Paradigm Shift I Computing Paradigm Shift II Business

Paradigm Shift I. Computing Paradigm Shift II. Business Paradigm Shift Dr. Chen, The Challenge of the Information Systems Technology TM -1 -1

I. Computing paradigm Users Networks Computers Users Computers Networks

II. Business Paradigm Shift New Enterprise, Expert Systems BPR, Paperless Office 1990 s and Beyond l. Client/Server, l. Open Systems Multimedia l. Distributed Computing l. Object-Orientation Automated Enterprise, 1980 s Back Office Automation On-Line Transaction Processing l. Proprietary Systems l. Mainframes Legacy Enterprise, Manual Back Office 1970 s Manual Front Office 1960 s

Chapter 2 Manageable Trends • • • Strategic Impact of IT Integrating Changing Technology Platforms Assimilating Emerging Technologies Sourcing Policies for the IT Value Chain Applications Development Process Partnership of Three Constituencies N Dr. Chen, The Trends of the Information Systems Technology TM -4

Theme 1: Strategic Impact • Operational/manufacturing impacts – cost – coping with complexity – coordination – integration of technology into product • Marketing impacts – choice of product – service (e. g. , order confirmation, tracking) – value-added information – product customization Dr. Chen, The Trends of the Information Systems Technology TM -5

Figure 2 -1 IT Impact: Position of Industry Leaders High Information technology impact on operations (cost/complexity management, coordination, integration, etc. ) Defense Banks Airlines Retail Paper Consulting High fashion Low High Information technology impact on marketing (customer focus, reaction to change, provision of differentiation. Etc. ) Dr. Chen, The Trends of the Information Systems Technology TM -6

Figure 2 -2 IT Impact: Position of Key Players in Airlines and Banks High CHEM Information technology impact on operations AA UA Citi CI Low SW Key: AA - American Airlines UA - United Airlines Low Citi - First National Citibank CHEM - Chemical Bank of NY CI - Continental Illinois SW - Southwest Airlines Dr. Chen, The Trends of the Information Systems Technology High Information technology impact on marketing (customer focus. ) TM -7

A Contingency Approach to IT Use What four competitive investment strategies used when organizations are comparing their positions with industry leaders? High Increase integrative capacity Operations gap vs. industry leader Figure 2 -3 Targeting ITBased Investment (as Compared with Industry Leaders Maintain advantage Low Catch up Increase flexibility, responsiveness/ Differentiate products and services Low High Marketing gap vs. industry leader Dr. Chen, The Trends of the Information Systems Technology TM -8

A Contingency Approach to IT Management • What four IT environments are created by variation in strategic impact of existing systems and strategic impact of the applications development portfolio? Dr. Chen, The Trends of the Information Systems Technology TM -9

How to Capitalize on the real Business Opportunities? Integrating. . . STRATEGIES POLICIES ORGANIZATION INFORMATION TECHNOLOGY Theme 2: Integrating Changing Technology Platforms Dr. Chen, The Trends of the Information Systems Technology TM -10

Who should be Involved in the Project Development? Consists of. . . USERS TECHNICAL PROFESSIONALS PROJECT MEMBERS MANAGEMENT Dr. Chen, The Trends of the Information Systems Technology TM -11

Theme 2: Integrating Changing Technology Platforms • Advances in – Processing power – Data storage – Communications • Integration of – – Computing Telecommunications Office support Broadcasting • Reasons – Physical interconnections – Development involves multiple technologies – Opportunities for integration Dr. Chen, The Trends of the Information Systems Technology TM -12

Theme 3: Assimilating Emerging Technologies • Phase 1: Technology Identification and Investment – Identify technology of interest – Pilot project (usually in IT) to test 1. Innovation (Technical-oriented) • Phase 2: Technological Learning and Adaptation – Users test technology in pilot projects – Will the technology make us more effective? 2. Learning (User-oriented) • Phase 3: Rationalization / Management Control – Develop support systems and controls for efficient use of 3. Rationalization technology • Phase 4: Maturity / Widespread Technology Transfer – Spread technology throughout the organization 4. Maturity Dr. Chen, The Trends of the Information Systems Technology N TM -13

