11. BUILDING INFORMATION SYSTEMS: CONTEMPORARY APPROACHES 11.1

INFORMATION SYSTEM INFORMATIONSYSTEM BUSINESSCHALLENGE BUSINESSSOLUTIONS MANAGEMENTINFORMATIONTECHNOLOGYORGANIZATION 11.2 RISKS & UNCERTAINTIES IN SYSTEMS DEVELOPMENT DETERMINING (LARGELY INTANGIBLE) BENEFITS MANAGING CHANGE

INFORMATION SYSTEMS PLAN DIRECTION OF SYSTEM DEVELOPMENT: RATIONALERATIONALE CURRENT SITUATIONCURRENT SITUATION MANAGEMENT STRATEGYMANAGEMENT STRATEGY IMPLEMENTATION PLANIMPLEMENTATION PLAN BUDGETBUDGET* 11.3

INFORMATION SYSTEMS PLAN 1. PURPOSE OF THE PLAN: OVERVIEW OF PLAN CONTENTSOVERVIEW OF PLAN CONTENTS CHANGES IN CURRENT SITUATIONCHANGES IN CURRENT SITUATION FIRM’S STRATEGIC PLANFIRM’S STRATEGIC PLAN CURRENT ORGANIZATIONCURRENT ORGANIZATION MANAGEMENT STRATEGYMANAGEMENT STRATEGY* 11.4

INFORMATION SYSTEMS PLAN 2. STRATEGIC BUSINESS PLAN: CURRENT SITUATIONCURRENT SITUATION CURRENT ORGANIZATIONCURRENT ORGANIZATION CHANGING ENVIRONMENTCHANGING ENVIRONMENT MAJOR GOALS OF PLANMAJOR GOALS OF PLAN* 11.5

INFORMATION SYSTEMS PLAN 3. CURRENT SYSTEMS: MAJOR SYSTEMS SUPPORTING BUSINESS FUNCTIONSMAJOR SYSTEMS SUPPORTING BUSINESS FUNCTIONS MAJOR CURRENT CAPABILITIESMAJOR CURRENT CAPABILITIES –HARDWARE –SOFTWARE –DATABASE –TELECOMMUNICATIONS DIFFICULTIES MEETING REQUIREMENTSDIFFICULTIES MEETING REQUIREMENTS ANTICIPATED FUTURE DEMANDSANTICIPATED FUTURE DEMANDS* 11.6

INFORMATION SYSTEMS PLAN 4. NEW DEVELOPMENTS: NEW SYSTEM PROJECTSNEW SYSTEM PROJECTS –PROJECT DESCRIPTIONS –BUSINESS RATIONALE NEW CAPABILITIES REQUIREDNEW CAPABILITIES REQUIRED –HARDWARE –SOFTWARE –DATABASE –TELECOMMUNICATIONS * 11.7

INFORMATION SYSTEMS PLAN 5. MANAGEMENT STRATEGY ACQUISITION PLANSACQUISITION PLANS MILESTONES & TIMINGMILESTONES & TIMING ORGANIZATIONAL REALIGNMENTORGANIZATIONAL REALIGNMENT INTERNAL REORGANIZATIONINTERNAL REORGANIZATION MANAGEMENT CONTROLSMANAGEMENT CONTROLS MAJOR TRAINING INITIATIVESMAJOR TRAINING INITIATIVES PERSONNEL STRATEGYPERSONNEL STRATEGY* 11.8

INFORMATION SYSTEMS PLAN 6. IMPLEMENTATION PLAN: DETAILED IMPLEMENTATION PLANDETAILED IMPLEMENTATION PLAN ANTICIPATED IMPLEMENTATION DIFFICULTIESANTICIPATED IMPLEMENTATION DIFFICULTIES PROGRESS REPORTSPROGRESS REPORTS 7. BUDGET REQUIREMENTS: REQUIREMENTSREQUIREMENTS POTENTIAL SAVINGSPOTENTIAL SAVINGS FINANCINGFINANCING ACQUISITION CYCLEACQUISITION CYCLE* 11.9

