Information Systems: the
Foundation of E-Business
(CIS 108)
Exploring the business of value of IS
and Managing Change
Lecture NINE (14th March 2005)
Amare Michael Desta
LEARNING OBJECTIVES

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EVALUATE MODELS DETERMINING BUSINESS
VALUE OF INFORMATION SYSTEMS
ANALYZE PRINCIPAL CAUSES OF INFORMATION
SYSTEM FAILURE
ANALYZE REQUIREMENTS FOR BUILDING
SUCCESSFUL SYSTEMS
SELECT STRATEGIES TO
MANAGE SYSTEM
IMPLEMENTATION
*
MANAGEMENT CHALLENGES



UNDERSTANDING BUSINESS VALUE OF
INFORMATION SYSTEMS
CHANGE MANAGEMENT IN
INFORMATION SYSTEM
SUCCESS & FAILURE
MANAGING
IMPLEMENTATION
*
UNDERSTANDING BUSINESS
VALUE OF INFO SYSTEMS



CAPITAL BUDGETING MODELS
PORTFOLIO ANALYSIS
REAL OPTIONS PRICING MODELS
*
CAPITAL BUDGET:


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PAYBACK METHOD: How long will it
take to pay back the investment?
RETURN ON INVESTMENT: Does return
during useful life of an item exceed the
cost to borrow money?
COST-BENEFIT RATIO: Does the ratio of
cost exceeds benefit?
*
CAPITAL BUDGET:



