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R. Ching, Ph.D. • MIS • California State University, Sacramento 1
Week 8Week 8Monday, October 17Monday, October 17
• OutsourcingOutsourcing• Managing OperationsManaging Operations• Systems DevelopmentSystems Development
• IT Project ManagementIT Project Management
R. Ching, Ph.D. • MIS • California State University, Sacramento 2
Drivers of OutsourcingDrivers of Outsourcing
• Breakdown in IT performanceBreakdown in IT performance– Need to retool lacking technologyNeed to retool lacking technology
• Intense supplier pressuresIntense supplier pressures– Sales of surplus supplier capacitySales of surplus supplier capacity
• Simplified general management agendaSimplified general management agenda– Outsource non-core competence operationsOutsource non-core competence operations
• Financial factorsFinancial factors– Reduce sporadic capital investments in ITReduce sporadic capital investments in IT– Downsizing IT operating costsDownsizing IT operating costs– Greater organizational awareness of IT’s costsGreater organizational awareness of IT’s costs– More appealing for takeoversMore appealing for takeovers
R. Ching, Ph.D. • MIS • California State University, Sacramento 3
• Corporate cultureCorporate culture
– Resistance to change within the organizationResistance to change within the organization
– Labor unionsLabor unions
• Eliminating an internal irritantEliminating an internal irritant
– Conflicts between users and IT staffConflicts between users and IT staff
• Other factorsOther factors
– Quick access to current technology and skillsQuick access to current technology and skills
– Need to quickly response to changes in the marketNeed to quickly response to changes in the market
Drivers of OutsourcingDrivers of Outsourcing
R. Ching, Ph.D. • MIS • California State University, Sacramento 4
Framework for OutsourcingFramework for Outsourcing
1.1. Position on the strategic gridPosition on the strategic grid
HighHigh
LowLow
HighHighLowLow
Impact of Impact of Existing IT Existing IT
applicationsapplications
Impact of Future IT Impact of Future IT applicationsapplications
FactoryFactoryOperational ITOperational IT
SupportSupportBasic elementsBasic elements
TurnaroundTurnaroundGradual adoptionGradual adoption
StrategicStrategicStrategic IT plan, Strategic IT plan,
initiativesinitiatives
YesYes
YesYes
DependsDepends
DependsDepends
Product differentiationProduct differentiationProduct differentiationProduct differentiation
R. Ching, Ph.D. • MIS • California State University, Sacramento 5
Strategic Grid: OutsourcingStrategic Grid: Outsourcing
HighHigh
LowLowHighHighLowLow
Impact of Impact of Existing IT Existing IT
applicationsapplications
Impact of Future IT Impact of Future IT applicationsapplications
FactoryFactoryOperational ITOperational IT
SupportSupportBasic elementsBasic elements
TurnaroundTurnaroundGradual adoptionGradual adoption
StrategicStrategicStrategic IT plan, initiativesStrategic IT plan, initiatives
• Economies of scaleEconomies of scale• Higher-quality service and Higher-quality service and
backupbackup• Management focus Management focus
facilitatedfacilitated
• Correct internal problemCorrect internal problem• Tap cash sourceTap cash source• Cost flexibilityCost flexibility• DivestitureDivestiture
• Access to IT professionalsAccess to IT professionals• Focus on core Focus on core
competenciescompetencies• Access to current ITAccess to current IT• Reduce risk in IT Reduce risk in IT
investmentsinvestments
• Internal IT shortfallsInternal IT shortfalls• Internal IT development Internal IT development