ENTERPRISE ANALYSIS (BUSINESS SYSTEMS PLANNING) ORGANIZATION-WIDE INFORMATION NEEDS IN TERMS OF: ORGANIZATIONAL UNITSORGANIZATIONAL UNITS FUNCTIONSFUNCTIONS PROCESSESPROCESSES DATA ELEMENTSDATA ELEMENTS HELPS IDENTIFY KEY ENTITIES & ATTRIBUTES IN ORGANIZATION’S DATA HELPS IDENTIFY KEY ENTITIES & ATTRIBUTES IN ORGANIZATION’S DATA* 11.10

CRITICAL SUCCESS FACTORS SMALL NUMBER, EASILY IDENTIFIABLE OPERATIONAL GOALS SHAPED BY INDUSTRY, MANAGER, ENVIRONMENT BELIEVED TO ASSURE FIRM’S SUCCESS. USED TO DETERMINE ORGANIZATION’S INFORMATION REQUIREMENTS * 11.11

EXAMPLE EXAMPLE GOALS GOALS CRITICAL SUCCESS FACTOR PROFIT CONCERN EARNINGS/SHARE RETURN ON INVESTMENT MARKET SHARE NEW PRODUCT NONPROFIT EXCELLENT HEALTH CARE AUTOMOBILE INDUSTRY STYLING QUALITY DEALER SYSTEM COST CONTROL ENERGY STANDARDS MEETING GOVERNMENT REGULATIONS FUTURE HEALTH NEEDS REGIONAL INTEGRATION OF HOSPITALS EFFICIENT USE OF RESOURCES IMPROVED MONITORING OF REGULATIONS Source: Rockart “Chief Executives Define Their Own Data Needs” (1979) CRITICAL SUCCESS FACTORS (CSFs) & GOALS 11.12

USING CFCs TO DEVELOP SYSTEMS COLLECT MANAGERS’ CFSsCOLLECT MANAGERS’ CFSs AGGREGATE, ANALYZE INDIVIDUALS’ CFCsAGGREGATE, ANALYZE INDIVIDUALS’ CFCs DEVELOP AGREEMENT ON COMPANY CFCsDEVELOP AGREEMENT ON COMPANY CFCs DEFINE COMPANY CFCsDEFINE COMPANY CFCs USE CFCs TO DEVELOP INFORMATION SYSTEM PRIORITIESUSE CFCs TO DEVELOP INFORMATION SYSTEM PRIORITIES DEFINE DSS & DATABASESDEFINE DSS & DATABASES* 11.13

SPECTRUM OF ORGANIZATIONAL CHANGE AUTOMATION: Using Technology to Perform Tasks Efficiently / EffectivelyAUTOMATION: Using Technology to Perform Tasks Efficiently / Effectively RATIONALIZATION OF PROCEDURES: Streamline SOPs; Eliminate BottlenecksRATIONALIZATION OF PROCEDURES: Streamline SOPs; Eliminate Bottlenecks BUSINESS REENGINEERING: Radical Redesign of Processes to Improve Cost, Quality, Service; Maximize Benefits of TechnologyBUSINESS REENGINEERING: Radical Redesign of Processes to Improve Cost, Quality, Service; Maximize Benefits of Technology PARADIGM SHIFTPARADIGM SHIFT* 11.14

PARADIGM SHIFT PARADIGM IS A COMPLETE MENTAL MODEL OF HOW A COMPLEX SYSTEM FUNCTIONSPARADIGM IS A COMPLETE MENTAL MODEL OF HOW A COMPLEX SYSTEM FUNCTIONS A PARADIGM SHIFT INVOLVES RETHINKING THE NATURE OF THE BUSINESS, THE ORGANIZATION; A COMPLETE RECONCEPTION OF HOW THE SYSTEM SHOULD FUNCTIONA PARADIGM SHIFT INVOLVES RETHINKING THE NATURE OF THE BUSINESS, THE ORGANIZATION; A COMPLETE RECONCEPTION OF HOW THE SYSTEM SHOULD FUNCTION* 11.15

