post a 500-word synopsis of your understanding of the concepts reviewed. In your posting, include questions about any course concepts that are unclear.

Management

Challenges

Foundation

Concepts

Information

Technologies

Business

Applications M o d u l e I V

Development

Processes

C h a p t e r H i g h l i g h t s Section I Planning Fundamentals Introduction Organizational Planning The Scenario Approach Real World Case: IT Leaders: IT/Business Alignment Takes on a Whole New Meaning Planning for Competitive Advantage Business Models and Planning Business/IT Architecture Planning Identifying Business/IT Strategies Business Application Planning Section II Implementation Challenges Implementation Implementing Information Technology Real World Case: Centene, Flowserve, and Shaw Industries: Relationships, Collaboration, and Project Success End-User Resistance and Involvement Change Management Real World Case: Forrester, NMSU, Exante Financial Services, and Others: Getting Real about Strategic Planning Real World Case: Blue Cross and Blue Shield, and Others: Understanding the Science behind Change

L e a r n i n g O b j e c t i v e s After reading and studying this chapter, you should be able to:

1. Discuss the role of planning in the business use of information technology, using the scenario approach, and planning for competitive advantage as examples.

2. Discuss the role of planning and business models in the development of business/IT strategies, architectures, and applications.

3. Identify several change management solutions for end-user resistance to the implementation of new IT-based business strategies and applications.

447

CHAPTER 11

DEVELOPING BUSINESS/IT STRATEGIES

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SECTION I P l a n n i n g F u n d a m e n t a l s

Imagine taking a caravan of thousands of people on a journey with no map, no plan, no one in charge, no logistical support, no way to keep everyone informed, no scouting reports to assess and update progress, and no navigational instruments. It would be sheer madness, yet that’s how most companies are handling the transition to e-business.

Information technology has created a seismic shift in the way companies do business. Just knowing the importance and structure of e-business is not enough. You need to create and implement an action plan that allows you to make the transition from an old business design to a new e-business design.

That is why you need to learn some fundamental planning concepts, which is the goal of this section. We will first discuss several strategic planning concepts and then talk more specifically about developing IT-based business strategies and other plan- ning issues. In Section II, we will discuss the process of implementing IT-based busi- ness plans and the challenges that arise when introducing new IT strategies and applications within a company. Read the Real World Case on the next page. We can learn a lot about recent trends in business/IT alignment and the new role of senior IT executives. See Figure 11.1 .

Figure 11.2 illustrates the components of an organizational planning process. This fundamental planning process consists of (1) team building, modeling, and consensus; (2) evaluating what an organization has accomplished and the resources they have ac- quired; (3) analyzing their business, economic, political, and societal environments; (4) anticipating and evaluating the impact of future developments; (5) building a shared vision and deciding on what goals they want to achieve; and (6) deciding which actions to take to achieve their goals. The result of this process is what we call a plan, which formally articulates the ac- tions we feel are necessary to achieve our goals. Thus, a plan is an action statement. Plans lead to actions, actions produce results, and part of planning is learning from results. In this context, the planning process is followed by implementation, which is monitored by control measures, which provide feedback for planning. Strategic planning deals with the development of an organization’s mission, goals, strategies, and policies. Corporations may begin the process by developing a shared vision using a variety of techniques, including team building, scenario modeling, and consensus-creating exercises. Team planning sessions frequently include answering strategic visioning questions such as those shown in Figure 11.3 . Tactical planning in- volves the setting of objectives and the development of procedures, rules, schedules, and budgets. Operational planning is done on a short-term basis to implement and con- trol day-to-day operations. Typical examples are project planning and production scheduling. Many organizational planning methodologies are used in business today. In this section, let’s concentrate on two of the most popular methodologies: the scenario ap- proach and planning for competitive advantage.

Planning and budgeting processes are notorious for their rigidity and irrelevance to man- agement action. Strict adherence to a process of rapid or efficient completion may only make the process less relevant to the true management agenda.

Managers and planners continually try different approaches to make planning eas- ier, more accurate, and more relevant to the dynamic, real world of business.

Introduction

Organizational Planning

The Scenario Approach

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IT Leaders: IT/Business Alignment Takes on a Whole New Meaning

can stream movies wirelessly, one of several products and features that Sony’s IT group itself helped make possible. CIOs should get their IT departments involved in product development—if IT can truly step up. “You have to have an awareness of where your business is trying to go,” he says. “Then you have to make sure you have the capability to sup- port that.” “At Konica Minolta USA, the IT group also influences what the company sells,” says Nelson Lin, CIO of the U.S. unit that is part of the $9.7 billion Konica Minolta Holdings in Japan. For example, Konica Minolta printers, measurement devices, and medical tools contain enough computer technol- ogy that when they break or get replaced, customers must dis- pose of them carefully to avoid environmental hazards. Lin saw end-of-life equipment disposal as a service that customers would pay for. Lin and other senior executives view Konica Minolta as an advanced technology company and through that prism, he says, the CIO’s input becomes even more valuable. He stepped up to lead discussion of equipment disposal as a money-maker. “I’m doing it for our own e-waste already. It’s now a matter of doing this large scale,” he says. “It’s the right thing to do, everyone knows. But it could be revenue for us, too.” Denise Coyne, CIO of Chevron’s corporate departments and services companies, was previously CIO of the oil and gas giant’s marketing group as well as manager of 200 Chev- ron gas stations. She would go to conventions to talk up the company’s point-of-sale system with gas station operators. “I found out what they wanted,” she says. Her MBA and nine years in mar- keting have shaped how she approaches IT, she says, assessing projects from finance and business perspectives, for example. Patti Reilly White has been with Darden Restaurants for 20 years, 10 of them as CIO. IT has “always” been customer- focused at Darden, she insists, but the past two years have been particularly intense. Projects in development include a system to text customers when their tables are ready, doing away with the flashing-light buzzers that restaurant greeters now hand out to waiting diners. “What our guests want is for us to value their time and personalize the experience for them. We in IT try to find ways to do that,” Reilly White says. Some CIOs even run businesses themselves. In addition to overseeing internal IT for the $3.6 billion Nasdaq OMX Group, executive vice president and CIO Anna Ewing runs Market Technology, a division that sells Nasdaq’s technology to financial exchanges around the world. The unit brought in $359 million in contracts in 2008, for everything from advisory services (helping customers set up various kinds of exchanges) to trading, clearing, and post-trade systems. Before coming to Nasdaq in 2000, Ewing didn’t have profit-and-loss responsibility in her previous positions at CIBC World Markets or at Merrill Lynch. But at those

CIOs thought they knew what business-IT alignment was. But fighting the dark forces of recession has re-ally taught the lesson—to some of them, anyway. At a truly aligned company with all cylinders firing, every executive, every manager, every employee works on one goal: winning customers. In the past, CIOs saw their role as, say, in- stalling business intelligence tools so that the marketing group could analyze customer data, or upgrading enterprise resource planning software for the supply chain guys to improve order fulfillment. Vital work, of course, but inwardly focused and a few steps removed from living, breathing, money-spending customers. But now, as shown in the 2010 State of the CIO survey by CIO Magazine, top technology executives increas- ingly see bringing home the bacon as their job, too. Nearly one third—30 percent—of the IT leaders polled say meeting or beating business goals is a personal leader- ship competency critically needed by their organizations, up significantly from the 18 percent who said so one year ago. Eighteen percent also named “external customer focus” as a critical skill, double 2009’s 9 percent. Double. Meanwhile, 22 percent cited “identifying and seizing on commercial opportunities”—up more than triple from the year before. Yes, triple. It’s clear that the recession has deepened CIOs’ under- standing of and commitment to business beyond IT. CIOs are interacting with customers directly and working side by side with product engineers to build IT into new goods and services. “In so many of the products offered now, the differentiat- ing component is the IT capability,” says Drew Martin, CIO of Sony Electronics. Certain Sony televisions, for example,

REAL WORLD

CASE 1

CIOs are increasingly turning their attention to customers and new product opportunities.

F I G U R E 1 1 . 1

Source: © Punchstock.

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companies, she chose a commercial direction as much as she could: At CIBC, she was a founding member of the financial services company’s e-commerce site. Among several posi- tions at Merrill, she led client technology. She was named Nasdaq’s CIO in 2005. At Nasdaq, Ewing and her team recently launched a free iPhone application for checking stock quotes as a way to ex- periment with hot new consumer technology and seed the ground for some revenue-generating app in the future. The app debuted on a Friday. By Tuesday, without advertising, the stock-checker was the fifth most downloaded free financial app at Apple’s site. “We wanted to see if the appetite was there,” Ewing says. “It is.” A CIO’s ability to spot new busi- ness opportunities comes from thinking like a CEO, she says. “Product development and technology go hand-in-hand.” Still, most CIOs have no P&L duties. That’s a mistake, says Bill Deam, CIO of Quintiles Transnational, a $2.7 bil- lion medical research company. Starting in 2007, most of Quintiles’ top executives, including the COO, the head of corporate development and Deam himself, were assigned one key customer account. Deam says he tries to cultivate good relations with senior managers at his assignment, a $15 billion biotech and pharmaceuticals firm. Quintiles helps the biotech firm conduct clinical trials for medicines in development. Deam reviews the account with an executive at the customer company every Friday and visits every six months. He hopes his efforts not only pro- duce closer ties but also more business between the two companies. But that takes time. “They want to make sure that all the work we do for them is performed excellently, without issues,” Deam says. “Then we can go to the next phase of the relationship; this is very much about the business side,” he says. For example, Quintiles would like to sell customers on the idea of out- sourcing their technology infrastructures, Deam says, and he sees a pivotal role for himself in that strategic sales process. “My job is to make sure senior executives feel comfortable enough to talk to each other.” Doing sales calls is a relatively simple way for a CIO to learn about customers. The CIO’s presence also adds weight to what the salesmen claim. Having a CIO on a sales call

isn’t uncommon, but it’s especially important now when so many products and services rely on IT, says Hilton Sturisky, senior vice president for information and communication technology with the $14 billion BCD Travel. BCD manages travel for big companies whose employees use BCD’s web technologies to, for instance, book flights and hotels. Special services, such as tools for analyzing your com- pany’s travel data for ways to cut costs, are also available. When Sturisky went out with BCD’s sales team recently, it wasn’t so much to contribute but to listen, he says. BCD hasn’t yet won the contract; sales cycles are 9 to 12 months in the travel services industry, he says. But he thinks that being there made a difference. “There was appreciation that we take a collective approach to serving customers and that added credibility to what the sales professionals were saying,” he says. As a result of those conversations, Sturisky is considering how to provide such new services as sending notifications of canceled flights to travelers’ smart phones, along with alter- native itineraries. CIOs who want to focus on external customers may have to deal with internal resistance. The way to overcome that, says Coyne of Chevron, is to be visible. When she is trying to change how people work, for exam- ple, she meets in person as much as possible with colleagues above and below her. At “Dining with Denise” lunches, she talks with lower-level employees about corporate change. At meetings once or twice a year with Chevron’s senior-most ex- ecutives, she explains the value of IT. In between there are monthly meetings with departments and governance boards. All the while, it’s her voice, her face out there. “Blogs, e-mail, town halls, dining. The objective for me is to continuously remind everyone of the bigger picture.” Reilly White, too, is aware of her visibility at Darden and tries to use it as a tool. When restaurant operations crews see IT managers and staff in kitchens and dining rooms, they know Reilly White takes their partnership seri- ously. If you’re not “out there” she says, you risk not under- standing what your business needs.

Source: Adapted from Kim S. Nash, “2010 State of the CIO: Today’s Focus for IT Departments—Business Opportunities,” CIO.com , December 17, 2009.

1. How does the job of the CIO change with the assump- tion of customer responsibilities? Do you agree with this new development. Why or why not?

2. Why would there be internal resistance to CIOs be- coming more externally customer-focused than they were before? Does this present a threat to executives in other areas of a company?

3. How do companies benefit from having their CIO meet customers and generally become more involved with product development? What can companies do now that was not possible before? Provide a few examples.

1. The IT function is notorious for being dynamic, and its leaders are no exception. Go online to research recent trends affecting the traditional roles of senior IT execu- tives and how those roles are changing. Prepare a pres- entation to share your findings with the rest of the class.

2. “In the future, the prevalence of IT in product offerings will blur the distinction between IT and other areas of the company, to the extent that the IT function will cease to exist as a separate entity.” Do you agree with this state- ment? Why? Break into small groups with your class- mates to see if you can reach a consensus on the issue.

REAL WORLD ACTIVITIES CASE STUDY QUESTIONS

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Chapter 11 / Developing Business/IT Strategies ● 451

The scenario approach to planning has gained in popularity as a less formal, but more realistic, strategic planning methodology for use by business professionals. In the scenario approach, teams of managers and other planners participate in what management author Peter Senge calls microworld, or virtual world, exercises. A micro- world is a simulation exercise that is a microcosm of the real world. In a microworld exercise, managers can safely create, experience, and evaluate a variety of scenarios of what might be happening, or what might happen in the real world.

When a work team goes white-water rafting or engages in some other outdoor team-building exercise, the team members are creating a microworld to reflect on and improve the way they work together. When personnel staff create a role-playing exercise to be used in a supervisory training, they are creating a microworld. Many team retreats serve as microworlds.

Thus, in the scenario approach to strategic IS planning, teams of business and IS managers create and evaluate a variety of business scenarios. For example, they make assumptions about what a business will be like three to five years or more into the future, and the role that information technology can or will play in those future scenarios.

F I G U R E 1 1 . 2 The components of an organizational planning process.

Analyze the Organization’s Environment

Evaluate Accomplishments and Resources

Team Building, Modeling, and

Consensus

Develop Implementation Methods and

Controls

Develop Strategies Policies Tactics

Articulate the Organization’s

Plan

Feedback

Establish Vision Mission Goals Objectives

Forecast Internal and External

Developments

F I G U R E 1 1 . 3 Examples of strategic visioning questions in planning for e-business initiatives.

• Understanding the Customer

Who are our customers? How are our customers’ priorities shifting? Who should be our target customers? How will an e-business help reach our target customer segments?

• Customer Value How can we add value for the customer with e-business services? How can we become the customer’s first choice?

• Competition Who are our real competitors? What is our toughest competitor’s business model? What are they doing in e-business and e-commerce? Are our competitors potential partners, suppliers, or customers in an e-business venture?

• Value Chain How would we design a value chain if we were just starting an e-business? Who would be our supply chain partners? What roles should we play: e-commerce Web site, B2C portal, B2B marketplace, or partner in an e-commerce alliance?

Strategic Business Visioning

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Alternative scenarios are created by the teams or by business simulation software, based on combining a variety of developments, trends, and environmental factors, in- cluding political, social, business, and technological changes that might occur. For example, Figure 11.4 outlines key business, political, and technological trends that could help guide business/IT planning.

F I G U R E 1 1 . 4 Converging business, political, and technological trends that are shaping strategic business/IT planning.

Technology

• Electronic Commerce • Customer Information Technology • “Death of Distance” • Digital Everything, Technology Convergence • Information Content of Products and Services Increasing Steadily

Competitive Imperatives

• Imperatives: - Real Growth - Globalization - Customer Orientation - Knowledge and Capability as Key Assets - New Entrants • Enablers: - Alliances - Outsourcing

Deregulation

• Regulated Markets Opening Up • Fewer Regulatory Impediments in Business • Single Currency Zones • Regulators Outflanked by Changing Boundaries and Unstoppable Forces (Internet and e-Business)

Customer Sophistication/

Expectations

• Demand for Better and More Convenient Solutions • Increased Emphasis on Service • Demand for Added Value • Less Tolerance for Poor Standards • Just-in-Time Delivery • Global Influences • Brand “Savvy”

Converging

Trends

CIOs are frequently asked, “What are our IT risks?” Unfortunately, this question is too generic because there are multiple kinds of risk. Before starting any risk assess- ment, IT needs to understand both the concern prompting the request and which risks need to be assessed. Moreover, everyone needs to understand that nearly all risks that affect an IT organization affect the entire business. Risks fall into four cat- egories that require different mitigation tools: Business operations risk . An assessment determines the risks involved in ad- dressing or ignoring a particular competitive threat. Analyzing competitive threats helps the company decide whether to invest the resources necessary to combat the threat. Determining appropriate responses to competitive threats from nontradi- tional sources can be particularly difficult. The appropriate mitigation tool is a good business case that evaluates all associated risks. For new business opportunities, a thorough risk assessment may be as important to success as accurate financial projections. Program risk . For approved or existing programs, management concerns focus on whether the program or project will be delivered on time, within budget, and with high quality. Effective project management and regular monitoring mitigate risk. Business interruption risk . This type of risk affects the company’s ability to continue operating under difficult circumstances. Scenarios run the gamut from a failed server to a destroyed building. In most cases, a failed server causes minor prob- lems for certain people. In contrast, a destroyed building can bring all company op- erations to a halt. A continuity-of-operations plan that describes how the business will function in the event of various difficulties mitigates risk. Market risk . This category is divided into geopolitical and industry-specific risks. Geopolitical risks include war, terrorism, and epidemics, as well as nationalization and import restrictions. These risks vary depending on the country, the com plexity of the corporate supply chain, and the importance of the industry to political leadership. Industry-specific risks also vary. Scenario planning mitigates risk by developing responses

Risk Assessment and Mitigation

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Chapter 11 / Developing Business/IT Strategies ● 453

to various unlikely events. Most important, it attempts to discover previously unknown risks because the most dangerous risk is often the one you don’t identify. Before embarking on any risk assessment, clarify which types of risk are of con- cern to your executive management; then select the appropriate mitigation tools to address potential difficulties. Depending on the financial consequences, risk insur- ance may be warranted. Thorough risk assessments leverage creative thinking into constructive preparations for addressing potential threats, and they’re essential to success. As the old adage goes, “Forewarned is forearmed.”

Source: Adapted from Bart Perkins, “Know Which Risks Matter,” Computerworld, December 17, 2007.

Betting on new IT innovations can mean betting the future of the company. Leading- edge firms are sometimes said to be on the “bleeding edge.” Almost any business executive is aware of disastrous projects that had to be written off, often after large cost overruns, because the promised new system just did not work.

Planning for competitive advantage is especially important in today’s competi- tive business arena and complex information technology environment. So, strategic business/IT planning involves an evaluation of the potential benefits and risks a company faces when using IT-based strategies and technologies for competitive advan- tage. In Chapter 2, we introduced a model of competitive forces (competitors, customers, suppliers, new entrants, and substitutes) and competitive strategies (cost leadership, dif- ferentiation, growth, innovation, and alliances), as well as a value chain model of basic business activities. These models can be used in a strategic planning process to help generate ideas for the strategic use of information technologies to support new e-business initiatives. Also popular in strategic business/IT planning is the use of a strategic opportunities matrix to evaluate the strategic potential of proposed business/IT opportunities, as measured by their risk/payoff probabilities. See Figure 11.5 .

SWOT analysis (strengths, weaknesses, opportunities, and threats) is used to evaluate the impact that each possible strategic opportunity can have on a company and its use of information technology. A company’s strengths are its core competencies and resources in which it is one of the market or industry leaders. Weaknesses are areas of substandard business performance compared to others in the industry or market segments. Opportunities are the potential for new business markets or innovative breakthroughs that might greatly expand present markets. Threats are the potential for

Planning for Competitive Advantage

SWOT Analysis

F I G U R E 1 1 . 5 A strategic opportunities matrix helps to evaluate the strategic risk/payoff potential of proposed business/IT opportunities.