skill shortfallsskill shortfalls
R. Ching, Ph.D. • MIS • California State University, Sacramento 6
Framework for OutsourcingFramework for Outsourcing
1.1. Position on strategic grid (Position on strategic grid (cont.cont.))
– Outsource operational activitiesOutsource operational activities
• More operationally dependent organizationsMore operationally dependent organizations
– Need for greater analysis when large IT budgets involvedNeed for greater analysis when large IT budgets involved
2.2. Development portfolioDevelopment portfolio
– Maintenance vs. development projectsMaintenance vs. development projects
• High structured vs. low structured development workHigh structured vs. low structured development work
R. Ching, Ph.D. • MIS • California State University, Sacramento 7
Framework for OutsourcingFramework for Outsourcing
3.3. Operational learningOperational learning
– Organizational assimilation of technologyOrganizational assimilation of technology
4.4. Organization’s IT architecture and infrastructureOrganization’s IT architecture and infrastructure
– Currency of architectureCurrency of architecture
5.5. Current technology in the organizationCurrent technology in the organization
– Segregated operations more easily outsourcedSegregated operations more easily outsourced
R. Ching, Ph.D. • MIS • California State University, Sacramento 8
Structuring the Alliance between Structuring the Alliance between Outsourcer and “Outsourcee” Outsourcer and “Outsourcee” (Customer)(Customer)
• FactorsFactors
– Contract flexibilityContract flexibility
– Standards and controlStandards and control
– Areas to outsourceAreas to outsource
– Cost savingsCost savings
– Supplier stability and qualitySupplier stability and quality
– Management fitManagement fit
– Conversion problemsConversion problems
AllianceAlliance
R. Ching, Ph.D. • MIS • California State University, Sacramento 9
Structuring the Alliance between Structuring the Alliance between Outsourcer and “Outsourcee” Outsourcer and “Outsourcee” (Customer)(Customer)
• Contract flexibilityContract flexibility
– Accommodating changes in the environmentAccommodating changes in the environment
• Information needsInformation needs
• Competitive needsCompetitive needs
• Advances in ITAdvances in IT
• Standards and controlStandards and control
– Risk (i.e., lost of control, disruptions) in operationsRisk (i.e., lost of control, disruptions) in operations
– Risk in introducing innovations to the organizationRisk in introducing innovations to the organization
– Risk in revealing internal Risk in revealing internal secretssecrets
R. Ching, Ph.D. • MIS • California State University, Sacramento 10
Structuring the Alliance between Structuring the Alliance between Outsourcer and “Outsourcee” Outsourcer and “Outsourcee” (Customer)(Customer)
• Areas to outsourceAreas to outsource
– DetermineDetermine
• Are operations segregated or tightly embedded?Are operations segregated or tightly embedded?
• Can specialized competencies be acquired in the long Can specialized competencies be acquired in the long run?run?
• Are operations core to the organization?Are operations core to the organization?
• Cost savingsCost savings
– ObjectiveObjective evaluation of costs and savings evaluation of costs and savings
R. Ching, Ph.D. • MIS • California State University, Sacramento 11
Structuring the Alliance between Structuring the Alliance between Outsourcer and “Outsourcee” Outsourcer and “Outsourcee” (Customer)(Customer)
• Supplier Stability and QualitySupplier Stability and Quality
– Financial stabilityFinancial stability
• Difficult to insourceDifficult to insource
• Difficult to change outsourcersDifficult to change outsourcers
– Incompatibility between the organization and outsourcerIncompatibility between the organization and outsourcer
• TechnologyTechnology
• Organization cultureOrganization culture
• Between technology and organization’s strategyBetween technology and organization’s strategy
R. Ching, Ph.D. • MIS • California State University, Sacramento 12
Structuring the Alliance between Structuring the Alliance between Outsourcer and “Outsourcee” Outsourcer and “Outsourcee” (Customer)(Customer)
• Management fitManagement fit
