BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
An important consideration was how long the user envisaged using the application. A warning signal
for Burden was that the supplier was offering a five-year licence while his client envisaged using the
software for eight to 12 years.
‘You might have a situation where the user is happily bedded in with the software after five years,
but the supplier is able to pull the rug out from under their feet because the licence is due to terminate at
that point. The danger is that a supplier can lock the user in and then rack up the licensing costs.’
Burden advised the bank to pay extra t secure a ‘perpetual’ licence, and it agreed to pay a further
£2m for this extension. ‘It is vital to get a licence long enough to get the full return on your investment’, he
says.
The other concern was to provide the bank with options to own the code or modifications, should it
later prove commercially expedient to control these. Burden renegotiated the standard licence to gain two
options.
The first option was for his client to identify functionality that it wanted developed from the core
application – spot trading, for example – and to create an exclusive licence for this part of the code.
An ‘uplift’ in price, to be negotiable according to the size of the modification, would take care of this.
The second option would be where the bank needed to take over development of the application as
a strategic move, whether to safeguard the application’s future or to ensure commercial confidentiality. This
option requires access to source code rather than object code.
If the bank ever wants to exercise this option, it will have to stump up an extra £6.8m.
‘For the right application, you may have to pay a substantial sum to get the licence you want’, says
Burden although the business benefit and peace of mind may make it worthwhile.
‘For users contemplating bespoke systems where millions of pounds will be spent on modifying a
core product, not looking at future scenarios is nothing short of criminally negligent’, he says.
Case study: The capacity model
The pattern of server deployment in Trafford NHS Trust is different to that in the private sector and it
follows that the trust prefers a different model of software licensing.
In the 15 years that Roger Fenton, deputy IT manager at Trafford, has been with the trust, it has
gone through three licensing regimes for back-up software. He is responsible for renegotiating and
introducing the most recent model for licensing back-up.
IT resources are assigned throughout the NHS on a project basis, rather than by central provision,
because of the way budget, rather than by central provision, because of the way that software licences need
to be procured.
‘We have upwards of 40 servers running various applications that all need to be licensed and
maintained’, Fenton says.
Trang 14 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
He has just moved to a new licensing regime with his back-up supplier, Computer Associates. The
health authority now pays on the basis of total raw storage capacity rather than per server, and the licence
can be scaled up incrementally.
It is a big improvement on the previous regime, both financially and in terms of simplifying and
reducing administration.
‘The price we secured was embarrassingly good’, says Fenton, who states he saved ‘thousands’ on
the previous licensing bill of £40,000.
Savings accrue chiefly because licensing on the basis of capacity, rather than individual servers,
better suits Trafford’s pattern of deployment; as servers proliferated within its project-led culture, serverbased licensing incurred a financial penalty.
This was compounded by the fact that in the per server model, CA charges both for the software
running on the central back-up server, and for ‘agents’ that run on the application servers that are backed
up.
Keeping track of the annual maintenance charges for the separate agent licences was a major
headache. Every additional back-up agent that ran on the application servers had to be licensed, and the
maintenance fee renewed each year.
‘Potentially, we had loads of different licences to maintain, all expiring on different dates’, says
Fenton.
In addition, the overall cost of the model had become unpalatable, ‘In such an environment, each
time we bought a new server, we were talking about another £750 or more in licence fees’, says Fenton. At
the same time, server costs were falling below the £2,000 mark, making licence costs proportionately
greater.
This licensing overhead had accumulated over time, creeping up on the health trust, which, like
other former Unix users, had no previous experience of licensing back-up.
Before moving to Windows, Trafford had used Unix boxes, which have back-up built-in. Each Unix
server came with its own low-capacity tape drive, and applications were accompanied by a script for the
back-up. ‘They were turnkey systems’, says Fenton.
When the trust moved to Windows it initially repeated its approach with the Unix boxes.
‘We used individual tapes for each SQL server. It was a logical extension of what we did with the
Unix boxes. However, as the number of servers and applications mushroomed, managing tapes and backup programs for each server became impractical.’
There are some disadvantages to the new approach. The first is having to licence back-up in blocks
of 1 Tbyte.
Trang 15 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
‘As you tip over into a new increment you are faced with buying a large chunk of extra capacity that
may be only partially used’, says Fenton.
A further disadvantage is the way that storage capacity is calculated – according to the raw capacity
of the backed-up drives, rather than the capacity actually utilized. The large disc installed in servers may
only be used nominally, while redundant array of independent disc (Raid) storage architectures are
designed to ensure redundancy.
‘Nonetheless, licensing capacity is cheaper and a lot less hassle for us’, says Fenton.
Beware the chamber of horrors
There are certain scenarios that users should avoid at all costs, says outsourcing broker Quantum
Plus. Above all, always remember the golden rule: there is no such thing as a standard contract.
Seemingly innocuous ‘version updates’
Relatively minor updates of the ‘0.1’ variety can incur unadvertised changes to terms and conditions
that have a significant impact on customers. For example, a version update may change the way that the
number of users is calculated or the nature of server licensing.
Obscure charging mechanisms
Be very sure of the supplier’s charging model for a licence. Is it based on the number of users,
servers or even processors ? Seemingly low-cost software can easily be installed in a non-compliant way.
For example, if software costs are processor-based, and the server is a quad processor, the result is under
licensing and a big bill.
Control of media
A number of suppliers of shrink-wrapped software have clauses in the agreement that require users
to show they control the media on which the software is distributed. Examples of control might include a
single point of contract for receipt of a disc, its safe storage, and an approval process for signing it out. A
supplier could cite a lapse in control as breach of contract.
The outsourcing clause
Supplier may try to insert into terms and conditions their right to renegotiate the licence should the
management of a asset be moved to a third party. This can be invoked for an outsourcing contract, even
when the software and server remain onsite. Suppliers may also reserve the right to charge an
administration fee to transfer the licence to the third party. Beware: the transfer fee could run into thousands
of pounds.
Enterprise licence
If you are underlicensed and on the back foot, the balance of power shifts to the supplier, who may
insist you sign up to an enterprise licence. Such a licence may appear to be all-inclusive and cover every
Trang 16 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
eventuality, but the reality is that it will likely be accompanied by a hefty three-year or more service and
support charge that adds no value.
Source: www.computerweekly.com/Articles/2006/07/25/217102/licensing-how-buyers-can-flex-their-muscles.htm
Question:
Summaries the main differences between ‘traditional’ software licenses and ‘subscription’
licenses including their respective advantages and disadvantages.

