Presentation on theme: "UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE"— Presentation transcript:
1UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE 15UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE
2LEARNING OBJECTIVESEVALUATE MODELS DETERMINING BUSINESS VALUE OF INFORMATION SYSTEMSANALYZE PRINCIPAL CAUSES OF INFORMATION SYSTEM FAILUREANALYZE REQUIREMENTS FOR BUILDING SUCCESSFUL SYSTEMSSELECT STRATEGIES TO MANAGE SYSTEM IMPLEMENTATION
3Challenges 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
4UNDERSTANDING 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)
5Capitol 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
6Capitol 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
7Capitol 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?
11CAPITAL 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.
12PORTFOLIO 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
14Typical 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
15Change Management Causes of implementation failure: DESIGN DATA COST OPERATIONS
16Change AgentDURING IMPLEMENTATION, INDIVIDUAL ACTS AS CATALYST DURING CHANGE PROCESS TO ENSURE SUCCESS
17FACTORS IN IMPLEMENTATION OUTCOME CAUSES OF SUCCESS OR FAILURE: USER INVOLVEMENT & INFLUENCEMANAGEMENT SUPPORTLEVEL OF COMPLEXITY / RISKMANAGEMENT OF IMPLEMENTATION PROCESS
18User Designer GapDIFFERENCES IN BACKGROUNDS, INTERESTS, PRIORITIES IMPEDE COMMUNICATION AND PROBLEM SOLVING AMONG END USERS AND INFORMATION SYSTEMS SPECIALISTS
19User 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?
20Designer 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?
21Level of Complexity and Risk PROJECT SIZEPROJECT STRUCTUREEXPERTISE WITH TECHNOLOGY
22Controlling Risk LOW HIGH SMALL LARGE VERY HIGH VERY LOW MEDIUM-LOW STRUCTURETECHNOLOGY LEVELSIZERISK
23CONSEQUENCES OF POOR PROJECT MANAGEMENT COST OVERRUNSTIME SLIPPAGETECHNICAL SHORTFALLSFAILURE TO OBTAIN BENEFITS
24CAUSES 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
25ChallengesENTERPRISE SYSTEMS: High risk of failure, replacing legacy systems, myriad interconnectionsBUSINESS PROCESS REENGINEERING: 70% failure rate, deeply rooted in old processes, employees often unprepared
26Change Management Challenges MERGERS & ACQUISITIONS:may produce a decline in shareholder value(70% do)difficult to integrate company systemsorganizational change, worker morale
27Implementing 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
28Formal 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
29Tools BUDGET: Time, money, resources MONITOR PROGRESS: Completion of tasks, fulfillment of goalsCONTROL RISK FACTORS: Cost/benefits
30External Integration LINK ALL USERS THROUGHOUT ORGANIZATION USE END USERS AS TEAM MEMBERSSHARE INFORMATION & PROGRESSINCLUDE TRAININGAVOID COUNTERIMPLEMENTATION
31Organizational 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