Copyright 2007 John Wiley & Sons, Inc. Information Systems: Creating Business Value John Wiley & Sons, Inc. Mark Huber, Craig Piercy, and Patrick McKeown

Copyright 2007 John Wiley & Sons, Inc.

Information Systems: Creating Business Value

John Wiley & Sons, Inc.

Mark Huber, Craig Piercy, and Patrick McKeown


Chapter 6:Creating IS Solutions


What We Will Cover:

• The Big IS Development Questions

• The Stages and Activities of System Development

• The People Who Develop IS

• IS Methodology

• Managing the IS Project

• IS Tools for IS Development


Student ROI (Return on Investment)

Your investment of time and effort in this course will result in your being able to answer these questions:

1. What major decisions do organizations make in obtaining an IS?

2. What important activities must an organization consider within each of the seven stages of an IS life cycle?

3. What considerations are important when creating an IS project team?

4. What methods do organizations use to ensure that they obtain the best IS to help meet their goals?

5. How do organizations provide effective and efficient management of IS projects?

6. What IT tools do many organizations rely on to obtain an IS that best meets its objectives?

Feasibility

OrganizationalFeasibility

Is it a good fit with the organization?

Legal/EthicalFeasibility

Should we do this? Is it Legal?

Financial/EconomicFeasibility

Can we afford it, anddo benefits outweigh

costs?

TechnicalFeasibility

Does the capabilityexist in our company

to build it?


The Big IS Development Questions• In order to support a complex organization,

businesses need complex information systems that must be obtained in some way.

• Questions that must be asked:– ?– ?– ?– ?


The Big Questions


IS Project Feasible?• If it is decided that an IS is needed, then the next step is

a __________ _______ which is a detailed investigation and analysis of a proposed project.

• Is the project __________ _______ , that is, the technology is available to solve the IS problem and the company is technically capable of acquiring and using the technology.

• IS the project __________ _______ , that is, is the company is able to pay for the project, and the project represents a good use of financial resources.


Determining Financial Feasibility

• Organizations use financial measures to determine financial feasibility. Examples of these include– return on investment (ROI) -

– net present value (NPV) -

– internal rate of return (IRR) -

– payback period -

• Some costs and benefits are ________ and some are ________.


Using Spreadsheets to Determine Financial Feasibility

Measuring Benefits and Costs

• Infrastructure versus specific applications – IT infrastructure provides the foundations for IT applications

• data center• Networks• data warehouse• knowledge base

– Long-term, shared investments, spread across– IT applications are specific systems and programs for specific tasks

• Payroll• inventory control• order taking

– Some departments, not others• Evaluating IT investments

– Value of information in decision-making– Traditional Cost-Benefit analysis (tangibles)– Scoring Matrix or Scorecard (intangibles)

Evaluating the value of information• Difference between the net benefits (benefits

adjusted for costs) of decisions made using information and the net benefits of decisions made without information

• Assumption: Systems that provide relevant information to support decision making will result in better decisions, and therefore they will contribute toward ROI. However, this may not always be the case.

How to justify IT economically

• Financial Cost-benefit analyses– Net Present Value (NPV)

• convert future values of benefits to their present-value eqivalent• Discounted at the organization’s cost of funds• Compare the present value of the figure benefits to the cost required

to achieve these benefits

– Return on Investment (ROI)• measures the effectiveness of management in generating profits

with its available assets • Calculated by dividing net income attributable to a project by the

average assets invested in the project

• How do you decide the costs and benefits, particularly of options not taken?

“Costing” IT Investments - evaluating

• Placing a dollar value on the cost of IT investments is not simple – consider fixed costs.

• Life Cycle Cost; costs for keeping it running, dealing with bugs, and for improving and changing the system

• There are multiple kinds of values (tangible and intangible)– Improved efficiency– Improved customer relations– The return of a capital investment measured in dollars or

percentage– etc.

• Probability of obtaining a return depends on the probability of implementation success

Intangible benefits – evaluating• Intangible benefits

– increased quality– faster product development– greater design flexibility– better customer service– improved working conditions for employees. – Difficult to quantify them with a monetary value– Complex but potentially substantial

• Evaluating Intangible Benefits– Make rough estimates of monetary values for all intangible

benefits, and then conduct a NVP or similar financial analysis.

– Scoring Matrix or Scorecard


Make or Buy/Lease

• Organizations usually choose one of three primary options for obtaining an IS:

1. Acquisition2. Lease3. Build

• Building an IS from scratch often ensures the best match of IS with an organization’s requirements and is the best option for obtaining competitive advantage.

• Building an IS can also be a long and costly process.