Trang 17 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 7.2
LASCELLES FINE FOODS
Lascelles Fine Foods (LFFL) is a fictitious example of a long-established company operating in the
food industry. The company has its administrative headquarters in Ashville and manufactures on an
adjacent site. All customer deliveries are from the Ashville-based warehouse. In addition, LFFL purchases
finished and semi-finished food products from other manufactures which it then finishes before resale.
The company has enjoyed steady growth in recent years and is now seeking to capitalize on the
current fashion for quality and healthy food products. LFFL’s turnover is £16 million with net profitability of
6.3 per cent of turnover/ It is hoping to gain a competitive edge by providing quality food products which
meet all present and anticipated quality standards and to this end will be applying for BS5750 accreditation
within the next six months. It is hoping to increase turnover by 10 per cent per year after inflation over the
next five years and increase net profitability to 9 per cent of turnover over the same period.
LFFL’s main operations are divided into four main areas:
-
Sales and marketing;
-
Warehousing and distribution;
-
Manufacturing;
-
Finance.
All information recording and internal communication is paper based and relies on range of
preprinted documents which are then used as appropriate.
The sales department
LFFL has a diverse customer base, ranging from small health food shops to major supermarket
chains. Orders can be one of two types: standard orders placed in advance for delivery in a specific week or
priority orders placed for immediate delivery.
Orders are placed either directly through sales office ‘account handlers’ or through field sales
persons (each customer has one sales person). Each customer is allocated an account handler who acts as
the main liaison point within LFFL. Besides receiving orders, the account handler is responsible for cash
collection, ensuring satisfactory progress of the order and handing day-to-day queries. Customers are also
placed into sales categories based on geographic location, volume of business and type of customer (e.g.
specialist store vs supermarket chain). The sales director is apt to change his mind about which category a
customer is in and which category means what.
Order processing
Trang 18 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
Once an order is taken, it is recording on a preprinted order form. One copy is retained by the sales
department and two copies are sent to warehousing and distribution.
Warehousing and distribution sort all order forms into date order. When an order is due to be
delivered, products are picked from the warehouse and loaded into the appropriate vehicle.
When an order is delivered, it is accompanied by a consignment note and an invoice. The customer
is required to check the delivery against the invoice and note any errors on the consignment note and if any
errors are noted a corrected invoice is sent to the customer.
Warehousing and distribution
LFFL stores finished products, bought-in products and raw materials in the warehouse. The
warehouse in divided into three areas:
-
The general zone, comprising a high-rise bulk storage area with a floor-level picking area;
-
The cool zone, comprising low-level storage at 2 to 4oC;
-
The frozen zone, with temperatures held to -18oC.
In addition to their role in the order processing cycle, other activities are also performed:
-
Internal warehouse movements from high-rise locations to ground-level areas and vice versa;
-
Receiving products and raw materials from suppliers and returned products from customers;
-
Issuing raw materials to manufacturing in response to submitted requisition forms;
-
Receiving finished products from manufacturing and any unused raw materials.
Information about quantities of finished goods and raw materials in stock is recorded in a card file,
which has to be searched manually for the appropriate entry when updating is required.
Manufacturing
Manufacturing ranges in complexity from simple repackaging of bulk-purchased materials to
complex mixing and cooking activities.
Recipes are recorded on 7” by 5” cards and include details of the required ingredients as well as the
processing which is to take place.
Finance
LFFL’s finance department is divided into three areas:
-
Accounts payable – when LFFL makes purchases, suppliers will invoice them; LFFL uses a manual
purchase ledge to manager these accounts;
-
Financial accounting – management of all monies flowing in and out of the company together with
compliance with legal accounting requirements;
Trang 19 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
-
Management accounting – internal accounting information necessary to manage the business more
effectively.
The accounts receivable area is handled by the account handlers who use a manual sales ledger
and make a weekly return to the finance department on the state of their customer’s accounts.
Specific business issues
There are a number of specific issues which relate to the activities of each department. These are
detailed below.
Sales
-
The status if an order cannot easily be determined without pestering the warehouse.
-
Many customer complaints occur due to delivery of wrong products, orders delivered too late,
incomplete orders and faulty products.
-
Warehousing does not deliver the most important orders first – small orders are often given priority
over larger orders from major retailers.
-
Orders often cannot be delivered on time because manufacturing produces too late and in
insufficient quantity.
Warehousing and distribution
-
Many items have a limited shelf life – warehousing often fails to rotate the stock properly.
-
Actual stock levels are rarely in step with the recorded stock levels – this may be due to pilfering,
poor update of stock records or both.
-
The sales department often accepts priority orders for products which are not in stock.
-
Manufacturing bypasses the normal requisition procedures and simply takes raw materials as
required – it also often fails to return unused materials to warehousing.
Finance
-
The sales returns from the account handlers are often incomplete.
-
There are several bad debts which cannot be recovered – this is attributed to poor credit control
procedures.
-
Management accounting is very difficult due to a general lack of accurate information from other
departments.
-
Financial accounts are often published late due to lack of accurate information.
Manufacturing
-
Warehousing is slow to respond to requests for raw materials, thus necessitating correct procedures
being bypassed (especially when the sales department is applying pressure).
Trang 20 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
-
Lack of accurate forecasting makes it difficult for production to be planned ahead and adequate
suppliers of raw materials to be secured.
General
-
There is a rapid turnover of staff, especially in the sales area where the pressure from customers
can be intense. In addition, field sales personnel are apt to make promises which cannot be kept
and new sales personnel are often thrown in at the deep end with little formal training for their jobs.
-
There is a high level of sickness in the warehousing and distribution area, due mainly to inadequate
provision of lifting equipment.
-
There is a perceived lack of management and technical support which has resulted in a general
lowering of morale.
Future plans
The managing director, Clive Moor, has indicated that he would like to replace the existing paperbased systems with ‘computers of some kind’. With such a move, he is hoping to improve on the
communication of information at all levels in the organization. However, Mr. Moor knows little about
computer hardware or applications software except that it seems to cost rather a lot.
In order to proceed with the computerisation programme, Mr Moor has asked the following senior
managers to produce a plan:
-
Paula Barlow – Finance director
-
Terry Watson – Sales and marketing director
-
Peter Jackson – Manufacturing operations director
-
Frances Clarke – Warehousing and distribution director
However, these directors have varying degrees of enthusiasm for the project, together with a desire
to minimize the risk of damage or exposure within their own departments. One of the key decisions which
must be made will be how LFFL acquires the necessary applications software. One option will be to hire
relevant IT staff and build bespoke applications, while another will be to purchase off-the-shelf packages.
Yet another option will be for end-users to develop their own applications. This last option may prove
awkward, since there is very little IT expertise among the end-users.
Questions:
1. Which method(s) of business systems software acquisition would you recommend to LFFL ?
Explain and justify your answer.
2. Assuming that LFFL decides to go down the route of purchasing off-the-shelf packages, what
steps do you recommend it takes to ensure that the applications which are selected meet their
requirements ?
Trang 21 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 7.3
LLOYDS BANK
INSURANCE SERVICES APPLIES RAD
When marketing people spot a business opportunity, it is often IT people who have to think and act
the faster.
Systems have to be put in place that meet the stipulated deadline, that work first time, and that fulfil
the expectations of users. Otherwise the opportunity could be lost forever.
That was the situation facing the computer team at Lloyds Bank Insurance Services when a new
product called MUDI (Mortgage Unemployment Disability Insurance) required a telesales quotation system
that had to be fully operational by October 2nd.
Yet it was already mid-August when David Jacklin, IT Development Manager, LBIS, was informed of
the need for new application. It was a moment he remembers well. ‘I faced the classic dilemma of no
available resource within my team and an immovable deadline’, he recalls.
However, in spite of that initial reaction and against some unexpected odds, the race against time
was won. The insurance broker’s objective was achieved with help of a hard-working software house, a
development environment toolset, and a fast-track approach called RAD (Rapid Application Development).
In fact, the entire development took just five weeks.
Reason for the urgency at the LBIS headquarters in Haywards Health, West Sussex was a
government decision to amend the rules relating to the payment of mortgage cover out of social security in
the event of a house-owner being made redundant. This opened a new insurance window which the
company was determined to exploit.
LBIS, a subsidiary of Lloyds Bank and Abbey Life, is a firm of independent brokers dealing in life
assurance, pensions and general insurance. Annual turnover is £100 million and 800 people are employed
at Haywards Health and six regional offices. A significant proportion of the company’s business is generated
through a business unit called Lloyds Bank Insurance Direct.
This is essentially a telemarketing organization based in Bournemouth. About 70 per cent of its
business comes via branches of Lloyds Bank, where advisors take an enquirer’s details and ring LBID for a
quote. The remaining 30 per cent is from people responding to direct mail of advertisement and telephoning
in direct.
A simple version of MUDI was, in fact, available at the bank branches. But there were no facilities for
accurate underwriting and anyone talking up the policy paid a straight £6.50 per £100 of cover (i.e. if the
monthly mortgage payment was £300, the premium was £19.50). The new system would incorporate a
Trang 22 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
complex screen replacing the existing simple paper form, providing the flexibility to quote premiums
appropriate to the enquirer ranging from £4.40 to £9.40 per £100 of cover.
But first the new system had to be built. There already existing another application at Bournemouth
– BIQS (Building Insurance Quotations Service) – but this ran under DOS, so what would almost certainly
be a Windows system could not merely be tagged on.
Jacklin and his team had been looking at development toolsets and the RAD concept earlier in the
summer. They had been particularly attracted by a RAD specialist, MDA Computing, and has already met
the Croydon-based soft-ware house at the end of July.
Suddenly, with the new business-critical requirement looming, the need for RAD became urgent.
‘We had no hesitation going back to MDA. They obviously knew what they were talking about and we were
in urgent need of a system’, says Jacklin.
Some of the main attractions of RAD included the delivery of a workable first version within a very
short time-scale, testing that is integrated within the development cycle, flexibility of the specification, and
user involvement throughout the whole process.
Within days, Jacklin and his colleagues had agreed with MDA the RAD methods to be used. The
software house underlined the need for an appropriate development environment, and recommended
Enterprise Developer. This versatile toolset from Symantec had all the advanced features of a second
generation client/server development system, and this was precisely what the LBIS team sought.
Such systems are repository-based and scaleable, and – specially important according to Jacklin –
are driven by business rules so that future changes are easily made as business needs change. MDA
evaluates every tool that comes on to the client/server market and felt that Enterprise Developer offered the
best set of second generation facilities.
Next step was a demonstration of the Symantec toolset at MDA, ‘The demo convinced us. We had
looked at other development tools but they did not seem meaty enough for our needs. And although MDA
had never built anything with Enterprise Developer they were clearly keen to do so.’ Following that demo
and an agreement of project scope, work began on August 24th.
The key requirement was for a front-end system that would enable telesales staff at 30 screens to
capture a caller’s details and generate an immediate MUDI quotation. The system would be in Windows 3.1
and GUI based, essentially a classic PC LAN application. It would run a Compaq server using Novell.
However, MDA’s first task was systems analysis. At the early stage, LBIS had not formulated all
their needs – not even the design of the ‘forms’ that would appear on the screen. So MDA used RAD
techniques to work out what the requirements would be, and spent three days at LBID in Bournemouth
prototyping the forms on screen using Enterprise Developer. The software house also had to allay fears,
among a user-team with little experience of Windows, about mouse-driven systems.
Trang 23 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
In order to get the project started, the use of a Watcom database was assumed. However, following
discussions within LBIS, it was decided that f or strategic and operational support reasons the use of Oracle
was preferred.
MDA had to accommodate a new database in already tight development cycle. The ability to adapt
to the fresh circumstances and still deliver the system on time was a big tribute to the software house’s RAD
methods and the Symantec toolset. (In fact, there were minor compatibility problems which disappeared
when LBIS upgraded to Enterprise Developer 2.5 at the beginning of November.)
The system was delivered in the last week of September for final testing in readiness to go live the
following Monday. By then, LBIS’s own technical team had adjusted the BIQS system so that the telesales
people could flip to it from MUDI, depending on the caller’s needs, with a simple keyboard Alt/Tab
depression.
On ‘live’ day, the telesales team processed 200 customer quotations with scarcely a hitch. Jacklin,
MDA and Symantec had every right to feel pleased with themselves. A business need had demanded IT
support, and that support was implemented on time.
Now the end-users, equipped with telephone headsets, enter personal details which affect ratings,
such as sex, post code and occupation, on to a GUI screen. The quotation then appears on the same
screen. There are five other, supporting screens labeled status, comments, letter print, rating and search for
existing customer.
A happy Jacklin concludes, ‘Here was a software house that gave us what we need. They were
always confident they could do something with Enterprise Developer and within time. There was no slippage
despite it being their first real use of the Symantec product and despite the change in database midway
through. I think that says something for Enterprise Developer too. And we went live on the big day.
‘We like RAD and we shall use it again. In a market-oriented organization like LBIS, we always have
a need to react to business changes quickly, and I suspect that within 18 months we could need a system to
handle all six of our insurance products.’
He adds, ‘The system had allowed LBIS to launch a more competitive product than would otherwise
have been possible, and we have sold more than we would have done. It had to be in at the right time or we
would have missed the boat. From a technical point of view, it forced us to go to Windows which was always
our eventual intention. All this, and the system will pay for itself before Christmas!’
Source: www.dsdm.org
Questions:
1. Why and how did the company choose the RAD approach used for this project ?
2. What disadvantages of the RAD method can you identify from the study ?
3. Do you think that Lloyds can be confident that future RAD projects will be successful ?
Trang 24 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 7.4
USE OF WATERFALL V. AGILE METHODS
AT MELLON FINANCIAL
Mellon Financial’s shift to agile software development is part of an emerging trend. ‘Every
investment bank and hedge fund I’ve spoken to is looking at agile’, says Sungard’s Chapman. A relatively
new term, agile development is based on iterative development – developing software in small, manageable
chunks that can be modified as requirements change, yet using a disciplined software delivery mechanism.
Historically, the software development approach used throughout Wall Street has been the ‘waterfall’
method, which calls for strict, lengthy analysis and documentation of requirements. For a one-year project,
for example, three to six months might be spent on needs analysis. ‘The business people are expected to
define 100 percent of their requirements up front before the project even starts’, Chapman says. ‘People get
stuck in this analysis paralysis – they spend months and months trying to define what they want.’
Another three to six months can be devoted to software design, then the actual program finally is
written. ‘Inevitably what happens is requirements change, integration becomes very difficult and all the risky
software development happens at the end of the development effort’, Chapman explains. ‘The waterfall
approach has a horrible track record of delivery.’
Agile software development is designed to delivery software more quickly yet maintain high quality.
In agile methods, every two or four weeks, businesspeople get a small amount of code to review and the
opportunity to change the requirements. ‘Imagine a hedge fund where traditionally a new credit derivatives
trading system would take a year to build using the waterfall approach, with businesspeople writing six
months’ worth of documentation versus using an agile approach, where some of the system is delivered in
two weeks, and it’s OK if you change your mind’, Chapman says. ‘For the hedge funds particularly, agile is
an extraordinarily good fit because the portfolio managers want to get things done quickly.’
But you every project lends itself to short iterations, Chapman concedes. ‘On Wall Street it’s not so
easy because there are a lot of other systems you need to integrate with’, he says. ‘But I think there are
parts of agile you can use on every project to improve it.’
Agile development had three levels: developer, project and enterprise. ‘Nobody on Wall Street is
using agile at the enterprise level’, Chapman says. ‘A lot of education needs to take place within the banks –
it’s going to take some time. But I think every project could gain some benefit from trying to break down the
project into more manageable chunks that can be delivered in a more iterative and agile way.’
Agile methods even improve software quality, Chapman contends, because they emphasize testing.
Agile methods encourage developers to do their own testing. Agile methods encourage developers to do
their own testing, often code and to develop automated testing routines for the programs they deliver.
Trang 25 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
‘Agile development approaches and CMMI are compliant with each other – you can use CMM and
CMMI to make agile software development better’, Chapman adds. On the other hand, he asserts, trying to
use CMM and CMMI on top of waterfall development approaches will just weigh projects down with
bureaucracy and paperwork.
Source:
www.wallstreetandtech.com/advancedtrading/showArticle.jhtml?articleID=199601961&cid=RSSfeed_TechWeb
accessed via www.computing.co.uk
Questions:
1.
What does the observation that ‘requirements change, integration becomes very difficult and
all the risky software development happens at the end of the development effort’ suggest
about the traditional waterfall approach to software development with respect to system
design?
2.
Do you think there are any dangers in trying to take short cuts around the traditional approach
to systems design ?

Trang 26 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
ACTIVITY 8.5
DETAILED WEIGHTED ANALYSIS
OF AN ERP SOFTWARE DECISION
Table 8.5 shows an analysis for three products from different suppliers that were compared across
many factors to establish which was most suitable. This type of detailed analysis is usually conducted when
a new system costs tens or hundreds of thousands of pounds. The grand total shows that Supplier 3 is the
clear winner.
Table 8.5 - Detailed weighted analysis for ERP software
Weighting
factor
Supplier
1 score
Supplier
2 score
Supplier
3 score
Receive information
70
60
60
60
Verify cut quantity
70
30
40
80
Schedule operations
80
56
56
56
Monitor schedule execution
80
40
40
68
Verify shop data input
80
64
64
64
Verify parts loss reporting
70
28
56
56
Detect labor variances ?
60
30
36
42
Provide real-time status
60
24
19
43
Provide capacity planning ?
70
56
40
50
Calculate incentive pay
70
30
25
35
Provide needed flexibility
80
65
50
55
Verify inventory data entry
60
42
42
42
Provide operation history
60
32
40
42
Provide security
90
30
36
36
1000
587
604
729
System reliability
100
56
56
56
Compatibility with other systems
100
56
56
56
Cross-module integration
100
45
70
65
Decision criteria
A. General functionality
A. Subtotal
B. Technical considerations
Trang 27 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
Implementation time
100
45
70
65
Ease of customisation
100
60
48
56
B. Subtotal
500
262
300
298
Cost
60
36
48
54
Service and support
90
45
50
57
Vendor vision
70
25
25
40
Confidence in supplier
80
35
45
65
C. Subtotal
300
141
168
216
Grand total
1800
990
1072
1243
C. Other considerations
Questions:
1. Review the different categories and the criteria within them. Do you think that the weighting
factors are valid? Are there other factors that might apply for ERP software ?
2. Look in detail at the values for each product. Comment on the basis for deciding on individual
scores.
3. Given possible deficiencies in 1 and 2 above, comment on the suitability of this technique for
making a decision. Would you use it and why? What would you do differently ?

Trang 28 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 8.1
SEDGEMOOR DISTRICT COUNCIL
Quick availability or information increases efficiency and reduces costs
Sedgemoor District Council is improving the availability of information online to enhance customer
service, increase the efficiency of accessing information and reduce data management costs. The council is
now in a position to remove its planning department’s legacy data management system (DMS), as it had
complete migrating information to its electronic document and records management (EDRM) system, Trim
Context from Tower Software.
Craig Wilkins, information system manager at Sedgemoor District Council, says archived material for
planning stretches from 1974 to 1995. ‘It was in a proprietary DMS but it has been migrated to our EDRM
system and been made available to the public online’, he says.
‘Dropping the DMS means we can improve efficiency and save about £7,000 annually on
maintenance and server hardware. Making planning documents available online has also reduced the
number of phone calls to the council.’
The aim is to replace paper-based systems and integrate all systems with the EDRM software to
centralise the storage and management of all documents, and to remove legacy DMS applications. ‘We now
have a million records in the EDRM system out of 7.5 million documents. We have a variety of systems
covering 14 different business areas and EDRM will underpin them all to attain availability of information
accurately’, says Wilkins.
‘New documents go into the repository as well as archived data being migrated. We can scan
documents into EDRM and recycle paper documents, reducing storage costs. We also aim to specify
retention policies for data to improve information lifecycle management.’
The council had started to fully integrate its Goss iCM content management system with its EDRM
software to assist in making data available via its web site.
As volumes of data multiply, the council has also installed a storage area network to support EDRM.
‘We are scanning documents into the EDRM system and populating the back-office systems with metadata.
We are having to key in metadata manually but the aim is to automate this process, perhaps through a
barcode system, although there is a question over how much metadata a barcode can contain’, says
Wilkins.
Recently the council received confirmation that it is likely to be one of the first local authorities to
comply with the Code of Connection requirements for connecting onto GCSx, part of the Government
Connect programme to provide a common infrastructure for secure electronic transactions between local
Trang 29 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
and central government. Other benefits include making council reports, agendas and minutes available
online – and using Goss software in conjunction with EDRM to ensure the correct document versions are
published online in each service area. The ultimate goal is for the EDRM system to make information readily
available to support customer services through all access channels – the internet, face to face and by
telephone, says Wilkins.
Lisa Kelly, Computing, 11 Oct 2007,
www.computing.co.uk/computing/analysis/2200923/case-study-sedgemoor-district
Questions:
1. Given the intangible nature of some of the benefits from the new information systems, how
might the council have gone about making the investment decision ?
2. Analyse the initiation part of the project in terms of the internal and external factors driving the
systems acquisition process.

