Managing Information Systems Seventh Canadian Edition. Laudon, Laudon and Brabston. CHAPTER 14 Project Management, Business Value, and Managing Change

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2 Project Management 1. What are the objectives of project management, and why it is so essential in developing information systems? 2. What methods can be used for selecting and evaluating information systems projects and aligning them with the firm s business goals? 3. How can firms assess the business value of information systems projects? Continued Copyright 2015 Pearson Canada Inc. 14-2

3 Project management (continued) 4. What are the principal risk factors in information systems projects? 5. What strategies are useful for managing project risk and system implementation? Managing information systems as a critical resource; managers need to understand in order to interact with IS department (critical service provider to other departments); managing personnel who develop systems and the systems developed Copyright 2015 Pearson Canada Inc. 14-3

4 Runaway Projects and System Failure Runaway projects Fail to perform as specified; exceed schedule, budget Types of system failure Fail to capture essential business requirements Fail to provide organizational benefits Complicated, poorly organized user interface Inaccurate or inconsistent data Copyright 2015 Pearson Canada Inc. 14-4

6 Project Management Activities include planning work, assessing risk, estimating resources required, organizing the work, assigning tasks, controlling project execution, reporting progress, analyzing results Includes scope, time, cost, quality, risk Budget for IS department and for strategic, tactical and operational level systems; justify financial investment Copyright 2015 Pearson Canada Inc. 14-6

7 Managing in the Merger and Acquisition Game 1. What are some of the risks involved when one firm acquires another firm s IT infrastructure? 2. Why do firms often fail to take the target firm s information systems and IT infrastructure into account when purchasing other firms? 3. How would you go about assessing the value of another firm s IT infrastructure and operational capabilities? What questions would you ask? Copyright 2015 Pearson Canada Inc. 14-7

8 Management Structure for Information Systems Projects Hierarchy in large firms Corporate strategic planning group Responsible for firm s strategic plan Information systems steering committee Reviews and approves plans for systems in all divisions Project management group Responsible for overseeing specific projects Project team Responsible for individual systems project Copyright 2015 Pearson Canada Inc. 14-8

10 Linking Systems Projects to the Business Plan Information Systems Plan Identifies systems projects that will deliver most business value, links development to business plan, goals includes: Rationale and direction of systems development Management strategy and implementation plan Budget Organizational challenges Enterprise analysis: examine organization in terms of units, functions, processes and data; identify key entities and attributes in organization s data Copyright 2015 Pearson Canada Inc

11 Information Requirements and Key Performance Indicators; Portfolio Analysis To develop effective information systems plan, organization must have clear understanding of both long-term and short-term information requirements Strategic analysis Key Performance Indicators (KPI): sees information requirements as determined by a small number of KPIs, believed to assure success of organization Portfolio analysis: based on inventory of all information systems projects and assets, assign risk and benefit profiles to IS investments Copyright 2015 Pearson Canada Inc

13 Scoring Models Used to evaluate alternative system projects, especially when many criteria exist Assigns weights to various features of system and calculates weighted totals; involves qualitative judgments made by experts; important to agree on criteria used to judge a system; may cycle through to final model, adjusting criteria and weights Copyright 2015 Pearson Canada Inc

14 Information Systems Costs and Benefits Tangible benefits: Can be quantified and assigned monetary value Systems that displace labour and save space: Intangible benefits: Cannot be immediately quantified but may lead to quantifiable gains in the long run E.g., more efficient customer service, enhanced decision making Copyright 2015 Pearson Canada Inc

15 Capital Budgeting for Information Systems Measure value of investing in long-term capital investment projects; analyze and select various proposals Rely on measures the firm s cash inflows and outflows Copyright 2015 Pearson Canada Inc

16 Real Options Pricing Models (ROPM) Can be used when future revenue streams of IT projects are uncertain and up-front costs are high Use concept of options valuation borrowed from financial industry: option is the right, but not obligation to act at a future date Gives managers flexibility to stage IT investment or test the waters with small pilot projects or prototypes to gain more knowledge about risks before investing in entire implementation Copyright 2015 Pearson Canada Inc

17 Limitations of Financial Models Do not take into account social and organizational dimensions that may affect costs and benefits Factors include management support, user involvement and influence, level of complexity, management of the implementation process Copyright 2015 Pearson Canada Inc

18 Dimensions of Project Risk Level of project risk influenced by: Project size Indicated by cost, time, number of organizational units affected Organizational complexity also an issue Project structure Structured, defined requirements run lower risk Experience with technology Copyright 2015 Pearson Canada Inc

19 Change Management and the Concept of Implementation Required for successful system building New information systems have powerful behavioral and organizational impact Changes in how information is used often lead to new distributions of authority and power Internal organizational change breeds resistance and opposition Copyright 2015 Pearson Canada Inc

20 Management Support and Commitment Positive perception by both users and technical staff Ensures sufficient funding and resources Enforcement of required organizational changes Copyright 2015 Pearson Canada Inc

21 Controlling Risk Factors First step in managing project risk involves identifying nature and level of risk of project Each project can then be managed with tools and risk-management approaches geared to level of risk Managing technical complexity; formal planning and control tools; increasing user involvement and overcoming user resistance Designing for the organization Copyright 2015 Pearson Canada Inc

22 Managing Technical Complexity Internal integration tools Project leaders with technical and administrative experience Highly experienced team members Frequent team meetings Securing of technical experience outside firm if necessary Formal planning tools Copyright 2015 Pearson Canada Inc

24 Management Challenges Summary Determining system benefits and costs when they are difficult to quantify Dealing with complexity of large-scale projects Guidelines: Obtain more value from IT investments: documentation of firm s applications and IT infrastructure, with periodic review of IT portfolio Use appropriate metrics to monitor outcomes Consider new approaches to project management Copyright 2015 Pearson Canada Inc