1、15.1 2006 by Prentice Hall15Chapter 15.2 2006 by Prentice Hall Evaluate models for understanding the business value of information systems Analyze the principal causes of information system failure Assess the change management requirements for building successful systems OBJECTIVES15.3 2006 by Prent
2、ice Hall Select appropriate strategies to manage the system implementation process Identify the challenges posed by implementing new systems and management solutions OBJECTIVES (Continued)15.4 2006 by Prentice Hall Challenge: Change the organization and business processes at one of the worlds larges
3、t retail banking firms in order to support V-Banking systems Solutions: develop new business processes, retrain workforce, develop a customer-centric culture Train customers in the use of new digital banking services Illustrates the importance of changing the organization and culture in a business t
4、o support technology changeHSBC Malaysia Case15.5 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Projects with 12-24 month objectives Longer periods infrastructure investments Two kinds of IS investments: Improvement in business processes to increase firm efficiency Imp
5、rovements in management decision making Two ways for producing value: 15.6 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Strengthening firm strategically (ties to partners, customers, increasing flexibility, etc.) Enabling future implementation of new technologies 15.7
6、 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Capital Budgeting: Process of analyzing and selecting various proposals for capital expendituresExpand production to meet anticipated demand Modernize production equipment to reduce costs Can be noneconomic, e.g. installin
7、g pollution control equipment 15.8 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS The payback method The accounting rate of return on investment (ROI) The net present value The cost-benefit ratio The profitability index The internal rate of return (IRR) 15.9 2006 by Pre
8、ntice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Do not express the risks and uncertainty of their own costs and benefits estimates Costs and benefits do not occur in the same time frame.Inflation may affect costs and benefits differently. Intangible benefits are difficult to quanti
9、fy.15.10 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Heartland Stores:General merchandise retail chain in eight Midwestern states Five regional distribution centers, 377 stores, and about 14,000 different products in each store 15.11 2006 by Prentice HallUNDERSTANDIN
10、G THE BUSINESS VALUE OF INFORMATION SYSTEMS New software and hardware to upgrade its supply chain management systemReduce inventory and inventory costs Reduce labor costs Reduce telecommunications costs Reduce transportation costs Investment strategy and goals:15.12 2006 by Prentice HallCosts and Be
11、nefits of the New SCM System UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Figure 15-115.13 2006 by Prentice HallFinancial Models UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Figure 15-215.14 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Payback me
12、thod: Measures the time required to pay back the initial investment of a projectOriginal InvestmentAnnual net cash inflow=Number of years to pay backHeartland Stores: More than 2 years to pay back initial investment 15.15 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS 1
13、.Calculate net benefit (Total benefits - Total cost - Depreciation)Useful life=Net benefit15.16 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS 2. Calculate ROI by dividing net benefit by the total initial investment Net benefitTotal initial investment=ROIHeartland Store
14、s ROI: 2.93 % 15.17 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Present value: The value in current dollars of a payment or stream of payments to be received in the future It can be calculated by using the following formula: 1 - (1+interest)-nInterest=Payment xPresen
15、t value15.18 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Net present value: Amount of money an investment is worth, taking into account its cost, earnings, and the time value of moneyPresent value of expected cash flows - Initial investment cost = Net present value 1
16、.Calculate present value of stream of benefits: 1 - (1+Interest)-nInterest=Payment xPresent value2. Calculate net present value: 15.19 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Heartland Stores present value = $21,625,709 Investment cost = $11,467,350 Net Present v
17、alue = $10,158,359 15.20 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Total benefitsTotal costs=Cost-benefit ratioProfitability Index: Can be used to compare the profitability of alternative investments Present value of cash inflowsInvestment=Profitability indexHeartl
18、and Stores Profitability Index: 1.89 Heartland Stores Cost-Benefit Ratio: 1.7115.21 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Rate of return or profit that an investment is expected to earn, taking into account the time value of money The discount (interest) rate t
19、hat will equate the present value of the projects future cash flows to the initial cost of the project Value of R (discount rate) is such that Present value Initial cost = 0 Heartland Stores IRR: 33% 15.22 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS An overall unders
20、tanding of where the firm is making information technology investmentsBased on inventory of all information systems projects and assets, including infrastructure, outsourcing contracts, and licenses Assigns risk and benefit profiles to IS investments Portfolio Analysis: Seeks to develop 15.23 2006 b
21、y Prentice HallA System Portfolio UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Figure 15-315.24 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS A quick and sometimes compelling method for arriving at a decision on alternative systems The most important outcome
22、 of a scoring model is not the score but agreement on the criteria used to judge a system. Best practice is to cycle through the scoring model several times, changing the criteria and weights, to see how sensitive the outcome is to reasonable changes in criteria. Scoring Models: 15.25 2006 by Prenti
23、ce HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Uses the financial industry concept of options valuation An option is the right, but not obligation, to act at a future date. An initial expenditure on IS technology creates the right, but not the obligation, to obtain the benefits assoc
24、iated with further development and deployment of the technology. Real Options Pricing Models (ROPM): 15.26 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Capital investments cannot be traded on a market and differ in value based on the firm. Factors, such as prior exper
25、tise, skilled labor force, market conditions, and other factors Real Options Pricing Models (ROPM): (Continued)15.27 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Value of IT project (real option) is a function of the following: Value of underlying IT asset (present va