– Compatibility between management styles and culturesCompatibility between management styles and cultures
• Conversion problemsConversion problems
– Mergers and acquisitionsMergers and acquisitions
• IncompatibilitiesIncompatibilities
R. Ching, Ph.D. • MIS • California State University, Sacramento 13
Managing the AllianceManaging the Alliance
• Critical areas:Critical areas:
– CIO FunctionCIO Function
• Management (balance between organization and Management (balance between organization and outsourcer)outsourcer)
• Planning (vision)Planning (vision)
• Awareness of emerging technologiesAwareness of emerging technologies
• Continuous adaptation (evolution)Continuous adaptation (evolution)
– Performance measurementsPerformance measurements
• Essential standards, measurements and interpretationsEssential standards, measurements and interpretations
R. Ching, Ph.D. • MIS • California State University, Sacramento 14
Managing the AllianceManaging the Alliance
– Mix and coordination of TasksMix and coordination of Tasks
• Development versus maintenance (portfolios)Development versus maintenance (portfolios)
– Associated risks inherent to eachAssociated risks inherent to each
– Customer-outsourcer interfaceCustomer-outsourcer interface
• Delegation of authority, not responsibilityDelegation of authority, not responsibility
R. Ching, Ph.D. • MIS • California State University, Sacramento 15
Information SecurityInformation SecurityProtecting the Information ResourceProtecting the Information Resource
• Five security pillarsFive security pillars– Authentication – verifying the authenticity of the userAuthentication – verifying the authenticity of the user
• Something you know, have or are (i.e., physical attribute)Something you know, have or are (i.e., physical attribute)– Identification – identifying users to grant them appropriate Identification – identifying users to grant them appropriate
accessaccess– Privacy – protecting information from Privacy – protecting information from
being seenbeing seen– Integrity – keeping information in its Integrity – keeping information in its
original formoriginal form– Nonrepudiation – preventing parties from denying actions Nonrepudiation – preventing parties from denying actions
they have takenthey have taken
EncryptionEncryption
R. Ching, Ph.D. • MIS • California State University, Sacramento 16
Management and Technical Management and Technical CountermeasuresCountermeasures
Management countermeasuresManagement countermeasures
• Evaluate return on their security expendituresEvaluate return on their security expenditures
• Conduct security auditsConduct security audits
• Do not outsource cybersecurityDo not outsource cybersecurity
• Security awareness trainingSecurity awareness training
Technical countermeasuresTechnical countermeasures
• FirewallsFirewalls
• EncryptionEncryption
• Virtual private networks (VPN)Virtual private networks (VPN)
ExpenseExpenseLikelihoodLikelihood
Balancing between expense Balancing between expense and likelihood of a threatand likelihood of a threat
R. Ching, Ph.D. • MIS • California State University, Sacramento 17
Planning for Business ContinuityPlanning for Business Continuity
• Recognize threatsRecognize threats
• Contingency plans if a threat is realizedContingency plans if a threat is realized
– Alternate workspaces for people to resume workAlternate workspaces for people to resume work
– Backup IT sitesBackup IT sites
– Up-to-date evacuation plansUp-to-date evacuation plans
– Backed up computers and serversBacked up computers and servers
– Helping people cope with disasterHelping people cope with disaster
R. Ching, Ph.D. • MIS • California State University, Sacramento 18
Internal and External ResourcesInternal and External Resources
InternalInternal
• Multiple data centersMultiple data centers
• Distributed processingDistributed processing
• Backup communications facilitiesBackup communications facilities
• LANsLANs
ExternalExternal
• Integrated disaster recovery servicesIntegrated disaster recovery services
• Specialized disaster recovery servicesSpecialized disaster recovery services
• Online and off-line data storageOnline and off-line data storage
