1 Management Information Systems - Class Note # 5 (Chap-13) Prof. Yuan-Shyi Peter Chiu Feb. 2012

2 CHAP. 13 Understanding the Business Value of Systems and Managing Change 13.1 Understanding the Business Value of Information Systems 13.2 The Importance of Change Management in Information System Success and Failure 13.3 Managing Implementation

Understanding the Business Value of Information Systems CHAP. 13 Tangible Benefits ■ Tangible Benefits Benefits that can be quantified and assigned a monetary value; they include lower operational costs and increased cash flows. Intangible Benefits ■ Intangible Benefits Benefits that are not easily quantified; they include more efficient customer service or enhanced decision making. ◇

4 Costs & Benefits ■ Tangible Benefit :  Increased Productivity  Low Operating Costs  Reduced Work Force  Lower Computer Expenses  Lower Vendor Costs  Lower Clerical / Professional Costs  Reduced Growth of Expenses  Reduced Facility Costs ◇

5 ■ Intangible Benefit : Improved Asset Use; Resource Control; Planning Increased Flexibility More Timely Information Increased Learning Attain Legal Requirements Enhanced Employee Goodwill, Job Satisfaction, Decision Making, Operations Higher Client Satisfaction Better Corporate Image Costs & Benefits ◇

The Payback Method ■ The Payback Method Measure of time required to pay back the initial investment on a project (p.420)Measure of time required to pay back the initial investment on a project (p.420) Accounting Rate of Return on Investment ■ Accounting Rate of Return on Investment(ROI) Calculation of the rate of return on an investment by its net benefit. Approximates the accounting income earned by the investment (p.421)Calculation of the rate of return on an investment by its net benefit. Approximates the accounting income earned by the investment (p.421) ◇

Present value ■ Present value The value, in current dollars, of a payment or stream of payments to be received in the future.The value, in current dollars, of a payment or stream of payments to be received in the future. Net present value ■ Net present value Amount of money an investment is worth, taking into account its cost, earnings, and the time value of money.Amount of money an investment is worth, taking into account its cost, earnings, and the time value of money. Cost-benefit ratio ■ Cost-benefit ratio Calculates returns from capital expenditure by dividing total benefits by total costs.Calculates returns from capital expenditure by dividing total benefits by total costs. ◇

Profitability index ■ Profitability index Compares profitability of alternative investments by dividing the present value of total cash inflow by initial cost. Compares profitability of alternative investments by dividing the present value of total cash inflow by initial cost. Internal Rate of Return (IRR) ■ Internal Rate of Return (IRR) Rate of return (or profit) an investment is expected to earn.Rate of return (or profit) an investment is expected to earn. ◇

9 Fig 13-3: A System portfolio Strategic considerations

The Importance of change management in information system success and failure ■ Information System Problem Areas ■ Measures of information system success ■ Factors in Implementation success or failure ◆ ◆

11 Systems Failure An information system that either does not perform as expected, or is not operational at a specified time, or cannot be used in the way it was intended As many as 75% of all large systems may be considered to be operating failures 13.2

Fig. 13-4: Information System Problem Areas ■ Information System Problem Areas

13 Data Data in the systems have a high level of inaccuracy or inconsistency may be ambiguous may be inaccessible 13.2 ■ Information System Problem Areas

14 Information Attributes or Qualities Freedom From Bias Freedom From Bias Appropriate -ness Appropriate -ness Clarity Timely Precision Accuracy Quantifiable Comprehen -sive Comprehen -sive Verifiable Accessible INFORMATION 13.2 ■ Information System Problem Areas ◇

15 Accuracy -- The degree of the absence of error in information Quantifiable -- The ability to state information numerically Precision --The measurement detail used in providing information Verifiable --The degree of consensus arrived at among various users examining the same information Timely --The receipt of information within the time frame it is needed by the recipient Accessible --The ease and speed with which information can be obtained Clarity --The degree to which information is free from ambiguity Freedom From Bias --The absence of intent to alter or modify information in order to influence recipients Appropriateness --How well the information relates to the user’s requirement Comprehensive --The completeness of the information 13.2 ■ Information System Problem Areas ◇

