PLANNING FOR IT SYSTEMS

1
CHAPTER 8

• PLANNING FOR IT SYSTEMS
• Knowing Where Youre Going

2
Opening case Chaos in California

• 1996 California IT chaos
• Dept of Motor Vehicles 32.8 failed
• Dept of Social Services millions
• lottery 57 million delay cost 100 million
• ---------------in
  need of system plan
• CIO set a strategic direction for
  IT
• ---- The state understand its
  needs at strategic level then plan for ..
• 2.5billion 125 agencies CIOs
  work CSF ---gtinfo needs to support
  CSF---gt SAWS saved million meet info
  requirement and the economic goals of California

3
WHY IT SYSTEMS PLANNING?
Introduction
8-2

• IT SYSTEMS PLANNING...
• provides a systematic process for finding new IT
  systems.
• generates a comprehensive list of new IT systems
  to develop that support the business strategy.
• begins the systems development life cycle (see
  Chapter 9).

4
YOUR FOCUS IN THIS CHAPTER
Introduction
8-3

• Planning for IT Systems and the IT Systems Plan
• Aligning IT Systems with Organizational Goals and
  Strategies
• Identifying Processes and Information Needs
• Evaluating IT Systems
• Planning for What You Cant Live Without

5
INFORMATION TECHNOLOGY (IT) SYSTEMS PLANNING
IT Systems Planning
8-4
is the process that uses the goals , strategies,
objectives, processes, and information
requirements of your organization as a foundation
for identifying and selecting which IT systems to
develop and deciding when to develop them.
6
IT SYSTEMS PLANNING PRODUCES A PLAN
IT Systems Planning
8-5
The IT systems planning process includes 5 steps

• 1.Aligning Organizational Goals and IT
• 2.Identifying Specific Processes
• 3.Identifying Specific Information
• 4.Evaluating IT Systems
• 5.Planning for What You Cant Live Without
• each step evaluate IT systems for modification
  and replacement

The result is the INFORMATION TECHNOLOGY (IT)
SYSTEMS PLAN that documents the results of the IT
systems planning process.
7
CIOs LEAD IT IN ORGANIZATIONS
IT Systems Planning
8-6
The CHIEF INFORMATION OFFICER (CIO) is the
strategic level IT manager who directs all IT
systems and personnel while communicating
directly with the highest levels of the
organization.
8
ALIGNING ORGANIZATIONAL GOALS AND IT
Aligning IT Business
8-7
You must consider IT as you formulate
organization strategies. ------bank Three
methods support aligning the organizational goals
with IT. They include

• IT Fusion
• Competitive Forces Model
• Competitive Intelligence
• one action position of CIO

9
INFORMATION TECHNOLOGY FUSION (IT FUSION)
OCCURS...
Aligning IT Business
8-8
when the information technology within your
organization is indistinguishable from the
business processes and the people who exploit the
information technology. So... if you dont even
know you are using IT, your organization has
achieved IT fusion. That is they want to provide
customer service with transparent technology
VCR
10
THE COMPETITIVE FORCES MODEL...
Aligning IT Business
8-9
is a tool to formulate strategy by examining the
environment in which your organization competes
(See Figure 8.4, page 325). Five forces create
the competitive environment

• 1.Customer force well-informed, price-sensitive,
  similar product/service alternatives
• 2.Substitute force price-competitive
  nonproprietary alternatives
• 3.Supplier force necessary?unique
  product/service
• 4.New competition force low barriers to market
  entry,nonproprietary product,little government
  regulation
• 5.Current competition force low brand identity,
  product/service similarity,slow industry
  growth,industry overcapacity

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Three Basic Strategies
Determine the strength of each force and then
look for opportunities to effect beneficial
change. The opportunities for changing
competitive forces with IT form the basis of a
defensive competitive strategy.

• Low-Cost Producer --produce product/service at
  the industrys lowest cost ----a weak supplier
  force
• Differentiation---unique characteristic --a weak
  customer and substitute
• Focus--target a small market niche from entirely
  industry to a portion of
• identification of which together with
  identification of IT system

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WHY COMPETITIVE INTELLIGENCE?
Aligning IT Business
8-10

• Helps you anticipate market changes
• Helps you anticipate competitive actions
• Alerts you to new or potential competitors
• Allows you to learn from others successes and
  failures
• Allows you to learn about regulatory changes
• Allows you to compare your processes to others.