RISKS & REWARDS RISK RETURN Low LowHigh High 11.16

INFORMATION TECHNOLOGY: CAPABILITIES & IMPACTS CAPABILITY CAPABILITY ORGANIZATIONAL IMPACT / BENEFIT ORGANIZATIONAL IMPACT / BENEFIT TRANSACTIONAL UNSTRUCTURED PROCESS INTO ROUTINIZED TRANSACTIONS GEOGRAPHICAL ELECTRONIC TRANSFER MAKES PROCESSES INDEPENDENT OF GEOGRAPHY AUTOMATIONAL REPLACES/REDUCES HUMAN LABOR ANALYTICAL USES COMPLEX ANALYTICAL METHODS INFORMATIONAL BRINGS GREAT AMOUNTS OF DETAILED INFORMATION INTO PROCESS SEQUENTIAL ENABLES CHANGES IN SEQUENCE OF TASKS; POSSIBLE TO RUN SIMULTANEOUSLY KNOWLEDGE CAN CAPTURE, DISSEMINATE KNOWLEDGE, EXPERTISE MANAGEMENT TO IMPROVE PROCESS TRACKING ALLOWS DETAILED TRACKING OF TASK STATUS, INPUTS, OUTPUTS DISINTERMEDIATION CAN CONNECT PARTIES DIRECTLY, NO LONGER REQUIRING INTERMEDIARY Source: Davenport & Short “The New Industrial Engineering”(1990) 11.17

BUSINESS REENGINEERING STEPS: 1. Develop Business Vision, Process Objectives 2. Identify Process to be Redesigned 3. Understand, Measure Performance of Existing Processes 4. Identify Opportunities for Applying Information Technology 5. Build PROTOTYPE of new Process * 11.18

SYSTEM DEVELOPMENT PROCESS SYSTEMS ANALYSISSYSTEMS ANALYSIS SYSTEM DESIGNSYSTEM DESIGN PROGRAMMINGPROGRAMMING TESTINGTESTING CONVERSIONCONVERSION PRODUCTION & MAINTENANCEPRODUCTION & MAINTENANCE* 11.19

SYSTEMS ANALYSIS ANALYSIS OF PROBLEM TO BE SOLVED WITH AN INFORMATION SYSTEM ANALYSIS OF PROBLEM TO BE SOLVED WITH AN INFORMATION SYSTEM FEASIBILITY STUDY: CAN PROBLEM BE SOLVED WITHIN CONSTRAINTS? FEASIBILITY STUDY: CAN PROBLEM BE SOLVED WITHIN CONSTRAINTS?* 11.20

FEASIBILITY TECHNICAL: Assess Hardware, Software, Technical ResourcesTECHNICAL: Assess Hardware, Software, Technical Resources ECONOMIC: Will Benefits Outweigh CostsECONOMIC: Will Benefits Outweigh Costs OPERATIONAL: Is Solution Desirable Within Existing Conditions?OPERATIONAL: Is Solution Desirable Within Existing Conditions? INFORMATION REQUIREMENTS: Detailed Statement of New System NeedsINFORMATION REQUIREMENTS: Detailed Statement of New System Needs* 11.21

SYSTEM DESIGN DETAILS HOW SYSTEM WILL MEET NEEDS: DETAILS HOW SYSTEM WILL MEET NEEDS: LOGICAL DESIGN: Components, Data as Needed by ApplicationsLOGICAL DESIGN: Components, Data as Needed by Applications PHYSICAL DESIGN: Physical Location of Components and DataPHYSICAL DESIGN: Physical Location of Components and Data END USERS: Needs Drive Design; Must Have Input, Understand How Solution Meets Their Needs END USERS: Needs Drive Design; Must Have Input, Understand How Solution Meets Their Needs* 11.22

DESIGNER SPECIFICATIONS OUTPUTOUTPUT –MEDIUM; CONTENT; TIMING INPUTINPUT –ORIGINS; FLOW; DATA ENTRY USER INTERFACEUSER INTERFACE –SIMPLICITY; EFFICIENCY; LOGIC –FEEDBACK; ERRORS DATABASE DESIGNDATABASE DESIGN –LOGICAL DATA RELATIONS –VOLUME, SPEED REQUIREMENTS –FILE ORGANIZATION & DESIGN –RECORD SPECIFICATIONS * 11.23