16 Design Fails to capture essential business requirements Fails to improve organizational performance Information may not be provided quickly enough to be helpful Information may be in a format that is impossible to digest and use It may represent the wrong pieces of data 13.2 ■ Information System Problem Areas

17 Cost run way over budget too costly to implement excessive expenditures cannot be justified by the business value of the information they provide 13.2 ■ Information System Problem Areas

18 Operations The system does not run well Information is not provided in a timely and efficient manner, because the computer operations break down Delayed & missed schedules for delivery of information An on-line system may be operationally inadequate because the response time is too long 13.2 ■ Information System Problem Areas ◆

19 Measures of information system success Measures of information System success Measures of information System success High Levels of System use High Levels of System use Financial payoff Financial payoff Achieved System objectives Achieved System objectives Favorable Attitudes About IS function Favorable Attitudes About IS function User Satisfaction With system User Satisfaction With system 13.2 ◆

20 High levels of system use Measured by polling users Employing questionnaires Monitoring system parameters such as the volume of on-line transactions 13.2 ■ Measures of information system success

21 User satisfaction with system measured by questionnaires or interviews: users’ opinions on the accuracy, timeliness, quality of service, and the schedule of operations managers’ attitudes on how well their information needs were satisfied users’ opinions about how well the system enhanced their job performance 13.2 ■ Measures of information system success

22 Favorable attitudes about information system function Favorable attitudes of users about information systems and the information systems staff 13.2 ■ Measures of information system success

23 Achieved system objectives the extent to which the system meets its specified goals as reflected by improved organizational performance and decision making resulting from use of the system 13.2 ■ Measures of information system success

24 Financial Payoff either by reducing costs or by increasing sales or profits be of limited value, since benefits of an information system may not be totally quantifiable (intangible benefits exists) 13.2 ■ Measures of information system success

Factors in Implementation Success or Failure Implementation outcome Design Cost Operations Data User involvement and influence Management support Level of Complexity / risk Management of implementation process ◆

26 User Involvement and Influence  If users are heavily involved in systems design, they have more opportunities to - Mold the system - Control the outcome  Users are more likely to react positively to the system Factors in Implementation Success or Failure 13.2 ◇

27 Management Support  Users and technical IS staff - Receive higher-level attention and priority - Recognized and rewarded for the time and effort they devote to implementation  Ensures that a systems project will receive sufficient funding and resources to be successful Factors in Implementation Success or Failure 13.2 ◇

28 Level of Complexity / Risk  Project size :  The larger the project, the greater the risk.  Project structure :  Requirements are clear and straightforward, ( highly structured ), risk is lower.  Experience with technology :  The project risk will rise if the project team lack the required technical expertise. Factors in Implementation Success or Failure 13.2

29 Factors in Implementation Success or Failure 13.2

30 Management of implementation process  Without proper management :  Cost overruns that vastly exceed budgets  Time slippage that is much greater than expected  Technical shortfalls resulting in performance that is significantly below the estimated level  Failure to obtain anticipated benefits Factors in Implementation Success or Failure 13.2

Managing implementation Increasing User Involvement Overcoming User Resistance Managing Technical Complexity Controlling Risk Factors Formal Planning and Control Tools (CPM & PERT) Allowing for Human Factor Creating a Global Technology Infrastructure  Must :

32 #1. Describe the tangible and intangible benefits of a business information system? #2. What are the problem areas of an Information system? #3. What are the measures of the Information system success? #4. Describe the factors in implementation success or failure? #5. What are the main considerations in determining a project’s level of complexity and risk? HOMEWORK Chap.13 ~ THE END ~ ~ THE END ~ ◇

33 THE END THE END

34 ~ To Think About ~ Info. System ? 企業之 I. T 應用 ? I.S. 建立之程序 ? I.S. 建立之方法 ? I.S. 應用於企業 vs I.T. 應用於生活 ? I.T. 之挑戰與創意 ?