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THE COMPETITIVE INTELLIGENCE PROCESS
Aligning IT Business
8-11

• 1.PLANNING--purpose,scope and timing
• COMPETITIVE SCANNING - continuous competitive
  intelligence
• 2.GATHERING
• PRIMARY INTELLIGENCE - gathering intelligence
  directly from the source
• SECONDARY INTELLIGENCE - gathering intelligence
  indirectly
• 3.ANALYSIS by knowledge workers
• 4.INTEGRATION or using results to support your
  goals

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COMPETITIVE INTELLIGENCE AND YOU
Aligning IT Business
8-12

• Helps in planning the purpose, scope, and timing
• Assists in gathering electronic intelligence
• Uses your expertise to analyze the intelligence
• Finance - How do competitors make money?
• Marketing - Can the market support another
  competitor?
• Manufacturing - What quality standards do your
  competitors use?

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The results of three methods is a clear view of
how IT can support the goals and strategy of the
organization. With this view, you can begin to
plan specifics about IT systems.
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IDENTIFY SPECIFIC PROCESSES THAT REQUIRE IT
SUPPORT
Identifying Processes
8-13
Using the value chain method, business processes
requiring IT support are identified, and the
result is a list of IT systems to develop.
17
THE VALUE CHAIN METHOD
Identifying Processes
8-14
views the organization as a chain - or series -
of processes, each of which adds value to the
product or service for the customer. Value chain
processes fall into 2 categories

• Primary value processes
• Support value processes

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Processes Can Add and Reduce Value
Identifying Processes
8-15

• Identifying Processes that Add Value (See Figure
  8.7, page 331)
• Find those processes that add the most value
• Support those processes with IT systems
• Identifying Processes that Reduce Value (See
  Figure 8.8, page 332)
• Find those processes that reduce value the most
• Improve those processes with IT systems

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IDENTIFYING SPECIFIC INFORMATION
Identifying Information
8-16
Three methods support identifying your
organizations information needs. They include

• Information Architecture
• Critical Success Factors
• Business Systems Planning

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AN INFORMATION ARCHITECTURE...
Identifying Information
8-17
for an organization describes what information
your organization needs and which people within
your organization need that information.
Remember Information must support the
customers moment of value.
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An Information Architecture Must Identify...
Identifying Information
8-18

• The three dimensions of information needed (See
  Figure 8.10, page 319)
• time
• content
• form
• Who needs this information
• Where you will maintain the information

And result in a list of IT systems that will
provide this information to the people who need
it.
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CRITICAL SUCCESS FACTOR
Identifying Information
8-19
a factor critical to organizational success.

• Examples
• Engineering start-up firm - creating designs that
  meet standards
• Bank - providing low transaction costs
• Ice cream manufacturer - providing fresh product
  on store shelves, innovative flavor
• Discount retail chain - keeping shelves fully
  stocked,qualified suppliers
• Shipping firm - delivering packages on time
• shortcomings
• CSFS come from kw
• support only existing information requirements

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BUSINESS SYSTEMS PLANNING (BSP)
Identifying Information
8-20
identifies information requirements by
documenting the relationships between business
processes and information classes.

• Identifies groups of related information called
  information classes.
• Relates those classes to business processes.
• Documents the processes that create and use
  information.

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CREATING A BSP MATRIX
Identifying Information
8-21

• Granularity problem
• The 3 steps to creating a BSP matrix are
• 1.Senior management defines the business
  processes.
• 2.Process experts define the information classes
  needed to support each process.
• 3.Process experts relate the information to the
  processes using the create and use criteria.

See Figure 8.11 (page 339) for an example BSP
matrix. Advantage identify the information
creators BSP identify information ownership BSP
identify IT systems and information requirements
they support
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EVALUATING IT SYSTEMS
Evaluating IT Systems
8-22
Limited resources Three analysis methods support
evaluating potential IT systems identified to
this point. They include

• Cost-Benefit Analysis
• Risk Analysis
• Capital Investment Analysis
• use each alone or in combinations

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COST-BENEFIT ANALYSIS
Evaluating IT Systems
8-23
is the process of evaluating IT systems for
development by comparing systems costs with
systems benefits. A more thorough COST-BENEFIT
ANALYSIS at the end of the system design
phase The analysis involves 3 steps. They are

• 1.Gathering proposed systems costs.
• 2.Gathering proposed systems benefits.
• 3.Comparing costs and benefits.

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PROPOSED SYSTEMS COSTS
Evaluating IT Systems
8-24
The proposed systems costs are calculated from
several sources. Systems costs should include

• Costs estimates for systems development.
• Costs estimates for systems operation and
  maintenance.
• Costs estimates for systems adoption at different
  times in the future.
• Costs for the organizational changes required.

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• Be conservative and estimate costs on the high
  side.

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PROPOSED SYSTEMS BENEFITS
Evaluating IT Systems
8-25
The proposed systems benefits fall into two
categories - tangible and intangible.

