Carnegie Mellon University © Robert T. Monroe Management Information Systems Making Better MIS Investment Decisions Management Information Systems Robert Monroe September 6, 2011

Carnegie Mellon University © Robert T. Monroe Management Information Systems Quiz 1.Name the organization and information system you identified for today’s class 2.Identify one specific type of data that this system stores and processes 3.Identify one of the benefits that the organization that created (or bought) this system expected to gain by its investment

Carnegie Mellon University © Robert T. Monroe Management Information Systems Goals Understand why it is useful to evaluate Information System projects as investment alternatives Understand the critical parameters that go into the valuation of an Information System and/or IS project Be able to apply the concept of return on investment to an Information Systems investment, at a very coarse level

Carnegie Mellon University © Robert T. Monroe Management Information Systems Course Wiki: cmuq-mis.wikispaces.com Question: Is the course wiki an information system? Did everybody successfully post their exercise answers? What problems did you encounter in doing so? –Did this go smoothly overall? –What could we have done to make the rollout more effective?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Quick Review: Two Information Systems Models Source: James O’Brien, Management Information Systems, 6 th ed.

Carnegie Mellon University © Robert T. Monroe Management Information Systems Case Study: MOI Traffic Violations Website Identify the site’s: Data inputs Processing activities Information Products (outputs) Resources: –People –Software –Network –Hardware –Data What processes does this site support and/or automate? What Information Technologies are required for this IS to work?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Case Study: Facebook Identify the site’s: Data inputs Processing activities Information Products (outputs) Resources: –People –Software –Network –Hardware –Data What processes does this site support and/or automate? What Information Technologies are required for this IS to work?

Carnegie Mellon University © Robert T. Monroe Management Information Systems IS Systems As Investment Decisions Information Systems are, generally speaking, expensive to build, operate, and maintain Your organization will generally have more ideas and options for how they can spend money, time, energy, etc. on information systems than they have money, time, or energy available to spend So, we need a way to decide how to spend our scarce resources amongst alternative information systems and new IS development ideas.

Carnegie Mellon University © Robert T. Monroe Management Information Systems Two Highly, Highly, Simplified Models Profit = Revenue – Costs

Carnegie Mellon University © Robert T. Monroe Management Information Systems Common Information System Costs and Benefits Common IS Costs (-) Hardware and software purchase, lease, license Staff to manage systems System development and integration Power, HVAC, facilities to run the system (data center) Training Process disruptions Customer and employee dissatisfaction Upgrades, improvements, maintenance … Common IS Benefits (+) Increased organizational efficiency Improved communication between employees and other employees, or between employees and customers Improved service or products for customers, leading to more satisfied customers Increased sales Better decisions …

Carnegie Mellon University © Robert T. Monroe Management Information Systems Resources Required To Build And Operate An IS Obvious, tangible: Money Employees Facility and utility expenses Current market position Time … Less obvious or tangible: Attention Opportunity Strategic alignment Customer goodwill …

Carnegie Mellon University © Robert T. Monroe Management Information Systems Applying These Models: For businesses seeking to maximize profits, an Information Systems investment should generally provide one or both of the following benefits: –Reduce costs –Increase revenues There may be many other reasons to invest in an information system, but most strong justifications lead back to one of these two benefits For organizations that are not only trying to maximize profts, an Information System investment should provide clear benefits that are in alignment with the organization’s mission and goals, and are greater than the costs that investment incurs

Carnegie Mellon University © Robert T. Monroe Management Information Systems Examples: Systems As Investments For the organizations and systems you identified: –Describe the organization - it's name, what it does, where it operates, etc. –Describe what the information system does and how the organization makes use of it –Describe the benefits that the information system provides to the organization –What are the costs that the organization incurred in creating or buying the system? To keep the system running? –Do you think that the organization has received a positive return on their investment in the system? –How do you think they justified making the initial investment? – Do you think they would make that investment again if they could go back in time for a ‘do-over’?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Examples: Systems As Investments Organization: System: Benefits:Costs: Investment justification? Was this a good investment? Why?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Examples: Systems As Investments Organization: System: Benefits:Costs: Investment justification? Was this a good investment? Why?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Examples: Systems As Investments Organization: System: Benefits:Costs: Investment justification? Was this a good investment? Why?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Risk-Adjusted Return One of the key elements that the simple ROI model is missing is adjustment for risk Why is it so important to understand risk in IS projects? –Are all IS projects inherently risky? –If so, why, if not then which ones are inherently risky? –How might we go about considering risk in our models?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Examples: Systems As Investments Organization: System: Benefits:Costs: Investment justification? Was this a good investment? Why?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Examples: Systems As Investments Organization: System: Benefits:Costs: Investment justification? Was this a good investment? Why?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Some Questions How would you tell if an information systems project was a success? How about if it was a failure? How long would you have to wait to make that judgement? What important things have these simple models left out? How might you apply the simple valuation models we used to a non-profit organization / IS? –How about Qatar MOI’s e-Government initiative? –How about Qatar’s National Development Strategy Program?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Key Ideas To Remember: Information Systems are, generally speaking, expensive to build, operate, and maintain Your organization will generally have more ideas and options for how they can spend money, time, energy, etc. on information systems than they have money, time, or energy available to spend So, we need a way to decide how to spend our scarce resources amongst alternative information systems and new IS development ideas.

Carnegie Mellon University © Robert T. Monroe Management Information Systems For Sunday 9/11: Sunday we explore the question “Does IT Matter?” Required preparation for class: –Carefully read the article “IT Doesn’t Matter” and 3-4 of the letters to the editor in response to the article –Come to class prepared to discuss: What is the core argument that the author is making in the article? –Do you agree or disagree with his argument? Why or why not? Is "IT Doesn't Matter" a fair title for the article? –If you could rename it more accurately, what title might you give it? Are there reasons to invest in a business other than "sustainable competitive advantage”? –If so, what might they be? How does Carr define IT? Is his definition a good one? Are the analogies that the author uses to explain why IT doesn't matter appropriate? –Are there fundamental differences between the historic examples he uses and IT that make their comparison misleading? Details on course wiki for Sunday’s class