Trang 30 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 9.1
PUTTING AN ALL-INCLUSIVE PRICE TAG
ON SUCCESSFUL IT
Failure to derive the expected benefits from IT systems is legendary. Yet organizations still fail to
recognize or accept why this occurs and generally do little to address the root cause in any meaningful way.
The first place to look is the application of the Return on Investment (ROI) tool as the arbiter for
benefits delivery and the subsequent plans for implementing the systems. An ROI is required by most
organizations, but the tool is often applied without fully understanding all of the cost components (full
disclosure)
By definition, IT projects tend to focus on dealing with the technical issues. It is these that get
measured as the cost side of the change – usually the cost of hardware and software with some allowance
for training. Typically, costs are grossly underestimated (often 40 per cent or more) by failing to consider
precisely those factors that are needed to deliver the return.
ROI is a technical measure talking expected returns and expected costs to determine the worth of
the investment. The key word is ‘expected’. The reality, of course, is that the ROI calculation is no more than
a forecast, based upon someone’s view of the costs and benefits. Realising the benefits forecast is where
the hard work arises, there is often a drastic underestimate of the efforts required to ‘make it happen’. The
underestimates are generally in:
-
ensuring compliance with the business strategy;
-
aligning the people with the processes the business is changing to;
-
ensuring that behaviours are commensurate with the required new ways of working.
This assumes processes are being changed – otherwise where are the benefits coming from?
Which means there is an implicit assumption that people somewhere will be doing something differently. It is
the need to ensure and facilitate this change that generates a high proportion of the total project costs. By
including these costs some projects start to appear unprofitable. This, of course, is generally not in the
interests of any systems suppliers. It may, however, stop some projects from getting off the ground and
avoid some of the overspending we have seen in the past. If the way things are done in the business is
being changed the there is a need to understand what that change means. There is a range of
implementation approaches taken by companies including:
-
simple ROI and the ‘stuff it at ‘em’ approach that follows the principles of ‘if we tell them what to do
and give them a bit of training then they’ll make it work’;
Trang 31 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
-
a considered approach that defines real business need and vision but then fails to communicate this
through to the ‘what’s in it for me’ messages and thereby does not connect with the users;
-
development of a system that involves some users early and is well communicated to staff, but is not
properly aligned to the organisation’s strategy and owned by specific, accountable people in the
business.
Quite often, once the decision to invest is made, technology projects are devolved to the IT
department who are then responsible for overseeing through delivery and implementation. Often these
technically focused people are poorly qualified to understand and business nuances and may not have the
required communications skills. Over and above this, who looks at the changes required in human
behavior? Who is addressing the motivational issues that will get the right people doing the right things?
A framework can be proposed to improve chances of success. This is based around the simple
model of People, Process and Technology (PPT) with the added element of environment or context (PPTE).
Context is the first parameter to get right. How does the development proposed relate to the business
strategy? What is the desired outcome for the development, in business benefit terms, so that we know what
is to be delivered and why? After thinking through the application needs and functions, the next useful
question is how is it to be delivered? This should be viewed as problem that the business deals with rather
than abdicating it to the IT group.
Costs can then be assessed in outline for the whole PPTE model. This may include some scenario
planning work fully to appreciate the different ways that the system may work, and identify the best options,
prior to getting the technologists involved. A full disclosure ROI can then be calculated that takes all benefits
and PPTE costs into account. This should include all of the people costs for effective change, from
ownership and visions through stakeholder buy-in, to positive, user-led adoption. Decisions to proceed are
now likely to be better informed and can be done on all fronts of process, technology and people readiness,
perhaps with the ‘go’ decision requiring people readiness to be assured.
Truer costs will be understood and the full implications of benefits will emerge. The business’s
responsible project owner will now have a budget that allows them to plan from concept to execution with
holistic consideration of all PPTE elements. This will give positive adoption of systems that are pulled
through by users who expect what they get and get what they expect. They will ‘pull’ the system through
rather than having it shoved at them.
Ron Barker, Financial Times, 30 May 2007
Question:
Discuss the difficulties in estimating the costs and benefits of an IT project.

Trang 32 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 9.2
LESSONS FOR BUSINESS
FROM THE PUBLIC SECTOR
Stephen King, the thriller writer, might be hard pressed to top some of the horror stories generated
by public sector information technology project. That’s an exaggeration, of course, but only just.
Take the UK’s Child Support Agency, charged with tracing absent fathers and forcing them to pay
child maintenance. The agency is in the process of being abolished, the consequence of an IT foul-up which
meant a government watchdog discovered that costs were eating 70p of each £1 it collected and that it had
a backlog of 300,000 cases. The system, developed by EDS, the US group, at a cost to date of about
£539m is through to have 52 critical faults of which 14 cannot be easily corrected. The CSA has had to
process thousands of cases manually because of system failures. The CSA story is chilling, not least
because of its human implications, but it is almost normal for an industry in which, according to analysts, an
IT project is more likely to be unsuccessful than successful and the bigger the project, the more likely it is to
fail.
There is no real difference between public and private sector projects in this respect. Public sector
failures, however, are more visible and attract media attention more easily. Here is Sir Andrew Turnbull, now
Baron Turnbull, the former UK cabinet secretary, the man with ultimate responsibility for government IT,
talking on the subject before leaving office: ‘There have been plenty of projects, large and small, that have
come in on time and to budget. Of course, you don’t tend to get headlines announcing “Government project
completed on time and to budget. No major problems encountered. Improved services delivered”. The
media inevitably focuses on those projects at the other and of the spectrum.’
This view resonates with Malcom George, executive director, government relations, for EDS in
Europe. He says public sector projects are on a scale rarely seen in the commercial sector and that scrutiny
tends to highlight failure. Successes, such as EDS’s Oyster card payment scheme with London Transport
rarely attract plaudits. Mr George says the most important lesson the commercial world could learn from the
public sector concerned the benefits of sharing pool of knowledge of what makes projects work and what
does not. Competition militated against such sharing, he said.
It is true that successful public sector projects rarely attract standing ovations. In 2002, the UK
government’s Swansea-based Vehicle and Driver Licencing Agency (DVLA) initiated a project to enable
British drivers to license their vehicles either online or by telephone. At present, most drivers renew their
licences at a post office. The system was built in collaboration with IBM at a cost of £30m. At the peak, 80
IBM staff and 20 DVLA IT specialists were involved. Today, two years after completion on time and budget
3m drivers have used the system successfully and it is attracting users at the rate of 400,000 a month. It can
Trang 33 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
be counted as an unqualified success. But it was not a simple project. A licensing authority has to be sure a
vehicle is insured, has passed its roadworthiness test and that payment has been made before a licence
can be issued. The DVLA database had to be linked to the motor industry insurance and roadworthiness
database. And a payment engine with links to the banks had to be created. Julie Palmer, the Vehicle
Programme Manager in charge of the project, says it was important that DVLA and IBM shared the same
vision: ‘To the outside world, we looked like a single team.’ The ground rules were agreed at the start: these
included the degree to which risks were shared and the rules covering change management, the most
critical issue in any big project. Andrew Rhodes, planning and performance manager, pointed to the efforts
made at the beginning to ensure that what was delivered was what customers wanted: ‘The secret in
defining a product your customers will want to use. We could simply have mirrored the existing paper
process but we redefined it in a way that not only met our needs but also out customers’ expectations of
ease of use.’
Nevertheless, there are significant numbers of projects that have lost their way. The Standish Group
in the US has been at the forefront in analyzing and classifying these failures: its 1995 report is regarded as
a classic. Its lasted survey of 9,000 IT projects, more than half of them in the US, suggests that 29 per cent
were successful, 53 per cent were late and/or over budget or with less than optimal functionality and 18 per
cent were cancelled or never used. More recently, the Standish Group’s methodology has been queried,
does it select for failure?, but the fact remains that the rate of failure of big projects is unacceptably high.
Why do IT projects founder? And what can the business world learn? Among the most important is a
failure to align project objectives and the organisation’s strategic priorities, an example being a US
insurance group that took three years to finish a one year marketing project, only to find the product in
question was being sold. A second reason is a lack of ‘ownership’ of a project by senior management. This
comes up time and again in studies: a project needs a champion at senior level who is responsible for
bringing the scheme to fruition on time and to budget. Third, some projects are simply too large to be
managed effectively. More recently, there has been a trend to tackle automation in small steps, linking
successful projects together to create a seamless whole as a final stage.
These issues are underlined by Graham Kemp, in charge of public sector business for Sun
Microsystems in the UK, whose customers include the health service, the Inland Revenue and the Home
Office. He says communication is critical: ‘I think that when projects fail, it is because the rigour around
communications or review and inspection is not what it could be.’ ‘For those engaged in the project, it is
fundamental that all stakeholders are excellent communicators.’ Not engaging all the stakeholders in the
aims and objectives of a project is frequently quoted as a cause of failure. The DVLA licensing project
involved representatives of everybody affected at each stage. Mr Kemp points to the importance of
established and proven methods of project management such as Prince2, a methodology which takes as its
starting point the business case for a project and provides guidance at each stage. He also stresses the
importance of ‘Gateway’ reviews, in which independent scrutineers assess high-risk projects at critical
stages in planning, procurement and implementation, rating them red, amber or green. ‘The proper review
mechanisms have to be in place’, Mr Kemp says. ‘The projects led by governments are sometimes just too
Trang 34 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
big. If they were segmented, then some risks could be mitigated by people with appropriate competences.
Projects and subprojects would be more manageable.’ So the public sector patient is responding to
treatment, if not yet out of intensive care. Is the private sector taking the same medicine? And would we
kmow? ‘The private sector keeps its mistakes to itself’, Mr Kemp notes.
Alan Cane, FT.com site, published 4 October 2006 (abridged)
Questions:
1. What reasons does the case study indicate are responsible for project failure ?
2. What steps can be taken to reduce the risk of project failure ?

Trang 35 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 13.1
AGILE DEVELOPMENT CAN MAKE
BUSINESS QUICK AND LIGHT
But ICT must communicate its benefits if managers are to accept it
Agile software development can prevent organizations becoming locked into yesterday’s ideas and
business strategies, but it makes some managers nervous, experts told New Zealand Computer Society
members at a recent NZCS meeting.
Agile software development is one way IT can guard against becoming an anchor weighing down
changing businesses, according to developer Shane Hastie. Rigid specifications and inflexible development
techniques can lock organizations into yesterday’s ideas and also inhibit commercial evolution. Management
can appreciate the benefits of agile development techniques – but only if these benefits are communicated
properly, he says.
Hastie, who is chief knowledge engineer at Software Education Associates, was one of two
developers who addressed a well-attended NXCS’ birds of a feather’ session on agile development, held in
Wellington earlier this month.
Fellow presenter Stephen Hilson, who currently works for Telecom, says both general and ICT
managers are nervous about the less structured nature of agile methods, especially when it comes to
mission-critical disciplines, such as telecommunications.
Telecom fits agile practices around a skeleton of more conventional waterfall-style development –
starting with a complete specification and working through design, coding and testing stages linearly, says
Hilson.
The essence of agile development is the creation of small pieces of a program, a process that can
sometimes lead to a realization that the original design of that part of the program either won’t work or
should be revised. This results in iterative redesign and re-coding, independently of other parts of the
development.
Superficially, this process looks unstructured, but requirements’ churn’ is actually a fact of
applications development life, the speakers say. In an agile environment, realizing work is off-track often
means that only a little work has to be thrown away, says Hastie.
In contrast, a misconceived design, based on a monolithic specification, could mean throwing away
much more, with major impact on the project schedule. This is important in resource-constrained New
Zealand, he says. And, if the completion target is hard to see at times, agile techniques can at least ‘deliver
enough to keep the business moving forward’.
Trang 36 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
The speakers acknowledge that, with agile development, the final product can be quite different from
that originally planned. But it tends to be more aligned with the business’ needs at the time of completion –
rather than its needs at the start, which may now be outdated.
If management and users are involved, they will understand the logic of the way the ICT team
chooses to develop.
‘Two of the most important factors are a high level of customer involvement and chief executive
support. If you have those, you will succeed no matter what technique you’re using’, says Hastie.
The essence of agile development has been known for 10 to 15 years, and recognised as good
practice, Hastie says. The essentials are programming with teams of peers, quick turnaround of small
modules, close contact with customers, and a daily ‘stand-up’, where developers report on the work they
have accomplished since the last meeting, as well as what they plan to do next and any obstacles they have
encountered.
Agile methods – branded as such around 2001 – ‘pull all these good practices together’.
Adapted from an article by Stephen Bell, 13 August 2007.
http:// computerworld.co.nz/news.nsf/devt/943AA253F4D6EADFCC257333000EAF06
Question:
What do the differences between the traditional waterfall model and agile development methods
suggest about their respective applicability to the strategic alignment of business and IS/IT strategies ?

