Management Information

Systems
MIS 503
MBA Program
What is MIS?
MIS: An Amalgamation of
Disciplines

Computer
Psychology Sociology
Science

Management Information
Science Business
Science
Major MIS Constituents

Organization Technology

People
A Framework for Managing Information Technology

Vision for the Organization

and Information Technology

IT and Organization Structure

Strategy Corporate Strategic Plan Integration of

IT and Decision
Making

Alliances & IT Initiatives IT Infrastructure Ongoing IT

Partnerships Operations
 Today’s IT Landscape
• How IT flattened the competitive
landscape…
 10 Flatteners
• Fall of the Berlin Wall • Offshoring
• Netscape IPO • Supply-chaining
• Work flow software • Insourcing
• Open-sourcing • In-forming
• Outsourcing • Wireless
 This NEW Paradigm Affects
Organizations in Myriad Ways
• New Business Environment
– Open, Competitive, Dynamic Marketplace
• New Enterprise
– Open, Networked, Information-based Organization
• New Geopolitical Order
– Open, Volatile, Multipolar World
• New Technology
– New Goals of IT
– Open, User-centered, Networked Computing
• New Competition
– Your competition is no longer only the firm across the street
Business Environment Changes Creating
New Challenges and Opportunities
• Worker Productivity
• Quality Emphasis
• Responsiveness to the Marketplace
• Globalization
• Outsourcing
• Communication Fluidity and Ubiquity
• Offshoring
• Partnering
• Social and Environmental Responsibility
 The New Enterprise
• Hierarchical Structure is out
• Problems with Hierarchies
– Hierarchies seek to separate governed from governors
– Middle managers act as a communication channel between
top and bottom
• Information Technology has supplanted ‘human
relays’, which has resulted in …

Flatter, Leaner Organizations

 Hierarchical vs.
Open-Networked Organizations
Closed Hierarchy Open Networked
Organization
Structure Hierarchical Networked
Scope Internal/Closed External/Open
Resource Focus Capital Human/Information
State Static/Stable Dynamic/Changing
Personnel/focus Managers Professionals
Key Drivers Reward and Punishment Commitment
Direction Management Commands Self-Management
Basis of Action Control Empowerment to act
Individual Motivation Satisfy Supervisors Achieve Team Goals
Learning Specific Skills Broader Competencies
Basis for Compensation Position in Hierarchy Accomplishment, Competence
Relationships Competitive (My Turf) Cooperative (Our Challenge)
Employee Attitude Detachment (Its a job) Identification (Its my company)
Dominant Requirements Sound Management Leadership
A Framework for IT: An IT Value Chain

External
Individuals Workgroups Organizations Organizations

Managerial tasks:
Changing technology: Structuring the organization
Transaction processing Formulating strategy
Decision support Managing and controlling
Expert systems Forming interorganizations relations
Group decision support system Reporting
Executive information systems Designing products and services
Personal support systems Managing and designing
Groupware business processes
Interorganizational systems
Communications
Networking
Database
Thin Clients
 Three Types of
Information Systems

1 Transactions System (Operational Systems)

Input
Workstation
User Validate Update Output
Report
Database
2 Decision System
Workstation

Analysis and
User Presentation

Retrieval Model
System Management

Database Model Base

3 Communication System

Communications
Link

Workstation Workstation

User 1 User 2
Computer

Mailboxes
IT-Enabled Organizational Forms

Frito-Lay, Hybrid
Mrs. Fields, Hierarchical and Flat

Calyx and Corolla,

Verifone, Snap Together
Blueberry Pancake Oticon, Spaghetti
 Three Shifts in the
Application of IT
• From Personal to Work-Group Computing
• From Systems Islands to Integrated Systems
– Management and control of physical assets and facilities
– Financial management and control systems
– Technologies to manage and support human resources
• From Internal to Inter-organizational Computing
Enabling Technology The Promise The Change

Business
Process
High-Performance
Workgroup Team
Redesign
Computing
Enabling Technology The Promise The Change

Integrated Integrated Organizational

Systems Organization Transformation

Business
Process
High-Performance
Workgroup Team
Redesign
Computing
Enabling Technology The Promise The Change
Interenterprise Extended Recasting
Computing Enterprise External
Relationships

