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Redesigning the Organization with Information Systems
Panagiotis Kanellis, Επιστημονικός Συνεργάτης Τμήματος Πληροφορικής ΕΚΠΑ
Business Consulting, 377 Syngrou Ave., 175 64 Athens, Greece
Email: [email protected]
Δρακούλης Μαρτάκος, Επίκουρος Καθηγητής Τμήματος Πληροφορικής ΕΚΠΑ
Κτίρια Πληροφορικής, Πανεπιστιμιόπολη, 157 84 Αθήνα
Email: martakoσ@di.uoa.gr
Talk about...
Understand why building new systems is a process of organizational change
Explain how the organization can develop information systems that fit its business plan
Identify the core activities in the systems development process
Describe various models for determining the business value of information systems
Systems as Planned Organizational Change
An IS is a sociotechnical entity Implies changes in jobs, skills, management
and organization IS as planned organizational change Systems can be technical successes but
organizational failures
Linking IS to the Business Plan
Information Systems Plan - A road map indicating the direction of systems development, the rationale, the current situation, the management strategy, the implementation plan, and the budget
Contents of an IS plan Purpose of the plan Strategic Business Plan (current situation, changing environment) Current systems (difficulties meeting business requirements) New developments (Business rational, new capabilities required) Management Strategy (Acquisition plans, internal reorganization) Implementation Plan Budget requirements
Establishing Organizational Information Requirements
To develop an effective IS plan, the organization
must have a clear understanding of both its long-
and short-term information requirements
Two principal methodologies for establishing
those: Enterprise Analysis (Business Systems Planning)
Strategic Analysis (Critical Success Factors)
Enterprise Analysis
An analysis of organization-wide information requirements by looking at the entire organization in terms of organizational units, functions, processes, and data elements; helps identify the key entities and attributes in the organization’s data
Developed by IBM in the 1960s Method: Take a large sample of managers and ask
them how they use information, where they get it, what their environment is like, what their objectives are, how they make decisions and what their data needs are
Enterprise Analysis
Gives a comprehensive view of the organization
Produces an enormous amount of information, expensive to collect and difficult to analyze
Bias towards top management and data processing
Focus not on critical objectives but rather on what existing information is used
The result is a tendency to automate whatever exists
Critical Success Factors
A small number of easily identifiable operational goals shaped by the industry, the firm, the manager, and the broader environment that are believed to ensure the success of an organization.
Example Goals CSFProfit Concern Earnings/share
Return on InvestmentMarket ShareNew Product
Automotive IndustryStylingQuality dealer systemCost controlEnergy Standards
Non-profit Excellent health careMeeting government regulationsFuture health needs
Regional integration with otherhospitalsEfficient use of resourcesImproved monitoring ofregulations
Using CSFs to Develop IS
Manager ACSFs
Manager BCSFs
Manager C CSFs
Manager D CSFs
Aggregate & analyze
individual CSFs
Develop agreement on
company CSFs
Define company
CSFs
Define DSS and databases
Use CSFs to develop IS
priorities
Critical Success Factors
Produces a smaller set of data to analyze Can be tailored to the structure of each industry Takes into account the changing environment Data collection and analysis are ‘art forms’ Confusion between individual and organizational
CSFs Biased towards top managers Assumes that successful TPS already exist Like the Enterprise Analysis method
provides a static picture
Systems Development and Organizational Change
Global networks (International division of labor; global reach of firms)
Enterprise networks (collaborative work) Distributed Computing (empowerment) Portable Computing (virtual organizations) Graphical User Interfaces (everybody has
access to information)
The Spectrum of Organizational Change (1)
Automation: using the computer to speed up the performance of existing tasks most common form of IT-enabled change involves assisting employees perform their
tasks more efficiently and effectively akin to putting a larger motor in an existing
vehicle
The Spectrum of Organizational Change (2)
Rationalization of procedures: the streamlining of existing operating procedures, eliminating obvious bottlenecks so that automation makes operating procedures more efficient follows quickly from early automation Toshiba had to rationalize its procedures down to the