Trang 37 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY 14.1
WHY DO PUBLIC-SECTOR PROJECTS FAIL ?
Back in the spring of 2007 a doctor application system which was supposed to match junior doctors
to specialist training posts was shelved by ministers. Doctors complained that the system – the medical
training application service (MTAS) – was profoundly flawed and that many juniors had been unfairly
treated. The reorganization of training and the application process meant that 30,000 doctors were chasing
just 32,000 posts in a system poorly thought through. Astonishingly research suggests that one in five
doctors have even considered suicide, such is the depth of the fiasco.
And the story didn’t end there. The MTAS site has also allegedly been the subject of two security
breaches, which caused the opposition to call for the resignation of the then-health secretary, Patricia
Hewitt.
But in the world of public sector technology initiatives, this story was the most recent in a long line of
blunders. One of the most troubled technology outsourcing cases was that of the now defunct Child Support
Agency. The outsourced IT system was at the root of the agency’s problems. An investigation by the
National Audit Office (NAO) found that ‘go live’ of the system had been authorized, despite the CSA and its
supplier being aware that there were 52 defects within the system. The NAO branded the project, ‘one of the
worst public administration scandals of modern times’.
These and other examples of outsourcing have been very damaging to public sector organizations
for a range of reasons. There is of course the waste of money and other resources. Public sector
organizations are effectively answerable to taxpayers – wanton waste of public funds does not bode well for
good relations. These public sector technology catastrophes also attract a good deal of negative publicity –
this can do serious amounts of damage to the organisation’s reputation and dent stakeholder and taxpayer
confidence in the ability of the organization to do a good job. Just look at the CSA – the situation
deteriorated to such an extent that the entire organization was scrapped.
The fact that public sector technology and outsourcing projects go wrong so regularly means we
aren’t surprised by these failures anymore. Public sector projects are so tainted by their poor track record,
expectations are set very low and they now have little to live up to. So why do these failures keep
happening?
There needs to ne an element of realism when looking at major technology projects. The sheer
scale of the larger projects means that inevitably there will be problems along the way. The problem with
many of these initiatives is that the parameters of the project and contract provisions are tightly defined and
the contracts are not managed effectively by the same team through the project lifecycle. When a problem is
encountered often the first reaction of the public sector is to seek to avoid any blame.
Trang 38 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
History has taught us that errors and mistakes should be expected and factored in to the way that
contracts and projects are managed. A shift away from the blame culture to an environment where
successful delivery is valued above all else is required in order to increase the probability of problems being
detected at an early enough stage for them to be dealt with appropriately in a way that works for the supplier
and the public sector.
Problems often arise around the cost issue. Cost is often cited as a major driver in technology and
outsourcing projects. Whilst it is undoubtedly important, public sector organizations have to be wary they are
not blinded in the quest for squeezing as much value for money as possible out of the supplier. This
procurement – led approach to technology and outsourcing cab be problematic as it leaves very little scope
for innovation in the project and makes it much more difficult to cope with problems when they arise.
What appears to be the cheapest deal is often the worst as frequently the service will be
compromised or the final cost will spiral because it was unrealistic in the first place. Of course as a spender
of public funds those in the public sector feel an obligation to get the best deal but nailing the supplier to the
wall financially can often backfire. End users need to realize that any mentality of ‘the cheapest wins’ means
that the more realistic suppliers will be missing out on contracts.
Problems in technology and outsourcing deals can often arise when there are unclear lines of
responsibility both within the public sector and between the public sector and the supplier. Drafting a
contract with clear responsibilities and then managing it appropriately deals with the responsibility between
the public sector and the supplier. However, it does not deal with the constant reorganization that takes
place at central and local government level or the constant churn of ministers and officials on projects.
With this sort of fundamental change, is it any wonder that there is not a great track record of
successful delivery of major technology projects? Failures are often attributed to the supplier but as in any
relationship it takes two to tango. A blame culture often comes to the fore when things go wrong, with the
end user blaming the supplier as operations were not executed to their satisfaction and the supplier blaming
the end user because they were negotiated right down on costs.
Problems worsen as the two parties are more concerned with absolving themselves of wrongdoing
than they are with rectifying the issues. Since differences or disputes are inevitable in relation to large-scale
technology projects, mediation and adjudication – which exist as legal mechanisms for resolving disputes –
should be more widely utilized. Adjudication is a particularly useful dispute – resolution process for obtaining
swift results which has yet to find favour on large-scale technology projects.
From all the press reports that circulate about these problematic projects, it would seem that they
invariably involve the same circle of suppliers. This understandably begs the question, why on earth do
public sector organizations keep selecting them? One of the major problems in the public sector today is the
lack of competition amongst suppliers.
The principle reason behind this is the protracted and complex tendering process that suppliers have
to go through. Far from these being an alleged ‘inner circle’, organizations really are limited when picking a
Trang 39 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
vendor for projects of this size. More choice would be likely to mean better service. But with such hurdles to
overcome how can smaller, quality suppliers compete in the public sector market? And how can end users
avoid the obvious choice?
Public sector organizations need to take a more strategic approach to outsourcing. They need to
ensure they have a dedicated team that manages the process full time, constantly reviewing existing
contracts and looking for improvements and innovations. Instead of using a ‘one-stop shop’ supplier the
public sector should look to use specialist suppliers for different aspects of a project. This gives smaller
companies a chance of a contract but also gives the end user access to.
Unfortunately the need for an ‘intelligent client’ is often overlooked – with the very expertise the
public sector needs to manage its IT suppliers being outsourced to those suppliers. Public organizations
shouldn’t be held to ransom by a private organization. If they spread the work and therefore knowledge
between a range of suppliers or keep some knowledge in-house then this won’t happen.
The public sector boom of technology outsourcing definitely set to continue but public sector bodies
need to learn lessons from their private peers. Successful delivery needs to be valued within the public
sector more than simply not being to blame for problems. The key to successful delivery is to have continuity
of personnel throughout the project lifecycle; a sensible, balanced contract managed appropriately; effective
dispute resolution; and the retention of an ‘intelligent client’ on the public sector side.
Paul Bentham, July 2007, www.silicon.com/publicsector/0,3800010403,39167934,00.htm
Questions:
1. Public-sector information systems projects have had a chequered history. Is the national
programme for IT proving to be any different from some of the flascos that have preceded it ?
2. The national programme for IT involves a substancial increase in outsourcing. What are the
likely benefits and risks associated with this approach ?
3. Could the COBIT methodology be applied in this context ?

Trang 40 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.01
AN ENTERPRISE ARCHITECTURE
FOR A U.S. INTELLIGENCE AGENCY
In 1996 the US Congress mandated that U.S. government agencies
develop enterprise architectures that established standards for software
development and integration. Most US agencies are still working on this
assignment. This case study considers an enterprise architecture developed
Author:
Mary Hain
Hain Communications
under that program.
Problem
Filed:
December 2002
Conquest, Inc., is a consultancy that develops solutions for federal and
commercial customers. In 1999, Conquest began working with a major
For more information on Conquest,
Inc. please check:
http://daffy.conquestnet.cncdsl.com
federal intelligence agency that collects, synthesizes and analyzes
information, then distributes it to other agencies. The client’s goal was to
develop an enterprise architecture that would help them improve their
technology planning at the enterprise level. The agency faced a simple, if
challenging, goal: defining current technology programs and future
technology development so that it could (1) make better decisions about
systems acquisition or development and (2) use it as a capital planning
system for making budget decisions.
The agency faced several formidable challenges because of the size
and complexity of its operations. Islands of “stovepipe” systems could not
intercommunicate, were not reusable and were costly to replace. Data was
not easily interchangeable because information was being captured in
incompatible formats and assigned different meanings. Information to build
an enterprise architecture and create models for the various operational
Note. C4ISR was the original name for
pieces was inconsistent or unavailable. Systems did not support a
the Dept. of Defense architectural
coordinated set of processes that in turn supported overall agency goals.
framework.
Some systems performed redundant functions.
C4ISR
is
defined
as
Command, Control, Communications,
Computers, Intelligence, Surveillance,
and
Reconnaissance
Regulatory pressures also drove some aspects of the project. The
framework,
Clinger- Cohen Act (1996) and recent Office of Management and Budget
developed under the auspices of the
(OMB) mandates require that agencies be accountable for technology
C4ISR Integration Task Force (ITF)
Integrated Architectures Panel.
expenditures to secure funding. The agency was required to support the
Dept. of Defense Architectural Framework (DoDAF) (formerly C4ISR), a
Trang 41 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
standard framework that the DoD had mandated affiliated agencies use. The
DoDAF was a brand new guideline when the project began and the first
version left a lot of latitude for interpretation.
As enterprise architecture experts, Conquest plays a key role acting as
a lead contractor for product and view definitions and functional knowledge.
Conquest acts as part of a larger team offering domain insight/experience as
well as modeling/enterprise architecture experience. At the start of the
project, the contractors worked with the agency to understand some unique
requirements for its architecture, including:
- Developing a new business approach that incorporated enterprisewide business requirements and technology needs into an integrated way to
run the business.
- Adopting a systems engineering approach that interpreted and
implemented the Dept. of Defense’s standard DoDAF. (Note: The DoDAF
features three different views: systems, operational and technical.)
-
Integrating
multiple
architectural
efforts
into
one
enterprise
architecture, including those that had been built and were in the process of
being built by internal departments as well as customer groups. The team
had to secure the feedback and approval of the owners of these subordinate
efforts.
- Although not an initial requirement, concordance between diagrams
quickly emerged as a vital piece of the requirements.
Conquest began its involvement by focusing on the functional analysis
of the core mission. They talked with domain experts (data gatherers,
information manipulators and information producers) as well as system
architects and agency management. Architects began by developing the
approach to modeling the enterprise, reviewing and selecting the appropriate
tools and methods and then architecting the models by interpreting DoDAF
guidelines and agency goals.
In the end, Conquest recommended a comprehensive modeling strategy
for building the architecture by defining which views were to be used, in
which order, which diagram types and architectural elements to include, how
to achieve concordance and how to interpret the DoDAF framework
guidelines. Conquest also defined the “to be” architecture. In addition, the
customers and subject matter experts were encouraged to examine and
appraise the models.
Trang 42 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
For more information on the various
U.S.
Government
Solution
architecture
initiatives, please check: www.cio.gov
Conquest architects needed a tool that could be easily customized to
meet DoDAF requirements and could help them understand how the various
and then select architectures.
processes and systems fit together. After an extensive evaluation, Conquest
For
more
information
on
Popkin
Software's System Architect product,
please check: www.popkin.com. For
specific
information
on
Popkin's
and the architecture team chose Popkin’s System Architect as the primary
enterprise modeling tool. System Architect offers complete support for
DoDAF operational, systems and technology views to produce the required
Support for government frameworks,
government framework deliverables. System Architect offers integrated
select Federal Systems on the Popkin
support for DoDAF, the Treasury Enterprise Architecture Framework (TEAF),
site.
Federal Enterprise Architecture Framework (FEAF), Zachman framework
and IDEF (Integrated Computer-Aided Manufacturing (ICAM) DEFinition).
”System Architect helps users understand how all the pieces of this
complex environment fit together through building a comprehensive
enterprise architecture,” said Tom Dalpini, senior architect, Conquest Inc.
“We were able to choose the best modeling approach for the goals we were
trying to achieve because the tool was so flexible in supporting a wide variety
of modeling techniques.”
System Architect’s built-in flexibility enables Conquest to easily
customize the views to the unique needs of the agency. For example, using
System Architect’s USRPROPS (user properties) feature, architects can add
fields or attributes for any diagram or object and add nonstandard
architecture elements to a diagram (such as observations for a diagram).
Most importantly, System Architect’s built-in concordance allows team
members to update individual models and have confidence that the changes
are reflected throughout the architecture. To help users share data and
views, System Architect supports a server-based central repository. In
addition, diagrams can be exported from System Architect into PowerPoint,
Word or Excel for review and approval.
”System Architect makes it easy to document how information flows
within an organization,” said Dalpini. “An enterprise architecture in a strong
modeling tool like System Architect offers an ideal communication vehicle for
the many people involved-contractors and internal business process and IT
teams-to communicate, collaborate and keep the organization on track.”
Benefits
More than two years into this multi-year project, the agency has already
benefited from the implementation of an enterprise architecture. The
Trang 43 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
standard DoDAF has facilitated consistent comparisons, including a glossary
of terms with definitions to ensure a common understanding. The
architecture
has
helped
the
agency’s
sub-organizations
coordinate
technology initiatives. Modeling helps facilitate feedback from throughout the
agency so that comments can be more easily incorporated into the
development process. Participants can more easily see and understand the
potential impact of changes.
Conquest’s architecture design helped the agency begin to understand
its future operations and processes. Model-driven architecture helped
facilitate communication by graphically representing vast amounts of data
into discrete views that could be reviewed and understood across different
organizational groups and business areas. Modeling also encouraged
collaboration between groups, helping them identify redundant and nonmission enhancing activities, and driving significant cost savings. To help
federal agencies jumpstart their development process, Popkin now offers an
integrated DoDAF option for System Architect.
The agency views the project as a wise long-term investment. The
architecture has been embraced by its sub-organizations and customers,
fostering communications and a shared drive to meet business goals. In the
long term, the architecture will enable the agency to make better budget
decisions on current and future technology programs. Eventually, groups will
need to show how their technology fits into the enterprise architecture before
For more information on this case,
contact: Mary@HainPR.com
receiving funding. Conquest will continue to play a key role in the entire life of
the architectural effort, providing leadership in the areas of modeling the
business and providing functional expertise.