Integrated Integrated Organizational

Systems Organization Transformation

Business
Process
High-Performance
Workgroup Team
Redesign
Computing
 Summary of Work-Group
Computing Shifts
Organizational Hierarchy Business Team Organization
Personal Computing Work-Group Computing

Emphasis on the individual Emphasis on the group

Designing Technology Redesigning the entire system
Taylorism The new work reengineering
Technical Users Direct support of all personnel
Installing Technology Leadership for evolving work
 Islands of Technology
• Technology is implemented to manage
three resources:
– Physical Assets
– Human Resources
– Financial Assets
• What if they are not speaking to one
another???
 Problems With Enterprises that
aren’t speaking…
• Redundancy of Functionality
• Miscommunications due to lack of integration
• Poor quality customer service
• Operational inefficiencies due to
miscommunications and redundant processing
• Internal Focus
 Problems With Enterprises that
aren’t speaking…
• Systems are perpetuated in order to treat
operational symptoms without recognizing
fundamental problems
• Organizational conflict and ‘turf’ battles erupt due
to the historical creation of data processing
developing financial solutions, engineering
developing physical assets, and administrative
groups to manage human resources
 What happens when an enterprise
shifts to integration
Technology Applications Organizational Restructuring

System Islands Integrated Systems

Separate Systems Integrated Environments

Single-form Systems Integrated data, voice, & image

Cost Reduction Enterprise Effectiveness

 What happens when an enterprise
shifts to integration
Value Chain Value Network

Simple Market Combat Competition via Cooperation

Manual Communications Electronic Communication

Enterprise Technology Interorganizational Computing

Purchaser of Information Information Purchaser/Vendor

Determining IT Value

Models and Implications

INFORMATION TECHNOLOGY
MANAGEMENT SYSTEM
ISSUES
Measuring Benefits
• No simple way to measure value
added benefits of IT
• Can track IS performance measures
over time

Page 598
 What is Value?
• The most common meaning of value is monetary
worth
• It is difficult to determine the value of IT
investments because such value can come from
– traditional (measurable) monetary returns
– indirect returns that may be hard to measure
– prevention of negative return from not investing in IT
(such as loss of market share)
 But Value is not always easy to
measure…
• It’s hard to measure directly
• In the short term, benefits may not be realized
• Benefits may happen after development costs
occur
• No relationship to benefits included in measures
• This has led to…
INFORMATION TECHNOLOGY
MANAGEMENT SYSTEM ISSUES

A common way to assign value (i.e., allocate costs) is

using chargeback systems

IS chargeback process – places control of IS spending

with business managers, and is used to better understand
true costs
Page 598
INFORMATION TECHNOLOGY
MANAGEMENT SYSTEM ISSUES
5. Designing an Equitable Financing System

Why use a chargeback system?

– Assign costs to those who consume
– Control wasteful use of IT resources
– Overcome belief that IT costs unnecessarily high
– Provide incentives using subsidy
– Change IS to be more business driven
– Encourage managers to be knowledgeable consumers

Page 598
INFORMATION TECHNOLOGY
MANAGEMENT SYSTEM
ISSUES
Typical measures used to track IT costs:
– Total IT budget as percentage of total organization revenues or income
– Total IT budget as percentage of total organization budget
– IS personnel costs as percentage of total organization professional
personnel salaries and wages
– Ratio of hardware and software costs to IS personnel costs
– Costs for IT hardware and software per managerial or knowledge
worker

Page 598
 IT Investment Equation

P(Success/Return) = P(Return on Investment Type) x P(Conversion Success)

Examples of IT Investment Equation
Estimate of Overall
Estimate of Return Probability of Probability of
Type of Probability Based on Successful a Return: the
Investment Type of Project Conversion SR Index
Budgeting 0.5 1.0 0.5
system
EDI/JIT System 0.95 0.75 0.71

Infrastructure 0.5 0.7 0.35

Network
Package 0.2 1.0 0.2
Tracking System
Groupware 0.9 0.8 0.72

Web Order Entry 0.9 0.7 0.63

Web Home 0 1.0 0

Pages
Stock Options and IT Projects
Call Option on a Real Option on IT
Stock Project
Underlying Asset Common stock on which An IT system that will be
option is purchased developed in the future
Current Value Current stock price Expected PV of returns
from IT project
Volatility Stock price fluctuations in Uncertainty (variance) in
the market expected cash flow from
the IT project
Exercise Price Price in the option at Investment required in IT
which holder may buy project
shares when exercising
the option
Exercise Date Date on the option when it Date for developing the IT
can be exercised project

