15,Chapter,Understanding the Business Value of Systems and Managing Change,Evaluate models for understanding the business value of information systems Analyze the principal causes of information system failure Assess the change management requirements for building successful systems,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,OBJECTIVES,Select appropriate strategies to manage the system implementation process Identify the challenges posed by implementing new systems and management solutions,OBJECTIVES (Continued),Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,Challenge: Change the organization and business processes at one of the worlds largest retail banking firms in order to support V-Banking systems Solutions: develop new business processes, retrain workforce, develop a customer-centric culture Train customers in the use of new digital banking services Illustrates the importance of changing the organization and culture in a business to support technology change,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,HSBC Malaysia Case,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Projects with 12-24 month objectives Longer periods infrastructure investments,Two kinds of IS investments:,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,Improvement in business processes to increase firm efficiency Improvements in management decision making,Two ways for producing value:,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Strengthening firm strategically (ties to partners, customers, increasing flexibility, etc.) Enabling future implementation of new technologies,Additional IS value from:,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Capital Budgeting: Process of analyzing and selecting various proposals for capital expenditures,Traditional Capital Budgeting Models,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,Capital expenditures:,Expand production to meet anticipated demand Modernize production equipment to reduce costs Can be noneconomic, e.g. installing pollution control equipment,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,The payback method The accounting rate of return on investment (ROI) The net present value The cost-benefit ratio The profitability index The internal rate of return (IRR),Six capital budgeting models for evaluating capital projects:,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Do not express the risks and uncertainty of their own costs and benefits estimates Costs and benefits do not occur in the same time frame. Inflation may affect costs and benefits differently. Intangible benefits are difficult to quantify.,Limitations of Financial Models,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Heartland Stores:,Case Example: Capital Budgeting for a New Supply Chain Management System,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,General merchandise retail chain in eight Midwestern states Five regional distribution centers, 377 stores, and about 14,000 different products in each store,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,New software and hardware to upgrade its supply chain management system Reduce inventory and inventory costs Reduce labor costs Reduce telecommunications costs Reduce transportation costs,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,Investment strategy and goals:,Costs and Benefits of the New SCM System,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Figure 15-1,Financial Models,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Figure 15-2,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Payback method: Measures the time required to pay back the initial investment of a project,The Payback Method,Management Information Systems Chapter 15 Understanding the Business Value of Systems and Managing Change,Heartland Stores: More than 2 years to pay back initial investment,UNDERSTANDING THE BUSINESS VALUE OF INFORMATION SYSTEMS,Calculates rate of return by adjusting the cash inflows produced by the investment for depreciation,Management Information Systems Chapter