• When time and cost are most important criteria, organizations then pursue acquisition or leasing.


Acquisition, Leasing, or Building

Development Choice

Advantages Disadvantages

Acquisition

Leasing

Building


In-House or OutsourceIf an organization chooses to build a new system, the next question is to whether to use its own staff (in-house development) or hire another company to do it (outsourcing).

IS Development source

Advantages Disadvantages

In-house Development

Outsourcing


Stages and Activities of System DevelopmentInformation systems go through a life cycle composed of 7 seven phases:

1. Pre-inception2. Inception3. Elaboration4. Construction5. Transition6. Production7. Retirement


Life Cycle of an IS


Seven Phases of IS Development

1. Pre-Inception:

2. Inception:

3. Elaboration:

4. Construction:


5. Transition:

6. Production:

7. Retirement:

Seven Phases of IS Development (cont.)


IS Development Disciplines

• Development disciplines - the group of activities that are focused on ____________________________. – Examples include business modeling, requirements gathering,

analysis and design, implementation, testing and deployment.

• Support disciplines - support the system over the __________________________________________.– Examples include configuration and change management,

project management, environmental scanning, and operations and support.

• Enterprise disciplines - most active prior to the ______________________________. – Examples include readiness to use IS to improve their

processes, create a promising environment for an IS project.


Systems Analysis and Design (SAD)• The process of completing an IS project

is known as systems analysis and design (SAD).

• Any SAD project involves four essential ingredients:

1. 2. 3. 4.


The Pillars of IS Development


People Who Develop IS

• The size of an IS development team varies with specific characteristics of the project.

• Most IS development teams possess the following skills:– Project strategy– Project management– Account management– Architecture and design– Programming– Specialists– Client interface


Project Team Skill Requirements• Project strategy:

• Project management:

• Account management:

• Architecture and design:

• Programming:

• Specialists:

• Client interface:


IS Project Team Technical Roles


Stakeholder Analysis• Stakeholder attitudes toward the project can dramatically

impact the project’s eventual success or failure.• A stakeholder analysis should begin as part of the

feasibility study and should be continued during the course of the project.

• A stakeholder analysis begins with a list of stakeholders, including what each has at stake, as well as the degree of impact each stakeholder can have on the project.

• The analysis should also to identify each stakeholder’s attitude toward the project and any risks.

• A project manager should assign team members to different stakeholders with an anticipated strategy for dealing with each one.


Example Stakeholder Analysis


IS Methodology• A methodology provides a framework for both the

management and technical processes of an IS project• A methodology, sometimes known as a development

life cycle, provides a project team with structure to ensure that everyone is working towards the same project goals.

• The methodology will define most of the development activities that are part of the plan developed by the project manager.

• Initially, systems developers used an ad hoc approach called the build-and-fix model in which the system was built based on customer interview and then tested. It often did not meet customer needs.


Importance of Methodology to IS DevelopmentAdvantages Disadvantages•Development fundamentals—methodologies help team use best practices.

•Avoiding rework—process should avoid repeating tasks in the event of changing requirements.

•Risk management—process helps to identify and manage risks.

•Assures quality—helps detects errors earlier, when they are easier to correct.

•Customer orientation—focuses on customers’ needs and desires

•Improved planning—makes it easy to identify and organize the project activities

•Targeting resources—helps target resources toward activities that need them.

•Bureaucratic—Some methodologies can be overly rigid and bureaucratic


Traditional IS Methodology: the Waterfall Model

• The first life cycle model to gain acceptance was the Waterfall Model.

• Phases –

• Problems –

• Development activities -


Traditional Waterfall Methodology


Evolutionary Development Life Cycle


Prototyping

• One approach to the evolutionary life cycle is to use prototyping.

• What is prototyping?

• The prototyping process helps team members and users better understand requirements.

• What problems can be associated with an evolutionary life cycle approach?

Two General Analysis Strategies• Asking Strategies

– Questionnaires– Interviews– Focus groups

• Deriving Strategies– Form analysis– Observation

A model of the prototyping process

A rapid prototyping development process versus SDLC


IS Modeling

• You can think of a model as a simplified representation of something real – Examples of models in common use?

• Also, a model can be a set of mathematical equations, a computer simulation, a graph or chart, or any of many other types.

• For IS development, a model usually includes one or more diagrams that developers use to examine, evaluate, and adjust in order to understand the system requirements and performance.

