Redesigning the Organization with Information Systems

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Redesigning the Organization with Information
Systems

• Panagiotis Kanellis, ?p?st?µ?????? S??e???t??
  ?µ?µat?? ?????f?????? ????
• Business Consulting, 377 Syngrou Ave., 175 64
  Athens, Greece
• Email kanellis_at_di.uoa.gr

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?????f?????? ???? ?t???a ?????f??????,
?a?ep?st?µ??p???, 157 84 ????a Email
martakos_at_di.uoa.gr
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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

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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

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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

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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)

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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
  organizations 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

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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

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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.

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Using CSFs to Develop IS
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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

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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)

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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

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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)

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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
  customers supplies
• Strikes fear, its expensive, its very risky and
  its extremely difficult to carry out and manage

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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

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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!

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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

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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

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Systems Analysis (2)

• Feasibility Study the way to determine whether
  the solution is achievable, given the
  organizations resources and constraints
• Technical feasibility
• Economic feasibility
• Operational feasibility
• Information Requirements

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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

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Completing the Design Process

• Programming
• Testing
• Unit testing
• System testing
• Acceptance testing
• Conversion
• Parallel strategy
• Direct cut-over strategy
• Pilot study strategy
• Phased approach strategy
• Maintenance

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The Business Value of Information Systems
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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

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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

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Non-financial and Strategic Considerations