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  1. 1. 11 UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE c h a p t e r
  2. 2. LEARNING OBJECTIVES <ul><li>EVALUATE MODELS DETERMINING BUSINESS VALUE OF INFORMATION SYSTEMS </li></ul><ul><li>ANALYZE PRINCIPAL CAUSES OF INFORMATION SYSTEM FAILURE </li></ul><ul><li>ANALYZE REQUIREMENTS FOR BUILDING SUCCESSFUL SYSTEMS </li></ul><ul><li>SELECT STRATEGIES TO MANAGE SYSTEM IMPLEMENTATION </li></ul><ul><li>* </li></ul>© 2002 by Prentice Hall
  3. 3. MANAGEMENT CHALLENGES <ul><li>UNDERSTANDING BUSINESS VALUE OF INFORMATION SYSTEMS </li></ul><ul><li>CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS & FAILURE </li></ul><ul><li>MANAGING IMPLEMENTATION </li></ul><ul><li>* </li></ul>
  4. 4. <ul><li>CAPITAL BUDGETING MODELS </li></ul><ul><li>PORTFOLIO ANALYSIS </li></ul><ul><li>REAL OPTIONS PRICING MODELS </li></ul><ul><li>* </li></ul>UNDERSTANDING BUSINESS VALUE OF INFO SYSTEMS
  5. 5. CAPITAL BUDGET: <ul><li>PAYBACK METHOD: How long will it take to pay back the investment? </li></ul><ul><li>RETURN ON INVESTMENT: Does return during useful life of an item exceed the cost to borrow money? </li></ul><ul><li>COST-BENEFIT RATIO: Does the ratio of benefit versus cost exceed 1? </li></ul><ul><li>* </li></ul>
  6. 6. CAPITAL BUDGET: <ul><li>PROFITABILITY INDEX: What is the ratio of present value of cash inflow to initial investment? </li></ul><ul><li>NET PRESENT VALUE: Accounting for cost, earnings & time value of money what is the investment worth? </li></ul><ul><li>INTERNAL RATE OF RETURN: Accounting for the time value of money, what is the return rate of an investment? </li></ul><ul><li>* </li></ul>
  7. 7. <ul><li>COSTS: </li></ul><ul><li>HARDWARE </li></ul><ul><li>SOFTWARE </li></ul><ul><li>SERVICES </li></ul><ul><li>PERSONNEL </li></ul><ul><li>* </li></ul>COSTS & BENEFITS:
  8. 8. <ul><li>TANGIBLE BENEFIT: </li></ul><ul><li>INCREASED PRODUCTIVITY </li></ul><ul><li>LOW OPERATING COSTS </li></ul><ul><li>REDUCED WORK FORCE </li></ul><ul><li>LOWER COMPUTER EXPENSES </li></ul><ul><li>LOWER VENDOR COSTS </li></ul><ul><li>LOWER CLERICAL/PROFESSIONAL COSTS </li></ul><ul><li>REDUCED GROWTH OF EXPENSES </li></ul><ul><li>REDUCED FACILITY COSTS </li></ul><ul><li>* </li></ul>COSTS & BENEFITS:
  9. 9. <ul><li>INTANGIBLE BENEFIT: </li></ul><ul><li>IMPROVED ASSET USE; RESOURCE CONTROL; PLANNING </li></ul><ul><li>INCREASED FLEXIBILITY </li></ul><ul><li>MORE TIMELY INFORMATION </li></ul><ul><li>INCREASED LEARNING </li></ul><ul><li>ATTAIN LEGAL REQUIREMENTS </li></ul><ul><li>ENHANCED EMPLOYEE GOODWILL, JOB SATISFACTION, DECISION MAKING, OPERATIONS </li></ul><ul><li>HIGHER CLIENT SATISFACTION </li></ul><ul><li>BETTER CORPORATE IMAGE </li></ul><ul><li>* </li></ul>COSTS & BENEFITS:
