Managing Information Systems For Strategic Advantage (Part 2)LEARNING GOALSChoosing Strategic ISQuestionsThe Balanced ScorecardSlide 6Total Cost of Ownership (TCO)TCO Analysis for PDA PurchaseThe IS Portfolio AnalysisSample IS PortfolioSlide 11Knowledge Management (KM)KM SystemsSlide 14Slide 15Summary QuestionsExpert SystemKMS1Managing InformationSystems For Strategic Advantage (Part 2)BUS3500 - Abdou Illia, Fall 2006(Week 12, Monday 11/7/2006)2LEARNING GOALSDescribe the methods organizations use to choose strategic IS projectsBalanced scorecardTotal cost of ownership (TCO)IS portfolio analysisExplain the concept of knowledge management and describe the technologies that comprise knowledge management systems.3Choosing Strategic ISIS face productivity paradoxIt is difficult to attribute cost savings directly to a specific information systemIt is difficult to prove that a specific IS led to certain financial outcomesChief Information Officer help choose strategic ISBy developing long-term IS strategyBy determining how to allocate IS budgetBy aligning IS portfolio with company’s strategiesTools used by CIOBalanced scorecardTotal cost of ownership (TCO)IS portfolio analysis4Questions1) Which of the following is true about the productivity paradox associated with investing in information systems? a) We can determine the cost associated with investing in information systemsb) We can easily attribute observed cost savings directly to specific information systemsc) We can easily prove that a specific information system led to specific profitsd) All of the above2) Which of the following is NOT among the kind of activities usually performed by a CIO?a) Design and develop strategic ISb) Manage IS portfolioc) Align a company’s IS portfolio with its strategies in different areasd) Determine a company’s long-term IS strategye) None of the above5The Balanced ScorecardAllows a company to address non-financial objectives that support its financial goalsAllows to investigate strategies in key areas and develop goals and measures for eachFinancialGoals Measures InitiativesImprove cash flowReduce expenses……Internal Primary Business ProcessesGoals Measures InitiativesDecrease production timeUnits/secImprove quality Defect rate…..CustomersGoals Measures InitiativesImprove customer satisfactionDecrease defects…….Learning and GrowthGoals Measures InitiativesDev. Successful new products……Vision& Strategy6The Balanced ScorecardCould help align investments in strategic IS with overall corporate strategyFinancialGoals Measures InitiativesImprove cash flowReduce expenses……Internal Primary Business ProcessesGoals Measures InitiativesDecrease production timeUnits/secImprove quality Defect rate…..CustomersGoals Measures InitiativesImprove customer satisfactionDecrease defects…….Learning and GrowthGoals Measures InitiativesDev. Successful new products……Vision& StrategyQ1: What kind of Strategic IS is needed if the Balanced Scorecard shows that Improving customer relationships is a major goal?Q2: What kind of Strategic IS is needed if the Balanced Scorecard shows that Developing successful new products is a major goal?7Total Cost of Ownership (TCO)Estimating IS costs and benefits is a SWAG*Costs include – Benefits includeHardware • Tangible benefitsSoftware • Intangible benefitsLaborTotal cost of ownership (TCO)Method to quantify long-term direct and indirect costs Indirect costsTrainingSystem downtime* Scientific Wild GuessBenefitsTangibleIntangible- Improved customer service - life savings for a medical ISDirect costsCapital expenses- Hardware costs - Software costs - Future upgrades - Future replacementsLabor costs- Custom develpt of software - Support and MaintenanceOverhead fees- Telecomm services - Maintenance contracts w/ vendors8TCO Analysis for PDA PurchaseInitial cost: 100 PDAs @ $300 each, i.e. $30000Replacement cost: 10% of PDAs replaced per year, i.e. $3000/yearSupport cost: $7000/year9The IS Portfolio AnalysisTreats investments in IS assets like a portfolio of investment assets to find redundancies and achieve balance in IS projectsFive steps1) Create an IS projects databaseContent: Project name, Description, Cost, Time line, staff assigned,…Objectives: Identify conflicting projects, lack of staff, etc.2) Prioritize the IS projectsBased on costs, benefits, chance of success3) Categorize IS projectsInfrastructure: Keep the basic company’s info. Systems runningUpgrades: Bring certain systems up to dateStrategic initiatives: Have potential to give a strategic advantage4) Automate the entire processEnter new IS projects in database, Re-prioritize, Re-categorize5) Perform a Modern Portfolio Theory analysis10Sample IS Portfolio11Questions1) Which of the following tools or techniques could be useful in identifying conflicting IS projects assignments like two big projects assigned to the same manager during the same time?a) Balanced Scorecardb) IS portfolio analysisc) Knowledge Work Systemd) Project Analysis2) Using the Balanced Scorecard, the CIO has determined that improving customer relationship must be one of the major goals for the company during the next five years. What kind of strategic IS the company should consider investing in?a) Transaction Processing Systemb) EDIc) Knowledge Work Systemd) SCMe) None of the above12Knowledge Management (KM)Knowledge assets is key for long-term competitive advantageKnowledge assets includeTacit knowledge within the minds of employeesExplicit knowledge in a tangible form such as databases, documents, and reportsKnowledge management (KM) Process by which organizations extract value from their knowledge assets to implement Knowledge Management Systems (KMS)Chief Knowledge OfficerDesigns and implements KMS13KM SystemsInformation systems that enable the exchange of knowledge among employees and the storage of knowledge in repositoriesKMS components:Expert directoriesKnowledge repositoriesKnowledge sharing technologiesKnowledge representation technologiesKMS usually available through company’s intranet and extranet14KM SystemsExpert directoryElectronic Phonebook that includes employees’ contact information and domain of expertiseKnowledge repositoryIncludes a company’s explicit knowledge retrieved from reports, documents, etc. and put