Aula 10 16052013 sii-v1

Sistemas de Informação para Indústria© António Grilo 2013Departamento de Engenharia Mecânica e Industrial

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Class 10

Strategic Planning of Information Systems

Ano 2013

Sistemas de Informaçãopara a Indústria

António GriloProf. Auxiliar FCT-UNL,


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What is Information Systems (IS) planning?

Is the process of developing a view of the future that guides decision making today. It states the direction we want to go and how we intend to get there.

• There is a need to make the alignment of strategic business goals and

information systems plans.

• Often the Chief Information Officer is not in the inner circle of strategic

decision making

• Technologies are rapidly changing

• Continuous planning (monitoring, adjustments)

• “Built to Change”


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Planning IS and Organizational Factors

When planning and designing a new information system, there are central organizational factors to consider :

• Environment

• Structure (Hierarchy, specialization, routines, business processes)

• Culture and politics

• Type of organization and style of leadership

• Main interest groups affected by system; attitudes of end users

• Tasks, decisions, and business processes the system will assist


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Strategic Environmental Challenges for IS Planning

Porter’s Competitive Force:


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Generic Competitive Strategies and IS

Low-cost leadershipProduce products and services at a lower price than competitors while enhancing quality and level of service. Examples: Continente, Pingo Doce Product differentiationEnable new products or services, greatly change customer convenience and experience. Examples: Google, Nike, Apple Focus on market nicheUse information systems to enable a focused strategy on a single market niche; specialize. Example: Hilton Hotels Strengthen customer and supplier intimacyUse information systems to develop strong ties and loyalty with customers and supplier or increase switching costs. Example: Netflix, Amazon


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Business Value Chain Model


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Value Web


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The Process of Strategic IS Planning


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Selecting ProjectsIn all but the smallest of firms, there is a considerable organizational apparatus involved in projects, which is one reason why they can be so difficult to manage.

The 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

Portfolio analysis is used to evaluate alternative system projects. Hence, it is necessary to inventory all of the organization’s information systems projects and assets, and each system has a profile of risk and benefit


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Portfolio Analysis

To improve return on portfolio, balance risk and return from systems investments. Companies should analyse their portfolio of projects in terms of potential benefits and likely risks. Certain kinds of projects should be avoided altogether and others developed rapidly. There is no ideal mix. Companies in different industries have different profiles.


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Multicriteria Methods for Selection

For selecting projects a multicriteria method can be used, like the Analytical Hierarchy Process (AHP), or simplifying with a more linear scoring model, that can be used to evaluate alternative system projects, especially when many criteria exist. This method assigns weights to various features of system and calculates weighted totals.


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Valuing Information Systems

Information systems capital budgeting models measure value of investing in long-term capital investment projects. These methods rely on measures of the firm’s:

Cash outflows• Expenditures for hardware, software, labor

Cash inflows• Increased sales• Reduced costs

There are various capital budgeting models used for IT projects: Payback method, accounting rate of return on investment, net present value (NPV), internal rate of return (IRR)


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Example of Creating a Business Case

Financial modelers use roughly two dozen shared files. When current data in these shared files is overwritten with obsolete data, financial modelers must recheck and redo their models. No records are kept for this work, but anecdotal evidence suggests that up to 40 hours per year may be wasted redoing financial models. At €50 per hour, this lost time costs ABC Company up to €2,000 a year.

Costs

ElectroWorkFlow purchase price: €10,000.

Estimated life cycle: three years.

Installation fee: €2,000.

Annual maintenance contract: €500.

Cash Flow Statement (three years)

ABC Company's discount rate is 5%.


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Example of Creating a Business Case (cont.)

The volume of shared files will remain the same or increase over the next three years.

Significant changes will not occur in the way most shared files are distributed, used, and updated.

To realize €7,800 in annual labor savings, ABC Company must reduce administrative assistant (AA) labor by 260 hours per year.

Currently, ABC Company employs three full-time AAs and one part-time AA who works on average 34 hours per week. In 2005 ABC Company hired a leased worker to perform 120 hours of AA tasks.

By eliminating the leased worker (120 hours saved) and reducing the part-time AA to 31 hours per week (140 hours saved), ABC Company will save 260 hours per year in AA labor.


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Example of Creating a Business Case (cont.)

Net present value (NPV): €13,530

Internal rate of return (IRR): 68%

Payback period: 1.2 years

Aula 10 16052013 sii-v1

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