  10. 10. <ul><li>LIMITATIONS: </li></ul><ul><li>Assume all relevant alternatives have been examined; cost & benefits can be expressed as $$ </li></ul><ul><li>Ignore intangible benefits </li></ul><ul><li>* </li></ul>CAPITAL BUDGETING MODELS
  11. 11. PORTFOLIO ANALYSIS: <ul><li>ANALYSIS OF POTENTIAL APPLICATIONS TO DETERMINE RISKS & BENEFITS </li></ul><ul><li>DETERMINE DESIRABLE FEATURES, ACCEPTABLE RISKS OF REQUIRED SYSTEM </li></ul><ul><li>GENERATE PORTFOLIO OF CHARACTERISTICS, RISKS FOR EACH ALTERNATIVE </li></ul><ul><li>SCORING MODEL </li></ul><ul><li>* </li></ul>
  12. 12. <ul><li>IDENTIFY DESIRABLE FEATURES </li></ul><ul><li>PROVIDE WEIGHTS FOR EACH (ADD TO 1.00) </li></ul><ul><li>LOOK AT EACH ALTERNATIVE: </li></ul><ul><ul><li>WHICH FEATURES ARE PRESENT? </li></ul></ul><ul><ul><li>TO WHAT EXTENT (as an amount)? </li></ul></ul><ul><ul><li>SCORE THE ALTERNATIVE </li></ul></ul><ul><li>RANK-ORDER THE ALTERNATIVES </li></ul><ul><li>SELECT HIGHEST RANKED OPTION </li></ul><ul><li>* </li></ul>SCORING MODEL:
  13. 13. REAL OPTIONS PRICING MODELS <ul><li>USEFUL UNDER UNCERTAIN CONDITIONS </li></ul><ul><li>INCLUDE ESTIMATES FOR MANAGEMENT LEARNING, VALUE OF DELAYING DECISION, VOLATILITY OF COSTS & REVENUES </li></ul>
  14. 14. CHANGE MANAGEMENT <ul><li>WHAT PROCESSES ARE BEST TO CHANGE: </li></ul><ul><li>DESIGN </li></ul><ul><li>DATA </li></ul><ul><li>COST </li></ul><ul><li>OPERATIONS </li></ul><ul><li>* </li></ul>
  15. 15. CHANGE AGENT <ul><li>DURING IMPLEMENTATION, INDIVIDUAL ACTS AS CATALYST DURING CHANGE PROCESS TO ENSURE SUCCESS </li></ul><ul><li>* </li></ul>
  16. 16. <ul><li>ALL ACTIVITIES LEADING TO ADOPTION, MANAGEMENT, ROUTINIZATION OF INNOVATION </li></ul>IMPLEMENTATION APPROACHES ADOPTION MANAGEMENT ROUTINIZATION ACTORS' ROLE XXXX XXXX STRATEGY XXXX ORGANIZATIONAL XXXX XXXX FACTORS IMPLEMENTATION STAGES
  17. 17. INNOVATION PROCESS © 2002 by Prentice Hall ACTOR CHARACTERISTICS & DEMOGRAPHICS SOCIAL STATUS EDUCATION SOPHISTICATION ACTOR ROLES PRODUCT CHAMPION BUREAUCRATIC ENTREPRENEUR GATEKEEPER INNOVATIVE BEHAVIOR
  18. 18. ACTIONS & INDICATORS FOR SUCCESSFUL SYSTEM IMPLEMENTATION <ul><li>SUPPORT BY LOCAL FUNDS </li></ul><ul><li>NEW ORGANIZATIONAL ARRANGEMENTS </li></ul><ul><li>STABLE SUPPLY & MAINTENANCE </li></ul><ul><li>NEW PERSONNEL CLASSIFICATIONS </li></ul><ul><li>CHANGES IN ORGANIZATIONAL AUTHORITY </li></ul><ul><li>* </li></ul>Source: Yin (1981 )