R. Ching, Ph.D. • MIS • California State University, Sacramento 19
Systems DevelopmentSystems Development
R. Ching, Ph.D. • MIS • California State University, Sacramento 20
Systems DevelopmentSystems Development
• The activity of creating or modifying existing business The activity of creating or modifying existing business systemssystems
• Managing the implementation of ITManaging the implementation of IT
– Size of the implementation requires a sound methodologySize of the implementation requires a sound methodology
– Understanding the user’s information needs and the Understanding the user’s information needs and the processes he/she must follow to complete his/her tasksprocesses he/she must follow to complete his/her tasks
R. Ching, Ph.D. • MIS • California State University, Sacramento 21
Systems Development Life Cycle (SDLC)Systems Development Life Cycle (SDLC)
Systems RequirementsSystems Requirements
Software RequirementsSoftware Requirements
Preliminary DesignPreliminary Design
Detailed DesignDetailed Design
Code and DebuggingCode and Debugging
Test and PreoperationTest and Preoperation
Operation and MaintenanceOperation and Maintenance
Each phase is managed according to its scope Each phase is managed according to its scope and has deliverablesand has deliverables
Documentation Documentation and deliverablesand deliverables
Sunset periodSunset period
R. Ching, Ph.D. • MIS • California State University, Sacramento 22
Systems Development Life CycleSystems Development Life CycleAnother ExampleAnother Example
• Definition PhaseDefinition Phase– Feasibility analysis – Economic, operational and technicalFeasibility analysis – Economic, operational and technical– Requirements definition – The “Requirements definition – The “right systemright system””
• Logical design (the Logical design (the whatswhats) ) • Construction PhaseConstruction Phase
– System design –Physical design (the System design –Physical design (the howshows))– System buildingSystem building– System testingSystem testing
• ImplementationImplementation– InstallationInstallation– OperationsOperations– MaintenanceMaintenance
Building the Building the ““system rightsystem right””
R. Ching, Ph.D. • MIS • California State University, Sacramento 23
Documentation and Managing User Documentation and Managing User ChangesChanges
R. Ching, Ph.D. • MIS • California State University, Sacramento 24
Systems Development Life CycleSystems Development Life Cycle
Cost of make a Cost of make a change ($)change ($)
TimeTime
Sys
tem
S
yste
m
Re
qui
rem
en
tsR
eq
uire
me
nts
So
ftwa
re
So
ftwa
re
Re
qui
rem
en
tsR
eq
uire
me
nts
Pre
limin
ary
Pre
limin
ary
De
sig
nD
esi
gn
De
taile
dD
eta
iled
De
sig
nD
esi
gn
Co
din
g a
nd
C
od
ing
an
d
De
bug
gin
gD
eb
ugg
ing
Te
stin
g a
nd
T
est
ing
an
d
pre
op
era
tion
pre
op
era
tion
Danger of Danger of off-shoringoff-shoring
Other variations existOther variations exist
R. Ching, Ph.D. • MIS • California State University, Sacramento 25
Prototyping and Discovering User Prototyping and Discovering User SpecsSpecs
Develop Develop PrototypePrototype
Operationalize Operationalize PrototypePrototype
Refine Refine PrototypePrototype
Investigate and Investigate and analyze problemanalyze problem
Complete Complete TaskTask
IterationsIterations
R. Ching, Ph.D. • MIS • California State University, Sacramento 26
PrototypesPrototypes
• Operational (evolutionary) – prototype Operational (evolutionary) – prototype eventually becomes the system or eventually becomes the system or applicationapplication
• Non-operational (throw-away) – prototype Non-operational (throw-away) – prototype is used to determine specifications of the is used to determine specifications of the actual system or applicationactual system or application
– Discarded after user’s specifications are Discarded after user’s specifications are knownknown
Often used for Often used for novel systems and novel systems and
applications or applications or when technology when technology or specifications or specifications
are knownare known
Actually number of iterations are unknown, therefore Actually number of iterations are unknown, therefore managers must carefully monitor progress.managers must carefully monitor progress.