Trang 44 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.02
CAN INFORMATION SYSTEMS SAVE U.S. STEEL?
In capacity U.S. Steel (USS) is the largest integrated steel producer in North America and the largest in
the United States. Headquartered in Pittsburgh, Pennsylvania, it can produce about 27 million tons annually.
The world's largest steel maker, Europe's Arcelor, produces more than 40 million tons annually, while South
Korea's POSCO, the second largest, produces about 30 million tons. In fiscal 2003 U. S. Steel's total
revenue was $9.3 billion. Its third largest customer is the Ford Motor Company, an automobile manufacturer
that requires an immense amount of steel.
In 1996, Ford viewed USS as the worst in performance amongst its leading suppliers, and it threatened
to turn elsewhere for its steel supplies despite their 70-year relationship. "We were in danger of losing Ford's
business," explained Gene Trudell, USS's CIO. "It was that serious." Ford's biggest complaint, among many,
was that it was not notified when its steel shipments would arrive, leaving Ford unable to operate efficiently.
To USS, Ford's threat was a wakeup call causing it to examine its whole production cycle.
USS identified a number of challenges beyond its notification system. It knew it needed to lower
production costs, including its cost per ton of steel and the number of hours per person required to produce
a ton, as well as the costly size of its steel inventory. It had to return to profitability, and to accomplish that it
needed to increase its share of the high-end steel market. Internally it needed to centralize management of
the various USS businesses and factories and their information infrastructures, which in 1996 were locally
controlled.
USS's major problems were reflected in its order-taking process. Orders were often manual, very
imprecise, and filled with errors. Moreover, once an order arrived, USS was unable to track it during
processing. Processing began when one of its four plants transformed the raw materials in steel coils, which
were then sent to USS's processors to be turned into finished products. USS has over 120 processors (35 to
40 of which work on Ford products). A single piece of steel might be processed by up to five different
processors as they treat, shape, and finish the products. The reason for the complexities is that these orders
require blending and shaping of the materials, including manipulating such characteristics as heat and
tensile strength. USS was unable to follow each order as it was processed and delivered.
One problem was that each processor had its own tracking and order systems, and each assigned its
own inventory codes, making tracking impossible for USS. In addition, each processor communicated its
processing data to USS over a dialup system. When the data arrived, they then had to be manually
translated into a format that could be used by USS's own system before the information could be sent to the
customer. This translation took about 90 minutes per message. It was a very expensive and inefficient
system, and it left USS's customers without enough information for their own production planning. USS did
send advanced shipping notices (ASNs) to customers notifying them of the arrival time, but the ASNs often
Trang 45 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
arrived after the steel, too late to benefit the customers. Late made customers such as Ford more inefficient.
Some Ford plants are only 20 minutes away from the processors. If a truckload of steel arrived without an
ASN, Ford employees would have to record the delivery information manually, a process requiring excess
labor while increasing errors. The tracking system's inadequacies also created forecasting and inventory
problems, forcing the company to hold too much inventory, which in turn raised USS's costs even higher. It
needed to modernize its order taking tracking, and inventory systems.
USS moved rapidly to solve these problems. One objective was to enable customers to enter orders
electronically so that they would be accurate. Using the Web, customers now can specify the product,
quantity, price, composition, size, thickness, and even delivery date for their orders. To achieve all of this,
the system had to handle information of production limitations such as metallurgical rules and production
capabilities. It even had to calculate cost and delivery date. All of this had to be done rapidly so the
customer knew cost and dates immediately after entering the order. USS even connected DecisionExpress
software from LiveCapital to speed up credit authorization, enabling USS to reduce uncollectible debts while
approving most orders.
To track orders, USS developed an event-driven system that recorded each step in processing an
order, automatically triggering the next step when the current step was finished, including the steps
performed by the external processors. The new system even triggered ASNs and the delivery of the order.
One benefit was that USS was able to handle processor messages in 12 minutes rather than 90. Both USS
and the customers knew exactly where the supplies were and how the processing was proceeding. USS
now found that when customer orders and ASNs were correct, its customers were more likely to give the
steel company repeat orders. "You need a way to differentiate your business," said Tom Zielinsky, senior
director of IT strategy at competitor Weirton Steel, "and I think you can do that with repeatability of customer
orders." David Sherwin, USS directory of order fulfillment, agreed, saying "Everyone was producing the
same steel; how to fulfill orders would be different.".
All of this required very complex software, much of it home grown. In addition to information about
price, quantity, and delivery date, an order must capture information on each steel product's composition,
size, and thickness. USS used order fulfillment and data management software supplied by the Oracle
Corporation, a product configuration system from Concentra, plus its own software for capturing very
complex business rules and procedures for handling the intricate mix of product specifications and prices for
customers. The business rules "required thousands of hours of interviews and logic revisions," because
"much of the knowledge was resident in the minds of our metallurgical engineers," explained Trudell. When
the system was completed, USS's need to revise orders dropped by two-thirds while greatly reducing ordertaking staff time.
USS replaced its order fulfillment system with i2 Technologies' Factory Planner forecasting software,
which the programmers connected to their order system. They also connected three homegrown systems,
including iTrac, which tracks orders as they go to processors or customers and an automatic order
generation system for repeat customers called MIGS (Mechanical Item Generation System). MIGS reduced
Trang 46 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
inventory by improving the forecasting of demand for finished goods at the customer's location. When MIGS
was first used, it reduced inventories from 33,500 to 24,000 tons. The system has been upgraded and is
now called MOGS (Mechanical Order Generation System). U.S. Steel now keeps only 20 days of inventory
on hand to meet demand, while it required 33 days of inventory on hand in five years ago.
Overall, this whole system, known as continuous flow manufacturing, made the company the vanguard
of the industry. According to Michael Shanahan a consultant to USS from the Boston Consulting Group, the
sweep of these order tracking and inventory systems for a continuous flow manufacturing business such as
steel is "astonishing." These systems can go from the shop, through U.S. Steel's own production facilities
and third-party service centers to customer, managing the entire supply chain through a single integrated
system.
USS created a subsidiary called USS Engineers and Consultants (now called UEC Technologies) in
1969 to generate additional revenue from the technology and services USS developed I-house. UEC's
principal products are an order-fulfillment system for businesses in the metals, glass, and pulp and paper
industries; a set of supply chain software toolsets jointly marketed with i2 Technologies that can help other
steel companies manage their suppliers; and a tool to help companies set up an extranet for customers to
place orders, check status, exchange electronic contract documents, and provide shipping information. To
maintain USS's competitive edge, UEC sells technology that is one generation behind what USS actually
uses. According to UEC President Chris Navetta, the venture has been highly profitable.
USS has continued to upgrade itself. One example is Mon Valley Works, one of its four plants, which is
located on the Monongahela River valley 10 miles south of Pittsburgh. It was originally built in 1875 and
upgraded several times since, the last project occurring from 1998 to 2000. This was a $36 million project
that replaced the computer controls and the mechanical equipment, including, for example, its laser sensors
that are central to current steel making. The plant's output had been boosted from 270 tons per hour to 335
tons per hour. It had needed 9,300 steel workers to tend the blast furnaces and presses, but that has been
reduced to only 2,100 in this half-mile long plant. In 2001, the U.S. Department of Energy's Office of
Industrial Technologies named Mon Valley Works the "Plant of the Year."
Has U.S. Steel's use of information technology solved its problems? The company's systems
investments have definitely helped the company streamline operations, consolidate purchasing and raw
material sourcing, and support customers from its various facilities. The company has become very efficient,
as shown by the time it takes to produce a ton of steel. USS requires about three person hours for one ton
while in Germany it is 4 hours (a 33 percent increase), Japan 4.5 hours, and POSCO 4.8 hours (a 63
percent increase). Although countries like India need 34 person hours, their hourly labor rate is much lower.
And still, USS's labor costs remain higher than competitors such as POSCO.
Many observers claim that one reason is that USS spends $40 per ton for retiree health care costs.
New labor agreements with the United Steelworkers of America have enabled U.S. Steel to reduce the cost
structure of its domestic business and reduce employee headcount from 28 ,000 to 22,000 as of December
31, 2003. According to Daniel Ikenson, the senior trade analyst at the Cato Institute, a conservative
Trang 47 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
Washington, D.C., think tank, "U.S. Steel's biggest problem is it doesn't have the same economies of scale
that its foreign competitors have." Ikenson says U.S. Steel is quite efficient but is simply not large enough to
equal its foreign competitors.
Another issue for USS is that Nucor and other innovative U.S. steel makers use scrap steel as
inexpensive raw material forcing USS to make higher-grade steel from coal and iron, the type of steel used
in automobiles and skyscrapers. USS has stated it would like to combine with Bethlehem Steel, National
Steel, and maybe even Weirton Steel, but only if the U.S. government takes over about $10 billion of their
cost of benefits. These "mini-mills" oppose this because they are non-unionized and don't have the medical
and pension expenses of the bigger companies. Dan Dimicco, Nucor's CEO, said that the U.S. Steel
proposals are "nothing more than an attempt to get the government to help a couple of companies at the
expense of the rest of the U.S. steel industry and the taxpayers."
Comparison with South Korea's POSCO might further help explain USS's problems. In the nineteenth
and early twentieth centuries, U.S. steel companies located themselves near the sources of iron and coal.
However half the cost of producing a $210 ton of steel today is for purchasing and shipping raw materials,
while energy is 6 percent, labor 6 percent, and the remaining costs of 38 percent are for such factors as
maintenance, information technology, and administration. Today companies locate themselves on Atlantic,
Pacific, and Mediterranean coastlines to reduce their largest single cost.
In 1966, as South Korea was attempting to modernize and rise out of third world status, its government
decided to establish a steel industry, even though it has almost no domestic iron or coal. It invested $296
million (U.S.), eventually named the company POSCO, and situated the factory at Pohang on its Pacific
coastline to keep its costs low. Pohang has the harbor depth to handle the largest container ships. South
Korea later built a second production facility nearby. It built very modern facilities, and then 18 years later
upgraded them. In 1999, according to Sang-Boo Yoo, POSCO's chairman, the company undertook a $247
million project, named Process Innovation. Its purpose was to enable the company to use the Internet for all
aspects of the company' activities, including booking and monitoring its fleet of 44 ships. In 2000 POSCO
became the largest steel producer in the world, although it was surpassed in 2001 when Arcelor was
created by merging three large European companies.
POSCO's costs are about $175-$180 per ton versus $240 a ton at USS and about $210 a ton by
Arcelor. Its advantages are its seaport location, and its late start, enabling it to start with more modern
equipment and information technology. Frank Voelker, CEO of Alstom Power Conversion, who has worked
on botha POSCO and USS systems, says USS's are every bit as good as POSCO's and better than most of
its competitors. But USS cannot do anything about its lack of a seaside location because of the high cost of
moving its facilities. "I'd love to have a seaport paid for by the government, just like POSCO," but it would
cost too much, said Usher.
During the past few years, U.S. Steel benefited from strong global economic conditions and surging in
demand in the United States, China, and other countries. But the steel industry is very cyclical. What will
Trang 48 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
happen when demand cools down, as it inevitably will do? Will U.S. Steel's systems and processes be
enough to keep it competitive in the global marketplace?
Sources: http://xnet3.uss.com/corp/customer/about_Steeltrack.htm, accessed February 26, 2005; U.S. Form 10K
for Year Ending 2004, www.ussteel.com, accessed April 12, 2005; Lehman Brothers Equity Research, "United States Steel
Corp," February 16, 2005; "Suddenly Steel Has Industrial Strength," Business Week, October 18, 2004; Mel Duvall, "U.S.
Steel: Selling Tech—or Selling Out?" Baseline, June 18, 2002; John McCormick and Mel Duvall, "U.S. Steel Tries Tech
Alchemy," Baseline, June 17, 2002; Mel Duvall, "U.S. Steel: Why the Red Ink?" Baseline, June 17, 2002; Mel Duvall,
"POSCO: The Next Big Steel," Baseline, June 17, 2002; Kim S. Nash, "Enterprise Servers: HP's Alpha Division," Baseline,
June 17, 2002; John McCormick, "At U.S. Steel, New Computers Revive Old Plant," Baseline, June 15, 2002; Sean Gallagher,
"Gotcha! Managing Continuous Flow Manufacturing," Baseline, June 15, 2002.
Questions:
1. Summarize U.S. Steel's current competitive situation.
2. How are information systems related to the way U.S. Steel runs its business? What role is
played by supply chain management systems?
3. What management, organization, and technology factors were responsible for USS's inability to
compete with other steel manufacturers?
4. Describe how USS has responded to its global and American competition.
5. How helpful were information systems in addressing USS problems?