PROFITABILITY INDEX: What is the ratio of
present value of cash inflow to initial
investment?
NET PRESENT VALUE: Accounting for cost,
earnings & time value of money what is the
investment worth?
INTERNAL RATE OF RETURN: Accounting
for the time value of money, what is the
return rate of an investment?
*
COSTS & BENEFITS:
COSTS:
 HARDWARE
 SOFTWARE
 SERVICES
 PERSONNEL
*
COSTS & BENEFITS:
TANGIBLE BENEFIT:
 INCREASED PRODUCTIVITY
 LOW OPERATING COSTS
 REDUCED WORK FORCE
 LOWER COMPUTER EXPENSES
 LOWER VENDOR COSTS
 LOWER CLERICAL/PROFESSIONAL COSTS
 REDUCED GROWTH OF EXPENSES
 REDUCED FACILITY COSTS
*
COSTS & BENEFITS:
INTANGIBLE BENEFIT:
 IMPROVED ASSET USE; RESOURCE
CONTROL; PLANNING
 INCREASED FLEXIBILITY
 MORE TIMELY INFORMATION
 INCREASED LEARNING
 ATTAIN LEGAL REQUIREMENTS
 ENHANCED EMPLOYEE GOODWILL, JOB
SATISFACTION, DECISION MAKING etc….
 HIGHER CLIENT SATISFACTION
 BETTER CORPORATE IMAGE
CAPITAL BUDGETING MODELS
LIMITATIONS:
 Assume all relevant alternatives have
been examined; cost & benefits can be
expressed as $$
 Ignore intangible benefits
*
PORTFOLIO ANALYSIS:
ANALYSIS OF POTENTIAL APPLICATIONS
TO DETERMINE RISKS & BENEFITS
 DETERMINE DESIRABLE FEATURES,
ACCEPTABLE RISKS OF REQUIRED SYSTEM
 GENERATE PORTFOLIO OF
CHARACTERISTICS, RISKS FOR EACH
ALTERNATIVE
 SCORING MODEL
*
SCORING MODEL:
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IDENTIFY DESIRABLE FEATURES
LOOK AT EACH ALTERNATIVE:
 WHICH FEATURES ARE PRESENT?
 TO WHAT EXTENT (as an amount)?
 SCORE THE ALTERNATIVE
RANK-ORDER THE ALTERNATIVES
SELECT HIGHEST RANKED OPTION
*
REAL OPTIONS PRICING
MODELS
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USEFUL UNDER UNCERTAIN
CONDITIONS
INCLUDE ESTIMATES FOR
MANAGEMENT LEARNING, VALUE OF
DELAYING DECISION, VOLATILITY OF
COSTS & REVENUES
CHANGE MANAGEMENT
WHAT PROCESSES ARE BEST TO
CHANGE:
 DESIGN
 DATA
 COST
 OPERATIONS
*
CHANGE AGENT
DURING IMPLEMENTATION,
INDIVIDUAL ACTS AS CATALYST
DURING CHANGE PROCESS TO ENSURE
SUCCESS
*
IMPLEMENTATION
ALL ACTIVITIES LEADING TO ADOPTION, MANAGEMENT,
ROUTINIZATION OF INNOVATION
APPROACHES
ACTORS' ROLE
IMPLEMENTATION STAGES
ADOPTION
MANAGEMENT ROUTINIZATION
XXXX
XXXX
STRATEGY
XXXX
ORGANIZATIONAL
FACTORS
XXXX
XXXX
INNOVATION PROCESS
ACTOR CHARACTERISTICS &
DEMOGRAPHICS
SOCIAL STATUS
EDUCATION
SOPHISTICATION
INNOVATIVE
BEHAVIOR
ACTOR ROLES
PRODUCT CHAMPION
BUREAUCRATIC
ENTREPRENEUR
GATEKEEPER
ACTIONS & INDICATORS FOR
SUCCESSFUL SYSTEM IMPLEMENTATION
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SUPPORT BY LOCAL FUNDS
NEW ORGANIZATIONAL ARRANGEMENTS
STABLE SUPPLY & MAINTENANCE
NEW PERSONNEL CLASSIFICATIONS
CHANGES IN ORGANIZATIONAL AUTHORITY
*
Source: Yin (1981)
ACTIONS & INDICATORS FOR
SUCCESSFUL SYSTEM IMPLEMENTATION
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INTERNALIZATION OF TRAINING PROGRAM
CONTINUAL UPDATING OF THE SYSTEM
PROMOTION OF KEY PERSONNEL
SURVIVAL OF SYSTEM AFTER TURNOVER
ATTAINMENT OF WIDESPREAD USE
*
Source: Yin (1981)
FACTORS IN IMPLEMENTATION OUTCOME
CAUSES OF SUCCESS OR FAILURE:
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USER INVOLVEMENT & INFLUENCE
MANAGEMENT SUPPORT
LEVEL OF COMPLEXITY / RISK
MANAGEMENT OF IMPLEMENTATION
PROCESS
*
USER-DESIGNER
COMMUNICATIONS GAP
DIFFERENCES IN BACKGROUNDS,
INTERESTS, PRIORITIES
IMPEDE COMMUNICATION AND PROBLEM
SOLVING
AMONG END USERS AND INFORMATION
SYSTEMS SPECIALISTS
*
USER CONCERNS:
1.
2.
3.
4.
5.
WILL SYSTEM DELIVER INFORMATION I
NEED?
HOW QUICKLY CAN I ACCESS DATA?
HOW EASILY CAN I RECEIVE DATA?
HOW MUCH CLERICAL SUPPORT WILL I
NEED FOR DATA ENTRY?
HOW WILL SYSTEM OPERATION FIT INTO
MY DAILY BUSINESS SCHEDULE?
6.
*
1.
1.
2.
3.
4.
5.
DESIGNER CONCERNS:
HOW MUCH DISK SPACE WILL MASTER
FILE CONSUME?
HOW MANY LINES OF PROGRAM CODE
WILL THIS FUNCTION TAKE?
HOW CAN WE REDUCE CPU TIME?
WHAT IS THE MOST EFFICIENT WAY OF
STORING THIS DATA?
WHAT DATABASE MANAGEMENT SYSTEM
SHOULD WE USE?
6.
*
LEVEL OF COMPLEXITY & RISK
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PROJECT SIZE
PROJECT STRUCTURE
EXPERTISE WITH TECHNOLOGY
*
CONTROLLING PROJECT RISK
STRUCTURE
HIGH
HIGH
HIGH
HIGH
LOW
LOW
LOW
LOW
TECHNOLOGY LEVEL
LOW
LOW
HIGH
HIGH
LOW
LOW
HIGH
HIGH
SIZE
LARGE
SMALL
LARGE
SMALL
LARGE
SMALL
LARGE
SMALL
RISK
LOW
VERY LOW
MEDIUM
MEDIUM-LOW
LOW
VERY LOW
VERY HIGH
HIGH
CONSEQUENCES OF POOR PROJECT
MANAGEMENT
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COST OVERRUNS
TIME SLIPPAGE
TECHNICAL SHORTFALLS
FAILURE TO OBTAIN BENEFITS
*
CAUSES OF POOR PROJECT
MANAGEMENT
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IGNORANCE & OPTIMISM
MYTHICAL MAN-MONTH: Many tasks
sequentially linked, require training
FALLING BEHIND: Bad news travels
slowly upward
*
CHANGE MANAGEMENT
CHALLENGES