High Risk High Payoff

Opportunities

High Success High Payoff

Opportunities

High Risk Low Payoff

Opportunities

Safe but Low Payoff

Opportunities

Low High

Strategic Business Potential

High

Low

Firm’s Ability to Deliver with IT

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business and market losses posed by the actions of competitors and other competitive forces, changes in government policies, disruptive new technologies, and so on. An example of SWOT analysis might come from a marketing problem. In com- petitor analysis, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses. Marketing managers may examine each competitor’s cost structure; sources of profits, resources, and competencies; competitive positioning and product differentiation; degree of ver- tical integration; historical responses to industry developments; and other factors. Marketing management often finds it necessary to invest in research to collect the data required to perform accurate marketing analysis. As such, they often conduct market research to obtain this information; although marketers use a variety of tech- niques, some of the more common methods include:

• Qualitative marketing research, such as focus groups. • Quantitative marketing research, such as statistical surveys. • Experimental techniques, such as test markets. • Observational techniques, such as ethnographic (on-site) observation. • Marketing managers may also design and oversee various environmental scanning

and competitive intelligence processes to help identify trends and inform the company’s marketing analysis.

Table 11.1 shows the content of a typical SWOT analysis. Now let’s look at a real-world example of how a company used technology to support SWOT analyses, and much more.

TA B L E 1 1 . 1 Example of a SWOT Analysis by a Human Resources Consulting Firm

Strengths Weaknesses Opportunities Threats

Market reputation Shortage of trained consul- Well-established market niche Large consultancies tants at the operating level operating at a minor market level

Partner-level Lack of ability to manage New market opportunities Many small consultancies expertise in HRM multidisciplinary assignments for consulting in areas other looking to invade the than HRM marketplace

When Bristow Helicopters Ltd. started losing market share in the 1990s, executives moved to improve business processes across the Redhill, England-based company. “We needed to change facilities and maintenance processes, improve the efficiencies of the staff, improve the interface between sales and clients,” says John Cloggie, technical director at the European business unit of Houston-based Bristow Group Inc., which provides helicopter services to the oil and gas industry. A key goal of this reengineering effort was to cut several million dollars from the operating budget of Bristow Helicopters. The company managed the project using MindGenius, “mind-mapping” software from East Kilbride, Scotland-based Gael Ltd. The product enabled it to conduct a SWOT analysis (an assessment of its strengths, weaknesses, opportunities, and threats), carve out various process reengi- neering tasks, and delegate them to appropriate groups. Each team then took the high-level version of the map and created its own subcategories, tasks, and deadlines for its designated work segment. Since beginning the project in 2004, says Cloggie, the company has managed to cut $6 million from its operating budget. “Mind mapping, of course, didn’t directly create our $6 million savings, but it did allow us to control the project while it was being delivered,” he says. “The speed with which you can map processes and capture knowledge is a huge return.”

Bristow Helicopters: Technology- Supported SWOT, and Much More

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Mind mapping has been around for centuries, but it didn’t garner much attention until psychologist Tony Buzan began to promote information visualization tech- niques in the 1970s. A mind map is a diagram that radially arranges words and im- ages around a central theme. It’s based on the cognitive theory that many people learn and recall information more easily through graphical representations. Mind mapping—increasingly called business mapping as it makes inroads into corporate settings—is used for a range of problem-solving and brainstorming activities, includ- ing managing projects, mapping business processes, creating workflows, planning events, and programming software. At Bristow Helicopters, mind mapping is used for “virtually all business strategy projects,” says Cloggie. Bristow has also used MindGenius for managing employee- retention efforts, and the company always uses it when introducing new aircraft types. “We have a [mind map] template that’s 90 percent usable for any aircraft type. It’s not just a checklist; it’s a tool to help the engineer understand the processes by which he’ll bring the aircraft in,” says Cloggie. “Through it, he understands the interface with manufacturing, among different departments within the company, and with the Civil Aviation Authority.” As key business strategies are developed around mind maps, the technology will need to move beyond its status as a desktop product to better facilitate collaboration, say users. In fact, Cloggie was recently invited, along with other mind-map software users from various industries, to speak on this need before the Scottish Parliament. “We talked about the need to take mind maps from being a personal tool to a cross-departmental business tool; you can’t extract their true, cross business abilities if you can’t work on maps simultaneously,” says Cloggie. “With real-time collabora- tion, you can have experts develop templates and facilitators work with different teams to create maps, with the business as a whole sharing them.”

Source: Adapted from Kym Gilhooly, “Business on the Map,” Computerworld , July 3, 2006.

“Business model” was one of the great buzzwords of the Internet boom, routinely invoked, as the writer Michael Lewis put it, “to invoke all manner of half-baked plans.” A good business model, however, remains essential to every successful organization, whether it’s a new venture or an established player.

A business model is a conceptual framework that expresses the underlying eco- nomic logic and system that prove how a business can deliver value to customers at an appropriate cost and make money. A business model answers vital questions about the fundamental components of a business, such as: Who are our customers? What do our customers value? How much will it cost to deliver that value to our customers? How do we make money in this business? A business model specifies what value to offer customers, which customers should receive this value, which products and services will be supplied, and what the price will be. It also specifies how the business will organize and operate to have the capability to provide this value and sustain any advantage from providing this value to its customers. Figure 11.6 outlines more specific questions about the components of a business that all business models must answer. Figure 11.7 lists questions that illustrate the essential components of e-business models. A business model is a valuable planning tool because it focuses attention on how all the essential components of a business fit into a complete system. Done properly, it forces entrepreneurs and managers to think rigorously and systemically about the value and viability of the business initiatives they are planning. Then the strategic planning process can be used to develop unique business strategies that capitalize on a firm’s business model to help it gain competitive advantages in its industry and the markets it wants to dominate.

Business Models and Planning

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F I G U R E 1 1 . 7 Questions that illustrate the components of e-business models that can be developed as part of the strategic business/IT planning process.

Component of Questions Specific to Business Model e-Business Models

Customer value What is it about Internet technologies that allows your firm to offer its customers something distinctive? Can Internet technol- ogies allow you to solve a new set of problems for customers?

Scope What is the scope of customers that Internet technologies enable your firm to reach? Does the Internet alter the product or service mix that embodies the firm’s products?

Pricing How does the Internet make pricing different?

Revenue source Are revenue sources different with the Internet? What is new?

Connected activities How many new activities must be performed as a result of the Internet? How much better can Internet technologies help you to perform existing activities?

Implementation How do Internet technologies affect the strategy, structure, systems, people, and environment of your firm?

Capabilities What new capabilities do you need? What is the impact of Internet technologies on existing capabilities?

Sustainability Do Internet technologies make sustainability easier or more difficult? How can your firm take advantage of it?

Component of Questions for Business Model All Business Models

Customer value Is the firm offering its customers something distinctive or at a lower cost than its competitors?

Scope To which customers (demographic and geographic) is the firm offering this value? What is the range of products/services offered that embody this value?

Pricing How does the firm price the value?

Revenue source Where do the dollars come from? Who pays for what value and when? What are the margins in each market and what drives them? What drives value in eachsource?

Connected activities What set of activities does the firm have to perform to offer this value and when? How connected (in cross section and time) are these activities?

Implementation What organizational structure, systems, people, and environ- ment does the firm need to carry out these activities? What is the fit between them?

Capabilities What are the firm’s capabilities and capabilities gaps that need to be filled? How does a firm fill these capabilities gaps? Is there something distinctive about these capabilities that allows the firm to offer the value better than other firms and that makes them difficult to imitate? What are the sources of these capabilities?

Sustainability What is it about the firm that makes it difficult for other firms to imitate it? How does the firm keep making money? How does the firm sustain its competitive advantage?

F I G U R E 1 1 . 6 Questions that illustrate the components of all business models. A good business model effectively answers these questions.

Left for dead by many observers in the IT and telecommunications worlds just a few years ago, the reborn Iridium Satellite LLC, which provides satellite-based communi- cations services, is showing new signs of life. Nowhere near the revenue and cus- tomer numbers posted by huge wireless telecommunications companies such as

Iridium Satellite: Finding the Right Business Model

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Verizon Wireless and AT&T, it’s definite progress for a company that was brought out of bankruptcy in 2000 and remodeled with a new focus and direction. The first Iridium marketed itself as a consumer satellite telephone service, but its original phone was too bulky and its service too expensive for general adoption. There were also some service quirks consumers wouldn’t accept, such as the need for line-of-sight connection to a satellite, which precluded using the phones indoors. After the buyout, the company recreated itself as a telecommunications provider that could offer reliable service in remote areas where cellular phones and landlines won’t work, such as barren deserts, the Earth’s poles, deep wilderness, disaster areas, and other isolated and harsh environments. “Originally Iridium was focused on the wrong business, on the mass-market con- sumer business selling directly to customers,” says Matt Desch, the company’s CEO and chairman. Since its rebirth in 2001, the company has worked with more than 150 partner companies to find new business uses and niches for Iridium service in industries from mining to manufacturing to oil and gas exploration to forestry to emergency response needs. “We’ve developed an ecosystem around ourselves,” Desch said. “That’s a big difference.” Not all of Iridium’s service is provided using handsets. An increasing part of its business is in machine-to-machine communications, using a sensor device about the size of a deck of playing cards that is attached to a ship, truck, container, or similar item. The device can send and receive short bursts of communications data to a sat- ellite wherever it is on Earth. Some of these sensors are even located on buoys in the ocean, where weather agencies can monitor wave heights, winds, and other storm data in real time to provide warnings for onrushing storms. “That’s the real fast part of our growth,” Desch said of the short-burst data communications segment. Max Engel, an analyst with Frost & Sullivan in Palo Alto, California, said that although Iridium’s original idea to be a satellite phone service for the masses “was an obvious example of stupid failure,” the change in business plan raises the service’s prospects. “What the new management did when they bought it was it took the as- sets that originally cost billions, but were now freed of those expectations,” Engel said. “They then asked, ‘what can we do with this’ and enlisted many partners” to create a more workable business model. “Yes, they’re very nichy, but as long as you’ve got bunches of niches, who cares?” says Engel. “They’ve redesigned their business to suit their assets instead of creating an asset to do business.” “We’re obviously hitting our stride,” says Desch. “We’re a lifeline where no other device can be used.”

Source: Adapted from Todd Weiss, “Defying Naysayers, Iridium Satellite Finds a Business Model,” Computerworld, July 27, 2007.

Figure 11.8 illustrates the business/IT planning process, which focuses on discovering innovative approaches to satisfying a company’s customer value and business value goals. This planning process leads to development of strategies and business models for new e-business and e-commerce platforms, processes, products, and services. Then a company can develop IT strategies and an IT architecture that supports building and implementing its newly planned business applications. Both the CEO and the chief information officer (CIO) of a company must manage the development of complementary business and IT strategies to meet its customer value and business value vision. This coadaptation process is necessary because, as we have seen so often in this text, information technologies are a fast-changing but vital component in many strategic business initiatives. The business/IT planning process has three major components:

• Strategic Development . Developing business strategies that support a company’s business vision, for example, using information technology to create innovative

Business/IT Architecture Planning

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458 ● Module IV / Development Processes

e-business systems that focus on customer and business value. We will discuss this process in more detail shortly.

• Resource Management . Developing strategic plans for managing or outsourc- ing a company’s IT resources, including IS personnel, hardware, software, data, and network resources.

• Technology Architecture . Making strategic IT choices that reflect an informa- tion technology architecture designed to support a company’s e-business and other business/IT initiatives.

The information technology architecture that is created by the strategic business/IT planning process is a conceptual design, or blueprint, that includes the following major components:

• Technology Platform . The Internet, intranets, extranets, and other networks, computer systems, system software, and integrated enterprise application soft- ware provide a computing and communications infrastructure, or platform, that supports the strategic use of information technology for e-business, e-commerce, and other business/IT applications.

• Data Resources . Many types of operational and specialized databases, including data warehouses and Internet/intranet databases (as reviewed in Chapter 5) store and provide data and information for business processes and decision support.

• Applications Architecture . Business applications of information technology are designed as an integrated architecture of enterprise systems that support strategic business initiatives, as well as cross-functional business processes. For example, an applications architecture should include support for developing and maintaining inter- enterprise supply chain applications, as well as integrated enterprise resource planning and customer relationship management applications as we discussed in Chapter 8.

• IT Organization . The organizational structure of the IS function within a com- pany and the distribution of IS specialists are designed to meet the changing strategies of a business. The form of the IT organization depends on the manage- rial philosophy and business/IT strategies formulated during the strategic plan- ning process. We will discuss the IT organization in Chapter 14.

In 1992, Robert S. Kaplan and David Norton introduced the balanced scorecard (BSC), a method for measuring a company’s activities in terms of its vision and strategies.

Information Technology Architecture

Balanced Scorecard

F I G U R E 1 1 . 8 The business/IT planning process emphasizes a customer and business value focus for developing business strategies and models, and an IT architecture for business applications.

Key Insights Key Objectives

More Questions Feedback

Customer and Business

Value Visioning

Business Strategies

and Models

Business/IT Strategies and Architecture

Priorities

Feedback

Business Application

Development and Deployment

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Chapter 11 / Developing Business/IT Strategies ● 459

It gives managers a comprehensive view of the performance of a business and has become a popular business and IT planning tool. BSC is a strategic management system that forces managers to focus on the impor- tant performance metrics that drive success. It balances a financial perspective with customer, internal process, and learning and growth perspectives. The system consists of four processes: (1) translating the vision into operational goals; (2) communicating the vision and linking it to individual performance; (3) business planning; (4) feedback and learning, and then adjusting the strategy accordingly. The scorecard seeks to measure a business from the following perspectives:

• Financial Perspective . This measures reflecting financial performance; for exam- ple, number of debtors, cash flow, or return on investment. The financial perform- ance of an organization is fundamental to its success. Even nonprofit organizations must make the books balance. Financial figures suffer from two major drawbacks:

º They tell us what has happened to the organization historically, but they may not tell us what is currently happening or be a good indicator of future performance.

º It is common for the current market value of an organization to exceed the market value of its assets. Tobin’s q measures the ratio of the value of a com- pany’s assets to its market value. The excess value can be thought of as intan- gible assets. These figures are not measured by normal financial reporting.

• Customer Perspective . This measures having a direct impact on customers; for example, time taken to process a phone call, results of customer surveys, number of complaints, or competitive rankings.

• Business Process Perspective . This measures reflecting the performance of key business processes; for example, time spent prospecting, number of units that re- quired rework, or process cost.

• Learning and Growth Perspective . This measures describing the company’s learning curve; for example, number of employee suggestions or total hours spent on staff training.

The balanced scorecard approach is not without its detractors, however. A major crit- icism of the balanced scorecard is that the scores are not based on any proven eco- nomic or financial theory and have no basis in the decision sciences. The process is entirely subjective and makes no provision to assess quantities like risk and economic value in a way that is actuarially or economically well-founded. The BSC does not provide a bottom-line score or a unified view with clear recommendations; rather, it is only a list of metrics. Positive responses from users of BSC may merely be a type of placebo effect, as there are no empirical studies linking the use of balanced scorecard to better decision making or improved financial performance of companies. Despite these criticisms, BSC can be found in many organizations and is a common strategic planning tool. Figure 11.9 shows an example of a balanced scorecard analysis.

Companies need a strategic framework that can bridge the gap between simply connecting to the Internet and harnessing its power for competitive advantage. The most valuable Internet applications allow companies to transcend communication barriers and establish connections that will enhance productivity, stimulate innovative development, and im- prove customer relations.

Internet technologies and e-business and e-commerce applications can be used strategically for competitive advantage, as this text repeatedly demonstrates. However, in order to optimize this strategic impact, a company must continually assess the stra- tegic value of such applications. Figure 11.10 is a strategic positioning matrix that can help a company identify where to concentrate its strategic use of Internet technologies to gain a competitive advantage. Let’s take a look at the strategies that each quadrant of this matrix represents.

Identifying Business/IT Strategies

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460 ● Module IV / Development Processes

F I G U R E 1 1 . 9 An example of a balanced scorecard analysis.

Source: Courtesy of Steelwedge Software, Inc.

F I G U R E 1 1 . 1 0 A strategic positioning matrix helps a company optimize the strategic impact of Internet technologies for e-business and e-commerce applications.

Global Market Penetration

E x t e r n

a l D

r iv

e r s

C u st

o m

e r

co n n e ct

iv ity

/c o m

p e tit

io n /t e ch

n o lo

g y

Internal Drivers

e-business processes/collaboration/cost containment

Cost and Efficiency

Improvements

Product and Service Transformation

Performance Improvement in Business Effectiveness

HIGHLOW

HIGH

• Cost and Efficiency Improvements . This quadrant represents a low amount of internal company, customer, and competitor connectivity and use of IT via the Internet and other networks. One recommended strategy would be to focus on improving efficiency and lowering costs by using the Internet and the World Wide Web as a fast, low-cost way to communicate and interact with customers, suppliers, and business partners. The use of e-mail, chat systems, discussion groups, and a company Web site are typical examples.

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Chapter 11 / Developing Business/IT Strategies ● 461

• Performance Improvement in Business Effectiveness . Here a company has a high degree of internal connectivity and pressures to improve its business processes substantially, but external connectivity by customers and competitors is still low. A strategy of making major improvements in business effectiveness is recommended. For example, widespread internal use of Internet-based technologies like intranets and extranets can substantially improve information sharing and collaboration within the business and with its trading partners.

• Global Market Penetration . A company that enters this quadrant of the matrix must capitalize on a high degree of customer and competitor connectivity and use of IT. Developing e-business and e-commerce applications to optimize interaction with customers and build market share is recommended. For example, e-commerce Web sites with value-added information services and extensive online customer support would be one way to implement such a strategy.

• Product and Service Transformation . Here a company and its customers, sup- pliers, and competitors are extensively networked. Internet-based technologies, including e-commerce Web sites and e-business intranets and extranets, must now be implemented throughout the company’s operations and business relation- ships. This enables a company to develop and deploy new Internet-based prod- ucts and services that strategically reposition it in the marketplace. Using the Internet for e-commerce transaction processing with customers at company Web sites and e-commerce auctions and exchanges for suppliers are typical examples of such strategic e-business applications. Let’s look at more specific examples.

Market creator . Use the Internet to define a new market by identifying a unique customer need. This model requires you to be among the first to market and to re- main ahead of competition by continuously innovating. Examples: Amazon.com and E*TRADE. Channel reconfiguration . Use the Internet as a new channel to access customers, make sales, and fulfill orders directly. This model supplements, rather than replaces, physical distribution and marketing channels. Example: Cisco and Dell. Transaction intermediary . Use the Internet to process purchases. This transac- tional model includes the end-to-end process of searching, comparing, selecting, and paying online. Examples: Microsoft Expedia and eBay. Infomediary . Use the Internet to reduce the search cost. Offer the customer a unified process for collecting information necessary to make a large purchase. Exam- ples: HomeAdvisor and Auto-By-Tel. Self-service innovator . Use the Internet to provide a comprehensive suite of services that the customer’s employees can use directly. Self-service affords employees a direct, personalized relationship. Examples: Employease and Healtheon. Supply chain innovator . Use the Internet to streamline the interactions among all parties in the supply chain to improve operating efficiency. Examples: McKesson and Ingram Micro. Channel mastery . Use the Internet as a sales and service channel. This model supplements, rather than replaces, the existing physical business offices and call centers. Example: Charles Schwab.

Source: Adapted from Joan Magretta, “Why Business Models Matter,” Harvard Business Review, May 2002.

e-Business Strategy Examples

The business application planning process begins after the strategic phase of business/ IT planning has occurred. Figure 11.11 shows that the application planning process includes the evaluation of proposals made by the IT management of a company for using information technology to accomplish the strategic business priorities devel- oped earlier in the planning process, as was illustrated in Figure 11.8 . Then, company

Business Application Planning

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462 ● Module IV / Development Processes

F I G U R E 1 1 . 1 1 A business application planning process includes consideration of IT proposals for addressing the strategic business priorities of a company and planning for application development and implementation.