Trang 49 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.03
NESTLE USA INSTALLS SAP
A good example of a company that has used ERP packages to reorganize
their business processes is provided by the U.S. subsidiary of Nestle SA, a
Swiss food conglomerate. Nestle USA was created in the late Eighties and early
Nineties via acquisitions. In 2002 it included seven divisions which collectively
Author:
Paul Harmon
Executive Editor, BP
Trends Newsletter
Filed:
November 2002
sold such popular brands as Alpo, Baby Ruth, Carnation Instant Breakfast,
Coffee-Mate, Nescafe, Nestle Toll House, PowerBar, Stouffer’s Lean Cuisine,
SweeTarts and Taster’s Choice. The company employees some 16,000
employees and earned about $8 billion in revenues.
In the mid-Nineties the various companies that make up Nestle SA were all
operating as independent units. In 1997 a team studying the various company
systems concluded that, collectively, the companies were paying 29 different
prices for vanilla – which they all purchased from the same vendor. The study
wasn’t easy, since each company had a different number or name for vanilla,
and purchased it via completely different processes. Just isolating vanilla and
then determining a common unit price required a considerable effort.
In 1997, Nestle USA decided that it would standardize all of the major
software systems in all of its divisions. A key stakeholder team was set up to
manage the entire process. By March 1998, the team had its plan. It decided it
would standardize on five SAP modules – purchasing, financials, sales and
distribution, accounts payable and accounts receivable. In addition, the
stakeholder team decided to implement Manugistics’ supply chain module. The
team considered SAP’s supply chaining module, Advance Planner and Optimizer
or APO, but it was brand new in 1997, and decided to go with the better known
Manugistic’s module that was specifically designed to work with SAP modules.
Before even beginning to implement SAP modules, people from the
divisions were gathered and spent 18 months examining data names and
agreeing on a common set of name. Vanilla, for example, would henceforth be
code 1234 in every division.
Somewhere along the line, the project to install SAP modules also became
a Y2K program. By moving to standard software that was guaranteed to be free
of bugs associated with date problems that might occur when applications
started dealing with dates subsequent to December 31, 1999, the company
Trang 50 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
hoped to avoid any Y2K problems. Unfortunately, this placed a deadline on the
entire implementation effort – it had to be done before January 1, 2000.
As the various SAP applications began to roll out to the divisions, the
stakeholder team managing the entire effort began to get lots of unpleasant
feedback. Jeri Dunn, the VP and CIO of Nestle USA, explained that in hindsight,
they had completely underestimated the problems involved in changing division
cultures or modifying established business processes. By the beginning of 2000,
the rollout was in serious trouble. The workers didn’t understand the new SAP
modules and they didn’t understand how the outputs they were now getting
would help them do their jobs or manage the processes for which they were
responsible.
It was at a major meeting in early 2000 that Dunn was given responsibility
for the project. Among the other conclusions reached by this executive
committee meeting, was the Y2K deadline would be ignored. Hence forth, they
would figure out the implementation requirements for each SAP module and then
let that specification guide their schedule. They decided that it was relatively
easy to install SAP modules, but that it was very hard to change business
processes and to win the acceptance of the people responsible for assuring
those processes operated correctly. They also decided that much more care
needed to be taken to determine just how the SAP modules would interact with
the processes and applications that would remain in place.
At the same time that Dunn took over, a new director of Process Change
has hired and a process manager (VP) for the supply chain was promoted to
help Dunn on the remainder of the project. In most cases, the team now began
to focus on modeling processes and defining process requirements and then
creating a plan to install the SAP modules. Several installations were delayed for
months or years to accommodate groups that were not prepared for the process
changes required. As we go to press, the Nestle transition is coming to an end.
The company spent approximately $200 million on the transition. Dunn claims
that the project has already paid for itself. The new planning processes, for
example, make it possible to project Nestle USA-wide demand more accurately
and to save significant inventory and redistribution costs. The VP for Nestle
USA’s supply chain, Dick Ramage estimates that supply chain improvements
have accounted for a major portion of the $325 million that Nestle has already
saved as a result of the SAP installation.
Dunn says she’s happy with the SAP applications and very happy that all of
the companies are now using the same basic processes. Still, in an article on the
Trang 51 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
transition in CIO magazine in May of 2002, Dunn claimed that if she had it to do
over again, she’d “focus first on changing business processes and achieving
universal buy-in, and then and only then on installing the software.”
Nestle USA’s use of ERP applications, and their problems are typical of
most large companies that have elected to rely on ERP applications to drive
major changes. The company embraces the ERP applications in hopes that they
can organize and standardize their software applications and databases across
departments and divisions. Most large companies have started on this path and
found that it takes much longer and is more painful than they had hoped. Few
have completed their ERP transitions. The problem lies in the fact that the ERP
applications aren’t a solution. They are a tool to use in changing business
processes. This isn’t something that IT can do by itself. The transition must be
conceptualized as a business process transition and guided by business
managers. The ERP applications must be installed as part of the overall
business process redesign effort, not as an independent activity. Used in an
appropriate manner, ERP applications offer a powerful tool to aid in business
process redesign.
For further information on this case, check an article by Ben Worthen,
"Nestle's ERP Odyssey" in CIO magazine, May 15, 2002. pg. 62-70.

Trang 52 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.04
SHOPKO AND PAMIDA:
SYSTEMS TRIUMPH OR TRAGEDY?
ShopKo, a regional discount merchandise retail chain headquartered in Green Bay, Wisconsin, has
about 140 stores in larger Midwestern cities, and 221 Pamida stores serving rural areas in the Midwest,
Mountain, and Pacific Northwest regions. ShopKo focuses on popular higher-margin categories such as
casual apparel, health and beauty items, and housewares. Sales totaled $3.18 billion for the fiscal year
ending in January 2005, and the company was recently acquired by a private company affiliate of Goldner,
Hawn, & Morrison Inc.
ShopKo has been an intensive user of applications to improve decision making about inventory levels,
sales performance, store layout, and selection of merchandise. One of its most powerful tools has been a
system to determine prices and timing of apparel markdowns. Traditionally companies that sell apparel have
four product cycles a year, one for each of the seasons. However such companies now face serious
competition from companies like Gap that now operate on rapidly changing product cycles, often bringing in
new product lines every two to four weeks. One of the growing problems ShopKo had to address was what
to do with the excess (or overstocked) merchandise when a cycle ends.
At the end of a season (or cycle), companies have faced two problems. One is the need to empty its
shelves in time for the arrival of the new cycle products (bathing suits do not sell well in the winter while fur
coats are not in demand in the summer). The other problem is getting rid of the overstocked items at the
highest possible price in an attempt to minimize losses in revenue. Traditionally the method ShopKo (and
most other clothing retailers) used to determine clearance prices for overstocked items was to set each
product price based upon clearance prices of similar products in past years. On average it found it needed
to lower prices four times to clear the overstock at the end of a cycle, selling as much at each price as
possible before lowering the price again. However, it always faced the calendar in addition to the customers'
willingness to purchase at each price. Mike Martin, ShopKo's director of business alignment and planning,
explains, "The first few markdowns buyers tend to take are very conservative. So they [Shopko] end up
taking too many markdowns to clear [merchandise] out."
This markdown strategy proved to be costly as the number of cycles per year increased. The clearance
price for each item was the same in every store throughout the entire chain. However, specific items were
more popular and sold better in some stores than in others. Also, traditionally markdown timing was always
the same for all stores, and yet seasonal changes can differ from store to store based on local geography
and culture. The result was that the company could have set higher markdown prices in stores where the
demand was higher or the cycle lasted a little longer. Moreover, a clothing markdown usually means a
Trang 53 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
manual price change on each clothing item, and the staff time required to change the prices can be very
costly. Four markdowns per item is very expensive.
ShopKo had made substantial information systems investments and one was a system to help the
company optimize prices during markdowns. ShopKo implemented Markdown Optimizer from Spotlight
Solutions in Mason, Ohio, which helps companies price leftovers so that the products will sell faster and with
a better profit at each store. The software enables companies to price a product according to season,
geography (specific store location), local tastes, and past demand, by analyzing historical pricing and sales
data. It is proving very useful in helping stores get rid of the leftovers in time to make space for incoming
products of the next cycle. This type of computer systems is similar to the yield management software
developed by the airlines. This software determines the best prices for its seats at any given time. The goal
is to fill the plane at the best total price possible.
ShopKo's CIO, Paul Burrows expressed his understanding that "The more you sell during the first
markdown, the fewer you have left even if you have to take a second markdown." ShopKo's weekly sales
data are stored in its merchandise data warehouse, and its computer system automatically feeds the data
into Markdown Optimizer. Each piece of data contains the specific store, item number, and date for each
item sold. Markdown Optimizer automatically stores the previous recommendation for each item in each
individual store so that it can evaluate past results and then produce recommendations for the closeout of
the current cycle. In 2001, ShopKo ran a pilot on the new product and the results were excellent. For the
leftovers the pilot showed a 25 percent increase in its gross margin from previous years, while its payroll
costs fell by 24 percent and the percentage of unsold goods at the end of each cycle fell from seven percent
to two percent. Burrows was most pleased, claiming that a 15 percent increase would mean a $15 million
growth in net profit.
In 1999, ShopKo purchased Pamida, a general merchandise retail chain focused on small towns such
as Crete, Nebraska, (25 miles southwest of Lincoln, population 6000+) and Belle Fourche, South Dakota
(Butte County, population about 4,000). With headquarters in Omaha, Nebraska, Pamida's slogan is
"Bringing smaller communities what they want." ShopKo's aim in purchasing Pamida was to increase its
presence in the small towns where competition from retailing powerhouses such as Wal-Mart and Target
was not as strong. Pamida was the only major retail store in most of these small towns, and its strategy was
to compete by maintaining a high in-stock rate rather than by becoming the lowest price competitor. Pamida
relies on information systems to execute that strategy, and its SEC filing stated, "Pamida's information
technology strategy is aimed at providing the customer with . . . merchandise which is always available as
advertised." When ShopKo purchased Pamida, the chain had a total of about 180 stores, although that
number increased to 229 stores in 16 states when ShopKo purchased the P.M. Place chain of 49 small town
Midwestern stores in May 2000 and merged it into Pamida.
Despite its strategy, Pamida had a too many out-of-stock items. To make it worse, many key products
were in warehouses even though they were not on store shelves. In addition, the company's gross margin
was too low and falling. ShopKo wanted to expand the number of Pamida stores in small towns. Pamida's
Trang 54 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
solution was to consolidate its five warehouses into three and modernize its inventory management systems
to increase stores' ability to keep their shelves stocked. The plan execution began early in 2000 with the
Lebanon (Indiana) Distribution Center Project to convert the Lebanon distribution center servicing 107 of
Pamida's 229 stores, to a full-service warehouse. The concept was to transform the warehouse from a flowthrough facility (where goods arrive at the warehouse and are immediately shipped to the stores) to a fullservice distribution center (where inventory is stored so that it can be shipped to the stores immediately
when needed). The warehouse was expanded from 200,000 square feet to 418,000 square feet, but the
warehousing software was neither updated nor replaced.
Initially, the new inventory management system created serious bottlenecks in Pamida warehouses,
causing Pamida's earnings to decline in the first nine months of 2001 and its corporate parent ShopKo to
lose $6.7 million in overall revenue. Pamida's old warehouse management information system came from
Catalyst, International, and the company had never updated the software, which was several versions
behind. According to Dan Trew, Catalyst's vice president of product strategy, "We have made significant
enhancements in the configurability of the product, things we couldn't do when Pamida was [originally
installing] its system," and so the system was out-of-date and inadequate. The software made it difficult to
lay out and run a full-service center in the most logical and efficient manner. "It's not real flexible so the
processes at the distribution center had to conform to the system," said Pamida's CIO Dan Nicklen. Newer
versions of warehouse management software can handle full-service distribution centers much more easily.
Nicklen said Pamida's warehouse management software was not updated when the rest of the
warehouse was modernized because the software had been working fine under the old distribution system.
Pamida had the support of ShopKo's management in making technology investments to become more
effective, but chose to continue using the old warehouse software. Instead, Pamida focused on a three-year
program to replace all of its major mainframe systems and software, including new merchandising software
from Retek Information Systems.
The product supply shortage became even more serious as the 2000 holiday season approached. The
estimated loss in sales for the 107 stores served by the Lebanon distribution center was $5 million, lagging 5
percent behind sales for the remaining 122 stores in the chain. Shareholders filed several class-action
lawsuits, charging that management had not revealed the seriousness of the distribution center problems,
partly to keep its stock prices up until November 2000, when it could no longer hide the problem. The
quarterly report released that month showed gross margins of 20.8 cents in that quarter versus 26.3 cents
previously.
Pamida partly blamed the problem on the previous owners, "Our resources were stretched thin," said
Nicklen. "Under our previous owners we were always under funded." But there were also other problems.
Certainly Pamida management turnover contributed, with the CEO, Steve Fishman, leaving in July 1999,
and a new COO arriving early in 2000. ShopKo also had a major management turnover when CEO William
Podany resigned as chairman in May 2001. Moreover, the task of merging P.M. Place with Pamida in the
spring of 2000 placed a heavy burden on the company.
Trang 55 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
Pamida eventually turned around its distribution center and became fully functional by the end of 2001.
ShopKo felt confident enough in Pamida's new distribution system to close a smaller warehouse in Missouri
to consolidate distribution at its Indiana and Nebraska centers.
Sources: "Success Story: ShopKo," MicroStrategy Inc.,2005; Associated Press, "ShopKo Agrees to Be Sold to Private
Firm," April 8, 2005; Carolyn Abate, "Going Once, Going Twice... Sold!" Smart Business, May 1, 2002; Edward Cone,
"Pamida's Distribution Debacle," Baseline, January 1, 2002. Meridith Levinson, "Everything Must Go," CIO, May 1, 2002;
Meridith Levinson, "They Know What You'll Buy Next Summer (They Hope)" CIO, May 1, 2002; and Bob Tedeschi, "The Price
is Right," Smart Business, May 1, 2002.
Questions:
1. Evaluate the role of information systems in the way ShopKo and Pamida run their business.
How important are they?
2. Evaluate the importance of Pamida's distribution center consolidation project on for both
Pamida and ShopKo. What management, organization and technology factors prevented
Pamida's new distribution center from working successfully?
3. Are ShopKo and Pamida using information systems effectively? Why or why not? How much
value do their systems provide to the business?
4. If you were the CEO of ShopKo, how would you have addressed the problem? If you were the
CEO of Pamida when it was purchased by ShopKo, would you have recognized the problem?
Explain. How would you have solved the problem?
5. What management challenges does this case study illustrate? Explain your answer.

