATION


Controlling Risk Factors


• Increasing User Involvement and Increasing User Involvement and Overcoming User Resistance:Overcoming User Resistance: Linking Linking work of implementation team to that of work of implementation team to that of users at all organizational levelsusers at all organizational levels


Controlling Risk Factors




Formal planning and control tools help to manage information systems projects successfully

Figure 13-7



Allowing for the Human FactorAllowing for the Human Factor

• Interaction of people and machines in Interaction of people and machines in work environmentwork environment

Sociotechnical DesignSociotechnical Design

• Produces information system blending Produces information system blending technical efficiency with sensitivity to technical efficiency with sensitivity to organizational and human needsorganizational and human needs


Designing for the Organization



Core systemsCore systems

• Support functions absolutely critical to Support functions absolutely critical to organizationorganization

Implementation Tactics: CooptationImplementation Tactics: Cooptation

• Bringing opposition into process of Bringing opposition into process of designing and implementing a solution designing and implementing a solution


Managing Global Implementations




Figure 13-8



Creating a Global Technology Creating a Global Technology InfrastructureInfrastructure• Build international private networkBuild international private network

• Rely on value added network serviceRely on value added network service

• Use Internet technologyUse Internet technology

• Build global intranets Build global intranets

• Use Virtual Private Networks Use Virtual Private Networks


Managing Global Implementations



• Project planning is an enterprise-wide Project planning is an enterprise-wide focusfocus

• Managers focus on solving problems and Managers focus on solving problems and meeting challenges meeting challenges


Fourth-Generation Project Management



13

UNDERSTANDINGUNDERSTANDING

THE BUSINESSTHE BUSINESS

VALUE OF SYSTEMSVALUE OF SYSTEMS

AND MANAGINGAND MANAGING

CHANGECHANGE

Chapter

Chapter13: Understading the business value of systems and managing change

Education

Transcript of Chapter13: Understading the business value of systems and managing change