13.1 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change 13 UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE Chapter

13.2 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change How can our company measure the business benefits of our information systems? What models should be used to measure that business value?How can our company measure the business benefits of our information systems? What models should be used to measure that business value? Why do so many system projects fail? What are the principal reasons for system failures?Why do so many system projects fail? What are the principal reasons for system failures? OBJECTIVES

13.3 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change How should the organizational change surrounding a new system be managed to ensure success?How should the organizational change surrounding a new system be managed to ensure success? What strategies can our organization use to manage the system implementation process more effectively?What strategies can our organization use to manage the system implementation process more effectively? OBJECTIVES

13.4 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Determining benefits and costs of a system when they are difficult to quantifyDetermining benefits and costs of a system when they are difficult to quantify Dealing with the complexity of large-scale systems projectsDealing with the complexity of large-scale systems projects MANAGEMENT CHALLENGES

13.5 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Capital budgeting Process of analyzing and selecting various proposals for capital expendituresProcess of analyzing and selecting various proposals for capital expenditures UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Traditional Capital Budgeting Models

13.6 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Do not express the risks and uncertainty of own cost and benefits estimatesDo not express the risks and uncertainty of own cost and benefits estimates UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Limitations of Financial Models

13.7 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change The Problem No automated way of tracking billable hoursNo automated way of tracking billable hours No secure method for communicationNo secure method for communication No client databaseNo client database No system to track costsNo system to track costs UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Case Example: Primrose, Mendelson, and Hansen

13.8 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change The Solution Local area networkLocal area network Lotus Notes to handle client accounting, document management, group collaboration, and Lotus Notes to handle client accounting, document management, group collaboration, and UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Case Example: Primrose, Mendelson, and Hansen

13.9 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Costs and Benefits of the Legal Information System Figure 13-1

13.10 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Financial Models Figure 13-2

13.11 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change The Payback Method Measure of time required to pay back the initial investment on a projectMeasure of time required to pay back the initial investment on a project Accounting Rate of Return on Investment (ROI) Approximates the accounting income earned by the investmentApproximates the accounting income earned by the investment UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Case Example: Primrose, Mendelson, and Hansen

13.12 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Present value Value in current dollars of a payment or stream of payments to be received in the futureValue in current dollars of a payment or stream of payments to be received in the future Net present value Amount of money an investment is worth after considering its cost, earnings and the time value of moneyAmount of money an investment is worth after considering its cost, earnings and the time value of money UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Case Example: Primrose, Mendelson, and Hansen

13.13 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Cost-benefit ratio Divides total benefits by total costsDivides total benefits by total costs Profitability index Compares profitability of alternative investments by dividing the present value of total cash inflow by initial costCompares profitability of alternative investments by dividing the present value of total cash inflow by initial cost UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Case Example: Primrose, Mendelson, and Hansen

13.14 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Internal Rate of Return (IRR) Rate of return or profit an investment is expected to earnRate of return or profit an investment is expected to earn UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Case Example: Primrose, Mendelson, and Hansen

13.15 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Portfolio Analysis Analysis of portfolio of potential applications within a firmAnalysis of portfolio of potential applications within a firm Determines risks and benefitsDetermines risks and benefits Selects among alternatives for information systemsSelects among alternatives for information systems UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Strategic Considerations

13.16 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS A System Portfolio Figure 13-3

13.17 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Scoring Models Method for deciding among alternative systems based on a system of ratingsMethod for deciding among alternative systems based on a system of ratings Real Options Pricing Models Models using techniques for valuing financial options to evaluate information technology investments with uncertain returnsModels using techniques for valuing financial options to evaluate information technology investments with uncertain returns UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Strategic Considerations

13.18 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Knowledge Value–Added Approach Focuses on knowledge input into a business processFocuses on knowledge input into a business process Determines costs and benefits of changes in business processes from new information systemsDetermines costs and benefits of changes in business processes from new information systems UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Strategic Considerations

13.19 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Productivity Measure of firm’s efficiency in converting inputs to outputsMeasure of firm’s efficiency in converting inputs to outputs Information Technology Contribution to productivity difficult to measureContribution to productivity difficult to measure UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Information Technology Investments and Productivity

13.20 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change System failure Information system does not perform as expected, is not operational at a specified timeInformation system does not perform as expected, is not operational at a specified time Problem areas: Poor design, inaccurate data, excessive expenditure, breakdown in operationsProblem areas: Poor design, inaccurate data, excessive expenditure, breakdown in operations IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE Information System Problem Areas