Key Objectives Action Plan

Feedback Feedback

IT Proposals for Addressing

Strategic Business Priorities

Business Case for Investing in e-Business

Projects

Planning for Application

Development and Implementation

Figure 11.12 outlines Avnet Marshall’s planning process for e-business initiatives and compares it to conventional IT planning approaches. Avnet Marshall weaves both e-business and IT strategic planning together coadaptively under the guidance of the CEO and the CIO, instead of developing IT strategy by just tracking and supporting business strategies. Avnet Marshall also locates IT application development projects within the business units that are involved in an e-business initiative to form centers of business/IT expertise throughout the company. Finally, Avnet Marshall uses an application develop- ment process with rapid deployment of e-business applications, instead of a traditional systems development approach. This application development strategy trades the risk of implementing incomplete applications with the benefits of gaining competitive advan- tages from early deployment of e-business services to employees, customers, and other stakeholders. It also involves them in the fine-tuning phase of application development.

Source: Adapted from Omar El Sawy, Arvind Malhotra, Sanjay Gosain and Kerry Young, “IT-Intensive Value Innovation in the Electronic Economy: Insights from Marshall Industries,” MIS Quarterly, December 1997.

Avnet Marshall: e-Business Planning

F I G U R E 1 1 . 1 2 Comparing conventional and e-business strategic and application planning approaches.

• Strategic improvisation: IT strategy and enter- prise business strategy coadaptively unfold based on the clear guidance of a focus on customer value

• CEO proactively shapes IT vision jointly with CIO as part of e-business strategy

• IT application development projects co-located with e-business initiatives to form centers of IT-intensive business expertise

• Perpetual application development based on continuous learning from rapid deployment with incomplete functionality and end-user involvement

• Strategic alignment: IT strategy tracks specified enter- prise strategy

• CEO endorses IT vision shaped through CIO

Phased application develop- ment based on learning from pilot projects

• IT application development projects functionally organized as technological solutions to business issues

•

Conventional IT Planning Avnet Marshall’s e-Business Planning

executives and business unit managers evaluate the business case for investing in pro- posed e-business development projects based on the strategic business priorities that they decide are most desirable or necessary at that point in time. Finally, business application planning involves developing and implementing business applications of IT, as well as managing their development projects. We will cover the application development and implementation process in Chapter 12. Now, let’s examine a real world example.

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Chapter 11 / Developing Business/IT Strategies ● 463

Another way to look at the business/IT planning process, which is growing in ac- ceptance and use in industry, is shown in Figure 11.13 . E-business architecture planning combines contemporary strategic planning methods (for example, SWOT analysis and alternative planning scenarios) with more recent business modeling and appli- cation development methodologies (for example, component-based development). As illustrated in Figure 11.13 , strategic e-business initiatives, including strategic goals, constraints, and requirements, are developed based on SWOT analysis and other planning methods. Application developers then use business process engineering methods to define how strategic business requirements are to be implemented; they use organizational, process, and data models to create new internal and inter- enterprise e-business processes among a company’s customers, suppliers, and other business partners. Component-based e-business and e-commerce applications are then developed to implement the new business processes using application software and data components stored in a repository of reusable business models and application components. Of course, the business process engineering and component-based application develop- ment activities are supported by a company’s technology infrastructure; this includes all the resources of its IT architecture, as well as the necessary component develop- ment technologies. So, e-business architecture planning links strategy development to business modeling and component development methodologies in order to produce the strategic e-business applications needed by a company.

Business/IT Architecture Planning

F I G U R E 1 1 . 1 3 E-business architecture planning integrates business strategy development and business process engineering to produce e-business and e-commerce applications using the resources of the IT architecture, component development technologies, and a repository of business models and application components.

e - B u s i n e s s S t r a t e g i e s

e - B u s i n e s s P ro c e s s e s

e - B u s i n e s s A p p l i c a t i o n A rc h i t e c t u r e

Te c h n o l o g y I n f r a s t r u c t u r e

R e p o s i t o r y

Application

Components

Business Models

Strengths, Weaknesses, Oppor tunities, Threats GOALS, REQUIREMENTS, CONSTRAINTS

Internal and Interenterprise ORGANIZATIONAL, PROCESS, and DATA MODELS

e-Business, e-Commerce COMPONENT-BASED APPLICATIONS

IT Architecture COMPONENT DEVELOPMENT METHOD

Source: Adapted from Peter Fingar, Harsha Kumar, and Tarun Sharma, Enterprise E-Commerce: The Software Component Breakthrough for Business to Business Commerce (Tampa, FL: Meghan-Kiffer Press, 2000), p. 68.

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464 ● Module IV / Development Processes

SECTION II I m p l e m e n t a t i o n C h a l l e n g e s

Many companies plan really well, yet few translate strategy into action, even though sen- ior management consistently identifies e-business as an area of great opportunity and one in which the company needs stronger capabilities.

Implementation is an important managerial responsibility. Implementation is do- ing what you planned to do. You can view implementation as a process that carries out the plans for changes in business/IT strategies and applications that were developed in the planning process we covered in Section I. Read the Real World Case on the next page. We can learn a lot from this case about some of the ways companies can bring everybody involved in a project onto the same page. See Figure 11.14 .

Moving to an e-business environment involves a major organizational change. For many large, global companies, becoming an e-business is the fourth or fifth major organizational change they have undergone since the early 1980s. Many companies have gone through one or more rounds of business process reengineering (BPR); installation and major upgrades of an ERP system; upgrading legacy systems to be Y2K compliant; creating shared service cent- ers; implementing just-in-time ( JIT) manufacturing; automating the sales force; contract manufacturing; and the major challenges related to the introduction of euro currency.

Implementation of new e-business strategies and applications is only the latest catalyst for major organizational changes enabled by information technology. Figure 11.15 illus- trates the impact and the levels and scope of business changes that applications of informa- tion technology introduce into an organization. For example, implementing an application such as online transaction processing brings efficiency to single-function or core business processes. Yet, implementing e-business applications such as enterprise resource manage- ment or customer relationship management requires a reengineering of core business processes internally and with supply chain partners, thus forcing a company to model and implement business practices by leading firms in their industry. Of course, any major new business initiatives can enable a company to redefine its core lines of business and pre- cipitate dramatic changes within the entire interenterprise value chain of a business. As we will see in this section, implementing new business/IT strategies requires managing the effects of major changes in key organizational dimensions such as busi- ness processes, organizational structures, managerial roles, employee work assign- ments, and stakeholder relationships that arise from the deployment of new business information systems. For example, Figure 11.16 emphasizes the variety and extent of the challenges reported by 100 companies that developed and implemented new en- terprise information portals and ERP systems.

Any new way of doing things generates some resistance from the people affected. For example, the implementation of new work support technologies can generate employees’ fear and resistance to change. Let’s look at a real-world example that demonstrates the challenges of implementing major business/IT strategies and applications, the change management challenges that confront management. Customer relationship management (CRM) is a prime example of a key e-business application for many companies today. It is designed to implement a business strategy of using IT to support a total customer care focus for all areas of a company. Yet CRM projects have a history of a high rate of failure in meeting their objectives. For example, according to a report from Meta Group, a stag- gering 55 percent to 75 percent of CRM projects fail to meet their objectives, often as a result of sales-force automation problems and “unaddressed cultural issues”—sales staffs that are often resistant to, or even fearful of, using CRM systems.

Implementation

Implementing Information Technology

End-User Resistance and Involvement

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to recover the schedule alone it wouldn’t have happened. We had to do it together.” Good relationships—between IT and business partners, project managers and IT staff, and project managers and stakeholders—keep IT projects on track, say IT leaders and project management experts. Bad relationships, however, are a leading cause of project failure. Faced with mounting operational and regulatory pres- sures, Linda Jojo, Flowserve’s CIO, knew it was time to sim- plify the company’s entire IT infrastructure—an endeavor that would bring about sweeping changes across an enter- prise spanning more than 56 countries. At Flowserve, a world leader in the supplying of pumps, valves, seals, automation, and services to the power, oil, gas, chemical, and other industries, Jojo’s assignment was heavy on IT change as the company sought to update processes and sys- tems: establishing a common IT infrastructure, introducing global help desk capabilities, and cutting dozens of disparate ERP systems. But that didn’t stop her from taking a decidedly business approach to simplifying Flowserve’s IT footprint. “The first step was making sure that this wasn’t viewed as an IT project,” says Jojo. “From our CEO, our leadership team and our board of directors on down, we’ve made sure that this project is something we talk about in terms of its business impact.” It’s a tactic that helped set the scope for a project that could have otherwise become unwieldy. For starters, Jojo helped assemble 35 divisional representatives from across the globe at the company’s world headquarters. Here, holed up in a conference room for 17 weeks, these divisional repre- sentatives pored over disparate systems and processes, deciding what was—and wasn’t—worthy of improvement. Throughout this period, Flowserve also called on inter- nal subject-matter experts, from engineers to sales represent- atives, to offer their in-the-trenches take on the company’s shortcomings. The result: a blueprint for business standards, the design of a common financial chart of accounts, and the creation of a set of data standards for customers and suppliers. In addition to creating project perimeters, Jojo says that by involving business leaders in the critical design phase, she was able to garner widespread support for a companywide strategic busi- ness initiative costing more than $60 million over four years. “I’ve seen projects that should have been successful fail purely because of relationship issues,” says Greg Livingston, director of IS planning and system development at Shaw Industries, a flooring manufacturer. On the other hand, when mutual trust exists between IT project managers and stakeholders, “IT project managers are more likely to discuss problems that could threaten the pro- ject as they arise,” says Imholz. If bad blood exists between the two groups, project managers may not be inclined to point out those issues, or they may try to cover them up.

Managed care provider Centene has just finished deploying a new financial system. CIO Don Imholz says the project, which involved multiple PeopleSoft modules as well as financial planning and report- ing software from Hyperion, was completed “very quickly”— in 12 months—and on budget. Imholz believes the project was successful for a number of reasons, including that the company implemented proven technology and hired a systems integrator to help who was experienced with PeopleSoft. Most importantly, Imholz says the project was successful because of “good teaming between the IT organization, the finance organization and the sys- tems integration resources.” In other words, much of the project’s success came down to people skills. The constructive relationship between IT and finance— and in particular, between Imholz and Centene’s CFO, William Scheffel—ultimately kept the project on track when the going got tough. And it did get tough. For example, at one point, the project team was having trouble setting up the technical environment needed to de- ploy a Hyperion module that a third-party was going to host. The difficulties that IT encountered put the project’s schedule at risk, says Imholz. Had the relationship between IT and finance been acrimo- nious, the organizations would have pointed fingers at each other—a counterproductive move that would have further de- layed the project. Instead, says Imholz, they worked together to recover the lost time and keep the implementation on schedule. “We could have blamed each other and told each other we can’t help,” says the CIO. “But there’s no value in doing that. It delays getting to the solution. If IT or finance tried

Centene, Flowserve, and Shaw Industries: Relationships, Collaboration, and Project Success

REAL WORLD

CASE 2

Fostering relationships between IT and business partners has a major impact on project success.

F I G U R E 1 1 . 1 4

Source: © Manchan/Getty Images.

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“If you look at projects that fail, invariably someone on those projects knew things were going bad,” says Imholz. “If you don’t have relationships and trust, those things don’t surface. And when you don’t do something about problems in a timely manner, those problems invariably get bigger. In many cases, minor problems become more serious because they’re not addressed in a timely manner. A culture of open- ness is absolutely essential to good project performance.” Furthermore, when something does go wrong with a pro- ject, business partners are less likely to place the sole blame for them on IT if they respect IT, says Shaw Industries’s Livingston. In fact, they’re more likely to give IT some leeway with the project schedule, he says. “It doesn’t matter what technology you’re using, how talented your technology staff is and how knowledgeable the business partners are on process and business improve- ment: Every system initiative will have issues,” says Living- ston. “If you don’t have a relationship, you resort to pointing fingers as opposed to being transparent and ad- mitting ‘we messed up’ or ‘we didn’t test that as well.’ If you have a good relationship, you’ll sit down and find a way to make it work.” Decisions affecting the project also get made more promptly when everyone involved gets along. “Fast and good decisions are crucial to keeping projects on track,” says Imholz. “The failure of senior people to make decisions means decisions are made at lower levels of the organization. If you have a software developer who’s waiting for a decision on a business requirement, there’s three things that can hap- pen: He can guess what to do and guess right. He can wait for a decision and while he’s waiting he’s not as productive. Third, he can guess and guess wrong. If those are equal pos- sibilities, two-thirds of the time it will be detrimental to the project. And if you stack enough of those decisions on top of each other, it will negatively impact the project.” Despite the positive impact good relationships have on project management, IT project managers rely more heavily on software and methodologies than on building relations when they need to improve their delivery. It’s no wonder: Compared with the time it takes to build relationships, soft- ware seems like a quick fix. IT project managers are also most comfortable with tools.

Shaw Industries’s Livingston is using Scrum, an agile software development practice, to improve relationships be- tween IT and business partners and ensure project success. With Scrum, says Livingston, business partners meet with IT during a four- to eight-hour planning meeting to look at all the projects in the backlog and to jointly determine which one will bring the greatest value to Shaw Industries. IT then divides the project into sprints—30-day increments of work. When IT completes a sprint, business partners assess IT’s progress and suggest any necessary changes. “The agile development methodology, just by design, promotes better relationships,” says Livingston. “Scrum and Agile force interaction on a more frequent basis. By doing so, IT delivers solutions on an incremental basis to the busi- ness, as opposed to the waterfall method, where it’s a year and a half before the business sees the fruits of an initiative.” Livingston says it’s not necessary for IT and other busi- ness functions to get along swimmingly for Agile to work effectively. Agile can work even if there’s initial tension be- tween the groups, he says. “We’ve had groups with troubled relationships, and certainly initial meetings are not always effective out of the gate,” he says. “But at least we can agree that we’re going to focus on 15 key items in the next 30 days, and at the end of the 30 days, we’ll get back to you.” The process forces IT and business partners to prioritize projects together and agree on the 15 items IT will complete in 30 days. Scrum also then drives IT’s behavior. At the end of that 30 days, IT has to show something for its work. Scrum makes IT accountable to the business. When business partners see IT making tangible progress every 30 days, their confidence in IT grows. Says Livingston, “If the business partner sees results more frequently than they used to, relationships can get better. Agile promotes better relationships just by forcing a process, forcing interaction.” Between the structure that Scrum imposes and the relation- ships that grow out of it, project delivery improves. Livingston says Shaw Industries is seeing this happen: “Better collabora- tion results in better value for the business,” he says.

Source: Adapted from Meridith Levinson, “Project Management: How IT and Business Relationships Shape Success,” CIO.com , September 16, 2009; and Cindy Waxer, “Using IT to Transform the Business: Three Keys to Success,” CIO.com , August 6, 2007.

1. Why do you think the practices described in the case led to success for these companies?

2. How do they change the structure of projects so that the likelihood of a positive outcome increases?

3. In the case of Shaw Industries, how did Scrum help?

4. Provide three specific examples from the case, and ex- plain where and how those activities helped the com- pany move their projects along.

5. Using examples from the case and your own understanding of how those worked, can you distill a set of recommen- dations that companies should follow when managing technology-based projects? Would these be universal, or would you add any limitations to their applicability?

1. The Scrum approach to project management has be- come quite popular in recent years. Go online and research other companies that are using it to organize their projects. Have those experiences been positive as well? What can you tell about how the approach works from your research? Prepare a report to summarize your findings.

2. Would the issues discussed in the case be solved by making a business executive the head of any projects in- volving IT? Why or why not? Break into small groups with your classmates and develop a justification for both alternatives.

CASE STUDY QUESTIONS REAL WORLD ACTIVITIES

466 ● Module IV / Development Processes

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Chapter 11 / Developing Business/IT Strategies ● 467

F I G U R E 1 1 . 1 6 The 10 greatest challenges of developing and implementing intranet enterprise portals and enterprise resource planning systems reported by 100 companies.

• Security, security, security • Defining the scope and purpose of

the portal

• Finding the time and the money • Ensuring consistent data quality • Getting employees to use it • Organizing the data • Finding technical expertise • Integrating the pieces • Making it easy to use • Providing all users with access

• Getting end-user buy-in • Scheduling/planning • Integrating legacy systems/data • Getting management buy-in • Dealing with multiple/international

sites and partners

• Changing culture/mind-sets • IT training • Getting, keeping IT staff • Moving to a new platform • Performance/system upgrades

Intranet Enterprise Portal Challenges

Enterprise Resource Planning Challenges

F I G U R E 1 1 . 1 5 The impact and the levels and scope of business change introduced by implementations of information technology.

Redefine Core Business

Best Practices

Single Function Core Processes Supply Chain Extended

Value Chain

Improve

Efficiency

New Business

Initiatives

Process

Reengineering

Model Best Practices

Efficiency

L e v e ls

o f C

h a n

g e

Scope of Business Change

Source: Adapted from Craig Fellenstein and Ron Wood, Exploring E-Commerce, Global E-Business and E-Societies (Upper Saddle River, NJ: Prentice Hall, 2000), p. 97.

Suburban sprawl might make a great business case for a transit agency, but when it came to servers, Canada’s Société de Transport de Montréal (STM) drew the line. Mike Stefanakis, senior systems engineer at STM, says that the main reason he started looking at virtualization technology was to prevent server sprawl. He wanted consolidation, particularly for development servers at the agency, which provides more than 360 million bus and metro rides each year. “We crunched the numbers and realized that our growth was going to cause a few problems in the near future,” he says. If things kept going as they had, the agency would need an additional 20 to 30 servers each year, on top of its existing base of 180 primarily Wintel machines. “Too many servers were going to be needed to feed the needs of our users and clients,” Stefanakis says. But even though staffers were convinced of virtualization’s benefits pretty early on, the agency’s end users didn’t necessarily feel the same way. Several factors contributed to the initial resistance. For starters, there was a fear of the unknown. There were

Société de Transport de Montréal: Smooth Ride after a Bumpy Start

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468 ● Module IV / Development Processes

questions like “How stable is this new technology?” and “What do you mean I will be sharing my resources with other servers?” Potential users thought the new tech- nology might slow them down. To help users get over their fears, Stefanakis focused on giving people the infor- mation they needed, while explaining the advantages of the new technology. Among them: great response time for business applications and baked-in disaster recovery. If anything does fail, restoration is just a quickly restored image away. Stefanakis and his staff kept “talking up” the technology and its benefits. “Virtu- alization came up in every budget, strategy and development meeting we had,” he recalls. “We made sure the information was conveyed to the proper people so that everyone in our department knew that virtualization was coming.” STM has been staging production servers in its virtual environment since De- cember 2005. The first virtual machine was staged in STM’s testing center as a means of quickly recovering a downed production server. Once the first few applica- tions were implemented, user resistance quickly became history. “After people see the advantages, stability and performance available to them on a virtual platform, they tend to lose any inhibitions they previously may have had. The psychological barrier for virtualization has been broken,” Stefanakis says, “and now users will ask for a new server as if they are ordering a coffee and danish.”

Source: Adapted from Mary Ryan Garcia, “After Bumpy Start, Transit Agency Finds Virtualization a Smooth Ride,” Computerworld , March 8, 2007.