Theme 4: Sourcing Policies for the IT Value Chain What is outsourcing? • The phenomenon that appeared in the information systems field in the late 1980 s was outsourcing, which means turning over a firm's computer operations, network operations, or perhaps other information systems functions to a vendor for a specified time - generally, at least for three years. Dr. Chen, The Trends of the Information Systems Technology TM -14

OUTSOURCING CONTRACTING: • COMPUTER CENTER OPERATIONS • TELECOMMUNICATIONS NETWORKS • APPLICATION DEVELOPMENT TO EXTERNAL VENDORS * Dr. Chen, The Trends of the Information Systems Technology TM -15

Why Outsoucing? • Outsourcing has become an option that most CIOs need to consider to satisfy their management that their operation is being run efficiently, effectively, and economically Dr. Chen, The Trends of the Information Systems Technology TM -16

The Driving Forces Behind Outsourcing • Two drivers – focus 3 on core business – value 3 shareholder Dr. Chen, The Trends of the Information Systems Technology TM -17

Outsourcing As an Economic Strategy • Core competencies • Which sources are less expensive • How much control is needed Dr. Chen, The Trends of the Information Systems Technology TM -18

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The Expanding Scope of Vendor Options ÊTo buy professional services ËTo buy a product ÌTo buy a transaction ÍTo use a systems integrator - project based ÎOutsourcing - time based Cost Speed Dr. Chen, The Trends of the Information Systems Technology Quality Products/Services TM -20

The Expanding Scope of Vendor Options ÊTo buy professional services ËTo buy a product ÌTo buy a transaction ÍTo use a systems integrator - project based ÎOutsourcing - time based Cost Speed Dr. Chen, The Trends of the Information Systems Technology Quality Products/Services TM -21

When to Outsourcing? • Which IS activities are strategic to our company's business? • Will outsourcing save us at least 15 percent? • Does our firm have access to the needed technology and expertise? – If not, outsourcing may be the answer to acquiring these resources. • Does outsourcing increase our firm's flexibility? Dr. Chen, The Trends of the Information Systems Technology TM -22

What Activities that Management should not Outsource? • strategy • policy role • the decisions about when to introduce information systems into the organization • the management of the vendor • when the system (IS) department is well managed, and where IT is a core competency Dr. Chen, The Trends of the Information Systems Technology TM -23

OUTSOURCING BENEFITS • • • Economy Service quality Predictability Flexibility Making fixed cost variable Freeing up human resources for other projects • Freeing up financial capital Dr. Chen, The Trends of the Information Systems Technology TM -24

CONS OF OUTSOURCING • Loss of control • Vulnerability of strategic information • Dependency Dr. Chen, The Trends of the Information Systems Technology TM -25

Outsourcing Recommendations • Write shorter contracts - less than 5 years • Subcontract control • Selective outsourcing Dr. Chen, The Trends of the Information Systems Technology TM -26

Desirable Outcomes and Implementation Issues • • • On-time On-budget Full functionality user acceptance Favorable cost-to-benefits ratio Low maintenance Scalability Integration with other systems Reusability Dr. Chen, The Trends of the Information Systems Technology TM -27

Theme 4: Sourcing Policies for the IT Value Chain • Why Make? – – – Custom to needs Confidentiality Insulate from external vulnerability Easy to adapt Leading-edge competence • Why Buy? – – – Access to specialized skills Cost Staff utilized for most important products Personnel costs “Professional” management of service organization Proliferation of services available Dr. Chen, The Trends of the Information Systems Technology TM -28

