1. UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE15
UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE

2. LEARNING OBJECTIVES
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

3. Challenges Not Tangible Determining benefits of information systems
Dealing with the complexity of large scale implementations
Large organization, wide area
Many staff members, users requirements
Technology choices, making a decision
Political impact, manager bias

4. UNDERSTANDING BUSINESS VALUE OF INFO SYSTEMS
Does a particular IS investment produce sufficient returns to justify its costs?
Three approaches:
CAPITAL BUDGETING MODELS
PORTFOLIO ANALYSIS
REAL OPTIONS PRICING MODEL (Skip this one)

5. Capitol Budget Cash flow in and out of the firm is the basis.
Several methods are can be used to justify IS technology within Capital Budget.
Process for analyzing and selecting various proposals for capital expenditures.
Cash flow in and out of the firm is the basis.
PAYBACK METHOD: How long will it take to pay back the investment?
Org inv / annual net cash inflow = # years

6. Capitol Budget Net ben / total initial invest = ROI
RETURN ON INVESTMENT: Does return during useful life of an item exceed the cost to borrow money?
(Total ben – cost – depriciation) / useful life = net Ben
Net ben / total initial invest = ROI
COST-BENEFIT RATIO: Does the ratio of benefit versus cost exceed 1?
Total ben / total cost = cost-ben ratio

7. Capitol 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?

8. Costs
COSTS:
HARDWARE
SOFTWARE
SERVICES
PERSONNEL

9. 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

10. More Benifits 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, OPERATIONS
HIGHER CLIENT SATISFACTION
BETTER CORPORATE IMAGE

11. CAPITAL BUDGETING MODELS
LIMITATIONS:
Assume all relevant alternatives have been examined; cost & benefits can be expressed as $$
Ignores intangible benefits
Cost are usually up front and tangible
Benefits are usually back loaded and intangible.

12. 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
Usually a SCORING MODEL is used.
Sometime is it more just a matter of group consensus on priorities
benefit versus risk

13. Risk Matrix Scoring Project Risk High Low Cautiously Examine
Identify and
Develop
High
Potential
Benifit
Avoid
Routine
Projects
Low

14. Typical Scoring Model IDENTIFY DESIRABLE FEATURES Totals TO 1.00
PROVIDE WEIGHTS FOR EACH
Totals TO 1.00
LOOK AT EACH ALTERNATIVE:
WHICH FEATURES ARE PRESENT?
TO WHAT EXTENT (as an amount)?
SCORE THE ALTERNATIVE 1-5highest
RANK-ORDER THE ALTERNATIVES
SELECT HIGHEST RANKED OPTION

15. Change Management Causes of implementation failure: DESIGN DATA COST
OPERATIONS

16. Change Agent
DURING IMPLEMENTATION, INDIVIDUAL ACTS AS CATALYST DURING CHANGE PROCESS TO ENSURE SUCCESS

17. FACTORS IN IMPLEMENTATION OUTCOME CAUSES OF SUCCESS OR FAILURE:
USER INVOLVEMENT & INFLUENCE
MANAGEMENT SUPPORT
LEVEL OF COMPLEXITY / RISK
MANAGEMENT OF IMPLEMENTATION PROCESS

18. User Designer Gap
DIFFERENCES IN BACKGROUNDS, INTERESTS, PRIORITIES IMPEDE COMMUNICATION AND PROBLEM SOLVING AMONG END USERS AND INFORMATION SYSTEMS SPECIALISTS

19. User Concerns
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?

20. 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?

21. Level of Complexity and Risk
PROJECT SIZE
PROJECT STRUCTURE
EXPERTISE WITH TECHNOLOGY

22. Controlling Risk LOW HIGH SMALL LARGE VERY HIGH VERY LOW MEDIUM-LOW
STRUCTURE
TECHNOLOGY LEVEL
SIZE
RISK

23. CONSEQUENCES OF POOR PROJECT MANAGEMENT
COST OVERRUNS
TIME SLIPPAGE
TECHNICAL SHORTFALLS
FAILURE TO OBTAIN BENEFITS

24. CAUSES OF POOR PROJECT MANAGEMENT
IGNORANCE & OPTIMISM
MYTHICAL MAN-MONTH: Many tasks sequentially linked, require training. Adding more chefs will not improve the stew.
FALLING BEHIND: Bad news travels slowly upward

25. Challenges
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

26. Change Management Challenges
MERGERS & ACQUISITIONS:
may produce a decline in shareholder value(70% do)
difficult to integrate company systems
organizational change, worker morale

27. Implementing Change
CONTROL RISK FACTORS: Gear tools, methodologies to level of risk Technical complexity managed with:
INTERNAL INTEGRATION TOOLS
Technical Project Manager Project management managed with:
FORMAL PLANNING TOOLS
FORMAL CONTROL TOOLS

28. Formal Planning Tools
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

29. Tools BUDGET: Time, money, resources
MONITOR PROGRESS: Completion of tasks, fulfillment of goals
CONTROL RISK FACTORS: Cost/benefits

30. External Integration LINK ALL USERS THROUGHOUT ORGANIZATION
USE END USERS AS TEAM MEMBERS
SHARE INFORMATION & PROGRESS
INCLUDE TRAINING
AVOID COUNTERIMPLEMENTATION

31. Organizational Issues
ORGANIZATIONAL IMPACT ANALYSIS: How will system impact structure, attitudes, decision-making, operations SOCIOTECHNICAL DESIGN: Explore group structures, task allocation, job design for human factor

32. The End
Questions