Strategic Information Systems Planning College of Information Technology CISB444 Strategic Information Systems Planning 1

Course Overview Strategic Planning for Information Systems explores the impact that information systems (IS) and information technology (IT) have on business performance and the contribution that they make to the strategic options of organisations. It describes tools, techniques and management frameworks to both align strategies for IS and IT with business strategy, as well as seek out new opportunities through innovative deployment of technology.

Course Overview This course demonstrates why strategic planning for information systems is essential to organisational success, especially in times of increasingly rapid change. Over the long term any organisation will get the information systems it deserves, according to the approach adopted to the use and management of IS/IT. To obtain the whole range of benefits available from IS/IT and avoid the potential pitfalls, every organisation must establish the means to manage IS/IT as an integral part of its approach to strategic management.

Course Objectives To provide an understanding that strategic planning for information systems is both essential and feasible. To demonstrate that organisation must establish a way of managing IS/IT strategically as part of the business development process in order to deliver the benefits available from IS/IT and to avoid the potential pitfalls in IS/IT implementation. To assess alternative approaches to developing information systems (IS) strategies. To highlight the importance of information as one of the organisation’s strategic resources

Managing Investments in Information Systems and Technology Chapter 9 Managing Investments in Information Systems and Technology

Chapter 9: Overview Chapter 9 presents approaches to managing IS/IT investments, setting priorities to gain the best overall return from those investments and defining and realising the business benefits that IT-enabled changes can produce.

Chapter 9: Main Topics Investment and priority-setting policies Evaluating IS/IT investments Setting priorities for applications Benefits management Assessing and Managing Investment Risks

Introduction The applications portfolio will include a range of different IS/IT investments that have been identified as new developments or significant enhancements to existing systems. Before resources are assigned and development begins, several other steps need to be taken including: Establishing the expected benefits of the investments Justifying the cost of the systems, technology and business changes involved Allocating priorities to individual developments across the portfolio

Investment and Priority Setting Policies IS/IT investments have traditionally been evaluated like capital projects such as plant and equipment assuming a fixed cost offset against net revenue over the life of the application. However, many modern applications are more like ‘new business ventures’ or business initiatives where the financial aspects of the outcome can only be guessed and the technology is only one component of a major change program.

Evaluating IS/IT Investments Parker et al.(1992) assess in detail the ways in which information and systems benefits accrue and how they can be quantified to help in justifying investments. They consider 3 main types of application: Substitutive – technology replacing people with economics being the main driving force, to improve efficiency Complementary – improving organisational productivity and employee effectiveness by enabling work to be performed in new ways Innovative – achieving a competitive edge by changing trading practice, creating new markets, etc.

Evaluating IS/IT Investments They suggest ways in which each of the different types of application should be justified and define 5 basic techniques for evaluating benefits: Traditional cost-benefit analysis Value linking Value acceleration Value restructuring Innovation evaluation

Evaluating IS/IT Investments Traditional cost-benefit analysis Allows for efficiency improvements in organisational processes resulting from automation Value linking Estimates the improvement in business performance, not just savings made, from improving the linkages between processes or activities or interactive component design with suppliers via a shared Computer-Aided Design system

Evaluating IS/IT Investments Value acceleration Considers time dependence of benefits and costs in other departments of system improvements. Benefits can occur in other parts of the business, not just where the system is actually implemented Value restructuring Considers the productivity resulting from processes and organisational change and change of job roles Innovation evaluation Attempts to estimate the value to the business of new business or new business practices levered from IS/IT (e.g. the launch of an online banking service may change the company image and attract new types of customers).

Relationship Between Benefit Types and the Application Portfolio Substitutive (efficiency) Complementary (effectiveness) Innovative (competitive) Cost/Benefit Value linking Value acceleration Value restructuring Innovation evaluation             Support High Potential Key Operational Strategic

Evaluating IS/IT Investments Enable the achievement of business objectives via explicit critical success factors STRATEGIC R&D project to explore potential value and cost-fund from R&D budget Risk money HIGH POTENTIAL Net cost reduction through quantified savings SUPPORT Disadvantage/Risk if it is not done (critical failure factors) and/or quantified performance improvement KEY OPERATIONAL RM RM RM RM RM extent to which benefits can be justified financially

Setting Priorities for Applications 3 factors need to be included in the assessment of priorities: What is most important to do, based on the benefits identified What is capable of being done, based on the resources available What is likely to succeed, based on the risks of failure of each investment

Benefits Management Definition: The process of organising and managing such that potential benefits arising from the use of IT are actually realised The ability to achieve benefits from a particular investment will depend largely on the organisation’s experience and knowledge of what type of benefit IS/IT investment can or cannot deliver and how they can be obtained. Based on the different objectives and rationale for the applications in each segment of the application portfolio, it can be seen that the mix of activities and their criticality to success will vary.

Generic Sources of Benefit for Different Applications Business innovation and change Business process restructuring STRATEGIC (R&D projects) HIGH POTENTIAL Business efficiency Process elimination and cost reduction SUPPORT Business effectiveness Business rationalisation and integration KEY OPERATIONAL

Benefits Management Context drivers Types of benefits Organisational context Benefits IT process and products management process changes

Assessing and Managing Investment Risks As part of the appraisal of investment viability, it is essential to assess the potential risks: The risks of failing to deliver anything at all The risks of failing to deliver some or all the benefits

Assessing and Managing Investment Risks Failure can occur in 5 domains: Technical failure Data failure User failure Organisational failure Failure in the business environment

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