13.21 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE Information System Problem Areas Figure 13-4

13.22 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Implementation Organizational activities working towards adoption, management, and routinization of innovationOrganizational activities working towards adoption, management, and routinization of innovation Change agent Individual acting as catalyst to ensure successful organizational adaptation to a new system or innovationIndividual acting as catalyst to ensure successful organizational adaptation to a new system or innovation Change Management and the Concept of Implementation IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.23 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Role of users in implementation processRole of users in implementation process Degree of management support for implementation effortDegree of management support for implementation effort Level of complexity and risk of implementation projectLevel of complexity and risk of implementation project Quality of management of implementation processQuality of management of implementation process Causes of Implementation Success and Failure IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.24 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Factors in Information System Success or Failure Figure 13-5 IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.25 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change User–designer communications gap Different backgrounds, interests, and prioritiesDifferent backgrounds, interests, and priorities Impedes communication and problem solving among end users and information systems specialistsImpedes communication and problem solving among end users and information systems specialists User Involvement and Influence IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.26 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Project requires backing and commitment of management at various levelsProject requires backing and commitment of management at various levels Helps project to be perceived positively by both users and technical information services staffHelps project to be perceived positively by both users and technical information services staff Management Support and Commitment IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.27 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Project size: Larger project has greater riskProject size: Larger project has greater risk Project structure: Clear and straightforward requirements help define outputs and processesProject structure: Clear and straightforward requirements help define outputs and processes Experience with technology: Project risk rises if project team and information system staff lack required technical expertiseExperience with technology: Project risk rises if project team and information system staff lack required technical expertise Level of Complexity and Risk IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.28 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Improper management leads to: Cost overrunsCost overruns Unexpected time slippageUnexpected time slippage Technical shortfallsTechnical shortfalls Failure to obtain anticipated benefitsFailure to obtain anticipated benefits Management of the Implementation Process IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.29 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Consequences of Poor Project Management Figure 13-6 IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.30 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change System Challenges of Mergers and Acquisitions Integrating systemsIntegrating systems Organizational characteristicsOrganizational characteristics Information technology infrastructuresInformation technology infrastructures Change Management Challenges IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.31 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change High failure rates: enterprise system, BPR, CRM, and SCM implementationsHigh failure rates: enterprise system, BPR, CRM, and SCM implementations Hurdles: Extensive change required in organizational culture and business processesHurdles: Extensive change required in organizational culture and business processes Change Management Challenges IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE

13.32 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Managing Technical Complexity: Usage of internal integration tools to ensure operation of implementation teamManaging Technical Complexity: Usage of internal integration tools to ensure operation of implementation team Formal Planning and Control Tools: Structures and sequences tasks, monitors progress towards fulfillment of goalsFormal Planning and Control Tools: Structures and sequences tasks, monitors progress towards fulfillment of goals MANAGING IMPLEMENTATION Controlling Risk Factors

13.33 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Increasing User Involvement and Overcoming User Resistance: External integration tools linking work of implementation team to that of users at all organizational levelsIncreasing User Involvement and Overcoming User Resistance: External integration tools linking work of implementation team to that of users at all organizational levels Counterimplementation: Deliberate strategy to thwart an implementation effortCounterimplementation: Deliberate strategy to thwart an implementation effort Controlling Risk Factors MANAGING IMPLEMENTATION

13.34 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Formal planning and control tools help to manage information systems projects successfully Figure 13-7 MANAGING IMPLEMENTATION

13.35 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Allowing for the Human Factor Ergonomics: interaction of people and machines in work environmentErgonomics: interaction of people and machines in work environment Sociotechnical Design Produces information system blending technical efficiency with sensitivity to organizational and human needsProduces information system blending technical efficiency with sensitivity to organizational and human needs Designing for the Organization MANAGING IMPLEMENTATION

13.36 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change Project planning is an enterprise-wide focusProject planning is an enterprise-wide focus Managers focus on solving problems as they arise and meeting challengesManagers focus on solving problems as they arise and meeting challenges Fourth-Generation Project Management MANAGING IMPLEMENTATION

13.37 © 2004 by Prentice Hall Management Information Systems 8/e Chapter 13 Understanding the Business Value of Systems and Managing Change 13 UNDERSTANDING THE BUSINESS VALUE OF SYSTEMS AND MANAGING CHANGE Chapter