Management Issues in

Systems Development

Chapter 10
 Today’s Lecture
• Introduction
• Project Management
– Definition, scope, best practices
– Change management
– Risk management
• Modernizing Legacy Systems
– To replace or not to?
– Improvement

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 Today’s Lecture
• Measuring systems benefits
– Differentiating systems roles
– IT investment assessments
– Return on (IT) Investments
• Conclusion

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 Introduction
• What are the management issues surrounding
systems development?
• IS as three separate businesses (lens)
– Infrastructure management (operations)
– Customer relationship (helpdesk)
– Product innovation (systems development)
• Project management is most sought-after skill
in systems development today

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 Project Management
• Project is a collection of related tasks and
activities undertaken to achieve a specific goal
within a finite time period (temporal)
• IT projects are similar to other forms but
arguably more difficult
– Intangibility (you cannot see it or feel it!)
• People become confused and concerned
• IT project management
– Coordination (managing interdependencies)

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 Scope: Job of a Project Manager
• Getting the project started (Why, what and
When, Who and How)
• Managing the schedule
• Managing the budget
• Managing the benefits
• Managing the risks, opportunities and issues
• Soliciting feedback and formative evaluation

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 Change Management
• Beyond technical aspects of system
• Managing change (people side of system)
– Assimilation of new systems into work processes
• Resistance (organizational inertia)
• ODR a methodology to manage technology-
triggered change (stakeholders involved)
– Sponsor
– Change agent
– Target

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 Change Management cont’d
• Discussed in earlier chapters
• Early 1990s architecture
– More flexibility than mainframe systems
– Workload (processing) split between client and
server
• Integration of pizzazz of the PC world with the
necessary back-end production strengths of
the mainframe world

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 The BOC Group
Case example: Change Management
• Re-engineer BOC’s core processes
• Teams assigned different processes to improve
– Understand semantics of entire process
– How to implement change
– Input into training plan
– Devise communication plan
• Garnering True Executive Sponsorship
– Vice presidents and directors
– ODR training workshop for sponsors

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 The BOC Group cont’d
• Involving middle management
– Advisory council
• Upward job: give feedback on implemented changes
• Downward job: obtain employee buy-in

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 The BOC Group cont’d
• One successful change project
– Team studied existing paperwork processing for
delivering gas products and invoicing customers
– Synergy established among IM and business staff
• Unexpected positive change dynamics (IT triggered)
– Implemented PODD in place of paper
– PODD advisory council facilitated upward and
downward communication
– Training program for drivers (less resistance)
– Sponsors identified and mitigated project risks
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 Risk Management
• Management of risks in IT projects crucial
– Technical risk
• Sub-performance; scope creep
– Business risk
• IT-triggered organizational change not as planned
• Risk management “cookbook”
1. Assess the risk
2. Mitigate the risk
3. Adjust project management approach

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 Risk Management cont’d
1. Assess change risks (predominant factors)
– Leadership
• Project leader should be business executive
• How does project leadership affect outcome?
– Employees’ perspective
• How would they react and why?
– Scope and urgency
• Is the scope too wide? How urgent?
– Gibson’s “plus-minus” decision tree

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Risk Management cont’d

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 Risk Management cont’d
• Mitigate the risks: involves identifying,
evaluating, prioritizing, and implementing
countermeasures to reduce risks
– Risk avoidance
• Identify and eliminate source of perceived risk
– Risk limitation
• Implementing controls to contain potential risk effects
– Risk transfer
• Letting others assume risk (outsourcing)

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 Risk Management cont’d
3. Adjust project management approach
– Project management style
• Authoritative vs. participatory
– Project budget and timeframe
• Rigid vs. flexible
– Gibson’s Four Approaches
• Big Bang Approach (all other 3 must be positive)
• Improvisation
• Guided evolution
• Top-down coordination

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Gibson’s Four Approaches to Risk
Management

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 Dow Corning
Case Example: Risk Management
• Successful ERP implementation (1995-1999)
– How did it manage the different business risks?
• Phase 0: Get Ready (assessed risks)
– Leadership (high)
– Employee perception (high)
– Scope and urgency (high)

