Evaluating the Impact of IT on the Organization

1. Evaluating the Impact of IT on the Organization Chapter 14 Z Irani & P.E.D. Love Presented By: Agasi Aslanyan CIS 590

2. Introduction • This research uses case study approach to examine the technology management experience of a leading UK manufacturing organization, Company V • In the study, authors compared development process of two software systems and provided detailed information about factors which were accountable for success or failure of system. • Company first implemented a vendor-supplied Manufacturing Resources Planning (MRPII), which ended up being a failure due to failure to satisfy user requirements • In order to stay competitive in market, the company was forced to develop a bespoke MRPII. • In today’s competitive business markets, companies strive for a unique competitive advantage enhanced with successful information technology. Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

3. The adoption of IT is a lengthy and complex process, which is why the efficiency of its management determines the difference between corporate success and failure. • They conducted interviews with the Managing Directors, Production Directors and more importantly with the Shop floor employees. • They collected primary and secondary data resources to help them analyze the success and failure factors of the information system implementation. • Several factors contributed to the failure of the first system [vendor-supplied (MRPII) ] • Traditional appraisal techniques • Software Package unfit for purpose • Cost • So what did Company V do different with the bespoke MRPII to make it a success story? Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

4. Company Background • Company V produces a wide variety of made-to-order parts, products and assemblies for large number of customers in diverse industries • It has a make-to-order inventory policy with almost every component part having a very low level of standardization and very few common components • To produce this very complex and less common products, highly flexible production capability is required • Materials produced according to customers’ specifications. In this type of manufacturing, timing and effective communication with the customers key • In order for the company to improve, innovate and remain competitive, it needed to have a versatile manufacturing equipment, flexible employees and maximum utilization of technology

5. Company V Organizational Chart Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

6. Case Findings and Analysis • The 'success' of Company V's previous investments helped give them the encouragement and motivation they needed to introduce a computerized Production Planning and Control (PPC) system • The measure of 'success' used by Company V was the removal of 'procedural pain ' -that is, if it was not considered painful to carry out the new computerized procedure, the project was considered a success • Driving force behind the PPC project was the managing director, who could see the long-term strategic implications to invest in IT. Other factors behind the decision to invest include pressure by customers to offer cost reductions. • Therefore, traditional criteria for evaluating IT project success are no longer correct and should be replaced by measures that reflect new approaches to system development and management.

7. Case Findings and Analysis • In this project, Company V lacked a formal justification process, because they had not previously invested in projects that were outside the scope of traditional appraisal techniques Company’s Previous Investment Experience • Computer Numerically Controlled (CNC) equipment had been financed through loan agreements where cash flow projections and sensitivity analysis had been used to assess the impact and risk of the investment • In such cases the focus is on direct financial benefits and costs, whereas the PPC system was viewed as providing a portfolio of benefits and costs, which were not easily accommodated within those appraisal techniques traditionally used by Company V • Soon as Company V discovered that the accountancy frameworks were not suitable for investments with intangible, nonfinancial benefits and indirect costs, as they provided inappropriate information for rigorous evaluation.

8. Case findings and analysis • A new and inexperienced management team , which was unaware of the latest appraisal techniques, used a simplistic Cost/Benefit Analysis (CBA). Latest appraisal techniques take into account qualitative costs and benefits • Management's use of CBA allowed the listing of perceived project benefits and costs, but no assignments of financial values were made to the PPC implications identified • This was due to the complexity, subjectivity, and time-consuming nature of identifying and assigning arbitrary values to the intangible and nonfinancial benefits and costs associated with the PPC investment • In terms of costs, CBA could only identify direct financial costs such as uninterruptable power supply , file servers, additional networking software, & …, but failed to measure costs of intangible factors • In terms of benefits, CBA proposed that investment benefits typically fall into three categories : strategic, tactical and operational benefits, but failed to provide further info about impact of each In particular, major strategic benefits such as perceived market leadership, leadership in new technology, and promotion of an 'open business culture' were not readily convertible in financial terms. • Next slide illustrates a taxonomy of strategic benefits identified as part of Company V’s cost and benefit analysis

9. Case findings and analysis intangible X X X X X X X X X X X Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

10. Case findings and analysis

11. Case findings and analysis X X

12. The interdependent nature of these categories ---

13. Case Findings (Problems) • Company V was unable to accurately calculate the financial returns achievable, an 'act of faith' decision to invest was made. The basis for this investment strategy, although ad hoc, was that the company was unable to calculate accurately the scope and magnitude of the investments' benefits. • Particularly, the far-reaching implications of intangible & nonfinancial benefits together with indirect costs that later appeared, added to the complexity of evaluation of investment • During the implementation of the core PPC module, it became evident that the vendor-supplied system required the data to fulfill its (the software's) needs, rather than fitting the way Company V operated • However, 'major' reengineering of business processes just to satisfy the software was considered expensive, non-value- adding, and time-consuming for Company V, which is why reengineering of the business process had to be avoided

14. Case findings (Problems) • Employee resistance and a culture based on reactive isolation added to the implementation problems • People openly blamed the IS when things went wrong • Confrontation between Company Director and Production Director • It appeared that Company V's biggest problem was their core vendor- supplied PPC module, which worked extremely well if kept supplied with a continuous flow of 'clean data.' • If there were glitches in data recording or accuracy, the system became highly unstable and unreliable . To remedy this situation, implementation team researched to purchase a vendor shop floor data collection (SFDC) module • It was also found that the operational workforce did not receive an orientation on the importance of PPC and on how a new module like SFDC could make a contribution to the performance of the PPC function

15. Case findings (Problems) • Finally, the software selection and implementation team regretted not educating the workforce • This was particularly painful to the team, because management considered this lack of education and training as a barrier to the program being accepted at an operational level • Skepticism and the implications of misuse resulted in 'unreliable' data, which brought issues into the Master Production Schedule (MPS).