  19. 19. ACTIONS & INDICATORS FOR SUCCESSFUL SYSTEM IMPLEMENTATION <ul><li>INTERNALIZATION OF TRAINING PROGRAM </li></ul><ul><li>CONTINUAL UPDATING OF THE SYSTEM </li></ul><ul><li>PROMOTION OF KEY PERSONNEL </li></ul><ul><li>SURVIVAL OF SYSTEM AFTER TURNOVER </li></ul><ul><li>ATTAINMENT OF WIDESPREAD USE </li></ul><ul><li>* </li></ul>Source: Yin (1981 )
  20. 20. FACTORS IN IMPLEMENTATION OUTCOME CAUSES OF SUCCESS OR FAILURE: <ul><li>USER INVOLVEMENT & INFLUENCE </li></ul><ul><li>MANAGEMENT SUPPORT </li></ul><ul><li>LEVEL OF COMPLEXITY / RISK </li></ul><ul><li>MANAGEMENT OF IMPLEMENTATION PROCESS </li></ul><ul><li>* </li></ul>
  21. 21. USER-DESIGNER COMMUNICATIONS GAP <ul><li>DIFFERENCES IN BACKGROUNDS, INTERESTS, PRIORITIES </li></ul><ul><li>IMPEDE COMMUNICATION AND PROBLEM SOLVING </li></ul><ul><li>AMONG END USERS AND INFORMATION SYSTEMS SPECIALISTS </li></ul><ul><li>* </li></ul>
  22. 22. USER CONCERNS: <ul><li>WILL SYSTEM DELIVER INFORMATION I NEED? </li></ul><ul><li>HOW QUICKLY CAN I ACCESS DATA? </li></ul><ul><li>HOW EASILY CAN I RECEIVE DATA? </li></ul><ul><li>HOW MUCH CLERICAL SUPPORT WILL I NEED FOR DATA ENTRY? </li></ul><ul><li>HOW WILL SYSTEM OPERATION FIT INTO MY DAILY BUSINESS SCHEDULE? </li></ul><ul><li>* </li></ul>
  23. 23. DESIGNER CONCERNS: <ul><li>HOW MUCH DISK SPACE WILL MASTER FILE CONSUME? </li></ul><ul><li>HOW MANY LINES OF PROGRAM CODE WILL THIS FUNCTION TAKE? </li></ul><ul><li>HOW CAN WE REDUCE CPU TIME? </li></ul><ul><li>WHAT IS THE MOST EFFICIENT WAY OF STORING THIS DATA? </li></ul><ul><li>WHAT DATABASE MANAGEMENT SYSTEM SHOULD WE USE? </li></ul><ul><li>* </li></ul>
  24. 24. LEVEL OF COMPLEXITY & RISK <ul><li>PROJECT SIZE </li></ul><ul><li>PROJECT STRUCTURE </li></ul><ul><li>EXPERTISE WITH TECHNOLOGY </li></ul><ul><li>* </li></ul>
  25. 25. CONTROLLING 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
  26. 26. CONSEQUENCES OF POOR PROJECT MANAGEMENT <ul><li>COST OVERRUNS </li></ul><ul><li>TIME SLIPPAGE </li></ul><ul><li>TECHNICAL SHORTFALLS </li></ul><ul><li>FAILURE TO OBTAIN BENEFITS </li></ul><ul><li>* </li></ul>
  27. 27. CAUSES OF POOR PROJECT MANAGEMENT <ul><li>IGNORANCE & OPTIMISM </li></ul><ul><li>MYTHICAL MAN-MONTH: Many tasks sequentially linked, require training </li></ul><ul><li>FALLING BEHIND: Bad news travels slowly upward </li></ul><ul><li>* </li></ul>
  28. 28. CHANGE MANAGEMENT CHALLENGES <ul><li>ENTERPRISE SYSTEMS: High risk of failure, replacing legacy systems, myriad interconnections </li></ul><ul><li>BUSINESS PROCESS REENGINEERING: 70% failure rate, deeply rooted in old processes, employees often unprepared </li></ul><ul><li>* </li></ul>