R. Ching, Ph.D. • MIS • California State University, Sacramento 27
RAD (Rapid Application Development)RAD (Rapid Application Development)
• A technique that employs tools, techniques and methodologies A technique that employs tools, techniques and methodologies designed to speed application developmentdesigned to speed application development
• Reduces paper-based documentationReduces paper-based documentation
• Automates program source code generationAutomates program source code generation
• Facilitates user participation in design and development Facilitates user participation in design and development activitiesactivities
• Best suited for decision support and management information Best suited for decision support and management information systems systems
R. Ching, Ph.D. • MIS • California State University, Sacramento 28
JAD (Joint Application Development)JAD (Joint Application Development)
• Process for daa collection and requirements analysis involving Process for daa collection and requirements analysis involving group meetingsgroup meetings
• Team approach: Facilitator, developer, users, observers, Team approach: Facilitator, developer, users, observers, managers, expertsmanagers, experts
• Assumes…Assumes…
– People who actually do a job have the best understanding People who actually do a job have the best understanding of that jobof that job
– People who are trained in information technology have the People who are trained in information technology have the best understanding of the possibilities of that technologybest understanding of the possibilities of that technology
R. Ching, Ph.D. • MIS • California State University, Sacramento 29
JAD (Joint Application Development)JAD (Joint Application Development)
Cont.Cont.
• Assumes…Assumes…
– Information systems and business processes rarely exist in Information systems and business processes rarely exist in isolationisolation
• People working in these related areas have valuable People working in these related areas have valuable insight on the role of a system within a larger insight on the role of a system within a larger community.community.
– The best information systems are designed when all of The best information systems are designed when all of these groups work together on a project as equal partners. these groups work together on a project as equal partners.
R. Ching, Ph.D. • MIS • California State University, Sacramento 30
Approaches to ImplementationApproaches to Implementation
• ParallelParallel
• PilotPilot
• PhasePhase
• CutoverCutover
OldOldNewNew
OldOld NewNew
OldOld NewNew
OldOld NewNew
R. Ching, Ph.D. • MIS • California State University, Sacramento 31
Sunset PeriodSunset Period
System PerformanceSystem Performance
Organizational NeedsOrganizational Needs
Performance Performance RequirementsRequirements
TimeTime
Widening gapWidening gap
UpgradesUpgrades
R. Ching, Ph.D. • MIS • California State University, Sacramento 32
Systems IntegrationSystems Integration
• Database management systems (DBMS)Database management systems (DBMS)
• Enterprise resource planning (ERP)Enterprise resource planning (ERP)
– Integration of processes and activities Integration of processes and activities
• MiddlewareMiddleware
Not mutually Not mutually exclusiveexclusive
R. Ching, Ph.D. • MIS • California State University, Sacramento 33
Project ManagementProject Management
• Application of knowledge, skills, tools and techniques to Application of knowledge, skills, tools and techniques to project activities to meet project requirementsproject activities to meet project requirements
• Processes involve: initiating, planning, executing, controlling Processes involve: initiating, planning, executing, controlling and closingand closing
• Knowledge areas involve: integration (coordination), scope Knowledge areas involve: integration (coordination), scope (project boundary), time, cost, quality, human resources, (project boundary), time, cost, quality, human resources, communication, risk, and procurement communication, risk, and procurement
R. Ching, Ph.D. • MIS • California State University, Sacramento 34
Project ManagerProject Manager
• Setting up the project – establish the scope, time frame and Setting up the project – establish the scope, time frame and deliverablesdeliverables
• Managing the schedule – coordinating activities and resources, Managing the schedule – coordinating activities and resources, and schedule of deliverablesand schedule of deliverables
• Managing the finances – costs, cash flows, benefitsManaging the finances – costs, cash flows, benefits
• Managing the benefits – profitability, cost reductions, changes Managing the benefits – profitability, cost reductions, changes to working capital, and adherence to regulatory/legal reform to working capital, and adherence to regulatory/legal reform
• Managing the risks, opportunities and issues – identify and Managing the risks, opportunities and issues – identify and weighweigh
• Soliciting independent reviews Soliciting independent reviews
R. Ching, Ph.D. • MIS • California State University, Sacramento 35
Change ManagementChange Management
• Helping people to accept changeHelping people to accept change
– Overcoming resistanceOvercoming resistance
– Accept and adopt changesAccept and adopt changes
R. Ching, Ph.D. • MIS • California State University, Sacramento 36
FreezeFreezeFreezeFreeze
Lewin-Schein Model for ChangeLewin-Schein Model for Change
MoveMoveMoveMove
Prepare for Prepare for changechange
Implement Implement changechange
Stop changeStop change
UnfreezeUnfreezeUnfreezeUnfreeze
Getting people to change their “behavior.”Getting people to change their “behavior.”