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 Dow Corning cont’d
• Phase 1: Understand the new system
– Used improvisation approach of participatory
management and flexible deadlines
• Emphasized building employee commitment
• Phase 2: Redesign work processes
– Used guided evolution approach of participatory
management and fixed deadlines
• Achieving employee commitment did little to get work
processes redesigned
• Continued through the pilot (ERP cutover in new
European subsidiaries)

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 Dow Corning cont’d
• Phase 3: Implement ERP worldwide
– Used top-down coordination with an authoritative
management style and flexible timelines
• Pilot’s success demonstrated managers’ resolve and
shifted employee perception to the positive
• “Company wide” scope created negative shift
• Phase 4: Complete implementation
– Used the Big Bang approach of authoritative
management and firm deadlines
• ERP implemented in most sites by 1998, so all risk
factors turned positive

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 Fast Tips: Good IS Management
• Establish the ground rules: Define the technical and
architectural specifications for the systems following four
guidelines (Adhere to industry standards, Use an open
architecture, Web-enable the system, and Power with
subsystems)
• Foster discipline, planning, documentation and
management
• Obtain and document “final” user requirements
• Obtain tenders from all appropriate potential vendors
• Include vendors /suppliers in decision making
• Convert existing data
• Follow through after implementation
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 Modernizing Legacy Systems
• BCG study: Replace or not?
– About 40% of replacement projects fail
– Seduction of “new toys”/new technology
– Upgrading is a better option
• BCG three analyses (replace or not)
– Costs-benefits of system
– Fit between new system and business needs
– IS staff capabilities (Can they do the job?)

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Options for Improving Legacy Systems
1. Restructuring the system
– Getting system ready for reengineering
– e.g., An application working fine but not running
efficiently needs restructuring
– 7 steps involved in the process- Use automated
restructuring engines (Read on Page #319-320)

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Restructuring the System

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Options for Improving Legacy Systems
cont’d
2. Reengineering the system (not BPR)
– Reverse Engineering
• Extracting and converting data elements from existing
systems and formats
– Forward Engineering
• Moving them to new hardware platforms and creating
new applications

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Reengineering the System

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 Verizon Directories
Case Example: Reverse Engineering
• Produced, marketed and distributed
telephone directories
• Directory publishing system
– Four main databases, designed application by
application
• Data elements difficult to change, enhance and reuse
• Acquired reengineering tools to improve
databases

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 Verizon Directories
• Blueprint project
– Used a graphical tool to “reverse engineer” a
poorly designed database from its physical to its
data model, and designed a new data model
(blueprint) that is more flexible
• Reuse project
– Employed reengineering tools to reuse data
elements in the largest existing database to create
a new production scheduling system

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Options for Improving Legacy Systems
cont’d
3. Refurbishing the system
– Add new extensions to a “good working” old system
– Surround Strategy- Legacy system is a black-box.
– Some examples of legacy system extensions
• Supply input in a new manner
• Make new uses of input
• Allow programs to deal more comprehensively with data
• Add a Web interface around a “blackbox”
– e.g., FedEx’s package tracking system

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Options for Improving Legacy Systems
cont’d
4. Rejuvenate the system
– Adding new functions to a reengineered system
to make it more valuable
– Phases of rejuvenation process
1. Recognize a system’s potential
2. Clean up the system and make it more efficient
3. Establish a strategic role for the system
 Add new functionalities to create business value

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 Amazon.com
Case Example: System Rejuvenation
• Initiated Web Services program (2002)
– Access to Amazon’s state-of-art Web technology platform (pay
for what you use)
– No control over how subscribers use its system, but in return,
others are creating gadgets, links, services, and software that
Amazon.com cannot accomplish on its own
– Diversify into e-commerce platform business
• Used Web Services to rejuvenate its internal system by
giving it a strategic role via XML

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Options for Improving Legacy Systems
cont’d
5. Rearchitect the system
– Involves having an architecture for new systems,
and then using that design to upgrade legacy
systems
– CTOs now devising enterprise level IT
architecture
• How systems are interconnected
– One-system-at-a-time migration strategy

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 Toyota Motor Sales
Case Example: Rearchitect the System
• Created global reference IT architecture
– Standard and integrated application development environment
– Mapping of business requirement to IT strategies
• New architecture enabled the company to
– Remediate legacy systems
– Keep systems designs robust
– Deliver application faster
– Permit future flexibility

