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13.1 © 2003 by Prentice Hall
1313
UNDERSTANDINGUNDERSTANDING
THE BUSINESSTHE BUSINESS
VALUE OF SYSTEMSVALUE OF SYSTEMS
AND MANAGINGAND MANAGING
CHANGECHANGE
Chapter
13.2 © 2003 by Prentice Hall
• How can our company measure the business How can our company measure the business benefits of our information systems? What benefits of our information systems? What models should be used to measure that models should be used to measure that business value?business value?
• Why do so many system projects fail? What Why do so many system projects fail? What are the principal reasons for system failures?are the principal reasons for system failures?
• How should the organizational change How should the organizational change surrounding a new system be managed to surrounding a new system be managed to ensure success?ensure success?
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
OBJECTIVES
13.3 © 2003 by Prentice Hall
• Are there any special challenges in Are there any special challenges in implementing international information implementing international information systems?systems?
• What strategies can our organization use to What strategies can our organization use to manage the system implementation manage the system implementation process more effectively?process more effectively?
OBJECTIVES
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
13.4 © 2003 by Prentice Hall
• Determining benefits of a system when they Determining benefits of a system when they are largely intangibleare largely intangible
• Dealing with the complexity of large-scale Dealing with the complexity of large-scale systems projectssystems projects
MANAGEMENT CHALLENGES
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
13.5 © 2003 by Prentice Hall
Capital budgetingCapital budgeting
• Process of analyzing and selecting Process of analyzing and selecting various proposals for capital expendituresvarious proposals for capital expenditures
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Traditional Capital Budgeting Models
13.6 © 2003 by Prentice Hall
• Do not express the risks and uncertainty Do not express the risks and uncertainty of own cost and benefits estimatesof own cost and benefits estimates
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Limitations of Financial Models
13.7 © 2003 by Prentice Hall
The ProblemThe Problem
• No automated way of tracking billable No automated way of tracking billable hourshours
• 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
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Case Example: Primrose, Mendelson, and Hansen
13.8 © 2003 by Prentice Hall
The SolutionThe Solution
• Local area networkLocal area network
• Lotus Notes to handle client accounting, Lotus Notes to handle client accounting, document management, group document management, group collaboration, and e-mailcollaboration, and e-mail
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Case Example: Primrose, Mendelson, and Hansen
13.9 © 2003 by Prentice Hall
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Costs and Benefits of the Legal Information System
Figure 13-1
13.10 © 2003 by Prentice Hall
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Financial Models
Figure 13-2
13.11 © 2003 by Prentice Hall
The Payback MethodThe Payback Method
• Measure of time required to pay back the initial Measure of time required to pay back the initial investment on a projectinvestment on a project
Accounting Rate of Return on Investment Accounting Rate of Return on Investment
(ROI)(ROI)
• Approximates the accounting income earned Approximates the accounting income earned by the investmentby the investment
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Case Example: Primrose, Mendelson, and Hansen
13.12 © 2003 by Prentice Hall
Present valuePresent value
• Value of a payment or stream of payments Value of a payment or stream of payments to be received in dollarsto be received in dollars
Net present valueNet present value
• Amount of money an investment is worth Amount of money an investment is worth
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Case Example: Primrose, Mendelson, and Hansen
13.13 © 2003 by Prentice Hall
Cost-benefit ratioCost-benefit ratio
• Calculates returns from capital Calculates returns from capital expenditure expenditure
Profitability indexProfitability index
• Compares profitability of alternative Compares profitability of alternative investments by dividing the present value investments by dividing the present value of total cash inflow by initial costof total cash inflow by initial cost
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Case Example: Primrose, Mendelson, and Hansen
13.14 © 2003 by Prentice Hall
Internal Rate of Return (IRR)Internal Rate of Return (IRR)
• Rate of return or profit an investment is Rate of return or profit an investment is expected to earnexpected to earn
Results of the Capital Budgeting Results of the Capital Budgeting
AnalysisAnalysis
• Cash flow positive over the time period Cash flow positive over the time period and returns more benefits than it costsand returns more benefits than it costs
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Case Example: Primrose, Mendelson, and Hansen
13.15 © 2003 by Prentice Hall
Portfolio AnalysisPortfolio Analysis