Theme 5: Applications Development Process • SYSTEM DEVELOPMENT PROCESS LIFE CYCLE (SDLC ) ( Dr. Chen, The Trends of the Information Systems Technology TM -29

SYSTEM DEVELOPMENT (Life Cycle) PROCESS • • • SYSTEMS ANALYSIS SYSTEM DESIGN PROGRAMMING TESTING CONVERSION PRODUCTION & MAINTENANCE * Dr. Chen, The Challenge of the Information Systems Technology TM -30

SYSTEMS DEVELOPMENT CORE ACTIVITY DESCRIPTION SYSTEMS ANALYSIS IDENTIFY PROBLEM(S) SPECIFY SOLUTIONS ESTABLISH INFORMATION REQUIREMENTS SYSTEMS DESIGN CREATE LOGICAL DESIGN SPECS CREATE PHYSICAL DESIGN SPECS MANAGE TECHNICAL REALIZATION OF SYSTEM PROGRAMMING TRANSLATE DESIGN SPECS INTO PROGRAM CODE Dr. Chen, The Challenge of the Information Systems Technology TM -31

SYSTEMS DEVELOPMENT CORE ACTIVITY DESCRIPTION TESTING UNIT TEST SYSTEMS TEST ACCEPTANCE TEST CONVERSION PLAN CONVERSION PREPARE DOCUMENTATION TRAIN USERS & TECHNICAL STAFF PRODUCTION & MAINTENANCE OPERATE SYSTEM EVALUATE SYSTEM MODIFY SYSTEM Dr. Chen, The Challenge of the Information Systems Technology TM -32

Theme 5: Applications Development Process • Design – User request or IT/user proposal – Analysis – (Logical) Design • Construct – Detailed design – Coding – Documentation – Testing – Acquisition Dr. Chen, The Trends of the Information Systems Technology TM -33

Theme 5: Applications Development Process (Cont. ) • Implement – Redesign – Install – Train – Systems test • Operate – Acceptance test – Retrain • Maintain – “Modernization” – Continuous improvement Dr. Chen, The Trends of the Information Systems Technology TM -34

Theme 6: Partnership of Three Constituencies Consists of. . . USERS Management IT Management GENERAL Management Dr. Chen, The Challenge of the Information Systems Technology TM -35

Theme 6: Partnership of Three Constituencies • IT Management – – Pool of technical skills Technology scan “Professional” development Process reengineering • User Management – Movement of operational responsibilities to IT – Availability of outside services – User IT sophistication and experience • General Management – Must balance IT / User issues – Executives balance IT/strategies Dr. Chen, The Trends of the Information Systems Technology TM -36

SPECTRUM OF ORGANIZATIONAL CHANGE RATIONALIZATION AUTOMATION ORGANIZATIONAL CHANGE PARADIGM SHIFT Dr. Chen, The Trends of the Information Systems Technology REENGINEERING TM -37

SPECTRUM OF ORGANIZATIONAL CHANGE • AUTOMATION: Using technology to perform tasks efficiently / effectively • RATIONALIZATION OF PROCEDURES: Streamline SOPs; eliminate bottlenecks • BUSINESS PROCESS REENGINEERING: Radical redesign of processes to improve cost, quality, service; maximize benefits of technology • PARADIGM SHIFT Dr. Chen, The Trends of the Information Systems Technology TM -38

What is Business Process and Business Reengineering? • Business process: A set of logically related tasks performed to achieved a defined business outcome • Business reengineering means radically changing how people work - changing business policies and controls, systems and technology, organizational relationships and business practices, and reward programs. Dr. Chen, The Trends of the Information Systems Technology TM -39

BUSINESS REENGINEERING STEPS: 1. Develop business vision, process objectives 2. Identify process to be redesigned 3. Understand, measure performance of existing processes 4. Identify opportunities for applying information technology 5. Build PROTOTYPE of new process Dr. Chen, The Trends of the Information Systems Technology TM -40

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