level of installation manuals and software instruction and had to create standard names and formats for the data items in its global data warehouse
Think: without a large amount of business process rationalization, computer technology would have been useless at Toshiba (what ERPs do)
The Spectrum of Organizational Change (3)
Business Process Re-engineering (BPR): The radical redesign of business processes, combining steps to cut waste and eliminating repetitive, paper-intensive tasks to improve cost, quality, and service and to maximize the benefits of information technology Involves radical rethinking Can change the way an organization conducts its business IT allowed Baxter to be a manager of its customer’s
supplies Strikes fear, its expensive, its very risky and its extremely
difficult to carry out and manage
Business Process Reengineering
Develop the business vision and process objective
Identify the processes to be redesigned (core and highest payback)
Understand and measure the performance of existing processes
Identify the opportunities for applying information technology
Build a prototype of the new process
The Spectrum of Organizational Change (4)
Paradigm Shift: Radical reconceptualization of the nature of the business and the nature of the organization akin to rethinking not only the automobile, but
transportation itself e-business is a paradigm shift Deciding which business process to get right is half the
challenge 70% of time programmatic reengineering efforts fail Why then change? Because the rewards are high!
Information Systems Development
Systems Development: the activities that go into producing an information systems solution to an organizational problem or opportunity
Structured kind of problem with distinct activities
Systems Analysis (1)
Systems Analysis: the analysis of a problem that the organization will try to solve with an IS thorough understanding of the existing
organization and system identify the primary owners and users of data
in the organization identification of the details of the problems of
existing systems
Systems Analysis (2)
Feasibility Study: the way to determine whether the solution is achievable, given the organization’s resources and constraints Technical feasibility Economic feasibility Operational feasibility
Information RequirementsInformation Requirements
Systems Design
Systems Design: details how a system will meet the information requirements as determined by the systems analysis Output, Input, User Interface, Database
Design, Processing, Manual Procedures, Controls, Security, Documentation, Conversion, Training, Organizational Changes
Completing the Design Process
Programming Testing
Unit testing System testing Acceptance testing
ConversionParallel strategyDirect cut-over strategyPilot study strategyPhased approach strategy
MaintenanceMaintenance
The Business Value of Information Systems
Costs and Benefits of Information Systems
Costs Benefits
Hardware Tangible (Cost Savings)
Telecommunications Increased productivity, low operational costs,reduced work force, lower outside vendor costs,lower clerical and professional costs, reduced rateof growth in expenses
Software Intangible
Services Improved asset utilization, improved resourcecontrol, improved organizational planning, moretimely information, more information, increasedorganizational learning, enhanced employeegoodwill, increased job satisfaction, improveddecision making, improved operations, higherclient satisfactions, better corporate image
Personnel
Capital Budgeting Models
Information Systems are considered long-term capital investment projects
Capital budgeting: The process of analyzing and selecting various proposals for capital expenditures. The difference between cash outflows and cash inflows is used for calculating the financial worth of an investment.
The high rate of technological obsolescence in budgeting for systems means simply that the payback period must be shorter, and the rates of return higher than typical capital projects with much longer useful lives
Capital Budgeting Models (2)
The Payback Method- A measure of the time required to pay back the initial investment of a project
Accounting Rate of Return on Investment (ROI) - Calculation of the rate of return from an investment by adjusting cash inflows produced by the investment for depreciation
Net Present Value (NPV) - The amount of money an investment is worth, taking into account its cost, earnings, and the time value of money
Cost-Benefit Ratio - A method for calculating the returns from a capital expenditure by dividing the total benefits by total costs
Non-financial and Strategic Considerations
CautiouslyExamine
Identify and Develop
Avoid Routine Projects
Project Risk
High Low
High
Low
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