One of the keys to solving problems of end-user resistance to new information technologies is proper education and training. Even more important is end-user involvement in organizational changes and in the development of new information systems. Organizations have a variety of strategies to help manage business change, and one basic requirement is the involvement and commitment of top management and all business stakeholders affected by the planning processes that we described in Section I. Direct end-user participation in business planning, as well as application develop- ment projects before a new system is implemented, is especially important in reducing the potential for end-user resistance. That’s why end users frequently are members of systems development teams or do their own development work. Such involvement helps ensure that end users assume ownership of a system and that its design meets their needs. Systems that tend to inconvenience or frustrate users cannot be effective systems, no matter how technically elegant they are and how efficiently they process data. For example, Figure 11.17 illustrates some of the major obstacles to knowledge management systems in business. Notice that end-user resistance to sharing knowledge is the biggest obstacle to the implementation of knowledge management applications. Let’s look at a real-world example that spotlights end-user resistance and what one company did about it.

F I G U R E 1 1 . 1 7 Obstacles to knowledge management systems. Note that end-user resistance to knowledge sharing is the biggest obstacle.

User resistance to sharing knowledge

Immaturity of technology

Immaturity of knowledge management industry

Cost

Lack of need

3%

9%

15%

20%

53%

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Chapter 11 / Developing Business/IT Strategies ● 469

Roberto Amores had just about had enough. It was a blistering hot day, and the struggling air-conditioning system had just blown the fuses in the Atlanta office building where Amores was working as a heating ventilation and air-conditioning technician for United Maintenance. But the biggest problem for Amores wasn’t the heat or the fuses, it was the new handheld that his company had given him to replace the paper and clipboard that he had used to keep track of his work. No matter what Amores tried, he couldn’t seem to pick up a signal and make the new computer work. He climbed down from the roof, where he was working, and got in his truck. Nothing. He tried driving around the block. Nothing. On his first day using wireless, it took Amores three hours to pick up a signal, get his service call, and fill out the report. One problem was that the pop-up window kept asking him if he wanted to do things that he didn’t want to do. He tried to re- member what he had been told in the training class, and he just became more con- fused. Amores was hardly alone. Most of the 30 technicians whom United Maintenance had outfitted with hand- helds were struggling with questions like exactly what to enter when the real reason they wanted to put a job on hold was not among those listed on the scrolling screen. Ralph Hawkins, the service manager at United Maintenance, heard the grumbling of his technicians and got to work on a solution. In one case, for example, employees objected to an automatic time-stamping of all messages because it made them feel like their computers were constantly moni- toring them. United Maintenance changed the function so that it allowed the techni- cians to enter the time that a message was received or an action taken. “You can go to all the training classes you want, but what really works is just get- ting used to it,” Amores says “Once you figure out what it does, it gets a lot easier.” Today, the technicians at United Maintenance use the handhelds to record every- thing they do in the field. Service calls are dispatched through the handhelds, service is recorded, and technicians make sure that the customers sign the machine at the completion of the call. As soon as the signature is captured, the call is taken off the dispatch screen and a bill is automatically printed. The new wireless system has reduced the billing cycle at United Maintenance from two to three weeks to two to three days. It also ensures the company that the technicians have filled out their paperwork and saves the technicians the time they used to spend bringing their records into the office. “Our guys were hesitant at first,” says Hawkins. “It was harder for the older guys; they balked at it but finally got the hang of it—that part was tough.”

Source: Adapted from Danielle Dunne, “Problem: User Resistance to Change—Solution: Patience and Compromise,” CIO.com , February 15, 2002.

United Maintenance: Solving User Resistance with Understanding

Figure 11.18 illustrates some of the key dimensions of change management and the level of difficulty and business impact involved. Notice some of the people, process, and technology factors involved in the implementation of business/IT strategies and applications, or other changes caused by introducing new information technologies into a company. Some of the technical factors listed, such as systems integrators and outsourcing, will be discussed in more detail in the next few chapters. For example, systems integrators are consulting firms or other outside contractors who may be paid to assume the responsibility for developing and implementing a new e-business ap- plication, including designing and leading its change management activities. In addi- tion, notice that people factors have the highest level of difficulty and longest time to resolve of any dimension of change management. Thus, people are a major focus of organizational change management. This includes activities such as developing innovative ways to measure, motivate, and reward perfor- mance. It is important to design programs to recruit and train employees in the core

Change Management

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470 ● Module IV / Development Processes

competencies required in a changing workplace. Change management also involves ana- lyzing and defining all changes facing the organization, as well as developing programs to reduce the risks and costs and to maximize the benefits of change. For example, imple- menting a new e-business application such as customer relationship management might involve developing a change action plan, assigning selected managers as change sponsors, developing employee change teams, and encouraging open communications and feedback about organizational changes. Some key tactics that change experts recommend include:

• Involve as many people as possible in e-business planning and application development.

• Make constant change an expected part of the culture. • Tell everyone as much as possible about everything as often as possible, pre ferably

in person. • Make liberal use of financial incentives and recognition. • Work within the company culture, not around it.

F I G U R E 1 1 . 1 8 Some of the key dimensions of change management. Examples of the people, process, and technology factors involved in managing the implementation of IT-based changes to an organization.

• Enterprise Architecture

• Supplier Partnership

• Systems Integrators

• Outsourcing

• Technology Selection

• Technology Support

• Installation

Requirements

• Ownership

• Design

• Enterprisewide Processes

• Interenterprise Processes

• Change Control

• Implementation

Management

• Support Processes

• Change Leaders

• Loose/Tight Controls

• Executive Sponsorship

and Support

• Aligning on Conditions

of Satisfaction

• Recruitment

• Retention

• Training

• Knowledge Transfer

PeopleProcessTechnology

O p

e r a t io

n a l

S t r a t e g

ic

Level of Difficulty/Time to ResolveLevel of Difficulty/Time to Resolve

I m

p a

c t o

n B

u s

i n

e s

s I m

p a

c t o

n B

u s

i n

e s

s H

ig h

L o

w

Low High

Source: Adapted from Grant Norris, James Hurley, Kenneth Hartley, John Dunleavy, and John Balls, E-Business and ERP: Transforming the Enterprise, p. 120. Copyright © 2000 by John Wiley & Sons, Inc. Reprinted by permission.

Depending on the business pressure du jour, large IT shops tend to swing back and forth from one organizational model to another. Need to save money and promote technology standards across the organization? Centralize. Need to respond more quickly to local market demands and better align with the business? Decentralize. “It’s a constant tension between the two extremes of the pendulum,” says Ron Kifer, senior vice president and CIO for the United States and Canada at DHL Express. The global transportation and logistics services giant began to centralize and consolidate IT infrastructure and services six years ago, building a massive computing supercenter in Kuala Lumpur to manage IT for most of its operations in the Asia- Pacific and emerging markets, Kifer says. Two years ago, DHL opened a supercenter

DHL Express: The Challenges of Global Change

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Chapter 11 / Developing Business/IT Strategies ● 471

in Scottsdale, Arizona, to consolidate IT for the United States, Canada, and parts of Central and South America; and this year, the company set up a supercenter in Prague to condense IT for most of Europe and the Mediterranean. Although centralization drove down costs, it did make it harder for business units to ensure that IT spending was in sync with business strategy. “It was difficult to get the right people from the business together with the right people from IT to define project requirements in a manner that was suitable for design and specification,” Kifer says. Multiple iterations of project requirement specs were continually shifting between the business and IT (because of their remoteness to each other), adding cost and time to project life cycles, he says. DHL has now embarked on an IT transformation that aims to give it the best of both worlds. The arrangement separates the supply side of DHL’s IT organization from the demand side, and it puts IT demand management under the business’s con- trol. “Demand CIOs” report to regional CEOs and manage the region’s IT budget, Kifer says, to align IT spending more closely with business strategy. The demand management function—Express Business IT (EbIT)—is staffed by IT employees who were previously focused on demand management aspects of IT. Under the new model, Kifer says, DHL will be able to reap the cost savings of its centralized computing super- centers, as well as the alignment benefits of having IT closely tied to regional opera- tions. All regions of DHL are adopting this organizational model. Regional teams are in charge of implementing the EbIT functions within their regions, Kifer says, but a “thin global group” under a single CIO is coordinating to ensure a consistent approach, standards, processes, and tools from region to region. DHL also has a global corporate transformation office supporting this initiative. For many employees, the reorganization means a dramatic change in roles, re- porting relationships, and processes, Kifer says. DHL’s change management plan emphasizes education and training to help employees understand the benefits of these changes to the company as a whole—and to them personally.

Source: Adapted from “Case Study: DHL’s Global Change Management Plan,” CIO Magazine, November 1, 2005.

An eight-level process of change management for organizations is illustrated in Figure 11.19 . This change management model is only one of many that could be applied to manage organizational changes caused by new business/IT strategies and applications and other changes in business processes. For example, this model suggests that the business vision created in the strategic planning phase should be communi- cated in a compelling change story to the people in the organization. Evaluating the readiness for changes within an organization and then developing change strategies and choosing and training change leaders and champions based on that assessment could be the next steps in the process. These change leaders are the change agents that would then be able to lead change teams of employees and other business stakeholders in building a business case for changes in technology, business processes, job content, and organizational structures. They could also communicate the benefits of these changes and lead training pro- grams on the details of new business applications. Of course, many change manage- ment models include methods for performance measurement and rewards to provide financial incentives for employees and stakeholders to cooperate with changes that may be required. In addition, fostering a new e-business culture within an organiza- tion by establishing communities of interest for employees and other business stake- holders via Internet, intranet, and extranet discussion groups could also be a valuable change management strategy. Such groups would encourage stakeholder involvement and buy-in for the changes brought about by implementing new e-business applica- tions of information technology.

A Change Management Process

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472 ● Module IV / Development Processes

F I G U R E 1 1 . 1 9 A process of change management. Examples of the activities involved in successfully managing organizational change caused by the implementation of new business processes.

• Understand Strategic Vision

Create Change Vision

Define Change Strategy

Develop Leadership

Build Commitment

Manage People Performance

Deliver Business Benefits

Develop Culture

Set Up Analysis Definition Transition

Design Organization

• Create Leadership Resolve

• Establish Needs

• Build Business Case • Quantify Benefits • Sustain Benefits

• Design Target Culture • Implement Cultural Change

• Implement Organizational Change

• Design Target Organization

• Understand Current Culture

• Understand Current Organization

• Assess Readiness for Change • Select Best Change Configuration • Establish Change Governance

• Communicate • Manage Resistance • Transfer Knowledge and Skills

• Create Compelling Change Story • Make Vision Comprehensive and Operational

• Build Teams • Manage Stakeholders

• Lead Change Program • Develop Leadership Capability

• Implement Performance Management • Implement People Practices

Source: Adapted from Martin Diese, Conrad Nowikow, Patric King, and Amy Wright, Executive’s Guide to E-Business: From Tactics to Strategy, p. 190. Copyright © 2000 by John Wiley & Sons, Inc. Reprinted by permission.

Figure 11.20 illustrates how a company like Avnet Marshall can transform itself via information technology. Notice how Avnet Marshall moved through several stages of organizational transformation as it implemented various e-business and e-commerce applications. First, Avnet Marshall implemented an automated shipping and receiving sys- tem (AS/RS) and a quality order booking, resell application (Qobra) as it focused on achieving customer value through cost savings generated by the efficiencies of automating these core business processes. Then it focused on achieving intercon- nectivity internally and building a platform for enterprise collaboration and knowl- edge management by implementing its AvNet intranet and a data warehouse. The second step was building an Avnet Marshall Web site on the Internet to offer cus- tomers 24/7 online e-commerce transactions and customer support services. In addition, the company built a customized Web site for customers of its European partner SEI. Next, Avnet Marshall connected with its suppliers by building a PartnerNet extranet and the Distribution Resource Planner (DRP) system, a supply chain

Avnet Marshall: Organizational Transformation

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Chapter 11 / Developing Business/IT Strategies ● 473

Free.

Perfect.

Now.

Phases of

Organizational

Transformation

Value Innovation

Cost/ Efficiency

Localized Implementation

Internal Integration

Business Process

Redesign

Business Network Redesign

Business Scope

Redefinition

Quality

Customization

Time

AS/RS

Qobra

MarshallNet

Marshall on the Internet

and SEI

PartnerNet

Electronic Design Center

ENEN

DRP

MAP2S Netseminar

Data Warehouse

F I G U R E 1 1 . 2 0 Avnet Marshall moved through several stages of organizational transformation as it implemented various e-business and e-commerce applications, driven by the customer value focus of its Free.Perfect.Now business model.

management application that enables the company and its suppliers to help manage a customer’s purchases and inventories. Avnet Marshall also implemented a customer relationship management and market intelligence system known as the Manufactur- ing Account Profile Planner (MAPP), which integrates and uses all the customer information from other systems to target its marketing activities more efficiently and manage its customer contacts. As Figure 11.20 illustrates, Avnet Marshall’s other in- novative e-business applications help its customers (1) simulate online and design custom special-purpose microprocessor chips (Electronic Design Center); (2) design new products online with suppliers, as well as take online training classes using real- time streaming video and audio and online chat (Netseminar); and (3) offer online seminars and push broadcasts to their own employees and customers—the Education News and Entertainment Network (ENEN). All of the new technologies and applications we have mentioned now enable Avnet Marshall to provide more value to its customers with fast delivery of high- quality customized products. In addition, all of these initiatives created many new interenterprise business links between Avnet Marshall and its customers and business partners. These major technological and business changes required the organiza- tional change phases noted in Figure 11.20 . In a little over five years, Avnet Marshall had transformed itself into a premier example of an inter-networked, customer value–focused business.

Source: Adapted from Omar El Sawy, Arvind Malhotra, Sanjay Gosain, and Kerry Young, “IT-Intensive Value Innovation in the Electronic Economy: Insights from Marshall Industries,” MIS Quarterly , December 1997.

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474 ● Module IV / Development Processes

1. Business model (455)

2. Business/IT planning (457)

a. Business application planning (461)

b. E-business architecture planning (463)

c. Strategic planning (448)

3. Change management (469)

4. End-user involvement (468)

5. End-user resistance (468)

6. Implementation (464)

7. Information technology architecture (458)

8. Organizational planning (448)

9. Planning for competitive advantage (453)

10. Scenario approach to planning (451)

11. SWOT analysis (453)

These are the key terms and concepts of this chapter. The page number of their first explanation is in parentheses.

K e y Te r m s a n d C o n c e p t s

1. An organization should create a shared business vision and mission, and plan how it will achieve its strategic goals and objectives.

2. Outlines a business vision, business/IT strategies, and technical architecture for a company.

3. A blueprint for information technology in a com- pany that specifies a technology platform, applica- tions architecture, data resources, and IT organization structure.

4. Evaluating strategic business/IT opportunities based on their risk/payoff potential for a company.

5. Planning teams simulate the role of information tech nology in various hypothetical business situations.

6. Evaluating IT proposals for new business applica- tion development projects.

7. Evaluating strategic business opportunities based on a company’s capabilities and the competitive environment.

8. Accomplishing the strategies and applications developed during organizational planning.

9. Managing the introduction of new technologies and IT-based strategies in organizations.

10. End users frequently resist the introduction of new technology.

11. End users should be part of planning for or- ganizational change and business/IT project teams.

R e v i e w Q u i z

Match one of the key terms and concepts listed previously with each of the brief examples or definitions that follow. Try to find the best fit for answers that seem to fit more than one term or concept. Defend your choices.

• Organizational Planning . Managing information tech- nology requires planning for changes in business goals, processes, structures, and technologies. Planning is a vital organizational process that uses methods like the scenario approach and planning for competitive advantage to eval- uate an organization’s internal and external environments; forecast new developments; establish an organization’s vision, mission, goals, and objectives; develop strategies, tactics, and policies to implement its goals; and articulate plans for the organization to act upon. A good planning process helps organizations learn about themselves and promotes organizational change and renewal.

• Business/IT Planning . Strategic business/IT planning involves aligning investment in information technology with a company’s business vision and strategic goals such as reengineering business processes or gaining competitive

advantages. It results in a strategic plan that outlines a company’s business/IT strategies and technology archi- tecture. The technology architecture is a conceptual blue- print that specifies a company’s technology platform, data resources, applications architecture, and IT organization.

• Implementing Business Change . Implementation activities include managing the introduction and imple- mentation of changes in business processes, organiza- tional structures, job assignments, and work relationships resulting from business/IT strategies and applications such as e-business initiatives, reengineering projects, sup- ply chain alliances, and the introduction of new technol- ogies. Companies use change management tactics such as user involvement in business/IT planning and develop- ment to reduce end-user resistance and maximize accept- ance of business changes by all stakeholders.

S u m m a r y

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Chapter 11 / Developing Business/IT Strategies ● 475

1. “Planning is a useless endeavor because developments in e-business and e-commerce and in the political, economic, and societal environments are moving too quickly nowadays.” Do you agree or disagree with this statement? Why?

2. “Planning and budgeting processes are notorious for their rigidity and irrelevance to management action.” How can planning be made relevant to the challenges facing a business?

3. Refer to the Real World Case on IT/Business Alignment in the chapter. Companies where IT is an important part of their product offerings presumably also have a sales force that is well versed in technology. Why is it then nec- essary to take the CIO along on customer visits? Discuss.

4. What planning methods would you use to develop busi- ness/IT strategies and applications for your own busi- ness? Explain your choices.

5. What are several e-business and e-commerce strategies and applications that should be developed and implemented by many companies today? Explain your reasoning.

6. Refer to the Real World Case on Centene, Flowserve, and Shaw Industries in the chapter. Where is the value in the approach taken by Flowserve to reaching consen- sus on their massive project? Discuss.

7. How can a company use change management to mini- mize the resistance and maximize the acceptance of changes in business and technology? Give several examples.

8. “Many companies plan really well, yet few translate strategy into action.” Do you think this statement is true? Why or why not?

9. Review the real-world examples on user resistance and involvement in the chapter. What else would you rec- ommend to encourage user acceptance in both cases? Explain your recommendations.

10. What major business changes beyond e-business and e-commerce do you think most companies should be planning for in the next 10 years? Explain your choices.

D i s c u s s i o n Q u e s t i o n s

1. Business on the Fly Remote Point of Sales in Mexico Melissa and “Rook” Nelson, co-owners of Skydive Chicago, shut down their northern operations in mid- December each year. With heavy cloud cover and frigid temperatures, they just cannot find enough skydivers will- ing to jump over the frozen Chicago landscape. Without customers, valued staff members would migrate to south- ern drop zones, and more than a million dollars in aircraft assets would sit in a hangar. Some northern drop zone owners turn to hauling freight. Others lease their aircraft to southern drop zones. Melissa and Rook, world- champion skydivers themselves, developed other plans. Each winter, Skydive Chicago moves their opera- tions to sunny Ixtapa, Mexico. By moving south, Sky- dive Chicago keeps its aircraft in operation, provides year-round employment for valued staff members, gives its northern customers a sunny winter holiday destina- tion, and introduces skydiving to crowds of tourists seeking to enjoy the beach from a new angle. When Skydive Chicago relocates to Ixtapa, they take their computers with them. “We use them for everything,” said Rook. “Everything” includes Web site updates, newsletters, video editing, photo printing,

jump manifesting, e-mail, customer account manage- ment, and credit card processing. With three computers, a credit card reader, a router, an Internet connection through Telmex, and credit card clearing through Authorize.Net, business continues in a much more hospitable climate.

a. Research credit card readers. What are the popular brands? What features do they offer? How much do they cost?

b. Research mobile point-of-sale devices. What are the popular brands? What features do they offer? How much do they cost?

c. Look up “Authorize.Net” and explore the Web site as a prospective retail merchant. Read and summa- rize a retail merchant case study.

