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Chapter 1: Introduction

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2 Chapter 1: Introduction
Information System Projects Systems Critical Success Factors

3 Denver International Airport Bozman [1994]; Zetlin [1996]; Montealegre & Keil [2000]
Designed as largest US airport Cost Estimate $1.7 billion (to be done Oct 1993) Pre-construction budget $2.08 billion Aug 1994 spent $3.2 billion Final 16 months late, $2 billion over budget

4 Denver International AP
Functionality Malfunctioning computerized baggage system Cost $193 million 55 networked computers, 56 barcode scanners Sometimes bags on wrong flights Major effort Many problems Functioning airport Typical project

5 What is a project? definable purpose cut across organizational lines
unique ad hoc projects come in a wide variety of forms dams: Boulder Dam, Hoover Dam, Three Gorges Dam Buildings Monuments Meetings are projects as well so are marketing campaigns, product engineering and design, training programs

6 What is a project? everything done the first time is a project
can be constructing something road, dam, building can be organizing something a meeting, an election campaign, a symphony, a movie GETTING A NEW, COMPLEX ACTIVITY DONE Even building an assembly line operation is a project (building is a project - operating an assembly line is the reverse) Projects require getting a new, complex activity done.

7 Project Characteristics
Because projects are new (not at the repetitive operations stage), they typically involve high levels of uncertainty and risk difficult to estimate resources required difficult to estimate time required Temporary activities by ad hoc organizations Projects by their nature involve high levels of risk are difficult to plan in terms of resources, time, budget Project organizations are temporary, with people brought in with diverse skills at diverse times. Project members need to learn to work with many other people.

8 Dimensions of Complexity
magnitude of effort number of groups and organizations to be coordinated diversity in skills or expertise needed usually the MORE COMPLEX, the more time and resources required Projects come in a wide variety of complexity levels. The simplest projects can be done by one person, and involve little coordination. Space shuttle projects require massive organization and planning. Installing enterprise resource planning systems also have massive impact, and affect many people.

9 Group Size Dimension individual term paper group wedding
system implementation organization auditing plant construction multiorganization space shuttle wars a spectrum of group size

10 Challenges of Modern Environments
high levels of risk and uncertainty from many interacting forces and variables rapidly changing technology rising costs increased competition frequent resource shortages many opposing interest groups This high level of change introduces much higher levels of risk in business operations. Technology is rapidly changing. Inflation has been under control, but there are constantly better methods developed at slightly higher costs The competitive climate is very severe, nationally and internationally Specific resources often are short Many interest groups interact world-wide Computer systems are not only useful, they are mandatory to succeed in contemporary business. Computer technology involves much greater rates of change than other aspects of society and business.

11 Project Management Features
differs from repetitive operations market and technology much less predictable greater uncertainty of outcomes more parties or organizations involved DYNAMIC environment Projects involve much greater risk and change than other types of operations (at an extreme, assembly line operations). Information system projects are usually short term (less than 9 months), because there is a risk that longer terms will find technological change outdating planned systems.

12 IS Project Features technological explosion
286; 386; 486; Pentium; ? CASE tools; C++; GUI; highly volatile & expanding market CAD/CAM; EDI; laptops; Internet uncertainty is what requester wants feasible? how long will it take to program? will there be any bugs? many people involved user group; systems designers; programmers; end users; Information systems and information technology have always involved a rapid pace of development. Some examples are shown.

13 the Systems Approach recognize that organizations are made up of interrelated units need coordinated goals integration benefits global objective attainment all pull towards same goal PROJECTS are system of interrelated tasks and work units PROJECT MANAGEMENT unifies planning and work efforts to accomplish multiple goals Viewing projects as systems is useful, because it focuses on the purpose of the project, the contribution of each system unit towards attaining project purpose, and the planning and control system required to make the project system successful.

14 Project Goal Dimensions
INTERRELATED DIMENSIONS Cost stay within budget Time stay within time schedule specified Performance end product performs to specifications Maintain focus on all 3, control trade-offs The three fundamental metrics of project success: COST TIME PERFORMANCE (quality, meeting specifications) There are typically tradeoffs in that it is very difficult to attain optimal performance on all three. Should problems be encountered in the project, usually at least one of the three will have to involve some sacrifice.

15 Adages Brooks’s Law Adding manpower to a late software project makes it later. Throwing money at a project doesn’t solve the problem Taking resources away from a project doesn’t always make it easier either A traditional saws in information systems project management There is a great deal of merit in Brooks's law, but it depends on the degree of interaction in the project. In order to succeed, sufficient resources need to be provided.