DESIGNER SPECIFICATIONS PROCESSINGPROCESSING –COMPUTATIONS –PROGRAM MODULES –REQUIRED REPORTS –TIMING OF OUTPUTS MANUAL PROCEDURESMANUAL PROCEDURES –WHAT ACTIVITIES –WHO PERFORMS THEM –HOW –WHERE * 11.24

DESIGNER SPECIFICATIONS CONVERSIONCONVERSION –TRANSFER FILES –INITIATE NEW PROCEDURES –SELECT TESTING MODULES –CUT OVER TO NEW SYSTEM TRAININGTRAINING –SELECT TRAINING TECHNIQUES –DEVELOP TRAINING MODULES –IDENTIFY TRAINING FACILITIES ORGANIZATIONAL CHANGESORGANIZATIONAL CHANGES –TASK REDESIGN –JOB DESIGN –PROCESS DESIGN –OFFICE / ORGANIZATION STRUCTURE DESIGN –REPORTING RELATIONSHIPS * 11.25

ROLE OF END USERS USERS DRIVE SYSTEMS EFFORTUSERS DRIVE SYSTEMS EFFORT MUST HAVE SUFFICIENT CONTROL TO ENSURE SYSTEM REFLECTS BUSINESS PRIORITIES, NEEDSMUST HAVE SUFFICIENT CONTROL TO ENSURE SYSTEM REFLECTS BUSINESS PRIORITIES, NEEDS FUNCTIONAL USERS DRIVE SYSTEM NEEDSFUNCTIONAL USERS DRIVE SYSTEM NEEDS 11.26

COMPLETING SYSTEM DEVELOPMENT PROCESS PROGRAMMING: Translating needs to Program CodePROGRAMMING: Translating needs to Program Code TESTING: Does System Produce Desired Results?TESTING: Does System Produce Desired Results?* 11.27

TESTING UNIT TESTING: Tests Each Unit SeparatelyUNIT TESTING: Tests Each Unit Separately SYSTEM TESTING: Do Modules Function as planned?SYSTEM TESTING: Do Modules Function as planned? ACCEPTANCE TESTING: Final CertificationACCEPTANCE TESTING: Final Certification TEST PLAN: Preparations for Tests to be PerformedTEST PLAN: Preparations for Tests to be Performed* 11.28

CONVERSION PARALLEL: Old & New Run Same Problems. Give Same Results?PARALLEL: Old & New Run Same Problems. Give Same Results? DIRECT: Risky Conversion to New SystemDIRECT: Risky Conversion to New System PILOT: Introduce Into One Area. Does it Work? Yes: Introduce into Other AreaPILOT: Introduce Into One Area. Does it Work? Yes: Introduce into Other Area PHASED: Introduce in StagesPHASED: Introduce in Stages CONVERSION PLAN: Schedule for ConversionCONVERSION PLAN: Schedule for Conversion DOCUMENTATION: Description of How System WorksDOCUMENTATION: Description of How System Works* 11.29

PRODUCTION & MAINTENANCE PRODUCTION: Constant Review by Users & Operators. Does it Meet Goals?PRODUCTION: Constant Review by Users & Operators. Does it Meet Goals? MAINTENANCE: Upkeep; Update; Corrections Over TimeMAINTENANCE: Upkeep; Update; Corrections Over Time* 11.30

SYSTEMS DEVELOPMENT CORE ACTIVITY CORE ACTIVITY DESCRIPTION DESCRIPTION SYSTEMS ANALYSIS IDENTIFY PROBLEM(S) SPECIFY PROBLEM ESTABLISH INFORMATION REQUIREMENTS SYSTEMS DESIGN CREATE LOGICAL DESIGN SPECIFICATIONS CREATE PHYSICAL DESIGN SPECIFICATIONS MANAGE TECHNICAL REALIZATION OF SYSTEM PROGRAMMING TRANSLATE DESIGN INTO CODE TESTING UNIT SYSTEMS ACCEPTANCE CONVERSION PLAN PREPARE DOCUMENTATION TRAIN USERS & TECHNICAL STAFF PRODUCTION & MAINTENANCE OPERATE EVALUATE MODIFY 11.31