2. Online University Degrees Distance Learning “Distance learning” is a growth business with an in- creasing number of accredited universities adding new online degrees to their offerings every year. However, prospective employers often value these degrees little more than the “mail-order degree” variety. University administrators would like to bring in additional revenue

A n a l y s i s E x e r c i s e s

12. Expresses how a business can deliver value to cus- tomers and make money.

13. Identifying and developing e-business strategies for a company would be an example.

14. A combination of traditional planning methods with business modeling and application development.

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but without compromising their degree’s integrity or cannibalizing their traditional student base.

a. Use news.google.com to find and read three articles about successful online degree programs. What are the key elements for success mentioned in the articles?

b. Prepare a SWOT analysis describing this business opportunity for your university’s administration.

c. What sorts of concerns might the faculty have about an online degree program? What steps would you rec- ommend the administration take in order to make an online degree initiative attractive to the faculty, whose help is required to make the endeavor a success?

3. Strategic Opportunities Matrix Planning Tool The strategic opportunities matrix described in this chapter provides a simple analysis tool for strategic planning groups. It places all plans in direct competi- tion with each other and so participants can quickly identify the most promising plans to evaluate in greater detail. Use the Internet and your own experience to evalu- ate each of the following opportunities and place them appropriately on a strategic opportunities matrix. Ex- plain how you assessed each decision.

a. Online sale and distribution of digital college text- books.

b. Customized news alerts by topic, industry, region, business function, or other key word.

c. Online college degrees from accredited universities. d. Brainstorm opportunities that might fit both the

“High Ability to Deliver with IT” and the “High

Strategic Business Potential” categories. Present your best idea to the class and explain how it fits both classifications.

4. Practical Change Management A Practical Exercise “Culture” evolves from and sets boundaries for inter- actions between people in an environment defined by rules, rule enforcement, and the example set by leader- ship. Conversely, culture can have a significant impact on which rule changes leadership can impose, as well as on the cost of these changes. New software systems invariably mean change. As a minimum, new software will require new proce- dures. In many cases, new systems herald significant organizational change. Managers responsible for implementing these systems must take an organiza- tion’s culture into consideration when planning implementation. To see these challenges for yourself, find an exam- ple of a proposed rule change within your student gov- ernment organization or any other group you belong to. Read about or monitor the debate, and interview representatives from each side of the issue.

a. Briefly describe the proposed change. b. What group or groups oppose the change? What

motivates them? c. What group or groups benefit from the change?

What motivates them? d. Apply the change management principles outlined

in this chapter to describe the steps you think lead- ership could take to ensure success at the lowest reasonable cost.

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Forrester, NMSU, Exante Financial Services, and Others: Getting Real about Strategic Planning

Michael Hites knew the lack of vision at New Mexico State University (NMSU) would be a challenge. “If you don’t have the highest level plan in place, even the best IT strategic plan won’t work,” explains Hites. “I’ve seen it; I’ve lived it.” When he became CIO in 2003, NMSU’s plan was no different from any other school’s. So Hites’s first IT strategic plan was standard and risk-averse. IT plodded along doing good work but nothing particularly strategic. In the absence of a more ambitious university plan, there was nothing to anchor a real IT strategy, says Hites. “If you stick your neck out [in that environment], the university may or may not be behind you,” he notes. Then a funny thing happened. After several years of bugging people about the lack of a strategic plan for the uni- versity, Hites was put in charge of strategic planning for the entire university and named vice president of planning and technology. Hites and his team have lots of great ideas—about $15 million worth of them, he says—but his organization is “funded to the tune of half a million a year.” The question he’s faced with each year is “how to spend that little bit to do something strategic. If the university has the ‘mom-and– apple-pie’ strategy of ‘helping students succeed’ or ‘increasing research,’ anything you do is going to foster those objectives. And you can never be sure you’re making the right choices. But if a university steps out on a limb and says, ‘We will have best online education program in criminal justice in world,’ then that becomes the strategic focus,” says Hites. “It can be appropriate for the CIO to help push business along in terms of strategy,” says Forrester vice president and principal analyst Bobby Cameron. That doesn’t necessarily mean the CIO takes on a second full-time job. When Kelly Clark joined Exante Financial Services, a financial services provider for the health care industry, he wanted to change the IT strategic planning process. “Generally, it’s done at the end of the year,” explains Clark. “You look at the budget, see you have X number of dollars, and figure out what you can do. It’s reactive.” Clark wanted a proactive process, a “business overlay that said, ‘here’s what the market is looking for, here’s what we have, here’s what we need.’ ” Exante had a business road-mapping process but no business and systems strategy, so Clark told his CEO and CFO they needed one—and they bought it. “So off we went,” says Clark. “We created an enterprise stra- tegic plan and IT became a piece of that.” Bethesda Lutheran Homes and Services (BLHS), a faith-based provider of services for individuals with develop- mental disabilities, was a couple of years into a five-year or- ganizational strategic plan when Brian Tennant became its CIO. The plan, however, was strategic in name only. “It was generic: Be the best and grow by this amount,” recalls Ten- nant. “But it was unclear why they picked the growth number or how they would measure it. And they hadn’t paid

It must be nice to be the CIO of a FedEx, or a GE, or a Credit Suisse, where IT and the business are so tightly aligned you can barely tell the two apart. In such compa- nies, corporate leaders understand that IT is a strategic asset and support it as such. These are places where the CIO is encouraged to spend the majority of his time on the Big Pic- ture. If one works in that kind of IT Wonderland, getting a good strategic plan down on paper is probably a snap. The vast majority of CIOs, however, work in places where the business itself may not have a clearly articulated strategy. In such companies, corporate leaders don’t care too much for IT, much less value it strategically. These are places where the CIO’s time is devoured by day-to-day operations and there’s little time left to look beyond the next few months. If one lives with that kind of tactical IT reality, getting a good strategic plan down on paper is practically impossible. For most CIOs, putting together an IT strategic plan— that annual road map to guide IT through the next 12 months and beyond—is dauntingly hard. Although the odds may be stacked against the average CIO, the truth is that those IT leaders who don’t master the art of strategic planning won’t last long. “The purpose of the IT strategic plan is to improve the business-IT relationship. A CIO needs it to communicate with the business, to tell them that he understands the com- pany’s needs and to set expectations,” says Alex Cullen, For- rester Research vice president and research director. “A CIO can’t succeed without it.” Michael Jones, CIO of the National Marrow Donor Program, calls it “the business case for IT.” The cardinal rule in developing an IT strategy is to connect it to the business strategy. “The business should have desired outcomes—market share gains, higher cus- tomer satisfaction levels, shortened cycle times,” says inde- pendent IT analyst Laurie Orlov. “IT has to figure out where they factor into that.” Yet for all the whining CIOs have had to endure about how IT needs to be more strate- gic, the businesses they support are often in even more dire strategic straits. “Businesses very often don’t have a strategy. Or they do, but it’s very high-level and vague. Or they re- serve the right to change it. Or they have some strategies, but they don’t apply to all the business activities taking place,” says Forrester’s Cullen. So, CIOs who operate in strategy-free organizations are off the hook, right? Wrong. “It’s the ultimate cop-out for CIOs to say they can’t do an IT strategy because the busi- ness doesn’t have an articulated strategy,” says Orlov. Fuzzy business goals present a challenge, but smart CIOs should see that as an opportunity. “People in the business are very focused on operations or other minutiae,” says Dave Aron, vice president and research director for Gartner Executive Programs. “IT can help the business articulate what will help it win and how IT fits into that. Then you go from just being an order taker to actually influencing overall strategy.”

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much attention to whether it was on track. Nothing was grounded in reality.” Frankly, that didn’t matter much to Tennant at first. BLHS had acquired Good Shepherd Com- munities, based in Orange County, California, in 2005. It increased its size by two-thirds, and there was a “whole pile of modernization to do,” recalls Tennant, including adjust- ing the core ERP system. Even with an overarching business strategy, IT’s mission was clear: Integrate and upgrade. Now that all that work is wrapping up, Tennant knows it’s time to create a plan to guide his department of 10 through the next three to five years. But Tennant is not wait- ing for the 105-year-old organization to come up with a new five-year plan specific enough to guide IT; he’s helping shape it. “I see myself as a member of the senior manage- ment team who just happens to be in charge of IT,” says Tennant. “So I’m taking the opportunity to weigh in early and weigh in on all disciplines, not just my own.” Senior leaders, Tennant included, are vetting the new plan with the board, operating divisions, donors, and families of those to whom they provide aid. The goal is to create what they’re calling “strategic positioning statements,” such as at- tracting a younger demographic as donors or expanding ser- vices or creating financial stability. “I’m already starting to think about how IT will fit into those goals,” says Tennant. Exante’s Clark says that if strategic planning is impor- tant, IT needs to put its money where its mouth is. “Often the problem is financial,” Clark says. “Everything is focused on capital expenses.” Clark says he has invested in people

and processes to make sure the IT strategic plan remains a priority. “You need a dedicated team,” he says. “Most or- ganizations don’t assign IT strategic planning to someone as a full-time job. Hence it doesn’t become a discipline; it be- comes a burden.” Clark made strategic planning the full- time responsibility of his directors. “Once the positions were open,” he says, “we found people were itching to do it.” “Someone in IT should be thinking about IT strategy most of the time,” agrees Orlov. “And their job the rest of the time should be making sure they’re connected to every- thing that’s going on in the business.” If an IT leader can set aside extra time now, the theory is that strategic planning will become an organic part of the company’s life and interactions. It will no longer be like a series of appointments that you’d just as soon cancel—and it will get easier. “If you did a strategic plan for the first time last year, you’ll find that this year it takes less time. And next year will be even better,” says Cullen. “You can focus more time on discussions with people and less time on the mechanics of putting it together. It could even become the part you like best about your job because that’s where you can talk about what you want to do and why it matters to the organization.” It could be fun—which is why strategic planning isn’t really like a root canal. Root canals have no fun parts.

Source: Adapted from Stephanie Overby, “How to Get Real About Strategic Planning,” CIO Magazine , January 28, 2008.

1. Consider statements made in the case about business often not having an overarching business strategy that can serve as guidance for the development of a strategy for IT.

2. How is it possible that companies get by without some sort of stable and clear direction? What does this tell you about the business and industry environment in which they operate?

3. Dave Aron of Gartner notes that in some cases the lack of clear business strategy provides an opportunity for IT leaders to step in and help articulate it and the role IT will play in the new strategy. This sounds like a good thing for IT people. What is the downside of being in this situation?

4. Why do you think IT’s success is dependent on the overall business strategy of an organization? Why must they be tied together ? Provide several reasons.

1. Go online and follow up on some of the organizations featured in the case (note that Exante Financial Services has recently merged with OptumHealth). How have these organizations been doing lately? Research what the news media and their own financial reports say, if anything, about the role of their IT investments and practices on their current status. How does that relate to what you read about them in the case?

2. One of the organizations featured in the case is New Mexico State University (NMSU). Think about how IT can be of strategic importance to universities and edu- cational institutions. Break into small groups with your classmates to discuss some possibilities and how these apply to your educational experience. What suggestions would you have for improving its performance?

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Blue Cross and Blue Shield, and Others: Understanding the Science behind Change

and sentimental, but actual physical and psychological discomfort. The brain pictures actually prove it. Change lights up an area of the brain, the prefrontal cortex, which is like RAM memory in a PC. The prefrontal cortex is fast and agile, able to hold multiple threads of logic at once to enable quick calcu- lations. Like RAM, the prefrontal cortex’s capacity is finite; it can deal comfortably with only a handful of concepts before bumping up against limits. That bump generates a palpable sense of discomfort, producing fatigue and even anger. Resistance to change is not inevitable. The prefrontal cortex has its limitations, but it is also capable of insight and self-control. The ability to be aware of our habitual impulses and do something about them is what makes us human. “The prefrontal cortex is extremely influential in our be- havior, but it does not have to be completely determinative,” says Jeffrey M. Schwartz, research psychiatrist at the School of Medicine at the University of California at Los Angeles. “We can make decisions about how much we want to be influenced by our animal biology.” Unfortunately, traditional change management tactics are based more in animal training than in human psychol- ogy. Leaders promise bonuses and promotions to those who go along with the change (the carrot), and they punish those who don’t with less important work and the potential loss of their jobs (the stick). “The carrot-and-stick approach works at the systemwide level—offering cash bonuses to the sales department to increase the number of customers in Latin America will get you more customers there, for example— but at a personal level it doesn’t work,” says David Rock, founder and CEO of Results Coaching Systems, a consult- ing firm. “Our personal motivations are too complex, and you can only offer so many raises.” Patience is critical, says Rock. “You have to paint a broad picture of change and resist the urge to fill in all the gaps for people,” he says. “They have to fill them in on their own. If you get too detailed. it prevents people from making the connections on their own.” Leaving holes in any plan is especially hard for CIOs, who tend to be ambitious and process-oriented, which means they have thought out all the details involved in a strategy or systems change and believe they know all the steps required to get there. In general, they’re bursting with the need to tell everyone exactly how to do it. “When I put out change proposals, it’s obvious to me why we should be changing, so when people resist I tend to get more aggressive in trying to convince them,” says Matt Miszewski, CIO of the state of Wisconsin. “But we lose peo- ple in that situation. The more we try to explain things, the more dug in they get.” To try to focus people’s attention on personal insight and change their behavior, Rock uses the same technique that psychoanalysts have used since the profession began: He

Kevin Sparks has been trying to get his staff to change the way it monitors and supports the data center for the past year, but he hasn’t been getting anywhere. Not that he’s getting resistance—at least not overtly. His staffers at Blue Cross and Blue Shield of Kansas City agree that installing automated monitoring software, along with a centralized control room and a set of standard processes for responding to problems, would be more efficient than the way they deal with things now, which is mostly through ad hoc heroism. “Logic always prevails and everyone will agree—at the intellectual level—that we need to change things,” says Sparks, who is vice president and CIO. Then he finds him- self surrounded by empty chairs at meetings while the peo- ple who should be sitting there are off fighting the latest fire. “I tell them I need them at the meetings and if we changed things they’d have the time to be there. But things always break down when we talk about taking monitoring out of their hands through automation,” Sparks says. To help his staff accept the new processes, Sparks says he’s taken layoffs off the table, even though the proposed automation and process efficiencies could reduce the need for bodies. The change is part of a larger effort to imple- ment the IT Infrastructure Library (ITIL) process frame- work to improve overall productivity. “I don’t want fewer people; I want the ones I have to do more things,” he says, sighing with frustration. In other words, Sparks’s staff doesn’t seem to have any logical reason for resisting the changes; but before you dis- miss them as a bunch of inflexible, fearful losers, know this: They are just like you. Maybe your resistance to change manifests itself in a differ- ent way or in a different setting; for example, it might be a re- fusal to throw away that old slide rule, to look while the nurse draws your blood, or to dance at weddings. We all refuse to change our ways. This happens for reasons that are often hard to articulate, until you begin to look at it from a scientific per- spective. In the past few years, improvements in brain analysis technology have allowed researchers to track the energy of a thought coursing through the brain in much the same way that they can track blood flowing through the circulatory system. These advances are bringing a much-needed hard foun- dation of science to a leadership challenge that to CIOs has long seemed hopelessly soft and poorly defined: change management. Pictures of the brain show that our responses to change are predictable and universal. From a neurological perspective, we all respond to change in the same way: We try to avoid it. Yet understanding the brain’s chemistry and mechanics has led to insights that can help CIOs ameliorate the pain of change and improve people’s abilities to adapt to new ways of doing things. Change hurts. Not the boo-hoo, woe-is-me kind of hurt that executives tend to dismiss as an affliction of the weak

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asks questions. “When you ask someone questions, you are getting them to focus on an idea,” he says. “When you pay more attention to something, you make more connections in the brain.” Rock also says that asking questions gets people to voice their ideas. “The best way to get people to change is to lay out the objective in basic terms and then ask them how they would go about getting there,” Rock says. One of the biggest mistakes that leaders, like CIOs, make in trying to win over the skeptical middle is assuming that everyone is motivated by ambition, as many CIOs are. Many people, especially IT professionals, are motivated as much or more by the work they do (for example, the craft of software development) as they are by the opportunity to move up in the hierarchy. “There are a lot of people who don’t want to be king or queen,” says Michael Wakefield, senior enterprise associate at the Center for Creative Leadership, a consulting firm. “That’s difficult for people to reveal because they fear their bosses will start to question their courage and commit- ment.” If these people don’t see an opportunity to maintain their allegiance to the work they love as part of a change, they won’t see the benefit of going along. They will remain skepti- cal or, worse, move into the camp of active resisters. One of the best ways to bring the skeptics around is through learning. At the New York State Workers’ Compensation Board, a change readiness survey of employees at the beginning of an effort to shift compensation cases from paper folders to elec-

tronic files found that employees’ number-one demand was for training. “They wanted reassurance that we weren’t go- ing to ask them to do something new without giving them the support they needed to do it,” says Nancy Mulholland, who is deputy executive director and CIO of the Workers’ Compensation Board. Change management is time-consuming and hard to quantify for process-oriented CIOs. Yet avoiding the chal- lenge leads to failure. “Anybody can stick $2,000 in some- one’s face to get them to finish a job, but it’s the people who can inspire others to follow them that are the most success- ful in the long run,” says Richard Toole, who is CIO for PharMerica, a pharmacy services company. “The soft stuff is important,” but inspiring others to change isn’t a matter of charisma or charm, say the experts. Sparks’s latest tactic for engaging his staff’s prefrontal cortexes was to bring in an outside consultant to discuss the IT Infrastructure Library program and to field concerns. “We had an outstanding instructor, and she was able to ad- dress many of the questions people had,” recalls Sparks. “I could begin to see the lights come on in some of the skep- tics. After a long meeting, one of my people stood up and said, ‘You know, we should have started working on this [au- tomated monitoring] six months ago.’ ”

Source: Adapted from Christopher Koch, “Change Management— Understanding the Science of Change,” CIO Magazine , September 15, 2006.

1. Although a very detailed change proposal may prevent people from making their own connections, as dis- cussed in the case, it may lead others to consider the proposal to be vague and unfinished. How do you bal- ance these two concerns? What guidelines would you use to ensure that you are not veering too far off in either direction?

2. Kevin Sparks of Blue Cross and Blue Shield of Kansas City had a difficult time convincing his people of the need for change. What would you have suggested he do before you read the case? What about afterwards? How did your recommendations change as a result?

3. Organizational change goes beyond promotions and the threat of layoffs. What ways other than those discussed in the case would you use to entice people to embrace proposed changes? Provide several suggestions and jus- tify their rationale.

1. Search the Internet for examples of recent successful and failed IT implementations. What was the role of employee involvement and resistance in each one of those? What strategies did companies use to manage the change process, and how much success did they have in doing so?

2. Prepare a report to share your findings with the class.

3. Break into small groups to discuss what change man- agement strategies and tactics you would use to ensure a smooth transition, either at a company you are famil- iar with or at one you know about from previous re- search for this or another class. How would you achieve a good balance between positive and negative conse- quences, as well as involvement in the process? Choose one of your group members to share your insights with the rest of the class.

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C h a p t e r H i g h l i g h t s Section I Developing Business Systems IS Development The Systems Approach Real World Case: Microsoft, SiCortex, and Others: How Virtualization Helps Software Developers Systems Analysis and Design The Systems Development Life Cycle Starting the Systems Development Process Systems Analysis Systems Design End-User Development Technical Note: Overview of Object-Oriented Analysis and Design Section II Implementing Business Systems Implementation Implementing New Systems Real World Case: JetBlue Airways, WestJet Airlines, and Others: The Difficult Path to Software Upgrades Project Management Evaluating Hardware, Software, and Services Other Implementation Activities Real World Case: PayPal: Going Global All Languages at a Time Real World Case: Queen’s Medical Center, National Public Radio, Worldspan, and Others: Your IT Project Has Been Backlogged

L e a r n i n g O b j e c t i v e s After reading and studying this chapter, you should be able to :

1. Use the systems development process outlined in this chapter and the model of IS components from Chapter 1 as problem-solving frameworks to help you propose information systems solutions to simple business problems.