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Options for Improving Legacy Systems
cont’d
6. Replace with a package or service
– Replace a legacy system with a commercial
package
• Commercial packages have many options and features
that can be customized
– Replace with service delivered over the Internet
• Quick availability
• Outsource IS responsibility to vendors
• Cost can be expensed (tax benefits)

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 Wachovia
Case Example: Replace with a service
• Legacy contact management system
– Incompatible with new systems and not adaptable
for new business needs
– Maintained by consultants ($)
• Replaced with SalesForce CRM system
– Pay by use
• Equivalent to maintenance costs
– Provides necessary management information

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Options for Improving Legacy Systems
cont’d
7. Rewrite the system
– System is “too far gone” to rescue
• Code convoluted and patched; technology antiquated
– Alternative to replacement
• Rare (usually only for very specialized systems)

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 Measuring Systems Benefits
• Measuring the value of information systems is
an ongoing task for IS managers (justify)
– Constant evolution of technology
• Top executives demand specific links between
new systems and corporate financial
measures (e.g., ROA, revenue)
– Is this reasonable?

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Measuring Systems Benefits cont’d
• Difficult task because IT itself is only one of many
factors that contribute to successful use of systems
– IT can trigger a series of events toward a goal, but those events
are very much dependent on organizational context
– Can you measure the value of decision support systems or data
warehouses?
– Can you calculate the ROI of e-commerce systems?
• Three suggestions to alleviate this conundrum
1. Distinguish between different roles of systems
2. Measure what is important to management
3. Assess investments across organizational levels

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 Distinguish Between the Different
Roles of Systems
• Information systems can play three roles
1. Performance: “Support systems” to increase
efficiency
2. Business Value: Carry out a business strategy
• e.g., CAD system used to design products
3. Product or Service: Itself or as a basis for a
product or service
• e.g., Web-based information services

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 Distinguish Between the Different
Roles of Systems
1. Measuring organizational performance
– Meeting deadlines and milestones
– Operating within budget
– Quality (efficiency, costs)
• e.g., time and costs reductions
2. Measuring business value
– Impact on value network (relationships)
• Customers, partners, suppliers
3. Measuring a product or service
– Can be measured as a business venture (ROI)

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 Measure What is Important to
Management
• Identify all indicators management use
(besides accounting) to determine corporate
performance
– Customer relations
• e.g., satisfaction
– Employee morale
– Cycle time
• In other words, devise measurements for
what management considers its key success
factor(s), with regard to information systems

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 Assess Investments Across
Organizational Levels
• Sources of value for IT at three levels
– Individual
– Division (or department)
– Corporation
• Impact focus of an IT investment extends to
– Economic performance payoffs
– Organizational process payoffs
– Technology impacts (functionality)
• Combine views to form 3 x 3 matrix
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 A Trucking Company
Case Example: Assess Investment Across Organizational
Levels
• Refrigerated carrier business
– Sustained 50% loss in market share
– $10 million IT investment to improve position
• Satellite tracking and communication system
• Measures
– Increased driver productivity (.5 hr/day; $59.60/mth savings)
– Improved load truck matching (1% deadhead time; $49.68/mth
savings)
– Customers willing to pay premium for ability to communicate
(unexpected revenue benefits)

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Do Investors Value IT Investments?
• A study found that every $1 invested in computers
yielded up to $17 in stock market value (and no less than
$5) vis-à-vis
– $1 invested in property, plant and equipment (book value) only
yielded $1 in stock market value
– $1 investment in other assets (inventory, liquid assets, and
accounts receivables) yielded only $0.70
• Researchers’ argument
– IT investment creates intangible asset value
• Know-how, skills, organizational structures

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 Conclusion
• Project management is cardinal but also
toughest job in IS
– Cannot be outsourced
– Managerial skills (technical and business) crucial
• Mostly about managing people (stakeholders)
• IS project success is dependent on
– Sponsor commitment
• understanding and exercising role
– Assisting targets in making the change

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 Conclusion cont’d
• Information systems difficult to keep up-to-
date
• Process of justifying a new system can
uncover what is important to management
• Measuring benefits afterward can help
companies spot latent benefits
• Investors more highly value companies with
higher IT investments?
– What do you think?

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