Redesigning the Organization

with Information Systems

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
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
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
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)
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 organization’s 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
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
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.

Example Goals CSF

Profit Concern Earnings/share Automotive Industry
Return on Investment Styling
Market Share Quality dealer system
New Product Cost control
Energy Standards

Non-profit Excellent health care Regional integration with other

Meeting government regulations hospitals
Future health needs Efficient use of resources
Improved monitoring of
regulations
Using CSFs to Develop IS

Manager A Manager B Manager C Manager D

CSFs CSFs CSFs CSFs

Aggregate &
analyze
individual
CSFs

Develop
agreement on
company
CSFs

Define
company
CSFs

Use CSFs to
Define DSS develop IS
and databases priorities
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
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)
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
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)
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 customer’s supplies
Strikes fear, its expensive, its very risky and its extremely
difficult to carry out and manage
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
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!
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
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
Systems Analysis (2)

Feasibility Study: the way to determine

whether the solution is achievable, given the
organization’s resources and constraints
Technical feasibility
Economic feasibility
Operational feasibility

Information Requirements
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
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
The Business Value of
Information Systems

Costs and Benefits of Information Systems

Costs Benefits
Hardware Tangible (Cost Savings)
Telecommunications Increased productivity, low operational costs,
reduced work force, lower outside vendor costs,
lower clerical and professional costs, reduced rate
of growth in expenses
Software Intangible
Services Improved asset utilization, improved resource
control, improved organizational planning, more
timely information, more information, increased
organizational learning, enhanced employee
goodwill, increased job satisfaction, improved
decision making, improved operations, higher
client satisfactions, better corporate image
Personnel
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
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
Non-financial and Strategic
Considerations

Project Risk

High Low
Potential Benefits to Firm

High Cautiously Identify and

Examine Develop

Low Avoid Routine Projects