2. Describe and give examples to illustrate how you might use each of the steps of the information sys- tems development life cycle to develop and imple- ment a business information system.

3. Explain how prototyping can be used as an effec- tive technique to improve the process of systems development for end users and IS specialists.

4. Understand the basics of project management and their importance to a successful system develop- ment effort.

5. Identify the activities involved in the implementa- tion of new information systems.

6. Compare and contrast the four basic system con- version strategies.

7. Describe several evaluation factors that should be considered in evaluating the acquisition of hard- ware, software, and IS services.

481

CHAPTER 12

DEVELOPING BUSINESS/IT SOLUTIONS

Management

Challenges

Foundation

Concepts

Information

Technologies

Business

Applications M o d u l e I V

Development

Processes

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SECTION I D e v e l o p i n g B u s i n e s s S y s t e m s Suppose the chief executive of the company where you work asks you to find a Web- enabled way to get information to and from the salespeople in your company. How would you start? What would you do? Would you just plunge ahead and hope you could come up with a reasonable solution? How would you know whether your solu- tion was a good one for your company? Do you think there might be a systematic way to help you develop a good solution to the CEO’s request? There is a way, and it’s a problem-solving process called the systems approach . When the systems approach to problem solving is applied to the development of information systems solutions to business problems, it is called information systems development or application development . This section will show you how the systems approach can be used to develop business systems and applications that meet the business needs of a company, as well as its employees and stakeholders. Refer to the Real World Case on the next page. We can learn a lot about the new technologies that improve the software development and testing process from this example. See Figure 12.1 .

The systems approach to problem solving uses a systems orientation to define prob- lems and opportunities and then develop appropriate, feasible solutions in response. Analyzing a problem and formulating a solution involve the following interrelated activities:

1. Recognize and define a problem or opportunity using systems thinking . 2. Develop and evaluate alternative system solutions. 3. Select the system solution that best meets your requirements. 4. Design the selected system solution. 5. Implement and evaluate the success of the designed system.

Using systems thinking to understand a problem or opportunity is one of the most important aspects of the systems approach. Management consultant and author Peter Senge calls systems thinking the fifth discipline . Senge argues that mastering systems thinking (along with the disciplines of personal mastery, mental models, shared vision, and team learning) is vital to personal fulfillment and business success in a world of constant change. The essence of the discipline of systems thinking is “seeing the forest and the trees” in any situation by:

• Seeing interrelationships among systems rather than linear cause-and-effect chains whenever events occur.

• Seeing processes of change among systems rather than discrete “snapshots” of change, whenever changes occur.

One way of practicing systems thinking is to try to find systems, subsystems, and components of systems in any situation you are studying. This is also known as using a systems context , or having a systemic view of a situation. For example, the business or- ganization or business process in which a problem or opportunity arises could be viewed as a system of input, processing, output, feedback, and control components. Then to understand a problem and solve it, you would determine whether these basic systems functions are being properly performed. See Figure 12.2 .

Example. The sales process of a business can be viewed as a system. You could then ask: Is poor sales performance (output) caused by inadequate selling effort (input),

IS Development

The Systems Approach

Systems Thinking

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Chapter 12 / Developing Business/IT Solutions ● 483

One key advantage is virtualization’s ability to set apart an unstable environment, which is something any developer ex- pects in early phases of application design. As the Microsoft tools are developed, says Friedman, testing early versions may destabilize a developer’s entire computing environment. “That’s the nature of the beast,” he says. “Almost any- thing except the simplest desktop application can crash the system. I often tell my developers that if they aren’t crashing the system regularly, they are not trying hard enough. We appreciate virtualization technologies, because they save time, and let our developers spend more of their time on the challenging stuff, not the mundane and extremely time- consuming aspects of prepping test environments.” Like other virtualization tools, Microsoft Hyper-V lets users “snapshot” the system at a “last-known good version.” “We create a rollback that allows us to restore the system to that previous good state within minutes,” Friedman says. “The alternative is having to re-image the computer or re- build the environment, which can take hours,” says Friedman. “This is a tremendous timesaver.” Friedman’s group also makes extensive use of virtualiza- tion and virtual machine images in quality assurance (QA) testing. “Once you get past unit testing by the developers, we like to talk about the test matrix—what versions of the OS does it run on, for example,” he says. “Then we need to test against both the 32-bit or 64-bit versions of each. Using Virtual Machine (VM) images is the fastest, cheapest, most flexible way to maintain a variety of testing environments. In our QA labs, we are doing this all the time; we do a lot of automated testing, so we stockpile these images as VMs, and point our test suite at them. It’s invaluable. We save so much time you wouldn’t believe it.” The ability to snapshot, and restore a working image within minutes, rather than wait hours for a rebuilt system, is particularly important. “You’re often looking at bugs where you have to spend a day or two to set up the environ- ment just to reproduce a bug. so the time you spend having to rebuild again and again—that’s a time waster,” says Fried- man. “That is loss of productivity.” For example, when a bug causes a system crash, the de- veloper has to work backward to identify the point where the system crashed. “People often initially set breakpoints too far into the process and the system crashes again. Since a developer can easily be crashing the system several times a day, being able to restore quickly and then re-run the debug- ging session while the problem is still fresh in their minds is a great benefit,” Friedman says “When you’re troubleshoot- ing a complicated bug, it’s good to stay in that groove.” Virtualization is a great boon to iterative testing, de- velopers say. “We have lots of test systems for use by our developers—each of which needs its own x86 control system. Rather than get a lot of PCs, even whatever’s cheapest, we’re using virtualization to create VMs which then ‘attach’ to the

V irtualization’s big push to fame was arguably kick-started by VMware’s Workstation product, which allowed individual users to run a bunch of operat- ing systems (OS), versions, or instances (similar to multiple application windows) instead of having a one-at-a-time multi-boot environment. In many companies, virtualization arrived with developers first using the technology quietly to do testing and development, then introducing the virtualiza- tion tools to IT executives. Although computer virtualization today fuels many pro- duction environments (e.g., servers, desktop infrastructures, and as a provisioning tool), virtualization is also used by a still-growing number of software developers. For starters, they use virtualization tools to provide a range of target environments for development and testing (such as different operating systems, OS versions, and browsers), and also to provision/reprovision configuration instances quickly and easily. Mark Friedman, a senior software architect, works in Microsoft’s Developer Division, where upwards of 3,000 peo- ple create Visual Studio and the .NET Framework. Friedman himself works mainly on the performance tools that ship with Microsoft’s Visual Studio Team System. “About two-thirds of the people in my division are in development and testing— and most of these developers and testers are using system virtualization (via Microsoft’s Hyper-V technology) as one of their key productivity tools,” says Friedman, who is also a board director of The Computer Measurement Group.

Microsoft, SiCortex, and Others: How Virtualization Helps Software Developers

REAL WORLD

CASE 1

Source: © Ryan McVay/Getty Images.

Virtualization technology simplifies the life of software developers and testers.

F I G U R E 1 2 . 1

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484 ● Module IV / Development Processes

external cluster boards,” says Adam Moskowitz, senior soft- ware engineer at SiCortex, which builds and sells a range of energy-efficient computers. A primary benefit of virtualizing the control systems, says Moskowitz, is ease of testing. “Want an experimental system? Clone a standard VM and away you go,” he says. The toolset is also valuable because of its ease of configura- tion; developers can build a VM with the latest software once, then clone it as many times as needed. Mike Brescia, who works for a company making real- time environmental data recording, and retrieval, says, “In addition to offering its system as a virtual appliance, our company’s developers use virtualization to put up different test environments, e.g. Windows and Linux, on fewer hard- ware boxes.” Cloning a clean computer system for testing purposes is much easier than copying a disk image and using Clonezilla, Brescia says. “Running VM does not require tearing down and wiping a complete system; we only need to be careful not to overload resources on the host machine,” adds Brescia. The 15 Web developers at design and marketing firm Eli Kirk have to cater to a number of Web browsers and operating systems, says Connor Boyack, Eli Kirk’s senior web developer, who uses Parallels version 4 on Mac OS X Leopard, and runs VMs of Windows XP, OpenSUSE 11, and Windows 7 Beta. “Creating functional and aesthetically identical sites re- quires a great deal of browser testing, which makes virtuali- zation a must,” says Boyack. “Virtualization allows me to use multiple operating systems and multiple browsers all col- laboratively and seamlessly.” There’s a huge advantage in the ability to test a dozen different scenarios simultaneously to ensure a consistent user experience, agrees Nick Gauthier, a developer at SmartLogic Solutions. “Another advantage is being able to boot up a spe- cific version and browser when a client has a complaint. We no longer have to say ‘Well, I don’t run that browser, I’m on Linux;’ now we can say, ‘One moment please. Ah, I see the problem and I’m fixing it now.’ ” “We use virtualization to test our software on the plat- forms and applications we support (for QA), and to replicate customer environments when there are customer issues for support,” says Eric Floehr, CTO at 3X Systems, a start-up that developed and sells a remote backup appliance. “Virtualization

allows us to quickly bring up and tear down environments, and allows us to do so with a minimum amount of physical hardware.” The ability to test against a large number of plat- forms and environments with a minimum of capital outlay is especially important in a small start-up company. Plus, “It greatly improves the quality and reliability of our product,” adds Floehr. There are, developers acknowledge, parts of the process where virtualization can’t help. “One area where virtualization doesn’t help is in stress testing our product, which is a network-based backup appli- ance,” notes 3X’s Floehr. “While we could test 10 simulta- neous clients virtually, it isn’t a true stress test because the 10 clients are only going through, say, four physical CPUs and two NICs, which are constraints that would not exist if they were 10 physical clients in the real world.” “For load testing or scaling, you have to run on the raw hardware, the physical machine,” says Microsoft’s Mark Friedman. “Performance characteristics, unless you expect to deploy on a VM, are very different. And the same applies to the state of the art for performance measurements; you can’t trust the [Physical Machines] you get on a VM cur- rently.” Although, Friedman notes, over time he expects this to be fixed. Also, says Friedman, the para-virtualization approach used by the virtualization industry can and does change some underlying aspects of the OS, notably the OS drivers. “So if you have a dependency on specific drivers or hard- ware environment, that will be impacted. For example, there’s a virtual NIC, and there’s a specific driver. The driver is ‘virtualization-aware.’ You have to understand that if you need testing against a native set of drivers, you won’t see that within a VM. So this impacts people doing driver develop- ment, but not web developers, etc.” Despite those quibbles, virtualization already gives de- velopers real benefits. “Virtualization makes our developers more productive once they learn to work with the technol- ogy,” says Microsoft’s Friedman. “It allows them to spend more of their time in coding, testing and debugging. It elim- inates a lot of time and delay spent in set-up and prepara- tion, which isn’t where we want them to be spending the bulk of their time.”

Source: Adapted from Daniel Dern, “How Virtualization Improves Software Development,” CIO.com , February 11, 2009.

1. How does virtualization work? In your own words, describe what you understand about the virtualization process as depicted in the case.

2. In software development and testing, where does virtu- alization help, and where does it not help? Why?

3. What are the business benefits of implementing virtual- ization technologies in software development? Classify them into those that enhance the effectiveness and the efficiency of the development and testing process.

1. Go online and research other users of virtualization technology (backup and disaster recovery being one of those). How do those differ from the ones described in the case? How are they similar? Prepare a report to summarize your findings.

2. If virtualization technology were to eventually allow end users to run any environment of their choice in the same device, does that mean the choice of computing platform (desktop, notebook, smartphone; Windows, Linux, Mac OS) becomes irrelevant? Break into small groups to discuss this issue.

REAL WORLD ACTIVITIES CASE STUDY QUESTIONS

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Chapter 12 / Developing Business/IT Solutions ● 485

out-of-date sales procedures (processing), incorrect sales information (feedback), or inadequate sales management (control)? Figure 12.2 illustrates this concept.

The overall process by which information systems are designed and implemented within organizations is referred to as systems analysis and design (SA&D). Within this process are contained activities that include the identification of business problems; the proposed solution, in the form of an information system (IS), to one or more of the problems identified; and the design and implementation of that proposed solution to achieve the desired and stated goals of the organization. Today, there are many approaches to SA&D. The two most common approaches are object-oriented analysis and design and the life cycle approach . Although each has its advantages and disadvantages, and the two approaches differ in many respects, both are concerned with the analysis and design of a successful information system. In most cases, the choice will depend upon the type of system under study and the degree to which users are able to specify their needs and requirements clearly. A thorough discussion of both approaches is beyond the scope of this text, so we will focus on the most common method: the life cycle approach.

One method of using the systems approach to develop information system solutions, and the most prevalent one in organization systems analysis and design, can be viewed as a multistep, iterative process called the systems development life cycle (SDLC). Figure 12.3 illustrates what goes on in each stage of this process: (1) investigation, (2) analysis, (3) design, (4) implementation, and (5) maintenance. It is important to realize, however, that all of the activities involved in the SDLC are highly related and interdependent. In actual practice, therefore, several develop- mental activities may be occurring at the same time, while certain activities within a given step may be repeated. This means both users and systems analysts may repeat previous activities at any time to modify and improve a system under development. We will discuss the activities and products of each step of the systems development cycle in this chapter.

Do we have business opportunities? What are our business priorities? How can information technologies provide information system solutions that address our business priorities? These are the questions that have to be answered in the systems investigation stage , which is the first step in the systems development process. This stage may involve consideration of proposals generated by a business/IT plan- ning process, which we will discuss in detail in Chapter 14. The investigation stage also includes the preliminary feasibility study of proposed information system solu- tions to meet a company’s business priorities and opportunities as identified in a planning process.

Systems Analysis and Design

The Systems Development Life Cycle

Starting the Systems Development Process

F I G U R E 1 2 . 2 An example of systems thinking. You can better understand a sales problem or opportunity by identifying and evaluating the components of a sales system. Poor

Sales Performance

?

Out-of-Date Sales

Procedures ?

Inadequate Selling Effort

?

Poor Sales

Management ?

Control

Input Processing Output

Incorrect Sales Information?Feedback

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486 ● Module IV / Development Processes

F I G U R E 1 2 . 3 The traditional information systems development life cycle. Note how the five steps of the cycle are based on the stages of the systems approach. Also note the products that result from each step in the cycle, and that you can recycle back to any previous step if more work is needed.

Systems Investigation

Product: Feasibility

Study

Systems Analysis

Product: Functional

Requirements

Systems Design

Product: System

Specifications

Systems Implementation

Product: Operational

System

Systems Maintenance

Product: Improved System

Understand the

Business

Problem or

Opportunity

Develop an

Information

System

Solution

Implement

the

Information

System

Solution

Use a postimplementation review process to monitor, evaluate, and modify the business system as needed.

Acquire (or develop) hardware and software.

Test the system, and train people to operate and use it.

Convert to the new business system.

Manage the effects of system changes on end users.

Develop specifications for the hardware, software, people, network, and data resources, and the information products that will satisfy the functional requirements of the proposed business information system.

Analyze the information needs of employees, customers, and other business stakeholders.

Develop the functional requirements of a system that can meet business priorities and the needs of all stakeholders.

.

Determine how to address business opportunities and priorities.

Conduct a feasibility study to determine whether a new or improved business system is a feasible solution.

Develop a project management plan and obtain management approval.

Develop logical models of current system.

Develop logical models of new system.

Because the process of development can be costly, the systems investigation stage typi- cally requires the development of a feasibility study . At this stage, this is a preliminary study where the information needs of prospective users and the resource requirements, costs, benefits, and feasibility of a proposed project are determined. A team of business professionals and IS specialists might then formalize the findings of this study in a written report that includes preliminary specifications and a developmental plan for a proposed business application. If the management of the company approves the recom- mendations of the feasibility study, the development process can continue. By design, the preliminary feasibility study of a project is a very rough analysis of its viability that must be continually refined over time. It is, nonetheless, a necessary first step in making the final commitment of organizational resources to the develop- ment of the proposed system. In some cases, however, the preliminary feasibility as- sessment is unnecessary. For extremely small or obvious projects, it may actually represent a waste of valuable time. Also, certain changes in the business environment may dictate the need for change, regardless of the assessed feasibility of such change. If the government changes the tax structure for employee income, an organization has no choice but to make the necessary changes to their payroll system. If a critical

Feasibility Studies

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Chapter 12 / Developing Business/IT Solutions ● 487

program has a major bug in it, the organization has no choice but to address and resolve it. In other words, there is little point in assessing the feasibility of a problem that must be solved. In these cases, the feasibility assessment may be better directed to the analysis of alternative approaches to the solution rather than the problem itself. Nevertheless, a thorough preliminary feasibility study should be the default standard in the organization, and a decision to eliminate this first step in the process should always be carefully scrutinized and justified. Thus, the goal of the preliminary feasibility study is to evaluate alternative system solutions and to propose the most feasible and desirable business application for development. The feasibility of a proposed business system can be evaluated in terms of five major categories, as illustrated in Figure 12.4 .

The operational feasibility assessment focuses on the degree to which the proposed development project fits in with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture, and existing business processes. Further, this assessment also determines the degree to which the project meets the specific business objectives set forth during the proposal phase. In the early stages of operational feasibility assessment, we are primarily interested in determining whether the identified problem is worth solving or the proposed solution actually solves the problem at hand. Additionally, we must concern ourselves with an initial as- sessment of schedule feasibility : Can we identify and solve the problem at hand within a reasonable time period? In the latter stages of operational feasibility assessment, such as during the physical design phase of the SDLC, we shift our focus to one of strategic fit and organizational impact, such as determining to what degree the proposed physi- cal system will require changes in our organizational structure, or what changes in the current spans of authority need to be made to accommodate the new system.

The purpose of the economic feasibility assessment is to determine the extent to which the proposed system will provide positive economic benefits to the organization. This determination involves the identification, and quantification, of all benefits expected

Operational Feasibility

Economic Feasibility

F I G U R E 1 2 . 4 Operational, economic, technical, human, and legal/ political factors. Note that there is more to feasibility than cost savings or the availability of hardware and software.

• How well the proposed system sup- ports the business priorities of the organization.

• How well the proposed system will solve the identified problem.

• How well the proposed system will fit with the existing organizational structure.

Technical Feasibility Human Factors Feasibility

• Hardware, software, and network capability, reliability, and availability.

Legal/Political Feasibility

• Patent, copyright, and licensing. • Governmental restrictions. • Affected stakeholders and reporting

authority.

• Cost savings. • Increased revenue. • Decreased investment requirements. • Increased profits. • Cost/benefit analysis.

• Employee, customer, supplier acceptance.

• Management support. • Determining the right people for

the various new or revised roles.

Operational Feasibility Economic Feasibility

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488 ● Module IV / Development Processes

from the system, as well as the explicit identification of all expected costs of the project. In the early stages of the project, defining and assessing all of the benefits and costs associated with the new system is impossible. Thus, the economic feasibility as- sessment is an ongoing process in which the definable short-term costs are constantly being weighed against the definable long-term benefits. If a project cannot be accu- rately judged as economically feasible using hard costs, then the project should not proceed, regardless of the other assessment category outcomes. The assessment of economic feasibility typically involves the preparation of a cost/ benefit analysis . If costs and benefits can be quantified with a high degree of certainty, they are referred to as tangible ; if not, they are called intangible . Examples of tangible costs are the costs of hardware and software, employee salaries, and other quantifiable costs needed to develop and implement an IS solution. Intangible costs are difficult to quantify; they include the loss of customer goodwill or employee morale caused by errors and disruptions arising from the installation of a new system. Tangible benefits are favorable results, such as the decrease in payroll costs caused by a reduction in personnel or a decrease in inventory carrying costs caused by reduc- tion in inventory. Intangible benefits are harder to estimate. Such benefits as better customer service or faster and more accurate information for management fall into this category. Figure 12.5 lists typical tangible and intangible benefits with examples. Possible tangible and intangible costs would be the opposite of each benefit shown.