16 Project Entities Project Manager Project Team
coordinates efforts across functional areas; integrates planning & controls costs; schedules, assigns tasks Project Team group of people doing what needs to be done often from different functions, organizations Project Management System organizational structure, information processing, procedures permitting integration of tasks and those who accomplish them Important information system project components

17 IS Project Environment
Risky Standish Group reports: >30% cancelled About 40% lack designed functionality Only 13% rated successful by sponsors Examples Bank of America project American Airlines subsidiary travel reservation

18 Large drug distributor, wanted to implement ERP
FoxMeyer Drug Large drug distributor, wanted to implement ERP This PPT describes implementation of an ERP by FoxMeyer Drug. It is a student project done by Jason Donalson, June Seibold, Matthew Welch, and Sok Woo Yoon in the INFO Department, Texas A&M University, Spring 1999.

19 ERP Integrate financial, logistics, marketing
can handle multiple sites worldwide, with global sourcing integrate decision making coordinates all functions (makes them use same computer software)

20 ERP Market Compound annual growth of 37% 1997-2002 (AMR Research)
Top tier vendors: SAP AG PeopleSoft Baan J.D. Edwards Oracle top tier growth 61%/year, have 64% of market SAP $5 billion, rest near $1 billion

21 SAP Systems, Applications & Products in Data Processing
founded 1972, Walldorf, Germany #1 vendor of standard business-application software in the world - 32% market share PRODUCTS: R/2 (mainframe; 11 modules) R/3 (client/server ; now > 1 million users over 9000 customers in 90 countries

22 FoxMeyer Corp Holding company in health care services
wholesale distribution of drugs & beauty aids served drug stores, chains, hospitals, care facilities US: 23 distribution centers Sought market niches, such as home health care

23 FoxMeyer Long-term strategies:
Due to aging population & growth in health care, expected high growth Market had extreme price competition, threatening margins Long-term strategies: efficiently manage inventory lower operating expenses strengthen sales & marketing expand services

24 Prior FoxMeyer IS 3 data processing centers, linked
included electronic order entry, invoice preparation, inventory tracking 1992 began migration of core systems Benefits not realized until system fully integrated

25 FoxMeyer Process Customer fills out electronic order
Order sent to 1 of the 3 data processing centers Orders sent to the appropriate distribution center (within 24 hours) Orders filled manually and packaged Had just completed national distribution center with multiple carousels & automated picking Could track inventory to secondary locations

26 New System Needed new distribution processes & IS to capitalize on growth Wanted to be able to undercut competitors Replacing aging IS key PROJECT: hoped to save $40 million annually (estimated cost $65 million) complete ERP installation & warehouse automation system (another $18 million)

27 FoxMeyer Project Select ERP hundreds of thousands of transactions
meet DEA & FDA regulations benchmarked & tested for months picked SAP R/3 hired Andersen Consulting to integrate hired Pinnacle Automation for warehouse automation system

28 Operations FoxMeyer expected the new systems to improve operational efficiency Signed several giant contracts counted on savings, underbid competitors Counted on being up and running in 18 months

29 Problems SAP & warehouse automation system integration
two sources, two installers - coordination problems New contracts forced change in system requirements after testing & development underway Late, Over budget SAP successfully implemented

30 Outcomes Warehouse system consistently failed
Lost key customer - 15% of sales To recoup, signed new customer, expected $40 million benefit from ERP immediately - pushed ERP project deadline ahead 90 days, no time to reengineer Warehouse system consistently failed late orders, incorrect shipment, lost shipments losses of over $15 million August 1996 filed for Chapter 11 McKesson bought

31 McKesson Bought FoxMeyer operation Made ERP work On time Within budget
Full functionality

32 Project Critical Success Factors Belassi & Tukel [1996]
Goal Definition Define goals, scope, requirements Top Management Support Continued involvement User Involvement Project Manager Competent; on-site Others Project team, manpower, accurate estimates, test & train

33 Project Champion Top level executive Powerful, with access to top
Don’t need to have authority Enthusiastic support leading to adoption Continued support key to project continuance Even if project should be cancelled

34 Summary All projects are complex
IS projects even more so Get diverse people to work together Time Cost Functionality Systems view helps understand projects Critical Success Factors Top management support Clearly stated objectives End user involvement

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