26、lue of expected revenues) Volatility of value of asset (exercise price) Risk-free interest rate Option time to maturity (length of project deferment) 15.28 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Any program that uses information technology to change business pro
27、cesses requires knowledge input The value of the knowledge used to produce improved outputs of the new process can be used as a measure of the value addedKnowledge inputs can be measured in terms of learning time to master a new process, and a return on knowledge can be estimated Knowledge Value-Add
28、ed Approach: 15.29 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Productivity is a measure of the firms efficiency in converting inputs to outputs. It refers to the amount of capital and labor required to produce a unit of output. Information technology has increased p
29、roductivity in manufacturing, but productivity gains in service sector are unclear. Information Technology Investments and Productivity 15.30 2006 by Prentice HallUNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS Contribution of IT to productivity in information and knowledge industries is dif
30、ficult to quantify. Information technology investments are more likely to improve firm performance if accompanied by complementary investments in new business processes, organizational structures, and organizational learning. Information Technology Investments and Productivity (Continued)15.31 2006
31、by Prentice HallInformation Systems Problem Areas THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Figure 15-415.32 2006 by Prentice HallSystem design may fail to capture essential business requirements or improve organizational performance. Information may not be timel
32、y: Information may be in a format that is difficult to understand or have a poor user interface. Design: THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE 15.33 2006 by Prentice HallThe data in the system may have a high level of inaccuracy or inconsistency, may be inacc
33、essible or incomplete. Data: THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Some systems operate quite smoothly, but their costs to implement and run on a production basis may be way over budget. Cost: 15.34 2006 by Prentice HallThe system does not run well or breaks
34、down and information is not provided in a timely and efficient manner. System response time is too long.Operations problems can be attributed to technical features, but most stem from organizational factors. Operations: THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE 1
35、5.35 2006 by Prentice HallImplementation: All organizational activities working toward the adoption, management, and routinization of a new system change agentChange Management and the Concept of Implementation THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE 15.36 2006
36、 by Prentice HallThe systems analyst who develops technical solutions and redefines the configurations, interactions, job activities, and power relationships of various organizational groups Acts as catalyst for the entire change process and is responsible for ensuring that all parties involved acce
37、pt the changes created by a new system THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Change Management and the Concept of Implementation (Continued)15.37 2006 by Prentice HallInformation Systems Success or Failure Factors THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORM
38、ATION SYSTEMS SUCCESS AND FAILURE Figure 15-5Causes of Implementation Success and Failure 15.38 2006 by Prentice HallIf users are heavily involved in systems design, they have more opportunities to mold the system according to their priorities and business requirements and control the outcome. Invol
39、ved users are more likely to react positively to the completed system. THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE 15.39 2006 by Prentice HallUsers can have limited understanding of other issues and solutions.THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTE
40、MS SUCCESS AND FAILURE Management Support and Commitment: Commitment of management to An information systems project usually results in a more positive perception and acceptance by users and the technical services staff.15.40 2006 by Prentice HallManagement backing also ensures that a systems projec
41、t receives sufficient funding and resources to be successful All the changes in work habits and procedures and any organizational realignment associated with a new system depend on management backing THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Management Support an
42、d Commitment: (Continued)15.41 2006 by Prentice HallTHE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE The level of project risk is influenced by:Level of Complexity and Risk: Project size Project structure Level of technical expertise of the information systems team 15.4
43、2 2006 by Prentice HallTHE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Figure 15-6Consequences of Poor Project Management15.43 2006 by Prentice HallCosts that vastly exceed budgets Unexpected time slippage Technical shortfalls resulting in performance that is significa
44、ntly below the estimated level THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE 15.44 2006 by Prentice HallFailure to obtain anticipated benefits Possible reasons for poor management: THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Ignoran
45、ce and optimism Mythical man-month Falling behind: Bad news travels slowly upward 15.45 2006 by Prentice HallTHE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE Successful implementation includes addressing employees concerns about change Resistance by key managers Changin
46、g job functions, career paths, recruitment practices Managing training 15.46 2006 by Prentice HallGain market share and expertise very quickly Critical issues include the organizational characteristics of the merging companies and IT infrastructures THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION
47、 SYSTEMS SUCCESS AND FAILURE As are major growth engines for businesses, enabling firms to 15.47 2006 by Prentice HallRealistic costs of integration Estimated benefits of economies in operation, scope, knowledge, and time Problematic systems that require major investments to integrate More than 70 p
48、ercent of all M&As result in a decline in shareholder value THE IMPORTANCE OF CHANGE MANAGEMENT IN INFORMATION SYSTEMS SUCCESS AND FAILURE System Implementation of Mergers and Acquisitions (M&As): (Continued)15.48 2006 by Prentice HallManaging technical complexity:Formal planning and control toolsIn
49、creasing user involvement and overcoming user resistance MANAGING IMPLEMENTATION 15.49 2006 by Prentice HallExternal integration tools: Ways to link the work of the implementation team to users at all organizational levels Counter implementation: Deliberate strategy to thwart the implementation of a
50、n information system or an innovation in an organization MANAGING IMPLEMENTATION Managing technical complexity: (Continued)15.50 2006 by Prentice HallFormal Planning and Control Tools Help to Manage Information Systems Projects Successfully Figure 15-7MANAGING IMPLEMENTATION 15.51 2006 by Prentice H
