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

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Management Information Systems - Class Note # 5 (Chap-13)

Prof. Yuan-Shyi Peter Chiu Feb. 2012

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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 inInformation System Success and Failure

13.3 Managing Implementation

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13.1 Understanding the Business Value of Information Systems

CHAP. 13

■ Tangible BenefitsTangible Benefits Benefits that can be quantified and assigned a monetary value; they include lower operational costs and increased cash flows.

■ Intangible BenefitsIntangible Benefits Benefits that are not easily quantified; they include more efficient customer service or enhanced decision making.

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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

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■ 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◇◇

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13.1

■ The Payback MethodThe Payback Method

• Measure of Measure of timetime required to pay back the initial required to pay back the initial investment on a project investment on a project (p.420)(p.420)

■ Accounting Rate of Return on Investment Accounting Rate of Return on Investment (ROI)(ROI)

• Calculation of the rate of return on an investmCalculation of the rate of return on an investment by its net benefit. Approximates the accouent by its net benefit. Approximates the accounting nting income earnedincome earned by the investment by the investment (p.42(p.421)1)

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13.1

■ Present valuePresent value

• The value, The value, in current dollarsin current dollars, of a payment or , of a payment or stream of payments to be received in the futustream of payments to be received in the future.re.

■ Net present valueNet present value

• Amount of money an investment is worth, takAmount of money an investment is worth, taking into account its cost, earnings, and ing into account its cost, earnings, and the tithe time value of moneyme value of money..

■ Cost-benefit ratioCost-benefit ratio• Calculates returns from capital expenditure bCalculates returns from capital expenditure b

y dividing total benefits by total costs.y dividing total benefits by total costs.

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13.1

■ Profitability indexProfitability index

• Compares profitability of alternativeCompares profitability of alternative inv investments by dividing the present value of total estments by dividing the present value of total cash inflow by initial cost.cash inflow by initial cost.

■ Internal Rate of Return (IRR)Internal Rate of Return (IRR)

•Rate of return (or profit) an investment is expeRate of return (or profit) an investment is expected to earn.cted to earn.

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9Fig 13-3: A System portfolio.

13.1 Strategic considerations

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13.2 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

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Systems FailureAn 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 beconsidered to be operating failures

13.2

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13.2

Fig. 13-4: Information System Problem Areas

■ Information System Problem Areas

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Data

Data in the systems have a high level ofinaccuracy or inconsistency

may be ambiguous

may be inaccessible

13.2 ■ Information System Problem Areas

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Information Attributes or Qualities

FreedomFrom Bias

FreedomFrom Bias

Appropriate -ness

Appropriate -ness

ClarityClarity

TimelyTimely

PrecisionPrecision

AccuracyAccuracyQuantifiableQuantifiable

Comprehen-sive

Comprehen-sive

VerifiableVerifiable

AccessibleAccessible

INFORMATIONINFORMATION


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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


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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 impossibleto digest and use

It may represent the wrong pieces of data


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Cost

run way over budget

too costly to implement

excessive expenditures cannot be justified by the business value of the informationthey provide


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Operations

The system does not run well

Information is not provided in a timelyand efficient manner, because the c

omputer operations break down

Delayed & missed schedules for delivery of information

An on-line system may be operationallyinadequate because the response time is too long


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Measures of information system success

Measures of informationSystem success

Measures of informationSystem success

HighLevels of

System use

HighLevels of

System use

Financial payoff

Financial payoff

AchievedSystem

objectives

AchievedSystem

objectives

Favorable Attitudes

About IS function

Favorable Attitudes

About IS function

UserSatisfactionWith system

UserSatisfactionWith system

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High levels of system use

Measured by polling users

Employing questionnaires

Monitoring system parameters such as thevolume of on-line transactions

13.2 ■ Measures of information system success

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User satisfaction with system measured by questionnaires or interviews:measured by questionnaires or interviews:

users’ opinions on the accuracy, timeliness,quality of service, and the schedule of operations

managers’ attitudes on how well theirinformation needs were satisfied

users’ opinions about how well the system enhanced their job performance


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Favorable attitudes about information system function

Favorable attitudes of users about information systems and theinformation systems staff


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Achieved system objectives

the extent to which the system meets its the extent to which the system meets its specified goalsspecified goals

as reflected by improved organizational performance and decision making

resulting from use of the system


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Financial Payoff

either

by reducing costs or by increasing sales or profits

be of limited value, since benefits of an information system may not betotally quantifiable (intangible benefits

exists)


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13.2 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

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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 Failure13.2

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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


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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.


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Management of implementation process

Without proper management :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 theestimated level

Failure to obtain anticipated benefits


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13.3 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 :Must :

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#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 implementationsuccess or failure?

#5. What are the main considerations in determining a project’s level of complexity and risk?

HOMEWORK Chap.13HOMEWORK Chap.13

~ THE END ~~ THE END ~

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THE ENDTHE END

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~ 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 ?

Documents

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