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ENTERPRISE SYSTEMS: High risk of failure,
replacing legacy systems, myriad
interconnections
BUSINESS PROCESS REENGINEERING:
70% failure rate, deeply rooted in old
processes, employees often unprepared
*
CHANGE MANAGEMENT
CHALLENGES

MERGERS & ACQUISITIONS: Decline in
shareholder value, difficult to integrate
company systems, organizational change,
worker morale
*
MANAGING IMPLEMENTATION:
CONTROL RISK FACTORS: Gear tools,
methodologies to level of risk
INTERNAL INTEGRATION TOOLS:
 FORMAL PLANNING TOOLS
 FORMAL CONTROL TOOLS
*
FORMAL PLANNING TOOLS
EXAMPLES:
PROGRAM EVALUATION & REVIEW
TECHNIQUE: Diagram of project activities,
sequential and concurrent, shows interactions
of activities
 GANTT CHART: Shows activities as bars along
a time line, with beginning, end of each task
THESE PROVIDE SCHEDULES
*

FORMAL CONTROL TOOLS:
BUDGET: Time, money, resources
 MONITOR PROGRESS: Completion of
tasks, fulfillment of goals
 CONTROL RISK FACTORS: Cost/benefits
*
EXTERNAL INTEGRATION
TOOLS
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LINK ALL USERS THROUGHOUT
ORGANIZATION
USE END USERS AS TEAM MEMBERS
SHARE INFORMATION & PROGRESS
INCLUDE TRAINING
AVOID COUNTERIMPLEMENTATION
*
ORGANIZATIONAL FACTORS
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JOB DESIGN
STANDARDS & PERFORMANCE
MONITORING
ERGONOMICS: Interaction of people &
machines; jobs, health, interface
*
ORGANIZATIONAL FACTORS
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EMPLOYEE GRIEVANCE RESOLUTION
PROCEDURES
HEALTH & SAFETY
GOVERNMENT REGULATORY
COMPLIANCE
*
ORGANIZATIONAL FACTORS
MONITOR PROGRESS: Completion of
tasks, fulfillment of goals
CONTROL RISK FACTORS: Cost / benefits
*
ORGANIZATIONAL FACTORS
ORGANIZATIONAL IMPACT ANALYSIS:
How will system impact structure,
attitudes, decision-making, operations
SOCIOTECHNICAL DESIGN: Explore
group structures, task allocation, job
design for human factor
*
“FOURTH-GENERATION” PROJECT
MANAGEMENT
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EMERGING TECHNIQUES TO DEAL
WITH COMPLEXITY
ENTERPRISE-WIDE FOCUS
DRIVEN BY STRATEGIC VISION &
TECHNOLOGY
MAY REQUIRE SEPARATE PROGRAM
OFFICE