Trang 56 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.05
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
IN BANKING: A CASE STUDY OF ICICI BANK
Focus on ICICI Bank’s Initiatives
The use of Customer Relationship Management (CRM) in banking has gained importance with the
aggressive strategies for customer acquisition and retention being employed by banks in today’s competitive
milieu. This has resulted in the adoption of various CRM initiatives by these banks to enable them achieve
their objectives.
The steps that banks follow in implementing Customer Relationship Management (CRM) are:
•
Identifying CRM initiatives with reference to the objectives to be attained (such as increased number
of customers, enhanced per-customer profitability, etc.),
•
Setting measurable targets for each initiative in terms of growth in profits, number of customers, etc.
and
•
Evaluating and choosing the appropriate Customer Relationship Management (CRM) package that
will help the company achieve its CRM goals (a comparison of pay-offs against investments could
be carried out during the evaluation exercise).
Customer Relationship Management (CRM) has been deployed in retail banking. The challenges in
managing customer relations in retail banking are due to the multiple products being offered and the diverse
channels being used for the distribution of the products. Customer expectation from banks can be summed
up as: “Any time anywhere service, personalized offers, and lower payouts”.
Aggressive marketing and promotions on the part of the banks have resulted in most customers
happily switching loyalties to enjoy better privileges, thereby making the task of retaining them more difficult
for the banks.
The use of Customer Relationship Management (CRM) in banking has been essentially done for the
following purposes:
•
Targeting customers: It is necessary for banks to identify potential customers for approaching them
with suitable offers. The transactional data that is generated through customer interactions and also
by taking into account the profile of the customer (such as the lifecycle stage, economic background,
family commitments, etc.) needs to be collated into one database to facilitate its proper analysis.
For example, a customer interacts with the banks for savings accounts, credit cards, home loans,
car loans, demat accounts, etc. the data generated through all these services needs to be
Trang 57 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
integrated to enable effective targeting. After the integration is done, a profitability analysis of the
customer needs to be undertaken to acquire an understanding of the profit-worthiness of the
customer before targeting him with new offers.
•
Sales reference material: A consolidated information database on all products, pricing, competitor
information, sales presentations, proposal templates and marketing collateral should be accessible
to all the people concerned. These prove to be very helpful in Sales Force Automation (SFA)
wherein the salesperson gets instantaneous access to all relevant material as and when it is
required (especially when he/she is in a meeting with a client.)
•
Consistent interface with customers: The communication to customers from various departments
like sales, finance, customer support, etc. should be consistent and not contradictory. Therefore, all
departments should be privy to a unified view of the customer to enable a consistent approach.
Removal of inconsistencies is necessary to ensure that customers are not harassed and frustrated
owing to poor internal co-ordination. This is bound to enhance customer satisfaction. The contact
centres used to interface with customers should ensure consistency in customer interaction,
irrespective of the medium used for the interaction such as telephone, Internet, e-mail, fax, etc.
Banks can use the data on customers to effectively segment the customers before targeting them.
Proper analysis of all available data will enable banks to understand the needs of various customer
segments and the issues that determine “value” for that segment. Accordingly, suitable campaigns can be
designed to address the issues relevant for that segment and to ensure higher loyalty from these
customers. When data analysis is done in the right manner, it helps in generating opportunities for crossselling and up-selling.
Read More: Customer Relationship Management in the Banking Sector
ICICI Bank’s CRM Initiatives
ICICI Bank has to manage more than 13 million customers. The bank has over 550 branches, a
network of 2025 ATMs, multiple call centres, Internet banking and mobile banking. Its customers often use
multiple channels, and they are increasingly turning to electronic banking options. Business from the
Internet. ATMs and other electronic channels now comprises more than 50 per cent of all transactions.
In the process of making its business grow to this level, ICICI Bank has distinguished itself from other banks
through its relationship with customers.
The Teradata solution focuses on a Customer Relationship Management (CRM) platform.
Information from various legacy and transaction systems is fed into a single enterprise called wide data
warehouse. This allows the bank to generate a single view of its customers. The warehouse has the
capability to integrate data from multiple sources comprising Oracle and flat files. The Behaviour Explorer
enables profiling of customers and querying on various parameters. These enable the bank staff create
suitable campaigns for targeting individual customers on the basis of their requirements.
The logistics in the system have also led to other benefits like interactive reports, unearthing cross-selling
opportunities as well as finding out about the channel usage undertaken by a segment. The data access
was facilitated through the use of Cognos Power Cubes.
Trang 58 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
The Benefits of CRM
•
Customers’ usage pattern: ICICI’s CRM data warehouse integrates data from multiple sources and
enables users to find out about the customer’s various transactions pertaining to savings accounts,
credit cards, fixed deposits, etc. The warehouse also gives indications regarding the customer’s
channel usage.
•
New product development: Analysis at ICICI guide product development and marketing
campaigns through Behaviour Explorer, whereby customer profiling can be undertaken by using ad
hoc queries. The products thus created take into account the customer’s needs and desires,
enabling the bank to satisfy customers through better personalization and customization of services.
•
Central data management: The initial implementation of CRM allowed ICICI to analyse its
customer database, which includes information from eight separate operations systems including
retail banking, bonds, fixed deposits, retail consumer loans, credit cards, custodial services, online
share trading and ATM.
Some Noteworthy CRM Initiatives of ICICI Bank
Mobile ATMs: Customers of ICICI Bank can access their bank accounts through mobile ATMs.
These ATMs are kept in vans and parked at locations that have a high traffic of bank customers such as the
commercial areas in a city or upmarket residential areas ICICI Bank now provides standard ATM facilities
through ATM vans. This facility has been tried at Mumbai, Chandigarh and various places in Kerala during
specified timings.
Bulk Deposits: The ICICI Bank’s Bulk Deposit ATMs enable customers to deposit large amounts at
one time. Unlike conventional ATMs, which are able to accept only 30 notes at a time, these ATMs allow
the deposit of huge amounts. The Bulk Deposit ATM is available in Mumbai’s Vashi sector branch office of
ICICI. The bulk deposit facility can be availed of by select customers who need to deposit huge amounts of
cash. ICICI Bank issues a special card called the `Deposit Only Card’ to facilitate this service. This card
allows for deposit transactions only. The service is further facilitated by the provision of special bags at
ATMs in which a customer can put his money. After the deposit slip is filled, the bag can be inserted in the
ATM. The transaction slip is then generated by the ATM as an acknowledgement of the deposit. ICICI
Bank also has cash pick-up service for business customers under the business banking segment.
ATMs for the visually challenged: ICICI Bank has launched ATMs with special voice-guided
systems, which guide a visually challenged person to access ATMs without any help. The jack on the
terminal enables headphones to be connected to it and voice commands enable the customer to transact
business. Customers may choose a suitable language to get voice commands. After the language
selection is done, the customer is guided to ensure that the ATM card is inserted in the right slot and
thereafter, guidance is provided for entering the PIN by using the keypad. A raised button is provided on
number 5 to enable users to identify the numbers easily through touch. The slot for cash collection has such
raised `pips’ that enable easy identification through touch.
Other Services through ATMs: Apart from the usual transactions involving the bank, some other
services can also be availed of by ICICI Bank customers. These include:
Trang 59 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
•
Prepaid mobile recharge
•
Buying and renewing Internet packs (such as those of TATA Indicom Internet service provider and
Sify).
•
Making donations for Tirupati Tirumala Devasthanams, Nathdwara temple and Shri Mata
Vaishnodevi shrine.
•
Mutual fund transactions, and
•
Bill payments
Mobile phone as a Virtual Wallet: The mobile phone has been transformed into a virtual wallet – a
new innovation in mobile commerce. On September 19, 2005, Airtel, ICICI Bank and VISA announced the
launch of mChq – a revolutionary new service – which is a credit card using the mobile phone. This is the
first mobile-to-mobile payment option which enables Airtel customers and ICICI Bank Visa cardholders to
pay for their purchases with their Airtel Mobile phones. The service has eliminated the need for carrying
physical cash for making a purchase and also the problems associated with the point of sale (POS) terminal
since the mobile phone services as a secure POS and a payment mechanism.
Social Events: ICICI Bank organized the largest domestic invitational amateur golf event for HN1
(high-net-worth individuals) customers. This nation-wide golf tournament had over one lakh high-net-worth
clients of ICICI Bank’s private banking division participating in the event.
Mobile Banking Benefits: Mobile banking enables the customer to avail of many facilities by just
sending an SMS. These facilities, which are currently offered free of cost, are as follows:
•
Locating ATM
•
Locating branch
•
Locating drop box
•
Alert facilities like salary credit, account debit/credit, cheque bounce, etc., and
•
Queries on banking, cards and demat account
Questions
1. Explain the initiatives take by ICICI Bank to promote Customer Relationship Management
(CRM).
2. Discuss the benefits of the initiatives taken by ICICI Bank to promote Customer Relationship
Management (CRM).
3. What should be the core elements of CRM that ICICI bank in your opinion should follow,
besides what they are already following to make themselves a distinct bank from their
competitors
4. Outsourcing CRM is one activity that most organizations follow. Is it a viable option. Give your
views keeping in mind the cost involved in implementing CRM and enhancing business also.

Trang 60 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.06
CAN DSS HELP MASTER CARD MASTER
THE CREDIT CARD BUSINESS ?
Credit (change) cards have been very big business for several decades. In 2001, over $30 trillion in
payments for goods and services were charged using credit cards. The cards have made life easier for
many people because they do not need to carry large amounts of cash for most purchases. Many people
also use the cards as a way to borrow money because they need only pay a small percentage of the amount
they owe each month, although they are usually charged very high interest rates for the unpaid balance. The
interest goes to the issuing bank, making credit cards a very profitable service for them. However, the credit
card industry is intensely competitive, highly fragmented, and growing at a rate of 3 to 4 per year, making
those profits difficult to achieve.
Visa and MasterCard are associations of banks that issue the credit cards. They market their cards,
often several different cards, and provide support for the transactions, making networks available to collect
and use the data. The most popular credit card has been Visa, with 44.5 percent of the business in 2001,
while MasterCard is number two with 31.6 percent. Being very much second to Visa, MasterCard is trying to
overtake it. While it had been number two since the beginning, MasterCard began to emerge from “its
doldrums” in 1997, according to Robert Selander, MasterCard’s CEO. It began to realize it might really be
able to overtake Visa and become number one. To reach that goal, MasterCard needed to present itself so
that potential user will choose a MasterCard rather than a Visa. It also had to spur the bank issuers to
promote MasterCard cards rather than those of their competition.
In 1998, when MasterCard had only 28.8 percent of the credit card charge volume while Visa’s was
over 50 percent, MasterCard decided it needed a new computer center, partially to handle all the data as
the company’s business expanded as a result of its drive to overtake Visa. It also foresaw growth as a result
of its change in strategy. The company’s new strategy required a system that would be able to keep a
record of every transaction of every customer for three years. The strategy included ways MasterCard and
its member banks could use that data to increase their credit card business. MasterCard wanted to increase
its daily volume of 30 million transactions in 1977. At the time it had three separate computer centers on four
floors in the suburbs of St. Louis, Missouri, and it wanted to consolidate the computer centers while
Trang 61 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
enlarging the new center so that it would be able to handle both the current volume and the planned volume
as it expanded. At that time it was storing nearly 50 terabytes (50 trillion numbers and letters) of data,
including the dollar amount, merchant, location, and card number. MasterCard also planned to add other
data fields, such as ZIP codes, to make the data more useful. However, to protect MasterCard users, it did
decide not to include demographic data such as incomes and ages.
Nonetheless, “The credit card business lives and dies by data”, said Ted Iacobuzio, director of
consumer credit research for the consulting and research firm, TowerGroup.
While both Visa and MasterCard had already been warehousing so much data, they were both
moving toward providing reports to their member banks. MasterCard’s goal was to give its members (the
banks) direct access to their customers’ data as well as tools to analyze all of this data, all in order to
persuade the banks to choose MasterCard over Visa. For example, if banks could use MasterCard tools to
improve their analysis of the profitability of the cards in their portfolios or gain more customers and
transactions to process, they would be inclined to push MasterCard more often. Such analysis could help
banks determine the types of customers that were most profitable or find ways to appeal to more potential
MasterCard customers. Many banks issue both Visa Cards and MasterCard cards (sometimes several of
each), and if the banks can use this information from MasterCard while Visa does not have or make
available such information, the MasterCard company can gain a strategic advantage. For example, in 2001,
MasterCard persuaded Citigroup, the largest issuer of credit cards, to push MasterCard over Visa so that 85
percent of its credit cards came from MasterCard versus only 15 percent from Visa. J. P. Morgan Chase
likewise was convinced to use MasterCard for 80 percent of the cards it issued.
MasterCard hoped it could persuade banks to use these data if they could see value (increased
profit) in the process. Joseph Caro, MasterCard’s vice president of Internet technology services, said that
“little percentages” can be very profitable to banks. In one case, a bank was requiring its merchants to verify
the whole process by using the telephone to call in one transaction out of 50 for approval (rather than using
a telecommunications method), while most banks were requiring only one transaction in 500. Because callins cost about $3 each, that bank could save $300,000 a year by switching over to the one in 500 method.
Another bank was turning down one one transaction out of five because so many call-ins were timing out.
The bank was able to discover that most of the customers turned down were actually creditworthy. By
changing its set up, the bank would be able to eliminate thousands of unnecessary lost transactions.
About 28,000 banks and financial service companies issue MasterCard credit cards. To draw these
customers into using its credit card transaction data, MasterCard needed not only to make each bank’s data
available to them, but it also needed to make available appropriate analytic software. MasterCard assigned
35 full-time developers to the task of identifying and creating software tools to accomplish this task. Drawing
on Business Objects Web Intelligence software in 2001, these developers created and programmed 27 tools
for the banks to use. (These tools are not free and they are not available to merchants.) One of
MasterCard’s new tools, called the Business Performance Intelligence, is for operational reporting and
includes a suite of 70 standard reports that banks can use to analyze their daily, weekly, or monthly
transaction. The banks can then compare the results from one market (such as a United States state or
region, or a single country) with that of another market. MasterCard also works with individual banks to
Trang 62 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
create their own custom reports, enabling them to concentrate on their own issues and concern. Subscribing
banks access the MasterCard business intelligence system via a secure extranet.
The developers also created MarketScope, which are applications that have the goal of helping
banks and merchants work together to generate more purchases from the merchants if they are paid for by
MasterCard. One example they give is to enable Wal-Mart stores to determine how many MasterCard
holders spend $25 or more on sporting goods in January and February. Then, MasterCard’s vice president
of systems development, Andrew Clyne, suggested that Wal-Mart could send these card-holders the right to
obtain tickets to their closest major league baseball team based upon future sporting goods purchase
above a certain dollar minimum. lacobuzio said that such a strategy should appeal to state and regional
banks. However, he believes it is likely that national and international banks would have already developed
and are using their own analytical software. But even they would have a use for MasterCard’s software as a
kind of benchmark against which to measure the effectiveness of their own systems.
Moreover, despite the increasing volume, the processing was much faster. As Caro said, “If we can
do thing faster, little percentages start moving in our direction.”
Visa, however, is not sitting still, and is managing about 100 trillion terabytes of data for its clients.
Until recently, it mainly supplied the data online or on disks to its bank customers, who used their own
software and computers to analyze the data. Recently, Visa started to run analyses for the banks on its own
computers. In May 2002, Visa also introduced a Web service called Resolve Online to help banks deal with
disputed payments and is working on providing banks with online analytic tools. “If MasterCard is ahead of
the game in any of this”, says Iacobuzio, Visa “will have it in six months”.
MasterCard’s new data storage site, which was opened in May 2002, is also in St. Louis, in a single
525,000-square – foot building. The complex, which was built on open land, cost MasterCard $135 million.
The changeover to the new site happened over a weekend with almost no problem, despite the purchases
of about $4 billion each day.
Questions
1. Analyze MasterCard using the competitive forces and value chain models. Briefly summarize
the problems that MasterCard was facing before 1998 that caused it to change its business
strategy.
2. Describe the new business strategy MasterCard developed. What is the role of information
systems in its new strategy?
3. What kind of decision-support systems did MasterCard develop? How are they related to its
business strategy?
4. Has MasterCard’s strategy been successful? Can MasterCard hold on to its strategic
advantage? Explain your answer.