The assessment of technical feasibility is focused on gaining an understanding of the present technical resources of the organization and their applicability to the expected needs of the proposed system. The analyst must assess the degree to which the current technical resources, including hardware, software, and operating environments, can be upgraded or added to such that the needs of the proposed system can be met. If the current technology is deemed sufficient, then the technical feasibility of the project is clear. If this is not the case, however, the analyst must determine whether the technol- ogy necessary to meet the stated specifications exists. The danger is that the project may require technology that does not yet exist in a stable form. Despite the claims of vendors that they can supply whatever is required, the analyst must be able to assess accurately the degree to which the needed technology exists in a form suitable for the proposed project. See Figure 12.6 .

Technical Feasibility

F I G U R E 1 2 . 5 Possible benefits of new information systems, with examples. Note that an opposite result for each of these benefits would be a cost or disadvantage of new systems.

Tangible Benefits Example

• Increase in sales or profits. • Development of IT-based products. • Decrease in information processing costs. • Elimination of unnecessary documents. • Decrease in operating costs. • Reduction in inventory carrying costs. • Decrease in required investment. • Decrease in inventory investment required. • Increased operational efficiency. • Less spoilage, waste, and idle time. Intangible Benefits Example

• Improved information availability. • More timely and accurate information. • Improved abilities in analysis. • OLAP and data mining. • Improved customer service. • More timely service response. • Improved employee morale. • Elimination of burdensome job tasks. • Improved management decision making. • Better information and decision analysis. • Improved competitive position. • Systems that lock in customers. • Improved business image. • Progressive image as perceived by

customers, suppliers, and investors.

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Chapter 12 / Developing Business/IT Solutions ● 489

F I G U R E 1 2 . 6 Examples of how a feasibility study might measure the feasibility of a proposed e-commerce system for a business.

• How well a proposed e-commerce sys- tem fits the company’s plans for devel- oping Web-based sales, marketing, and financial systems.

Technical Feasibility Human Factors Feasibility

Legal/Political Feasibility

• No patent or copyright violations. • Software licensing for developer side only. • No governmental restrictions. • No changes to existing reporting

authority.

• Capability, reliability, and availability of Web store hardware, software, and management services.

• Acceptance of employees. • Management support. • Customer and supplier acceptance. • Staff developers have necessary skills.

• Savings in labor costs. • Increased sales revenue. • Decreased investment in inventory. • Increased profits. • Acceptable return on investment.

Operational Feasibility Economic Feasibility

It is one thing to assess the degree to which a proposed system can work and quite another to evaluate whether the system will work. The human factors feasibility as- sessment focuses on the most important components of a successful system implemen- tation: the managers and end users. No matter how elegant the technology, the system will not work if the end users and managers do not perceive it to be relevant and, therefore, do not support it. In this category, we assess the degree of resistance to the proposed system, the perceived role of the end users in the development process, the degree of change to the end users’ working environment as a result of the new system, and the current state of human resources available to conduct the project and to man- age and use the system on completion.

This category of assessment is often overlooked during the early stages of project ini- tiation and analysis. The legal and political feasibility of a proposed project includes a thorough analysis of any potential legal ramifications resulting from the construction and implementation of the new system. Such legal issues include copyright or patent infringements, violation of existing antitrust laws (such as in the antitrust suit brought against Microsoft Corporation over Windows and Internet Explorer by the U.S. Justice Department in 1998), foreign trade restrictions, or any existing contractual obligations of the organization. The political side of the assessment focuses on understanding who the key stake- holders within the organization are and the degree to which the proposed system may positively or negatively affect the distribution of power. Such distribution can have major political repercussions and may cause disruption or failure of an otherwise rel- evant development effort.

What is systems analysis? Whether you want to develop a new application quickly or are involved in a long-term project, you will need to perform several basic activities of systems analysis. Many of these activities are an extension of those used in conducting a feasibility study. Systems analysis is not a preliminary study; however, it is an in- depth study of end-user information needs that produces functional requirements that

Human Factors Feasibility

Legal/Political Feasibility

Systems Analysis

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490 ● Module IV / Development Processes

are used as the basis for the design of a new information system. Systems analysis tra- ditionally involves a detailed study of:

• The information needs of a company and end users like yourself. • The activities, resources, and products of one or more of the present information

systems being used. • The information system capabilities required to meet your information needs,

and those of other business stakeholders that may use the system.

An organizational analysis is an important first step in systems analysis. How can peo- ple improve an information system if they know very little about the organizational environment in which that system is located? They can’t. That’s why the members of a development team have to know something about the organization, its management structure, its people, its business activities, the environmental systems it must deal with, and its current information systems. Someone on the team must know this infor- mation in more detail for the specific business units or end-user workgroups that will be affected by the new or improved information system being proposed. For example, a new inventory control system for a chain of department stores cannot be designed unless someone on a development team understands a great deal about the company and the types of business activities that affect its inventory. That’s why business end users are frequently added to systems development teams.

Before you design a new system, it is important to study the system that will be im- proved or replaced (assuming there is one). You need to analyze how this system uses hardware, software, network, and people resources to convert data resources, such as transactions data, into information products, such as reports and displays. Then you should document how the information system activities of input, processing, output, storage, and control are accomplished. For example, you might evaluate the format, timing, volume, and quality of input and output activities. Such user interface activities are vital to effective interaction be- tween end users and a computer-based system. Then, in the systems design stage, you can specify what the resources, products, and activities should be to support the user interface in the system you are designing.

Organizational Analysis

Analysis of the Present System

What if, in the days leading up to Christmas, a crush of shoppers forced a retailer to lock its doors during peak business hours? Unimaginable—but that’s exactly what happened in varying degrees at the Web stores for Walmart, Macy’s, and other re- tailers as the 2006 holiday season got off to a blazing start. Walmart’s failure on Black Friday, the day after Thanksgiving, was the most stunning. Walmart.com was down for a total of about 10 hours that day, according to Internet monitoring firm Keynote Systems, forcing it to greet shoppers at times with a “come back later” notice. “I’m afraid it was too much of a good thing on Friday,” a Walmart spokesman said. Walmart expected order activity to be double the level of the previous year’s Black Friday, but it came in at seven times the previous year’s volume. Walmart had set big online goals for that holiday season, having spent 13 months adding faster checkouts and an interactive toy section, the kind of features it hoped would lure about 300 million visitors. Not if the door is closed. Macy’s site performed poorly for about nine hours on that Black Friday, accord- ing to Keynote, and was down for about an hour that day and then again part of the following Tuesday. The sites for Zappos and Foot Locker also had some perform- ance problems. Keynote says most sites, including Walmart’s, recovered Monday and didn’t have major problems that day.

Walmart and Others: Stress- Testing Web Sites for the Holiday Season

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With the Web bringing in increasingly significant sales, why would retailers drop the ball on site performance? In most cases, they aren’t. Many conduct load testing, forecasting, and monitoring using tools from companies such as Keynote and Gomez, and they use content distribution networks to speed performance. They build their e-commerce infrastructures with an eye on performance, with redun- dancy at common failure points. But sites can still fail. One reason is that the various teams—marketing, site designers, QA testers—too often aren’t watching or sharing the same metrics, says Matthew Poepsel, vice presi- dent of professional services at Gomez. If groups worry only about their metrics—marketing pushes a promotion, for in- stance, without being sure site design and capacity can handle it—you have “individual success but collective failure,” he says. When a problem hits, Poepsel says, 80 percent of the recovery time is spent identifying the problem. “Once you know what the prob- lem is, you can get it fixed pretty quickly, unless it’s a sheer bandwidth issue and you need to cut a new contract,” he says. Customers are ruthlessly unforgiving of poor performance. In a Gomez survey of 1,173 online shoppers, 53 percent say they’ll switch to a competitor if a site takes too long to load, and 21 percent will call customer service. When testing their systems for load capacity in preparation for Black Friday, retailers typically used twice the capacity their sites had on the same day last year, says Keynote, which equates that level to a 600 percent increase over an average shopping day outside of the holidays. Stores that kept their sites up did blockbuster business. However, when a major competitor’s site fails, other sites pick up a rush of new customers, which can over- whelm their sites. There’s less time than ever to react to shifts in traffic, too.

Source: Adapted from Mary Hayes Weier, “Opening Holiday Weeks Show Uptime Isn’t Easy for Online Retailers,” InformationWeek , December 4, 2006.

One of the primary activities that occur during the analysis phase is the construction of a logical model of the current system. The logical model can be thought of as a blueprint of the current system that displays only what the current system does with- out regard for how it does it. By constructing and analyzing a logical model of the cur- rent system, a systems analyst can more easily understand the various processes, functions, and data associated with the system without getting bogged down with all the issues surrounding the hardware or the software. Also, by creating a logical model, the various noncomputer components of a system can be incorporated, analyzed, and understood. For example, in the physical version of a system, a person’s inbox may be the location where new orders are stored until they have been entered into the com- puter. In the logical model, that inbox is treated just like a computer hard drive or other electronic storage media. In a logical sense, it is just another place to store data. Logical and physical models are not limited to use in the design of an information system. They are commonly used in a variety of situations with which you are familiar. Take, for example, the remodeling of your house. Let’s say you want to knock out a wall to expand two small bedrooms into one big one. You also want to add a second bathroom for your guests. One way to approach this would be to call in the contractor and have him start tearing out the wall and adding the plumbing. The problem with this approach is that you have no blueprint for what you are trying to accomplish. You may find that the wall you want removed also holds up part of the second floor. Tearing it out would make for a bad day. Using this approach, you are proceeding with the redesign of the physical model without analyzing the logical model. A better approach would be to have an architect look at the blueprints to see the feasibility of accomplishing your goals. If it is discovered that the wall cannot be re- moved, no harm is done. Then, alternative designs—say, putting in an archway between the two rooms—can be easily tested without any costly mistakes. Once the logical model

Logical Analysis

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of the remodeling project has been determined to be sound, the physical model can be redone with the expected, and desired, positive consequences. The same approach is used when designing or redesigning information systems.

This step of systems analysis is one of the most difficult. You may need to work as a team with IS analysts and other end users to determine your specific business informa- tion needs. For example, first you need to determine what type of information each business activity requires; what its format, volume, and frequency should be; and what response times are necessary. Second, you must try to determine the information processing capabilities required for each system activity (input, processing, output, storage, control) to meet these information needs. As with the construction of the logical model, your main goal is to identify what should be done, not how to do it . When this step of the life cycle is complete, a set of functional requirements for the proposed new system will exist. Functional requirements are end-user information requirements that are not tied to the hardware, software, network, data, and people resources that end users presently use or might use in the new system. That is left to the design stage to determine. For example, Figure 12.7 shows examples of functional requirements for a proposed e-commerce application for a business.

Once the analysis portion of the life cycle is complete, the process of systems design can begin. Here is where the logical model of the current system is modified until it represents the blueprint for the new system. This version of the logical model repre- sents what the new system will do. During the physical design portion of this step, users and analysts will focus on determining how the system will accomplish its objec- tives. This is where issues related to hardware, software, networking, data storage, se- curity, and many others will be discussed and determined. As such, systems design consists of design activities that ultimately produce physical system specifications satis- fying the functional requirements that were developed in the systems analysis process. A useful way to look at systems design is illustrated in Figure 12.8 . This concept focuses on three major products, or deliverables , that should result from the design

Functional Requirements Analysis and Determination

Systems Design

F I G U R E 1 2 . 8 Systems design can be viewed as the design of user interfaces, data, and processes.

Systems Design

User Interface Design

Data Design

Screen, Form, Report, and Dialog Design

Data Element Structure Design

Program and Procedure Design

Process Design

F I G U R E 1 2 . 7 Examples of functional requirements for a proposed e-commerce system for a business.

Examples of Functional Requirements

• User Interface Requirements Automatic entry of product data and easy-to-use data entry screens for Web customers.

• Processing Requirements Fast, automatic calculation of sales totals and shipping costs.

• Storage Requirements Fast retrieval and update of data from product, pricing, and customer databases.

• Control Requirements Signals for data entry errors and quick e-mail confirmation for customers.

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stage. In this framework, systems design consists of three activities: user interface, data, and process design. This results in specifications for user interface methods and products, database structures, and processing and control procedures.

During the design phase, the development process frequently takes the form of, or includes, a prototyping approach. Prototyping is the rapid development and testing of working models, or prototypes , of new applications in an interactive, iterative proc- ess that can be used by both IS specialists and business professionals. Prototyping, as a development tool, makes the development process faster and easier, especially for projects where end-user requirements are hard to define. Prototyping has also opened up the application development process to end users because it simplifies and accelerates systems design. Thus, prototyping has enlarged the role of the busi- ness stakeholders affected by a proposed system and helps make possible a quicker and more responsive development process called agile systems development (ASD). See Figure 12.9 .

Prototyping can be used for both large and small applications. Typically, large business systems still require using a traditional systems development approach, but parts of such systems can frequently be prototyped. A prototype of a business application needed by an end user is developed quickly using a variety of application development software tools. The prototype system is then repeatedly refined until it is acceptable. As Figure 12.9 illustrates, prototyping is an iterative, interactive process. End users with sufficient experience with application development tools can do prototyping themselves. Alternatively, you could work with an IS specialist to develop a prototype system in a series of interactive sessions. For example, you could develop, test, and refine prototypes of management reports, data entry screens, or output displays. Usually, a prototype is modified several times before end users find it acceptable. Program modules are then generated by application development software using

Prototyping

The Prototyping Process

Identify an End User’s Business Requirements

Develop Business System

Prototypes

Revise the Prototypes to Better

Meet End-User Requirements

Use and Maintain the Accepted

Business System

Analysis/Design. End users and/or IS specialists use application development tools to interactively design and test prototypes of information system components that meet end-user business needs.

Implementation/Maintenance. The accepted business system can be modified easily since most system documentation is stored on disk.

Prototyping Cycle

Maintenance Cycle

Design/Implementation. The business system prototypes are tested, evaluated, and modified repeatedly until end users find them acceptable.

Investigation/Analysis. End users identify their business needs and assess the feasibility of several alternative information system solutions.

F I G U R E 1 2 . 9 Application development using prototyping. Note how prototyping combines the steps of the systems development life cycle and changes the traditional roles of IS specialists and end users.

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Frito-Lay created national sales teams to focus on top customers such as super- market chains, but the teams, used to working regionally, found nationwide collabo- ration difficult. Although Frito-Lay had rich stores of market research and other pertinent customer information housed in databases at its headquarters, there was no easy way for team members to find what they needed. Frustration rose, performance suffered, and sales team turnover reached 25 percent. So Mike Marino, Frito-Lay’s vice president for category and customer develop- ment, engaged Dallas-based Navigator Systems to help. Navigator consultants en- visioned a Web-based enterprise knowledge portal that would combine tools for knowledge management and collaboration, enabling the team to better serve the customer while helping reduce frustration and turnover. A portal development project team was formed to work with the national super- market sales team because they had the most centralized and demanding customers. “We knew if we could deliver there, we could satisfy any customer,” Marino says. The supermarket sales team told the project team what kind of knowledge they needed. The request ranged from simple information, such as why Frito-Lay products Lays and Ruffles were in one part of a store and Doritos were in another, to more complex research on what motivates shoppers as they move through a store. A few months later, the project team presented a working prototype they had developed to a group of beta users from the supermarket sales team only to find that, in the quest for speed, they had made a classic and crippling error. Because the project team had not involved the Frito-Lay team in the design of the prototype, the portal they had built wasn’t specific enough for the supermarket sales team. “Conceptually, it was a great idea,” says Frito-Lay sales team leader Joe Ackerman. “But when folks are not on the front line, their view of what is valuable is different from those running 100 miles an hour in the field.” The project team needed to

Frito-Lay Inc.: Failure and Success in Systems Development

F I G U R E 1 2 . 1 0 An example of a typical application of prototyping during a software development project.

Example of Prototyping Development

• Team. A few end users and IS developers form a team to develop a business application. • Schematic. The initial prototype schematic design is developed. • Prototype. The schematic is converted into a simple point-and-click prototype using

prototyping tools.

• Presentation. A few screens and routine linkages are presented to users. • Feedback. After the team gets feedback from users, the prototype is reiterated. • Reiteration. Further presentations and reiterations are made. • Consultation. Consultations are held with IT consultants to identify potential im-

provements and conformance to existing standards.

• Completion. The prototype is used as a model to create a finished application. • Acceptance. Users review and sign off on their acceptance of the new business system. • Installation. The new business software is installed on network servers.

conventional programming languages. The final version of the application system is then turned over to its end users for operational use. While prototyping is a use- ful method of allowing an end user to develop small software applications, its real power is as a development tool, within a life cycle project, to help analysts and users finalize the various interfaces and functions of a large business system. Figure 12.10 outlines a typical prototyping-based systems development process for a business application.

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backtrack and plug in the missing features, but they also had to win back the sales force, who now suspected that even a revised tool would be a waste of time. The project team then spent the next four months working with salespeople to evolve the prototype into a system they would embrace. For example, a call-reporting feature was added. “So many people want to know what happened on a sales call, the account manager involved can be on the phone for days,” Ackerman explains. “Now, we’re able to post that to a Web site. It frees up the account manager to document the call once and move on.” Other changes included enabling users to analyze and manipulate data rather than just viewing data, and developing reports tailored to customers’ needs. “The original reports were very general,” Ackerman says, so users would have had to spend lots of time reformatting them for customer presentations. Ackerman was also en- listed for the official rollout of the portal. Now Ackerman says that better collaboration with the portal has helped to reduce turnover significantly, while improved access to knowledge-based data has enabled account managers to present themselves to customers as consultants with important data to share.

Source: Adapted from Kathleen Melymuka, “Profi ting from Mistakes,” Computerworld , April 20, 2001.

F I G U R E 1 2 . 1 1 Useful guidelines for the design of business Web sites.

Checklist for Corporate Web sites

• Remember the Customer : Successful Web sites are built solely for the customer, not to make company vice presidents happy.

• Aesthetics : Successful designs combine fast-loading graphics and simple color palettes for pages that are easy to read.

• Broadband Content : The Web’s coolest stuff can’t be accessed by most Web surfers. Including a little streaming video isn’t bad, but don’t make it the focus of your site.

• Easy to Navigate : Make sure it’s easy to get from one part of your site to another. Providing a site map, acces- sible from every page, helps.

• Searchability : Many sites have their own search en- gines; very few are actually useful. Make sure yours is.

• Incompatibilities : A site that looks great on a PC using Internet Explorer can often look miserable on an iBook running Netscape.

• Registration Forms : Registration forms are a useful way to gather customer data. But make your customers fill out a three-page form, and watch them flee.

• Dead Links : Dead links are the bane of all Web surfers—be sure to keep your links updated. Many Web-design software tools can now do this for you.

Let’s take a closer look at user interface design , since it is the system component closest to business end users and the one they will most likely help design. The user interface design activity focuses on supporting the interactions between end users and their computer-based applications. Designers concentrate on the design of attractive and efficient forms of user input and output, such as easy-to-use Internet or intranet Web pages. As we mentioned earlier, user interface design is frequently a prototyping process, where working models or prototypes of user interface methods are designed and mod- ified several times with feedback from end users. The user interface design process produces detailed design specifications for information products such as display screens, interactive user/computer dialogues (including the sequence or flow of dia- logue), audio responses, forms, documents, and reports. Figure 12.11 gives examples of user interface design elements and other guidelines suggested for the multimedia Web pages of e-commerce Web sites. Figure 12.12 presents actual before-and-after screen displays of the user interface design process for a work scheduling application of State Farm Insurance Company.