  29. 29. CHANGE MANAGEMENT CHALLENGES <ul><li>MERGERS & ACQUISITIONS: Decline in shareholder value, difficult to integrate company systems, organizational change, worker morale </li></ul><ul><li>* </li></ul>
  30. 30. MANAGING IMPLEMENTATION: <ul><li>CONTROL RISK FACTORS: Gear tools, methodologies to level of risk </li></ul><ul><li>INTERNAL INTEGRATION TOOLS: </li></ul><ul><li>FORMAL PLANNING TOOLS </li></ul><ul><li>FORMAL CONTROL TOOLS </li></ul><ul><li>* </li></ul>
  31. 31. FORMAL PLANNING TOOLS EXAMPLES: <ul><li>PROGRAM EVALUATION & REVIEW TECHNIQUE: Diagram of project activities, sequential and concurrent, shows interactions of activities </li></ul><ul><li>GANTT CHART: Shows activities as bars along a time line, with beginning, end of each task </li></ul><ul><li>THESE PROVIDE SCHEDULES </li></ul><ul><li>* </li></ul>
  32. 32. FORMAL CONTROL TOOLS: <ul><li>BUDGET: Time, money, resources </li></ul><ul><li>MONITOR PROGRESS: Completion of tasks, fulfillment of goals </li></ul><ul><li>CONTROL RISK FACTORS: Cost/benefits </li></ul><ul><li>* </li></ul>
  33. 33. EXTERNAL INTEGRATION TOOLS <ul><li>LINK ALL USERS THROUGHOUT ORGANIZATION </li></ul><ul><li>USE END USERS AS TEAM MEMBERS </li></ul><ul><li>SHARE INFORMATION & PROGRESS </li></ul><ul><li>INCLUDE TRAINING </li></ul><ul><li>AVOID COUNTERIMPLEMENTATION </li></ul><ul><li>* </li></ul>
  34. 34. ORGANIZATIONAL FACTORS <ul><li>JOB DESIGN </li></ul><ul><li>STANDARDS & PERFORMANCE MONITORING </li></ul><ul><li>ERGONOMICS: Interaction of people & machines; jobs, health, interface </li></ul><ul><li>* </li></ul>
  35. 35. ORGANIZATIONAL FACTORS <ul><li>EMPLOYEE GRIEVANCE RESOLUTION PROCEDURES </li></ul><ul><li>HEALTH & SAFETY </li></ul><ul><li>GOVERNMENT REGULATORY COMPLIANCE </li></ul><ul><li>* </li></ul>
  36. 36. ORGANIZATIONAL FACTORS <ul><li>MONITOR PROGRESS: Completion of tasks, fulfillment of goals </li></ul><ul><li>CONTROL RISK FACTORS: Cost / benefits </li></ul><ul><li>* </li></ul>
  37. 37. <ul><li>ORGANIZATIONAL IMPACT ANALYSIS: How will system impact structure, attitudes, decision-making, operations </li></ul><ul><li>SOCIOTECHNICAL DESIGN: Explore group structures, task allocation, job design for human factor </li></ul><ul><li>* </li></ul>ORGANIZATIONAL FACTORS
  38. 38. “ FOURTH-GENERATION” PROJECT MANAGEMENT <ul><li>EMERGING TECHNIQUES TO DEAL WITH COMPLEXITY </li></ul><ul><li>ENTERPRISE-WIDE FOCUS </li></ul><ul><li>DRIVEN BY STRATEGIC VISION & TECHNOLOGY </li></ul><ul><li>MAY REQUIRE SEPARATE PROGRAM OFFICE </li></ul><ul><li>* </li></ul>
  39. 39. 11 UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE c h a p t e r

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