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Chapter 9: Evaluating the Outcomes of Information Systems Plans Managing information technology evaluation

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Chapter 9: Evaluating the Outcomes of Information Systems Plans Managing information technology evaluation techniques and processes* By: Satchanawit Phongkriangkrai – PowerPoint PPT presentation

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Title: Chapter 9: Evaluating the Outcomes of Information Systems Plans Managing information technology evaluation


1
Chapter 9 Evaluating the Outcomes of Information
Systems PlansManaging information technology
evaluation techniques and processes
  • By Satchanawit Phongkriangkrai
  • An earlier version of this chapter appeared in
    the European Management Journal, Vol. 10, No.2.
    June, pp. 220229.

2
Overview Information systems planning
3
Agenda
  • Evaluation emerging problems
  • Strategy and information systems
  • Evaluating feasibility findings
  • Linking strategy and feasibility techniques
  • CODA From development to routine operations

4
Introduction
  • The size and continuing growth in IT investments
    from the early 1990 served to place IT issue
    above the ranks in most organization .
  • Many organizations have encountered IT investment
    problems, e.g., high risks, and hidden cost
    processes.
  • At least 20 of IT investment is wasted and
    between 30 and 40 of IT projects realize no net
    benefits.
  • Major problems occur in how the IT investment is
    evaluated and controlled.

5
Evaluation emerging problems
  • Evaluation brings into question the notion of
    cost, benefit, risk, value, and process.
  • There are many problems that impact on IT
    evaluation
  • inappropriate measures
  • understating human and organizational costs
  • overstating cost
  • neglecting intangible benefits, etc.
  • The fundamental and common failure relates to
    strategy alignment.

6
Strategy and information systems
  • Organizational investment climate is affected by
  • The financial health and market position of the
    organization
  • Industry sector pressures
  • The organizational business strategy and
    direction
  • The management and decision-making culture
  • Decision-making culture
  • Conservative
  • Innovative
  • Decision-making style
  • Directive
  • Consensus-driven

7
Alignment
  • Alignment creates strategic climate in which IT
    investment can be related to business/organization
    al direction.
  • Lack of alignment is a common problem in public
    sector information.
  • When the organization lacks alignment of IT
    evaluation practice, they tend to become
    separated from business needs and plans, and from
    organizational realities.
  • Another critical alignment is that between
  • what is done with IT
  • how it fits with the information needs of the
    organization

8
IT Strategic grid
  • Developed by McFarlan and McKenney in 1983
  • Classifies systems where IT investment has been
    made and where it should be applied.
  • Demonstrates whether the IT vestments are being
    made
  • into core system,
  • business growth,
  • competitiveness.
  • Identifies four classes of firms.

9
Figure Strategic grid analysis
10
Value chain
  • Established by Porter and Millar in 1991
  • Consists of the primary and support activities.
  • Primary activities of a typical manufacturing
    company
  • inbound and outbound logistics
  • operations
  • marketing and sales
  • support service
  • Support activities
  • firm infrastructure
  • human resource management
  • technology development
  • procurement

11
IT investment mapping
  • Developed by Peters in 1993
  • The basic dimensions of map were arrived at after
    reviewing the main investment concerns.
  • Two dimension over 50 IT projects
  • investment orientation
  • Infrastructure software/hardware environment
  • Business Process finance and accounts
  • Market Influence increasing repeat sales
  • and benefit
  • Business Expansion
  • Risk Minimization
  • Enhance Productivity

12
Figure IT investment mapping
13
Figure Investment map comparing business and IT
plans
14
Multiple methodology
  • Developed by Earl in 1989
  • A multiple methodology inquires IT investment
    more closely with the strategic aims and
    direction of the organization, and its key needs.
  • Three strategy formulas are
  • A top-down approach use critical factor success
    (CFC) to establish objectives
  • A bottom-up evaluation evaluate current
    systems
  • Inside-out innovation create new strategic
    options.
  • The purpose is to identify through internal and
    external analysis of business needs and
    opportunities to relate the development of IS
    applications to business strategy.

15
Evaluating feasibility findings
  • Evaluating IT projects at its feasibility stage
    are based on the right strategic climate.
  • Feasibility evaluation provides results of
    interest and to sponsor of research.
  • Value of IT/IS are justified by understating cost
    and using notational figure for benefit
    realization.
  • Willcocks and Lester looked at 50 organizations
    from both private and public section of
    manufacturing and service.
  • There is little evidence of a concern for
    assessing risk in any formal manner.