Lucas, 1999
 The Productivity Paradox
• Organizational IT investments have not shown a
significant impact on a variety of productivity statistics
• Possible explanations are:
– Results of IT spending occur locally and cannot be
expected to show up in national statistics
– Many firms may yet have to undergo significant
restructuring or cost cutting for the benefits of IT to become
evident
– The measurements showing the lack of such a relationship
may be flawed
 Barriers to Estimating IT
Value
• Moore’s Law
• Evolving Organizational Use of Computing
• Management’s Aversion to IT
• Pace of Change in Business is
Exacerbating our ability to accurately value
IT
 Perceptions of IT
Issue IT a Cost/Liability
Are we getting value for ROI on IT is difficult to
money invested in IT? measure; the organization is
unhappy with IT
How important is IT? Stories of strategic IT use are
dismissed as irrelevant to
business
How do we plan for IT? IT plans are made by
specialists or missionary
zealots
Is the IS function doing a There is a general cynicism
good job? about the track record of IT
What is the IT strategy? Many IT applications are
under development
What is the CEO’s vision The CEO sees a limited role
for the role of IT? for IT in the business
What to do we expect The CIO is positioned as a
from the CIO? specialist functional manager
IT an Asset
ROI is difficult to measure;
the firm believes IT makes an
important contribution
Stories of strategic IT use are
instructive
IT thinking is subsumed with
business thinking
The performance of IS is no
longer an agenda item
IS efforts are focused on a
few key initiatives
The CEO sees IT as a
transformational change
agent for the business
The CIO is valued as a
contributor to business
thinking and business
operations Lucas, 1999
Three Types of IT Measurement
• Metrics to Manage IT Internally
– Network uptime
• Metrics for Business Unit Managers
– Detailed IT Usage Report
• Metrics for Senior Managers
– Balanced Scorecard
IT value comes in many forms
 Contributions of IT
• New ways to design organizations and new
organization structures
• New relationships between customers and
suppliers
• Opportunities for electronic commerce
• Efficiencies through EDI
• Changed basis of competition and industry
structure
• Groupware
 Contributions of IT
• Knowledge capture and accessibility
• Increased productivity and flexibility of
knowledge workers
• Electronic alternatives for
communications and supervision
• Improved opportunities of competition
among nations
So, if you can find value, how do
you mange IT?
 The Role of the Manager
• Management and not technology determines return on IT
investments
– Successful organizations have strong IT leadership
• Key management decisions related to IT
– Strategy
– Value of IT
– Investing in infrastructure
– Deciding on applications
– The role of knowledge
– E-business
– Options for service
– Change management
– Managing value nets
MANAGING THE ASSETS IN AN
IS ORGANIZATON
Possible IS Management Positions

Figure 15.1 Selected IS Management Positions (1 of 3) Page 584-585

MANAGING THE ASSETS IN AN
IS ORGANIZATON
Possible IS Management Positions

Figure 15.1 Selected IS Management Positions (1 of 3) Page 584-585

MANAGING THE ASSETS IN AN
IS ORGANIZATON
Possible IS Management Positions

Figure 15.1 Selected IS Management Positions (1 of 3) Page 584-585

INFORMATION TECHNOLOGY
MANAGEMENT SYSTEM ISSUES
2. Selecting Effective IS Leadership
Senior IS Management Issues:
• Improving data and IT planning, especially linking IS to the business
• Gaining business value through IT
• Facilitating organizational learning about and through IT
• Refining the IS unit’s role and position
• Guiding systems development by business managers
• Managing organizational data as an asset
• Measuring IS effectiveness
• Integrating information technologies
• Developing systems personnel

Page 594-595
INFORMATION TECHNOLOGY
MANAGEMENT SYSTEM ISSUES
3. Creating an Active Partnership with Business Managers

IS steering committee or advisory board used to:

• Ensure frequent interaction
• Set priorities
• Check progress
• Allocate scarce resources
• Communicate concerns
• Provide education
• Develop shared responsibility

Page 595
Questions?