• TANGIBLE BENEFITS are systems benefits that can
  be monetarily quantified.
• INTANGIBLE BENEFITS are systems benefits that
  cannot be monetarily quantified.
• See table 8.3

Its best to make every effort to quantify all
benefits for a proposed system.
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COMPARING COSTS AND BENEFITS
Evaluating IT Systems
8-26
Systems costs and benefits vary over time. Look
over Figure 8.12 (page 341) for the following
characteristics

• High costs during systems development.
• Benefits at zero during systems development.
• Costs drop to a maintenance level after
  development.
• Benefits rise after system implementation.

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RISK ANALYSIS
Evaluating IT Systems
8-27
INFORMATION TECHNOLOGY SYSTEMS RISK is the
possibility that a system will not achieve the
predicted benefits. Some sources of IT risk
include

• Unproven technology
• A changing market or economy
• Long selection and development time
• Significant organizational change
• Poor or too many assumptions

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A RISK ANALYSIS FRAMEWORK
Evaluating IT Systems
8-28
Comparing system risk with system benefits
suggests the following selection criteria (See
Figure 8.13, page 342)

• High risk, low benefits - reject the system.
• High risk, high benefits - limit the cost
  invested
• Low risk, low benefits - use a cost-benefit
  analysis
• Low risk, high benefits
• For very high costs, use a cost-benefit analysis
• Otherwise, develop

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CAPITAL INVESTMENT ANALYSIS
Evaluating IT Systems
8-29
calculates a quantitative measure of IT systems
value.(the most quantitative) Some investment
analysis models in use include (See Table 8.4,
page 343)

• Payback method
• Cost-benefit ratio
• Return on investment (ROI)
• Net present value (NPV)
• Internal rate of return (IRR)

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CONTINGENCY PLANNINGPlanning for What You Cant
Live Without
Contingency Planning
8-30
Ninety percent of businesses whose computers are
down for more than 5 working days will be out of
business within a year!
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Potential Opportunities for Disaster Include...
Contingency Planning
8-31

• Weather-related disasters
• Floods
• Lightning strikes
• Hurricanes
• Tornadoes
• Earthquake disasters
• Loss of system and information access
• Technology failure

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CONTINGENCY PLANNING
Contingency Planning
8-32
is the process of examining the possibilities of
losing an IT system and formulating procedures to
minimize the damage. The three steps in
contingency planning are

• 1.Discovering whats really important.
• 2.Asking how much does it cost to have
  information unavailable.
• 3.Balancing the cost of unavailability with the
  cost of recover.

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DISCOVERING WHATS REALLY IMPORTANT
Contingency Planning
8-33

• Identify critical functions and processes.
• Identify the supporting IT systems.
• Gather estimates of losses associated with the
  unavailability of these IT systems and their
  information.

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HOW MUCH DOES IT COST TO HAVE INFORMATION
UNAVAILABLE?
Contingency Planning
8-34
An INFORMATION UNAVAILABILITY COST CURVE is a
depiction of the costs to the organization of the
unavailability of information (See Figure 8.14,
page 346). Information unavailability cost curve
characteristics

• Low losses early
• Losses jump as business is lost
• Losses level out again at a high level

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THE COST OF DISASTER RECOVERY
Contingency Planning
8-35
A DISASTER RECOVERY COST CURVE is a depiction of
the organizations disaster recovery costs based
on how quickly you wish to recover (See Figure
8.15, page 347). Disaster recovery cost curve
characteristics

• High costs early
• Costs drop rapidly
• Costs level out low

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BALANCE THE COST OF UNAVAILABILITY WITH THE COST
OF RECOVERY
Contingency Planning
8-36

• 1.Superimpose the cost curves upon each other.
• 2.Find the point where they cross.
• 3.This point is the best disaster recovery plan
  in terms of cost and time.

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THE INFORMATION TECHNOLOGY SYSTEMS PLAN
IT Systems Plan
8-37

• The documented results of IT systems planning.
• This document does not signal an end to planning.
• IT systems planning is an ongoing process, not a
  project.

Look over Figure 8.17 (page 347) for an IT system
plan outline.
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TO SUMMARIZE
8-38

• IT systems planning identifies and selects IT
  systems.
• The steps in IT systems planning are
• Aligning organizational goals and IT
• Identifying specific processes
• Identifying specific information
• Evaluating IT systems
• Planning for what you cant live without
• The result of these steps is an IT systems plan.

43
TO SUMMARIZE
8-39

• Each IT system planning step is supported by one
  or more methods.
• Aligning organizational goals and IT is supported
  by
• IT fusion
• Competitive forces model
• Competitive intelligence
• Identifying specific processes is supported by
• Value chain

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TO SUMMARIZE
8-40

• Identifying specific information is supported by
• Information architecture
• Critical success factors
• Business systems planning
• Evaluating IT systems is supported by
• Cost-benefit analysis
• Risk analysis
• Capital investment analysis
• Planning for what you can? live without is
  supported by
• Information unavailability cost curve
• Disaster recovery cost curve