Trang 63 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.07
MANAGEMENT INFORMATION SYSTEM AT DELL
Management information system involves the information system and the organization. MIS begins
where computer science ends. Computer scientists deserve accolades for developing and delivering even
more advanced forms of information technology: hardware technology; software technology; and network
technology. Yet because no technology implements itself, there is more to MIS than just information
technology. MIS has dimensions. The four interrelated dimensions of MIS are as follows: First, MIS involves
not just information technology, but also its instantiation; second, MIS involves, as reactive and inextricable
elements, both an information system and its organizational context; third, MIS involves information
technology as a form of intellectual technology; and fourth, MIS involves the activities of a profession or
corporate function which are integral to the essence of what MIS is (Currie & Galliers, 1999).
Dell Computer Corporation: Company Background
Dell Computer Corporation is a major manufacturer of personal computers, computer peripherals,
and software. Among the leading producers of computers in the world, Dell sells its products directly to
customers through the Internet and mail-order catalogs rather than through retail outlets. The company is
based in Round Rock, Texas. At Dell Computers, customers are brought into the product planning and
manufacturing processes, with all employees encouraged having contact with customers. Through effective
collaboration across boundaries, ideas can be shared about product designs and value propositions. The
result is faster and more customer-focused product and service innovation. To produce the capacity for this,
considerable attention must be placed on organizational structures, processes, skills and culture. Such
elements may need a radical overhaul in established companies (Dennis & Harris, 2002). Dell was founded
in 1984 by Michael Dell. In 1983, during his freshman year at the University of Texas, he bought excess
inventory of RAM chips and disk drives for IBM personal computers from local dealers. He resold the
components through newspaper advertisements at prices far below retail cost. By 1984, his sales totaled
about $80,000 a month. In April 1984, Dell dropped out of school to launch his company (Ford, Honeycutt, &
Simintiras, 2003).
The new company soon began manufacturing its own IBM-compatible computers under the name
PCs Limited. Because Dell sold computers directly to users through advertisements in magazines and
catalogs, the company could price its machines lower than those sold through retail stores. Sales reached
nearly $6 million during the company’s first year, climbing to $34 million the following year. By 1987, Dell
was the leading mail-order computer company in the United States. In that year, it created a sales force to
target large corporations and began adding international offices to capture the direct-mail market outside the
United States (Ford, Honeycutt, & Simintiras, 2003). While the company continued to grow rapidly; Dell
experienced a series of setbacks that hurt profits. In 1990, the company began selling computers through
Trang 64 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
retail stores, an effort it abandoned in 1994. In 1991, Dell launched a line of notebook computers, but quality
problems and inadequate production planning forced the company to stop selling for a year. In 1994, Dell
launched a new line of notebook computers and expanded efforts to increase overseas sales. Dell also
began focusing on the market for servers, which used the computers to run local area networks. By the late
1990s, Dell was firmly in place as the world’s number one direct seller of computers. More than 50 percent
of the company’s computer sales transactions took place via its website, which generated worldwide sales in
excess of $40 million a day (Ford, Honeycutt, & Simintiras, 2003).
Information Processing Tools
Information processing or Data processing is the analysis and organization of data. It is used
extensively in business, engineering, and science and an increasing extent in nearly all areas in which
computers are used. Businesses use data processing for such tasks as payroll preparation, accounting,
record keeping, inventory control, sales analysis, and the processing of bank and credit card account
statements. Engineers and scientists use data processing for a wide variety of applications, including the
processing of seismic data for oil and mineral exploration, the analysis of new product designs, the
processing of satellite imagery, and the analysis of data from scientific experiments (Thierauf, 1978).
Data processing is used extensively in business, engineering, and science and to an increasing
extent in nearly all areas in which computers are used. Data processing is divided into two kinds of
processing: database processing and transaction processing. A database is a collection of common records
that can be searched, accessed, and modified, such as bank account records, school transcripts, and
income tax data. In database processing, a computerized database is used as the central source of
reference data for the computations. Transaction processing refers to interaction between two computers in
which one computer initiates a transaction and another computer provides the first with the data or
computation required for that function. Most modern data processing uses one or more databases at one or
more central sites (Thierauf, 1978).
Transaction processing is used to access and update the databases when users need to
immediately view or add information; other data processing programs are used at regular intervals to
provide summary reports of activity and database status. Examples of systems that involve all of these
functions are automated teller machines, credit sales terminals, and airline reservation systems (Thierauf,
1978).
The information processing tools that Dell uses include computers, the internet, maps,
spreadsheets, models, and databases. For the operational level of Dell, the most appropriate tool for
information processing is maps. Through the said information processing tool, decisions on how to operate
the organization can be initialized and made. Maps can be used to determine which country/place
information will be acquired from, it can also assist in determining the demographic level of people and
information will be gathered. Maps can be in the form of charts that can also provide necessary information.
The information gathered in turn can assist in helping to decide how an organization will be operated. For
the tactical level of Dell, the most appropriate tool for information processing is databases. Through the said
information processing tool, the records that can assist in finding out the strength and weakness of the
Trang 65 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
company can be used to determine the tactic that will be used by the organization. For the strategic level of
Dell, the most appropriate information processing tool is the internet or World Wide Web. Through the
internet, trends and strategies by other companies can be known. After analyzing the trends and strategies
used by other companies, an appropriate strategy can be formulated to use by the organization.
Inventory control systems
Individual businesses need, first and foremost, an efficient inventory control system. This implies the
minimum amount of inventory that will provide the consumers with what they need whenever and wherever
they need it. Effectiveness of the inventory system means basically having an inventory mix that is most
likely successful in satisfying consumer needs (Samli & Sirgy, 1995). The inventory control systems used by
Dell is up to date and reliable to prevent problems to arise. The inventory system of Dell makes sure that
anything the consumer need will be available to them at any given time. It is also what the company uses to
know if certain products are still available or misuse of the inventory system may cost problems to the
company.
Conclusion
Management information system involves the information system and the organization. Dell benefits
a lot from the management information system. The system helps the company create strategies that will
help the company conquer any problems and threats from competitors. The system also assists the
company in processing the needed information. Management Information Systems also helps a company to
create or update its inventory control system.
Recommendations
Since the MIS of a company is a vital part of its operations and its survival in the modern world, it
must be well updated and it must compete well with MIS’s competitors. The MIS of a company should be
created from high standards so that it can be of stiff competition against its counterparts. The MIS system
should help the company to achieve its goals and assist the company in reaching its potential.
Questions
1. Comment on the MIS in Dell and suggest the positives and negatives of MIS in Dell?
2. The dell directly sells its computers to the customer whether it will give them good and reliable
information or they are lacking in information system due to this move?
3. Develop the information flow diagram for dell and suggest some improvement in the same.
4. MIS is a combination of Management, Information and System otr of the three parts of the
information system in which area does the Dell lacking?

Trang 66 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
CASE STUDY N.08
SIEBEL’S SOLUTION FOR TATA MOTORS
TATA Motors is India’s foremost, and the only fully integrated automobile manufacturer. Established
in 1945 as TATA Engineering & Locomotive Company (TELCO), to manufacture locomotives and other
engineering products, the company is today among the world’s top 10 producers of commercial vehicles.
TATA Motors was also previously known as TATA Engineering. It is today one of the biggest and most
prominent companies in the TATA group, with an annual revenue of $1.8 billion in 2001-02. Today TATA
motors’ vehicles run in more than 70 countries.
TATA Motors use a manual dealer management system, where every dealer managed details. With
legacy-based systems, the environment produced inconsistent data, making interpretations difficult and
resulting in inefficient planning for capacity and spare parts. The basic challenge was to provide a Dealer
Management System (DMS) solution. All in all, TATA Motors required a standardised solution that would
provide them with: Increase in sales and profitability by easy management. Improved accuracy of dealercaptured information. Collaboration between vehicle manufacturers and dealers. A strong feedback
mechanism and interface for communicating with customers.
India’s largest and only fully integrated auto maker, and Siebel Systems, Inc. (NASDAQ: SEBL), a
leading provider of business applications software, Tata has deployed Siebel Automotive, a customer
relationship management (CRM) solution, to enhance customer service, strengthen dealer relationships,
and improve operational efficiency and effectiveness.
According to K. R. Sreenivasan, head, CRM and dealer management system, Tata Motors, “Within
the first year of implementing the Siebel’s solutions, we have seen improvements in customer satisfaction,
revenue and operating cost reductions through productivity improvements, and these benefits are expected
to increase further over time. This is helping us become truly customer-centric, since we can draw upon
real-time, centralised customer and vehicle data and respond better to our customer and dealer needs.”
Tata Motors, a flagship company of the Tata Group, is the world’s fifth-largest medium and heavy
commercial vehicle manufacturer and produces more than 150 commercial vehicle models with a range of
light, medium, to heavy-duty trucks, buses, and tractor-trailers with revenues exceeding $3.5 billion and is
the second-largest player in the domestic passenger car market in India The company works through a
network of dealers located across the country to sell its vehicles. In recent years, this number has expanded
by 50 per cent to its current pool of 250 dealer organisations.
The Siebel CRM solution will enable Tata Motors to gather feedback on products to improve design
or manufacturing quality as well as measure the effectiveness of marketing campaigns and programmes.
The automaker selected Siebel Automotive because of its partner management capabilities to handle its
large dealer network, the solution’s zero-footprint web-based architecture and user-friendly interface-critical
to support thousands of salespeople with various skill levels.
Trang 67 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
Tata Motors is currently in the first part of a three-phase deployment. Once the current phase is
completed, the company plans to deploy marketing, call centre, business analytics, and captive finance
modules. This will allow Tata Motors to better understand customer needs and requirements, improve its
responsiveness to service requests and problem resolution, initiate more proactive contacts with customers,
add support for new products and services, and streamline dealer financing processes. The ease of
integration between CRM solution and Tata Motors’ dealer management and ERP systems was also a
critical factor in the company’s decision process. The company says that Tata Motors has already seen
improvements in a number of areas, including:
•
Improved demand forecasting, planning, logistics management, and inventory management
•
Overall reduction in quality-related costs due to faster product performance feedback
•
Improved workflow and escalation of customer grievances for faster resolution
•
Increased revenue growth from both higher vehicle sales and a rise in the company’s after-sales
parts business
Ultimately, Tata Motors intends to create an open portal for customer self-service, enabling car
buyers to manage product configuration and place orders online.
“The cyclical nature of automotive demand, together with competition from new entrants in the
market, has made it difficult for automotive companies to achieve their growth and globalisation goals,” says
John Gray, general manager, Automotive, Siebel Systems. “By enabling Tata Motors to manage,
synchronise, and coordinate interactions with its dealers and customers, Siebel Automotive provides the
company with an ideal platform for getting closer to its customers while strengthening its position as a worldclass automotive brand,” adds.
Siebel Automotive, a comprehensive suite of business applications, provides a single, 360-degree
view of the customer to all who need it; facilitates coordination between Tata and its dealers; and enables
Tata to track each vehicle throughout its life cycle. Siebel Automotive has been closely integrated with a
wide array of back-office applications, including applications for inventory management, fulfilment, and parts
location. Pricing and tax calculations can be adjusted for each dealer’s requirements. In addition,
comprehensive sales and reporting functionality built into Siebel Automotive enables Tata to distribute sales
targets to its dealers and roll up sales numbers across the country.
Siebel, incidentally, pioneered the industry-specific application model and today delivers 23 industry
applications and more than 100 industry-specific solution sets. These solutions, which include Siebel
Automotive, enable companies to establish a single, enterprise-wide view of their customers and execute
key customer-facing business processes more efficiently and effectively.
Questions
1. “The most important point in selecting any software is the expected cost and benefits which one
derive from it but, it is easy to quantify cost but hard to calculate benefits”. Explain this in the
case of Tata motors.
2. Explain the role Siebel play in the success of Tata motors ?
Trang 68 / 69
BÀI TẬP TÌNH HUỐNG - MÔN HỆ THỐNG THÔNG TIN QUẢN TRỊ - Hệ Đại học chính quy
3. “Effective and efficient communication is most important in the success of information system”.
Explain how 360 degree view of the customer increase efficiency of Tata motors ?
4. “Control of MIS is difficult if you outsource your information system to the vendor”. Do you
agree. Why or why not ?

Trang 69 / 69