16
Figure IT evaluation feasibility findings
17
Linking strategy and feasibility techniques
  • A method uses evaluation techniques to
  • measure the type of IT project,
  • develop techniques relating the IT investment to
    business/organization value.
  • The method of evaluation needs to be
  • reliable,
  • consistent in its measurement over time.
  • The three evaluation techniques are
  • Return on management (ROM),
  • Matching objectives, projects and techniques,
  • From cost-benefit to value.

18
Linking strategy and feasibility techniques
(Return on management (ROM))
  • Developed by Strassman in 1990
  • ROM is modern IT investment evaluation.
  • ROM measures the performance based on the added
    value the difference between net revenues and
    payment external supplier to an organization
    provided by management.
  • However, ROM is not widely used in UK.
  • The problem is whether it really represents what
    IT has contributed to business performance.

19
Linking strategy and feasibility techniques
(Matching objectives, projects and techniques)
  • Butler Cox (1990) suggests five main purposes
  • surviving and functioning as a business
  • improving business performance by cost
    reduction/increasing sales
  • achieving a competitive leap
  • enabling the benefits of other IT investments to
    be realized
  • being prepared to compete effectively in the
    future
  • The matching of IT investment can now be
    categorized as follows
  • Mandatory investments
  • Investments to improve performance
  • Competitive edge investments
  • Infrastructure investments
  • Research investments

20
Figure Classifying IT investments
21
Figure Matching projects to techniques
22
Linking strategy and feasibility techniques(From
cost-benefit to value)
  • Known as the information economics approach
  • Developed by Parker et al. 1988
  • This technique copes with many problems of IT
    evaluation, both at the level of methodology and
    of process.
  • Information economics looks beyond benefit to
    value.
  • Value is the sum of
  • Enhanced return on investment,
  • Business domain assessment,
  • Technology domain assessment.

23
Figure The information economic approach
24
Linking strategy and feasibility techniques(From
cost-benefit to value (Contd))
  • Enhanced ROI
  • Value Linking assesses indirect benefits added
    to other departments.
  • Value Acceleration reduced time-scales for
    operations.
  • Value Restructuring measures the benefits of
    restructuring a department, or job.
  • Innovation valuation considers the value of
    competitive advantage and calculate risks,
    pioneer cost, or failing cost.
  • Business Domain Assessment
  • Strategic Match matches the business goals to
    the proposed project/IT investment.
  • Competitive Advantage assesses the degree of an
    advantage in the market.
  • Management Information assesses the
    contribution toward the management need for
    information.
  • Competitive Response assesses the degree of
    corporate risk associated with not undertaking
    the project.
  • Organization Risk implements the project in
    terms of personnel, skills, and experience.

25
Linking strategy and feasibility techniques(From
cost-benefit to value (Contd))
  • Technology Domain Assessment
  • Strategic IS Architecture measures the degree
    to which the project fits into the overall
    information system plan.
  • Definitional Uncertainty assesses the
    complexity of the area and probability of
    non-routine change.
  • IS Infrastructure Risk evaluates a projects
    dependence on new or untried technologies.

26
CODA From development to routine operations
27
CODA From development to routine operations
(Contd)
  • The evaluation cycle is useful for
  • controlling a specific project,
  • building organizational know-how on IT and
    management.
  • However, some of limitations in evaluation
    techniques and processes are
  • Weak linkage between evaluations carried out
    different stages,
  • Projects shelved,
  • Stakeholders not included in feasibility stage,
  • Continual problems from feasibility stage.

28
CODA From development to routine operations
(Contd)
  • Suggestion to improve evaluation
  • Linking evaluation across stages and time
  • Determining stakeholders who are participants in
    evaluation at all stages
  • Avoiding the fall-of interest in evaluation at
    later stage
  • Providing adequate evaluation techniques for the
    long term process.

29
Conclusions
  • The profile of IT evaluation has increased
  • high expenditure,
  • disappointed expectations,
  • underdeveloped and undermanaged area.
  • Need more effective evaluation practice
  • traditional techniques,
  • tailor modern techniques.
  • In the past of the evaluation practice, value is
    price.
  • The future challenge is to continue the
    measurement of value and build techniques and
    processes.

30
Thank youQA
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