UNDERSTANDING BUSINESS VALUE OF INFO SYSTEMS CAPITAL BUDGETINGCAPITAL BUDGETING CASH FLOWCASH FLOWLIMITATIONS: Assume all Relevant Alternatives have been Examined; Cost & Benefits can be Expressed as $$Assume all Relevant Alternatives have been Examined; Cost & Benefits can be Expressed as $$ Ignore Intangible BenefitsIgnore Intangible Benefits 11.32

CAPITAL BUDGET: PROCESS OF ANALYZING, SELECTING CAPITAL EXPENDITURESPROCESS OF ANALYZING, SELECTING CAPITAL EXPENDITURES –Payback Method –Return on Investment –Cost-Benefit Ratio –Net Present Value –Profitability Index –Internal Rate of Return * 11.33

CASH FLOWS: INFLOW: Investments; SalesINFLOW: Investments; Sales –Increased Sales: New Products; Higher Quality; Increased Market Share; Lower Costs of Production, Operations OUTFLOW: Total Cost of Goods Sold; Expenses; OverheadOUTFLOW: Total Cost of Goods Sold; Expenses; Overhead WORTH OF INVESTMENT= INFLOW - OUTFLOWWORTH OF INVESTMENT= INFLOW - OUTFLOW* 11.34

COSTS & BENEFITS COSTS: HARDWAREHARDWARE SOFTWARESOFTWARE SERVICESSERVICES PERSONNELPERSONNEL* 11.35

COSTS & BENEFITS TANGIBLE BENEFIT: INCREASED PRODUCTIVITYINCREASED PRODUCTIVITY LOW OPERATING COSTSLOW OPERATING COSTS REDUCED WORK FORCEREDUCED WORK FORCE LOWER COMPUTER EXPENSESLOWER COMPUTER EXPENSES LOWER VENDOR COSTSLOWER VENDOR COSTS LOWER CLERICAL/PROFESSIONAL COSTSLOWER CLERICAL/PROFESSIONAL COSTS REDUCED GROWTH OF EXPENSESREDUCED GROWTH OF EXPENSES REDUCED FACILITY COSTSREDUCED FACILITY COSTS* 11.36

COSTS & BENEFITS INTANGIBLE BENEFIT: IMPROVED ASSET USE; RESOURCE CONTROL; PLANNINGIMPROVED ASSET USE; RESOURCE CONTROL; PLANNING INCREASED FLEXIBILITYINCREASED FLEXIBILITY MORE TIMELY INFORMATIONMORE TIMELY INFORMATION INCREASED LEARNINGINCREASED LEARNING ATTAIN LEGAL REQUIREMENTSATTAIN LEGAL REQUIREMENTS ENHANCED EMPLOYEE GOODWILL, JOB SATISFACTION, DECISION MAKING, OPERATIONSENHANCED EMPLOYEE GOODWILL, JOB SATISFACTION, DECISION MAKING, OPERATIONS HIGHER CLIENT SATISFACTIONHIGHER CLIENT SATISFACTION BETTER CORPORATE IMAGEBETTER CORPORATE IMAGE* 11.37

PORTFOLIO ANALYSIS ANALYSIS OF POTENTIAL APPLICATIONS TO DETERMINE RISKS & BENEFITS DETERMINE DESIRABLE FEATURES, ACCEPTABLE RISKS OF REQUIRED SYSTEMDETERMINE DESIRABLE FEATURES, ACCEPTABLE RISKS OF REQUIRED SYSTEM GENERATE PORTFOLIO OF CHARACTERISTICS, RISKS FOR EACH ALTERNATIVEGENERATE PORTFOLIO OF CHARACTERISTICS, RISKS FOR EACH ALTERNATIVE SCORING MODEL: Score Features of each Alternative, Accumulate ScoreSCORING MODEL: Score Features of each Alternative, Accumulate Score SELECT HIGHEST SCORING ALTERNATIVESELECT HIGHEST SCORING ALTERNATIVE* 11.38

11. BUILDING INFORMATION SYSTEMS: CONTEMPORARY APPROACHES 11.39