• Convincing Convincing people to accept people to accept changechange
• Selling the Selling the benefits of benefits of changechange
• Assurance that Assurance that change comes with change comes with predefined goalspredefined goals
• Stopping change Stopping change with goals are with goals are achievedachieved
• Managing Managing changechange
R. Ching, Ph.D. • MIS • California State University, Sacramento 37
Lewin’s Theory of ChangeLewin’s Theory of Change
Driving Driving ForcesForces
Driving Driving ForcesForces
Restraining Restraining ForcesForces
Restraining Restraining ForcesForcesChangeChangeChangeChange
Driving forces must overcome restraining forcesDriving forces must overcome restraining forces
R. Ching, Ph.D. • MIS • California State University, Sacramento 38
Perceived UsePerceived UsePerceived UsePerceived Use
Fred Davis’Fred Davis’Perceived Usefulness, Perceived Ease Perceived Usefulness, Perceived Ease of Use, and Perceived Useof Use, and Perceived Use• Perceived Ease of UsePerceived Ease of Use
– Self-efficacy beliefs: Self-efficacy beliefs: Perceived exertion level to implement behavioral changePerceived exertion level to implement behavioral change
• Perceived UsefulnessPerceived Usefulness
– Outcome beliefs: Outcome beliefs: Perceived success resulting from behavioral changePerceived success resulting from behavioral change
R. Ching, Ph.D. • MIS • California State University, Sacramento 39
Fred Davis’Fred Davis’Perceived Usefulness, Perceived Ease Perceived Usefulness, Perceived Ease of Use, and Perceived Useof Use, and Perceived Use
Perceived Ease Perceived Ease of Useof Use
Perceived Perceived UsefulnessUsefulness
Perceived UsePerceived Use
Perceived use is the best Perceived use is the best predictor of actual future usepredictor of actual future use
If a person believes the amount of expended energy to adapt to a If a person believes the amount of expended energy to adapt to a new system will place him/her in a better position as a result of its new system will place him/her in a better position as a result of its
use, he/she is more likely to commit him/herself to using it.use, he/she is more likely to commit him/herself to using it.
R. Ching, Ph.D. • MIS • California State University, Sacramento 40
Risk ManagementRisk Management
• Types of riskTypes of risk
– Technical – failure due to technologyTechnical – failure due to technology
– Business – failure do due organizational issuesBusiness – failure do due organizational issues
• Assessment of risksAssessment of risks
– Project’s leadership – commitment, experience, abilities, Project’s leadership – commitment, experience, abilities, formal and informal management skillsformal and informal management skills
– Employee’s perspective – acceptance to changeEmployee’s perspective – acceptance to change
– Scope and urgency – extent of change (breadth and depth), Scope and urgency – extent of change (breadth and depth), need to implement changeneed to implement change
R. Ching, Ph.D. • MIS • California State University, Sacramento 41
Risk ManagementRisk Management
LeadershipLeadershipEmployees’ Employees’ PerspectivePerspective
Project Scope Project Scope and Urgencyand Urgency
++
++
++
++
++
++
++--
--
--
--
--
--
--
Likelihood of Likelihood of Business Business ChangeChange
Recommended Recommended Project MethodProject Method
HighHigh
LowLow
Big BangBig Bang
ImprovisationImprovisation
Guided EvolutionGuided Evolution
Top-down Top-down CoordinationCoordination
Championed Championed DealmakerDealmaker
Championed Championed ImprovisionImprovision
Champion Guided Champion Guided EvolutionEvolution
Migrate or Kill Migrate or Kill the Projectthe Project
Less
Less
Risky
Risky
More
More
Risky
Risky
R. Ching, Ph.D. • MIS • California State University, Sacramento 42
Other Aspects of IT Project Other Aspects of IT Project ManagementManagementBased on a Survey of 10 Executives in Based on a Survey of 10 Executives in SacramentoSacramento• Develop and compare feasibility, complexity, scalability and Develop and compare feasibility, complexity, scalability and
cost of possible solutionscost of possible solutions
• Project portfolio – investing in the right projectsProject portfolio – investing in the right projects