16. Results: • Inaccurate customer delivery lead times being quoted • Falls in productivity • Loss of a customer base Obviously, these factors had a significant impact on the perceived success of the IS and were not acknowledged as implementation issues during the system’s evaluation phase At this point, due to the lack of success, managing director turned his attention to a new project which was bespoke MRPII

17. Development of a bespoke MRPII System • Due to Company’s need for an integrated system, key employees set about developing their own business solution. However, this contradicted the managing director’s initial justification for purchasing vendor software • It would appear that human and organizational issues played a crucial part in the decision-making process to develop a bespoke software system • The development of bespoke software was intended to give Company V a new opportunity to gain operational support for the successful implementation of MRPII • New indirect costs (such as organizational and human costs) in addition to the already realized direct costs were identified • So company needed to find ways to reduce the cost as much as possible to make the new system effective and functional

18. Taxonomy of indirect human costs • Management/ Staff Resource • Management Time • Cost of ownership: system support • Management Effort and Dedication • Employee Time • Employee Training • Employee Motivation • Changes in Salaries • Software Disposal • Staff Turnover Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

19. Taxonomy of indirect organizational costs • Productivity Losses • Strains on Resource • Business Process Reengineering • Hardware Disposal • Organisational Restructuring

20. Development of Bespoke MRPII • It was decided by the managing director to hire a consultant firm, as help was needed to facilitate the design, development and implementation process • Company V also decided to reassess its strategic direction, organizational strengths/weakness, and revise its business plan to develop a project strategy • Company also began a series of intensive strategic educational sessions and workshop trainings • To help keep the cost down, Company employed industrial students for a period of 6 months to 1 year to work on this project Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

21. Development of Bespoke MRPII (cont) • Students were supervised by a member of staff from university, so company had technical academic support • This policy helped to keep the system development cost down, thus reducing the need for expensive consultants and outside contract engineers • In addition, having students maintained constant stream of innovation, inspiration and motivation • During development phase, company mapped out its entire business process using flowchart tools • This enabled processes to be reengineered and facilitated the removal of non-value-adding activities before any systems were computerized • This approach was considerably different from earlier attempts which were mainly generic and around the functionality of the vendor-supplied software • The reengineering of business processes prior to development of bespoke system allowed for the software to be programmed and modeled on best practice activities Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

22. Comparative Review of Technology Management Processes As a result of this case study findings, a number of technology management factors have been identified as having an impact on the failure or success of Company V’s adoption of MRPII

23. Comparative review of technology management processes (conted) Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

24. Conclusion • The increased scope of new technology has not only provided organizations with enablers for change, but also prompted companies to reassess the way they evaluate, manage, and exploit technology. • The strategy adopted by the case study when evaluating the MRPII investment was an 'act of faith,' and thus ad hoc in nature. • The relatively new and inexperienced management team further complicated the justification process, as a result of their lack of knowledge in regards to IS-related benefits and costs • There are also serious implications connected with the poor project management, which in part was presented by indecisive and inconsistent leadership • The case study points to the significance of human and organizational factors that need to be taken into consideration during evaluation process

25. Questions?

26. Pop Quiz • 1) The methods which return the values back to the calling code are called as •        a) Constructors •        b) Interrogative methods •        c) Imperative methods • 2) How do you terminate code execute with in a VB.NET method •        a) Exit •        b) Close Sub •        c) Exit Sub •        d) Kill Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

27. 3) How do you create a Read only Property in VB.NET •        a) Using Only Get..EndGet with in property definition  •        b) Using Only Set..EndSet with in property definition •        c)  Using both Get and Set • 4) The constructors in VB.Net is similar to which event in previous versions of VB •        a)  Class_Load •        b) Class_Terminate •        c) Class_Initialize  • 5) Which interface allows to implement the Dispose method to do cleanup work •        a) Idestructor •        b) Icleanup  •        c) Idisposable Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

28. 6) How do you call non shared methods of a class •        a) Directly invoking the method name •        b) Invoking the method through the instance of that class  •        c) None of the above • 7) How do we implement private interfaces •        a) Using Inherits Keyword •        b) Private interfaces can not be implemented  •        c) Using Implements Keyword • 8) Where do you find COMException class •        a) System.Runtime.Interopservices  •        b) System.XML •        c) System. Data Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization

29. 9) Which method of the XMLdocument class takes xml as string while loading •        a) Loadxml ( )  •        b) Load( ) •        c) Save ( ) • 10) Which is the base class for TypedDataset •        a) DataReader •        b) Dataset  •        c) DataAdapter Based on M Irani Z and D E Love Evaluating the Impact of IT on the Organization