Logical Analysis & Design

• Data Analysis & Design– Entities & Relationships– Tables– E-R diagramming (we’ve already done this)

• Process Analysis & Design– Procedures– Programs– Data Flow Diagrams (DFDs)

• Interface Design– Input Forms– Output Reports– Screens– We’ve done this already in Access


ERDs and Logical Data Models

Two types of models are commonly used to designing the organization of relational database:

• The Entity-Relationship Diagram (ERD) …

• The Logical Data Model …


Partial (a) ERD and (b) Data Model for an E-voting System


Data Flow Diagrams

• A Data Flow Diagram is traditional IS model that depicts how data move or flow through a system.

• It includes–

–

–

–


Data Flow Diagram

Logical Analysis & Design

• Data Analysis & Design– Entities & Relationships– Tables– E-R diagramming (we’ve already done this)

• Process Analysis & Design– Procedures– Programs– Data Flow Diagrams (DFDs)

• Interface Design– Input Forms– Output Reports– Screens– We’ve done this already in Access

CUSTOMER

Food Ordering System

0

Management Reports

KITCHEN

RESTAURANTMANAGER

Food OrderCustomer Order

Receipt

Process Design - Context DFD

UpdateGoods Sold

File

2.01.0

UpdateInventory

File

3.0

ProduceManagement

Reports

4.0

Receive Customer

Food Order

Food Ordering System

0

Decomposition Diagram

CUSTOMER

ReceiveCustomer

Food Order

1.0

Management Reports

KITCHEN

RESTAURANTMANAGER

Food OrderCustomer Order

Receipt

UpdateInventory

File

UpdateGoods Sold

File

2.03.0

INVENTORYFILE

D2GOODS SOLDFILE

D1

GoodsSold Data

Inventory Data

Formatted Goods Sold Data

Formatted Inventory Data

Daily InventoryDepletion Amounts

Daily GoodsSold Amounts

ProduceManagement

Reports

4.0

Level 0 Data Flow Diagram


Managing the IS Project

• Project Management - “the application of knowledge skills, tools, and techniques to project activities to meet project requirements.”1

• For IS development, a project manager oversees three main project elements:

1.

2.

3.

1A Guide to the Project Management Body of Knowledge (PMBOK® Guide) 2000 Edition, Chapter 1, p. 4, (2000)


Elements of Project Management


Project Management Tasks

Four core functions lead to specific project objectives:

1. Project scope management:

2. Time management:

3. Cost management:

4. Quality management:


A Project Management Framework


Project Integration


Project Time ManagementControlling the project schedule is second only to budgeting in importance. The main activities of project time management include:

– Activity definition:

– Activity sequencing:

– Activity duration estimating:

– Schedule development:

– Schedule control:


Gantt Chart


Risk ManagementThe job of risk management is to recognize, address, and eliminate sources of risk before they become a threat to the successful completion of the project.

Common Areas of Project Risk

•Feature Creep •Requirements gold-plating

•Shortchanged quality •Overly optimistic schedule

•Inadequate design •Silver-bullet syndrome

•Research-oriented development

•Weak personnel

•Friction with customers


Risk Management Matrix


Responses to Risk

• Risk Transfer:

• Risk Deferral:

• Risk Reduction:

• Risk Acceptance:

• Risk Avoidance:


Project Management SoftwareProject management (PM) software is designed to support and automate the tasks of project management and to help project managers make decisions.

•Low level packages: for entry-level users, include tools for basic scheduling, project control, reporting, filtering and sorting.Examples –

•Mid level packages: adds resource leveling, resource allocation, cost control and flexible charting. For large projects with up to about 2,000 tasks. Examples –

•High level packages: adds advanced functions including scheduling by user-defined rules, programming languages, resource management for multiple projects, and risk management. Examples –


PERT Chart


Integrated Development Environments (IDEs)Combines several important programming tasks into the same

package


Modeling Tools and Code Generators


Authoring Software Categories Category Description Representative

Software

Database (DBMS)

Oracle Database; InterSystems Caché, MySql, MS Access

Web Development

Macromedia Dreamweaver; IBM Websphere

Animation/video Macromedia Flash and Shockwave

Graphics Adobe Photoshop

Audio Content Adobe Audition


Installation Conversion Methods

Old SystemOld System New SystemNew System

Old SystemOld System

New SystemNew System

Old SystemOld System

Old SystemOld System New System

New System

Parallel

Pilot

Phased

Plunge


CASE Tools• What is Computer aided software

engineering (CASE)?

• CASE tools are integrated into a complete package known as a CASE environment.

• A CASE environment can provide a shared database, messaging system, and support for consistent development style.


CaseWise CASE Tool with Repository

Documents

Copyright 2007 John Wiley & Sons, Inc. Information Systems: Creating Business Value John Wiley & Sons, Inc. Mark Huber, Craig Piercy, and Patrick McKeown