• Aligning projects and initiatives to strategic objectivesAligning projects and initiatives to strategic objectives
• Risk management – risk considerations, factors and plansRisk management – risk considerations, factors and plans
– Contingency plansContingency plans
• Managing multiple vendors and workflowManaging multiple vendors and workflow
• Regulatory and compliance issuesRegulatory and compliance issues
• Leveling resources over projects – human, financial, technicalLeveling resources over projects – human, financial, technical
R. Ching, Ph.D. • MIS • California State University, Sacramento 43
Other Aspects of IT Project Other Aspects of IT Project ManagementManagementBased on a Survey of 10 Executives in Based on a Survey of 10 Executives in SacramentoSacramento• Project planning, execution and scheduling – Prioritizing, Project planning, execution and scheduling – Prioritizing,
defining performance measures, tracking processes to ensure defining performance measures, tracking processes to ensure performance, schedule resources, project monitoring, change performance, schedule resources, project monitoring, change and service controls, quality assurance and testing, identify and service controls, quality assurance and testing, identify key driverskey drivers
• Project leadership – Assessing change and change Project leadership – Assessing change and change management, communication and organizational skillsmanagement, communication and organizational skills
• Adoption issuesAdoption issues
• Identify and understanding stakeholdersIdentify and understanding stakeholders
R. Ching, Ph.D. • MIS • California State University, Sacramento 44
Good IT Project ManagementGood IT Project Management
• Deliver on timeDeliver on time
• Come in or under budgetCome in or under budget
• Meet the original objectivesMeet the original objectives
• Establish ground rulesEstablish ground rules
• Foster discipline, planning, documentation and managementFoster discipline, planning, documentation and management
• Obtain and document the “final” user requirementsObtain and document the “final” user requirements
• Obtain tenders from all appropriate potential vendorsObtain tenders from all appropriate potential vendors
• Include suppliers in decision makingInclude suppliers in decision making
• Convert existing dataConvert existing data
• Follow through after implementationFollow through after implementation
Successful project Successful project characteristicscharacteristics
R. Ching, Ph.D. • MIS • California State University, Sacramento 45
Value of a System or ApplicationValue of a System or Application
• Benefits the business will receive from the ITBenefits the business will receive from the IT
– IT by itself provides no benefits or advantagesIT by itself provides no benefits or advantages
• Measuring benefitsMeasuring benefits
– Distinguish between the different roles of the systems – Distinguish between the different roles of the systems – support role, integral to strategy, or product/service support role, integral to strategy, or product/service offeringoffering
– Measure what is important to managementMeasure what is important to management
– Assess investments across organizational levelsAssess investments across organizational levels
R. Ching, Ph.D. • MIS • California State University, Sacramento 46
Measuring Benefits: Role of SystemMeasuring Benefits: Role of System
• Measuring organizational performance – ability to support the Measuring organizational performance – ability to support the organization and its users with their tasksorganization and its users with their tasks
• Measuring business value – help meeting organizational and Measuring business value – help meeting organizational and business goalsbusiness goals
• Measuring a product or service – profitability of product or Measuring a product or service – profitability of product or serviceservice
R. Ching, Ph.D. • MIS • California State University, Sacramento 47
Measuring Benefits: Importance to Measuring Benefits: Importance to ManagementManagement
• IT is usually not viewed as a revenue generatorIT is usually not viewed as a revenue generator