• Analysis of portfolio of potential Analysis of portfolio of potential applications within a firm applications within a firm
• Determines risks and benefitsDetermines risks and benefits
• Selects among alternatives for information Selects among alternatives for information systemssystems
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Strategic Considerations
13.16 © 2003 by Prentice Hall
Scoring ModelsScoring Models
• Method for deciding among alternative Method for deciding among alternative systems based on a system of ratings systems based on a system of ratings
Real Options Pricing ModelsReal Options Pricing Models
• Models for evaluating information Models for evaluating information technology investments with uncertain technology investments with uncertain returns returns
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Strategic Considerations
13.17 © 2003 by Prentice Hall
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
A System Portfolio
Figure 13-3
13.18 © 2003 by Prentice Hall
Knowledge Value–Added ApproachKnowledge Value–Added Approach
• Focuses on knowledge input into a Focuses on knowledge input into a business process business process
• Determines costs and benefits of changes Determines costs and benefits of changes in business processes from new in business processes from new information systemsinformation systems
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Strategic Considerations
13.19 © 2003 by Prentice Hall
Productivity Productivity
• Measure of firm’s efficiency in converting Measure of firm’s efficiency in converting inputs to outputsinputs to outputs
Information TechnologyInformation Technology
• Reduces costReduces cost
• Increases quality of products and servicesIncreases quality of products and services
UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Information Technology Investments and Productivity
13.20 © 2003 by Prentice Hall
System failureSystem failure
• Information system does not perform as Information system does not perform as expected, is not operational at a specified expected, is not operational at a specified timetime
• Poor design, inaccurate data, excessive Poor design, inaccurate data, excessive expenditure, breakdown in operationsexpenditure, breakdown in operations
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Information System Problem Areas
13.21 © 2003 by Prentice Hall
THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Information System Problem Areas
Figure 13-4
13.22 © 2003 by Prentice Hall
ImplementationImplementation
• Organizational activities working towards Organizational activities working towards adoption, management, and routinization adoption, management, and routinization of innovationof innovation
Change agentChange agent
• Individual acting as catalyst to ensure Individual acting as catalyst to ensure successful organizational adaptation to a successful organizational adaptation to a new system or innovationnew system or innovation
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Change Management and the Concept of Implementation
13.23 © 2003 by Prentice Hall
• Role of users in implementation processRole of users in implementation process
• Degree of management support for Degree of management support for implementation effortimplementation effort
• Level of complexity and risk of Level of complexity and risk of implementation projectimplementation project
• Quality of management of implementation Quality of management of implementation processprocess
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Causes of Implementation Success and Failure
13.24 © 2003 by Prentice Hall
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Factors in Information System Success or Failure
Figure 13-5
13.25 © 2003 by Prentice Hall
User–designer communications gapUser–designer communications gap
• Different backgrounds, interests, and Different backgrounds, interests, and priorities priorities
• Impedes communication and problem Impedes communication and problem solving among end users and information solving among end users and information systems specialistssystems specialists
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
User Involvement and Influence
13.26 © 2003 by Prentice Hall
• Project requires backing and commitment Project requires backing and commitment of management at various levels of management at various levels
• Perceived positively by both users and Perceived positively by both users and technical information services stafftechnical information services staff
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Management Support and Commitment
13.27 © 2003 by Prentice Hall
• Project size:Project size: Larger project has greater Larger project has greater riskrisk
• Project structure:Project structure: Clear and Clear and straightforward requirements help define straightforward requirements help define outputs and processes outputs and processes
• Experience with technology:Experience with technology: Project Project risk rises if project team and information risk rises if project team and information system staff lack required technical system staff lack required technical expertiseexpertise
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Level of Complexity and Risk
13.28 © 2003 by Prentice Hall
Improper management leads to:Improper management leads to:
• Cost overruns Cost overruns
• Unexpected time slippageUnexpected time slippage
