Presentation on theme: "UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE"— Presentation transcript:
1 UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE 15UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE
2 LEARNING OBJECTIVESEVALUATE MODELS DETERMINING BUSINESS VALUE OF INFORMATION SYSTEMSANALYZE PRINCIPAL CAUSES OF INFORMATION SYSTEM FAILUREANALYZE REQUIREMENTS FOR BUILDING SUCCESSFUL SYSTEMSSELECT STRATEGIES TO MANAGE SYSTEM IMPLEMENTATION
3 Challenges Not Tangible Determining benefits of information systems Dealing with the complexity of large scale implementationsLarge organization, wide areaMany staff members, users requirementsTechnology choices, making a decisionPolitical 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 MODELSPORTFOLIO ANALYSISREAL 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 BenNet ben / total initial invest = ROICOST-BENEFIT RATIO: Does the ratio of benefit versus cost exceed 1?Total ben / total cost = cost-ben ratio
7 Capitol BudgetPROFITABILITY 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?
11 CAPITAL BUDGETING MODELS LIMITATIONS:Assume all relevant alternatives have been examined; cost & benefits can be expressed as $$Ignores intangible benefitsCost are usually up front and tangibleBenefits are usually back loaded and intangible.
12 PORTFOLIO ANALYSIS:ANALYSIS OF POTENTIAL APPLICATIONS TO DETERMINE RISKS & BENEFITSDETERMINE DESIRABLE FEATURES, ACCEPTABLE RISKS OF REQUIRED SYSTEMGENERATE PORTFOLIO OF CHARACTERISTICS, RISKS FOR EACH ALTERNATIVEUsually a SCORING MODEL is used.Sometime is it more just a matter of group consensus on prioritiesbenefit versus risk
14 Typical Scoring Model IDENTIFY DESIRABLE FEATURES Totals TO 1.00 PROVIDE WEIGHTS FOR EACHTotals TO 1.00LOOK AT EACH ALTERNATIVE:WHICH FEATURES ARE PRESENT?TO WHAT EXTENT (as an amount)?SCORE THE ALTERNATIVE 1-5highestRANK-ORDER THE ALTERNATIVESSELECT HIGHEST RANKED OPTION
15 Change Management Causes of implementation failure: DESIGN DATA COST OPERATIONS
16 Change AgentDURING IMPLEMENTATION, INDIVIDUAL ACTS AS CATALYST DURING CHANGE PROCESS TO ENSURE SUCCESS
17 FACTORS IN IMPLEMENTATION OUTCOME CAUSES OF SUCCESS OR FAILURE: USER INVOLVEMENT & INFLUENCEMANAGEMENT SUPPORTLEVEL OF COMPLEXITY / RISKMANAGEMENT OF IMPLEMENTATION PROCESS
18 User Designer GapDIFFERENCES IN BACKGROUNDS, INTERESTS, PRIORITIES IMPEDE COMMUNICATION AND PROBLEM SOLVING AMONG END USERS AND INFORMATION SYSTEMS SPECIALISTS
19 User ConcernsWILL 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 ConcernsHOW 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 SIZEPROJECT STRUCTUREEXPERTISE WITH TECHNOLOGY
22 Controlling Risk LOW HIGH SMALL LARGE VERY HIGH VERY LOW MEDIUM-LOW STRUCTURETECHNOLOGY LEVELSIZERISK
23 CONSEQUENCES OF POOR PROJECT MANAGEMENT COST OVERRUNSTIME SLIPPAGETECHNICAL SHORTFALLSFAILURE TO OBTAIN BENEFITS
24 CAUSES OF POOR PROJECT MANAGEMENT IGNORANCE & OPTIMISMMYTHICAL MAN-MONTH: Many tasks sequentially linked, require training. Adding more chefs will not improve the stew.FALLING BEHIND: Bad news travels slowly upward
25 ChallengesENTERPRISE SYSTEMS: High risk of failure, replacing legacy systems, myriad interconnectionsBUSINESS 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 systemsorganizational change, worker morale
27 Implementing ChangeCONTROL RISK FACTORS: Gear tools, methodologies to level of risk Technical complexity managed with:INTERNAL INTEGRATION TOOLSTechnical Project Manager Project management managed with:FORMAL PLANNING TOOLSFORMAL CONTROL TOOLS
28 Formal Planning ToolsPROGRAM EVALUATION & REVIEW TECHNIQUE: Diagram of project activities, sequential and concurrent, shows interactions of activitiesGANTT 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 goalsCONTROL RISK FACTORS: Cost/benefits
30 External Integration LINK ALL USERS THROUGHOUT ORGANIZATION USE END USERS AS TEAM MEMBERSSHARE INFORMATION & PROGRESSINCLUDE TRAININGAVOID 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