– Investment to improve the businessInvestment to improve the business
• Corporate effectivenessCorporate effectiveness
• Less tangible benefits includesLess tangible benefits includes
– Customer relations (satisfaction)Customer relations (satisfaction)
– Employee moraleEmployee morale
– Time to complete an assignmentTime to complete an assignment
R. Ching, Ph.D. • MIS • California State University, Sacramento 48
Measuring Benefits: Across the Measuring Benefits: Across the OrganizationOrganization
• Potential benefits differ at Potential benefits differ at various organizational levelsvarious organizational levels
• DimensionsDimensions
– Economic performance Economic performance payoffs (market measures of payoffs (market measures of performance)performance)
– Organizational processes Organizational processes impact (measures of process impact (measures of process change)change)
– Technology impacts (impacts Technology impacts (impacts on key functionality)on key functionality)
Indi
vidu
al
Indi
vidu
alDiv
ision
Divisi
onCor
pora
te
Corpo
rate
Sources of ValueSources of Value
Assess IT’s impact Assess IT’s impact in each cellin each cell
R. Ching, Ph.D. • MIS • California State University, Sacramento 49
Value of IT Investments to InvestorsValue of IT Investments to Investors
• Brynjolfsson, Hitt and Yang studyBrynjolfsson, Hitt and Yang study
– Every $1 of installed computer capital yielded up to $17 in Every $1 of installed computer capital yielded up to $17 in stock market value, and no less than $5stock market value, and no less than $5
– Led to organizational changes that created $16 worth of Led to organizational changes that created $16 worth of “intangible assets”“intangible assets”
– Past IT investments correlated with higher current market Past IT investments correlated with higher current market valuevalue
R. Ching, Ph.D. • MIS • California State University, Sacramento 50
Value of IT Investments to InvestorsValue of IT Investments to Investors
• Brynjolfsson and Hitt studyBrynjolfsson and Hitt study
– Organizational factors correlated to and complemented IT Organizational factors correlated to and complemented IT investmentsinvestments
• Use of teams and related incentivesUse of teams and related incentives
• Individual decision-making authorityIndividual decision-making authority
• Investments in skills and educationInvestments in skills and education
• Team-based initiatives Team-based initiatives
– Businesses making the highest IT investments not only Businesses making the highest IT investments not only invest in IS but also invest in making organizational invest in IS but also invest in making organizational changes to complement the new ISchanges to complement the new IS
R. Ching, Ph.D. • MIS • California State University, Sacramento 51
Value of IT Investments to InvestorsValue of IT Investments to Investors
• Brynjolfsson and Hitt study (Brynjolfsson and Hitt study (cont.cont.))
– Led to adoption of decentralized work practicesLed to adoption of decentralized work practices
• Frequent use of teamsFrequent use of teams
• Employees Employees empoweredempowered (i.e., given broader decision- (i.e., given broader decision-making authority)making authority)
• Offer more employee trainingOffer more employee training
R. Ching, Ph.D. • MIS • California State University, Sacramento 52
Value of IT Investments to InvestorsValue of IT Investments to Investors
• Brynjolfsson, Hitt and Yang studyBrynjolfsson, Hitt and Yang study
– Companies with the highest market valuation had the Companies with the highest market valuation had the largest IT investments and decentralized work practiceslargest IT investments and decentralized work practices
– Market value of investing in IT is substantially higher in Market value of investing in IT is substantially higher in businesses that use these decentralized practices because businesses that use these decentralized practices because each dollar of IT investment is associated with more each dollar of IT investment is associated with more intangible assets because the IT investments complement intangible assets because the IT investments complement the work practices the work practices
ITIT
Other resourceOther resource
LeveragingLeveraging