• Technical shortfalls Technical shortfalls
• Failure to obtain anticipated benefitsFailure to obtain anticipated benefits
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Management of the Implementation Process
13.29 © 2003 by Prentice Hall
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Consequences of Poor Project Management
Figure 13-6
13.30 © 2003 by Prentice Hall
System Challenges of Mergers and System Challenges of Mergers and
AcquisitionsAcquisitions
• Integrating systemsIntegrating systems
• Organizational characteristics Organizational characteristics
• Information technology infrastructuresInformation technology infrastructures
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Change Management Challenges for Enterprise Applications, Business Process Reengineering (BPR), and Mergers and Acquisitions
13.31 © 2003 by Prentice Hall
Disparate Information Requirements Disparate Information Requirements
and Business Processesand Business Processes
• Transborder data flow:Transborder data flow: Movement of Movement of information across international information across international boundaries in any formboundaries in any form
• Technology Hurdles:Technology Hurdles: Lack of standards Lack of standards and connectivity in hardware, software, and connectivity in hardware, software, and telecommunications and telecommunications
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
The Challenge of Implementing Global Systems
13.32 © 2003 by Prentice Hall
• Local User Resistance to Global Local User Resistance to Global Systems:Systems: Difficult to convince local Difficult to convince local managers to change their business managers to change their business processes processes
IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEM SUCCESS AND FAILURE
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
The Challenge of Implementing Global Systems
13.33 © 2003 by Prentice Hall
• Managing Technical Complexity:Managing Technical Complexity: Usage of internal integration tools to Usage of internal integration tools to ensure operation of implementation team ensure operation of implementation team
• Formal Planning and Control Tools:Formal Planning and Control Tools: Structures and sequences tasks, monitors Structures and sequences tasks, monitors progress towards fulfillment of goals progress towards fulfillment of goals
MANAGING IMPLEMENTATION
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Controlling Risk Factors
13.34 © 2003 by Prentice Hall
• Increasing User Involvement and Increasing User Involvement and Overcoming User Resistance:Overcoming User Resistance: Linking Linking work of implementation team to that of work of implementation team to that of users at all organizational levelsusers at all organizational levels
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Controlling Risk Factors
MANAGING IMPLEMENTATION
13.35 © 2003 by Prentice Hall
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 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
13.36 © 2003 by Prentice Hall
Allowing for the Human FactorAllowing for the Human Factor
• Interaction of people and machines in Interaction of people and machines in work environmentwork environment
Sociotechnical DesignSociotechnical Design
• Produces information system blending Produces information system blending technical efficiency with sensitivity to technical efficiency with sensitivity to organizational and human needsorganizational and human needs
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Designing for the Organization
MANAGING IMPLEMENTATION
13.37 © 2003 by Prentice Hall
Core systemsCore systems
• Support functions absolutely critical to Support functions absolutely critical to organizationorganization
Implementation Tactics: CooptationImplementation Tactics: Cooptation
• Bringing opposition into process of Bringing opposition into process of designing and implementing a solution designing and implementing a solution
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Managing Global Implementations
MANAGING IMPLEMENTATION
13.38 © 2003 by Prentice Hall
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Figure 13-8
MANAGING IMPLEMENTATION
13.39 © 2003 by Prentice Hall
Creating a Global Technology Creating a Global Technology InfrastructureInfrastructure
• Build international private networkBuild international private network
• Rely on value added network serviceRely on value added network service
• Use Internet technologyUse Internet technology
• Build global intranets Build global intranets
• Use Virtual Private Networks Use Virtual Private Networks
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Managing Global Implementations
MANAGING IMPLEMENTATION
13.40 © 2003 by Prentice Hall
• Project planning is an enterprise-wide Project planning is an enterprise-wide focusfocus
• Managers focus on solving problems and Managers focus on solving problems and meeting challenges meeting challenges
Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 13 Understanding the Business Value of Systems and Managing ChangeChapter 13 Understanding the Business Value of Systems and Managing Change
Fourth-Generation Project Management
MANAGING IMPLEMENTATION
13.41 © 2003 by Prentice Hall
1313
UNDERSTANDINGUNDERSTANDING
THE BUSINESSTHE BUSINESS
VALUE OF SYSTEMSVALUE OF SYSTEMS
AND MANAGINGAND MANAGING
CHANGECHANGE
Chapter