User Interface Design

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For most people, including its own executives, Google still means search. On both the query page and the results pages, design flourishes have been legendarily kept to a minimum, with layout decisions based on what will provide the user with the fastest, most efficient service. Nonetheless, engineers and analysts pore over streams of data to assess the impact of experiments with colors, shading, and the position of every element on the page. Even changes at the pixel level can affect revenue. But as Google products proliferate beyond search, design decisions become more critical if the company wants a coherent brand image. “More than anything, Google prefers to make design decisions based on what performs well. And as a company, Google cares about being fast, so we want our user experience to be fast,” says Irene Au, Google’s Director of User Experience. That’s not just in terms of front-end latency—how long it takes the page to download—it’s also about making people use their computers more efficiently. “A lot of our design decisions are really driven by cognitive psychology research that shows that, say, people online read black text against a white background much faster than white against black, or that sans serif fonts are more easily read than serif fonts online,” says Au. Google has a big culture of being bottom-up and that can make it difficult to get a coherent design experience. There’s a federation of people doing whatever they think is best for their product and not looking out for the bigger picture. “We don’t want everything to be dictated and top-down, but we do want to find a balance,” says Au. “For example, Google apps all look different from each other. As you move from one app to another, the keyboard shortcuts are different, the save model is different. The interaction consistency is not there. For good reason: These were all different startups using different backends. But we’re trying to pull all that together. More and more, these experiences are going to get integrated with each other, or there’ll be reusable components that might be built for applications but also appear in a search experience. It’s becoming increasingly critical for us to have common UIs [user in- terface] and common infrastructure,” she notes. At Google, there’s top-down support for consistency, but not a mandate. But middle layers of management are hearing loud and clear from Larry Page and Sergey Brin and the executives that there should be one way to do things. “Inconsistency

Google’s Interface: Balancing Freedom and Consistency

F I G U R E 1 2 . 1 2 An example of the user interface design process. State Farm developers changed this work scheduling and assignment application’s interface after usability testing showed that end users working with the old interface (at left) didn’t realize that they had to follow a six-step process. If users jumped to a new page out of order, they would lose their work. The new interface (at right) made it clearer that a process had to be followed.

Source : Courtesy of the Usability Lab of State Farm.

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System specifications formalize the design of an application’s user interface methods and products, database structures, and processing and control procedures. Therefore, systems designers will frequently develop hardware, software, network, data, and person- nel specifications for a proposed system. Figure 12.13 shows examples of system spec- ifications that could be developed for an e-commerce system of a company.

In a traditional systems development cycle, your role as a business end user is similar to that of a customer or a client. Typically, you make a request for a new or improved system, answer questions about your specific information needs and information processing problems, and provide background information on your existing business systems. IS professionals work with you to analyze your problem and suggest alterna- tive solutions. When you approve the best alternative, it is designed and implemented. Here again, you may be involved in a prototyping design process or be on an imple- mentation team with IS specialists. In end-user development , however, IS professionals play a consulting role while you do your own application development. Sometimes, user consultants may be avail- able to help you and other end users with your application development efforts. This may include training in the use of application packages; selection of hardware and soft- ware; assistance in gaining access to organization databases; and, of course, assistance in analysis, design, and implementation of the business application of IT that you need.

It is important to remember that end-user development should focus on the funda- mental activities of any information system: input, processing, output, storage, and con- trol, as we described in Chapter 1. Figure 12.14 illustrates these system components and the questions they address.

System Specifications

End-User Development

Focus on IS Activities

F I G U R E 1 2 . 1 3 Examples of system specifications for a new e-commerce system for a business.

Examples of System Specifications

• User Interface Specifications Use personalized screens that welcome repeat Web customers and that make product

recommendations.

• Database Specifications Develop databases that use object/relational database management software to organize

access to all customer and inventory data and to multimedia product information.

• Software Specifications Acquire an e-commerce software engine to process all e-commerce transactions with

fast responses, i.e., retrieve necessary product data and compute all sales amounts in less than one second.

• Hardware and Network Specifications Install redundant networked Web servers and sufficient high-bandwidth telecommu-

nications lines to host the company e-commerce Web site.

• Personnel Specifications Hire an e-commerce manager and specialists and a Webmaster and Web designer to

plan, develop, and manage e-commerce operations.

drives Larry and Sergey crazy. So there’s growing appreciation and awareness and with that comes motivation. As a group, we’re trying to be very opportunistic and pragmatic. The design team has to be a few steps out—we’re designing the target for all the different products to converge towards,” says Au.

Source: Adapted from Helen Walters, “Google’s Irene Au: On Design Challenges,” BusinessWeek Online , March 18, 2009.

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F I G U R E 1 2 . 1 4 End-user development should focus on the basic information processing activity components of an information system.

Output

What information is needed by end users and in what form should the output be presented?

Control

What controls are needed to protect against accidental loss or damage? Is there a need to control access to data used by the application?

Processing

What operations on the inputs are needed to produce the desired output? What software can most effectively support those operations?

Storage

Does the application use previously stored data? Does it create data that must be stored for future use by this or other applications?

Input

What data are available, in what form?

Source : Adapted from James N. Morgan, Application Cases in MIS , 4th ed. (New York: Irwin/McGraw-Hill, 2002), p. 31.

When analyzing a potential application, you should first focus on the output to be produced by the application. What information is needed and in what form should it be presented? Next, look at the input data to be supplied to the applica- tion. What data are available? From what sources? In what form? Then you should examine the processing requirements. What operations or transformation processes will be required to convert the available inputs into the desired output? Among software packages the developer is able to use, which package can best perform the operations required? You may find that the desired output cannot be produced from the inputs that are available. If this is the case, you must either make adjustments to the output expected, or find additional sources of input data, including data stored in files and databases from external sources. The storage component will vary in importance in end-user applications. For example, some applications require extensive use of stored data or the creation of data that must be stored for future use. These are better suited for database management development projects than for spreadsheet applications. Necessary control measures for end-user applications vary greatly depending upon the scope and duration of the application, the number and nature of the users of the application, and the nature of the data involved. For example, control measures are needed to protect against accidental loss or damage to end-user files. The most basic protection against this type of loss is to make backup copies of application files on a frequent and systematic basis. Another example is the cell protection feature of spread- sheets that protects key cells from accidental erasure by users.

In end-user development, you and other business professionals can develop new or improved ways to perform your jobs without the direct involvement of IS specialists. The application development capabilities built into a variety of end-user software packages have made it easier for many users to develop their own computer-based

Doing End-User Development

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F I G U R E 1 2 . 1 5 Microsoft FrontPage is an example of an easy-to-use end-user Web site development tool.

Source: Courtesy of the Corporate Financial Group.

F I G U R E 1 2 . 1 6 How companies are encouraging and managing intranet Web site development by business end users.

Encouraging End-User Web Development

• Look for Tools That Make Sense . Some Web development tools may be more powerful and more costly than what your

business end users really need.

• Spur Creativity . Consider a competition among business departments for the best Web site, to help

spur users to more creative uses of their intranet sites.

• Set Some Limits . Yes, you have to keep some control. Consider putting limits on exactly which parts of a

Web page users can change and who can change which pages. You still want some con- sistency across the organization.

• Give Managers Responsibility . Make business unit managers sign off on who will be Web publishing from their

groups, and make the managers personally responsible for the content that goes on their Web sites. That will help prevent the publishing of inappropriate content by some users.

• Make Users Comfortable . Training users well on the tools will help users become confident in their ability to

properly manage and update their sites—and save IT the trouble of fixing problems later on or providing continuous support for minor problems.

solutions. For example, Figure 12.15 illustrates a Web site development tool you could use to help you develop, update, and manage an intranet Web site for your business unit. You might choose instead to use an electronic spreadsheet package as a tool to develop an easy way to analyze weekly sales results for the sales managers in a com- pany. You could also use a Web site development package to design Web pages for a small business Web store or a departmental intranet Web site. See Figure 12.16 .

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Businesses increasingly accept the existence of a “shadow” IT culture, in which end users install uncontrolled rogue technology to make good the shortcomings of over- stretched IT departments. Rogue IT includes users who install software or tamper with existing software or macros without the IT department’s consent, according to a survey by integration specialist Blue Prism. Budget and resource constraints often lead to elements of rogue behavior, reported by 67 percent of respondents to the survey. Twenty-four percent believed that rogue IT isn’t used in their organizations, and 10 percent admitted that they didn’t know. These systems are not necessarily simple variations on the Excel spreadsheet. On the contrary, they can be very sophisticated—rivaling and even exceeding any tech- nological solution produced by IT departments. Such systems range from consumer solutions like Google Apps to highly tailored ones. It seems that end users are in- creasingly aware nowadays that their IT department cannot always deliver a practical solution for their needs, which can lead to the creation of a shadow IT culture within an organization, whereby users actively install their own applications or find their own work-around solutions in order to do their day-to-day job. This is often because IT departments have to manage business-critical projects, sometimes at the expense of helping business users with tactical change requests. Indeed, more than 52 percent reported that working on strategic projects was the main focus for their department, with 40 percent saying that delivering day-to-day business change requests was their priority. The Blue Prism survey, however, also challenges the traditional perception that IT departments frown upon rogue behavior by users. The survey concludes that many IT departments fully understand why pockets of rogue behavior exist, and it reveals that these departments were equally pragmatic when asked for the best way of deal- ing with it. With this change in the relationship between end users and technology, the IT department’s singular claim to technology knowledge is disappearing, and with it, its position of power. The more technologists try to counter this effect by enforcing the old ways, the more defunct and isolated they will become; their decisions will be ig- nored and their solutions will be unused. One of the primary reasons shadow systems succeed is that people at the front lines of organizations need them. They know that when they have a problem and when they find a solution that works well for them, their needs are met. IT departments, on the other hand, focus too strongly on the technology to solve a problem rather than on the problem itself—to the extent that when end users do not use officially sanctioned solutions, IT may pro- ceed on radical search-and-destroy missions of user-created systems. In doing so, it ignores why the user did not use its solutions in the first place and, in effect, it destroys one of the few sources of IT strategic and competitive advantage an organization has.

Source: Adapted from Tom Jowitt, “‘Shadow IT Culture on the Rise for Businesses,” CIO Magazine , July 5, 2007; and Sandy Behrens, “Time to Rethink Your Relationship with End Users,” CIO Magazine , July 24, 2007.

Blue Prism: “Shadow” IT Is Becoming More Pervasive

As stated at the beginning of the chapter, there are two common approaches to analy- sis and design: SDLC and object-oriented. Whereas the SDLC remains the predomi- nant approach to software development, the object-oriented approach is gaining favor, particularly among programmers focusing on complex systems that require handling a wide variety of complex data structures, such as audio, video, images, documents, Web pages, and other types of data. We introduced the concepts of objects and object oriented databases in Chapter 5. Thorough coverage of the object-oriented approach to analysis and design is beyond the scope of this text, but a brief overview is presented here. Let’s begin with a simple definition of anything object-oriented.

Technical Note: Overview of Object- Oriented Analysis and Design

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An object-oriented system is composed of objects. An object can be anything a programmer wants to manage or manipulate—cars, people, animals, savings accounts, food products, business units, organizations, customers—literally anything. Once an object is defined by a programmer, its characteristics can be used to allow one object to interact with another object or pass information to another object. The behavior of an object-oriented system entails collaboration between these objects, and the state of the system is the combined state of all the object in it. Collaboration between objects requires them to send messages or information to one another. The exact semantics of message sending between objects varies, de- pending on the kind of system being modeled. In some systems, “sending a message” is the same as “invoking a method.” In others, “sending a message” might involve sending data using a pre-prescribed media. The three areas of interest to us in an object-oriented system are object-oriented programming, object-oriented analysis, and object-oriented design. Object-oriented programming (OOP) is the programming paradigm that uses “objects” to design applications and computer programs. It employs several tech- niques from previously established paradigms, including:

• Inheritance. The ability of one object to inherit the characteristics of a higher- order object. For example, all cars have wheels; therefore, an object defined as a sports car and as a special type of the object cars must also have wheels.

• Modularity. The extent to which a program is designed as a series of interlinked yet stand-alone modules.

• Polymorphism. The ability of an object to behave differently depending on the conditions in which its behavior is invoked. For example, two objects that inherit the behavior speak from an object class animal might be a dog object and a cat object. Both have a behavior defined as speak . When the dog object is commanded to speak, it will bark, whereas when the cat object is commanded to speak, it will meow .

• Encapsulation. Concealing all of the characteristics associated with a particular object inside the object itself. This paradigm allows objects to inherit characteris- tics simply by defining a subobject. For example, the object airplane contains all of the characteristics of an airplane: wings, tail, rudder, pilot, speed, altitude, and so forth.

Even though it originated in the 1960s, OOP was not commonly used in mainstream software application development until the 1990s. Today, many popular programming languages (e.g., ActionScript, Ada95/2005, C�, C��, Delphi, Java, JavaScript, Lisp, Objective-C, Perl, PHP, Python, RealBasic, Ruby, Squeak, VB.Net, Visual FoxPro, and Visual Prolog) support OOP. Object-oriented analysis (OOA) aims to model the problem domain, that is, the problem we want to solve, by developing an object-oreinted (OO) system. The source of the analysis is a set of written requirements statements and/or diagrams that illus- trate the statements. Similar to the SDLC-developed model, an object-oriented analysis model does not take into account implementation constraints, such as concurrency, distribution, persistence, or inheritance, nor how the system will be built. Because object-oriented systems are modular, the model of the system can be divided into multiple domains, each of which are separately analyzed and represent separate business, technological, or conceptual areas of interest. The result of object-oriented analysis is a description of what is to be built, using concepts and relationships between concepts, often ex- pressed as a conceptual model. Any other documentation needed to describe what is to be built is also included in the results of the analysis. Object-oriented design (OOD) describes the activity when designers look for logical solutions to solve a problem using objects. Object-oriented design takes the

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conceptual model that results from the object-oriented analysis and adds implementa- tion constraints imposed by the environment, the programming language, and the chosen tools, as well as architectural assumptions chosen as the basis of the design. The concepts in the conceptual model are mapped to concrete classes, abstract interfaces, and roles that the objects take in various situations. The interfaces and their implementations for stable concepts can be made available as reusable services. Con- cepts identified as unstable in OOA will form the basis for policy classes that make decisions and implement environment or situation-specific logics or algorithms. The result of OOD is a detailed description of how the system can be built, using objects. Thus, the object-oriented world bears many simularities to the more conventional SDLC approach. This approach simply takes a different view of the programming domain and thus approaches the problem-solving activities inherent in system devel- opment from a different direction. In the next section, we will continue to look at systems development by changing our focus from design to implementation.

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SECTION II I m p l e m e n t i n g B u s i n e s s S y s t e m s

Once a new information system has been designed, it must be implemented as a work- ing system and maintained to keep it operating properly. The implementation process we will cover in this section follows the investigation, analysis, and design stages of the systems development life cycle we discussed in Section I. Implementation is a vital step in the deployment of information technology to support the employees, custom- ers, and other business stakeholders of a company. Read the Real World Case on the next page. We can learn a lot from this case about the challenges of upgrading enterprise applications from this case. See Figure 12.17 .

Figure 12.18 illustrates that the systems implementation stage involves hardware and software acquisition, software development, testing of programs and procedures, con- version of data resources, and a variety of conversion alternatives. It also involves the education and training of end users and specialists who will operate a new system. Implementation can be a difficult and time-consuming process; however, it is vital in ensuring the success of any newly developed system. Even a well-designed system will fail if it is not properly implemented, which is why the implementation process typically requires a project management effort on the part of IT and business unit managers. They must enforce a project plan, which includes job responsibilities, time- tables for major stages of development, and financial budgets. This is necessary if a project is to be completed on time and within its established budget, while still meet- ing its design objectives. Figure 12.19 illustrates the activities and timetables that might be required to implement an intranet for a new employee benefits system in the human resource department of a company.

Implementation

Implementing New Systems

IT departments are either the darlings or the despised of corporate America, and some practitioners would debate which extreme causes the most pain. Let’s face it; nowadays the reward for doing a great job is more work. Once an IT group earns the trust of business units, it must then survive the onslaught of new projects. Good organizations, like good bosses, don’t want you to take on more than you can handle and collapse in the process. Smart organizations have a grip on project portfolio management (PPM) and are willing to prioritize and, when needed, end projects when they turn bad. Like risk management, PPM is nothing new for mature disciplines. “We’ve picked up where construction and engineers have been for years,” says John Nahm, an IT project manager for the state of Virginia. The highest performers in the IT world, as defined in a recent study by the IT Process Institute, are those most likely to cancel projects—at a rate double that of their lower-performing counterparts, in fact. “It’s counterintuitive until you think about it,” says Kurt Milne, managing director of the institute. The business world is accustomed to trying new initiatives but being willing to move on if they don’t work. But, as Milne points out, in IT there’s value in stability, so we’re hesitant to pull the trigger. “I don’t know that that’s a skill that IT folks think they need to have, but logically, it makes sense to shoot your bad projects and move on.” Line-of-business executives understand capacity planning and prioritization, Milne says, but they expect these choices to be presented in business language. What they don’t understand is when IT overpromises and then underdelivers, failing to

Project Portfolio Management: Shoot the Bad Projects, Keep the Good Ones

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They also wanted additional functions, such as the abil- ity to link their prices and seat inventories to other airlines with whom they might wish to cooperate. After studying alternatives, WestJet and JetBlue inde- pendently selected a system offered by Sabre Holdings Corp., a provider of such technology to 300 airlines and owner of Travelocity and other online travel agencies. JetBlue says the new system cost about $40 million, including $25 million in capital spending and $15 million in one-time operating ex- penses. WestJet did not disclose its costs. The system sells seats and collects passenger payments but it also controls much of the passenger experience: shop- ping on the airline’s Web site; interacting with reservation agents; using airport kiosks; selecting seats; checking bags; boarding at the gate; rebooking and getting refunds for can- cellations. “It has a very big circle of influence and has to integrate with other systems in the airline,” says Steve Clam- pett, an executive at Sabre Airline Solutions division. “It’s as visible a technology upgrade as in almost any industry.” WestJet, which has 88 planes and is Canada’s second- largest airline, switched to Sabre in October 2009 after it had shifted to a lighter winter schedule and canceled some flights. A big challenge was the overnight transition of 840,000 files—transactions of customers who already had purchased flights—from WestJet’s old reservations server in Calgary to Sabre’s servers in Tulsa, Oklahoma. It didn’t go well, says Bob Cummings, WestJet’s executive vice president of marketing and sales, because the migration required WestJet agents to go through complex steps to process the data. Making matters worse, WestJet didn’t reduce the number of passengers on the flights operating after the cutover, nor did it tell customers of its upgrade plans until the day of the switch. “We didn’t want to telegraph dates so a competitor would put on a big fare sale,” Mr. Cummings says. WestJet’s customer loyalty scores tumbled as a result of long waits and booking difficulties. The airline sent apology letters, offered flight credits to some customers, and a month later bolstered its call center with temporary staffers in India. “We were in pretty good shape in mid-January from a service perspective,” Mr. Cummings says. “But this is a three- to six-month recovery process.” He says WestJet re- mains enthusiastic about the new system’s potential, which will allow the airline to fulfill its plans to begin cooperating with U.S. and international airlines. JetBlue, which has 151 aircraft, had the benefit of observ- ing WestJet’s transition, at WestJet’s invitation. JetBlue de- cided to make its switch on a Friday night because Saturday traffic tends to be low. It trimmed its schedule that January weekend and sold abnormally low numbers of seats on remain- ing flights. With WestJet’s crashing Web site in mind, JetBlue developed a backup site that it used twice for a few hours. JetBlue also contracted for 500 outside reservations agents. After the switch, in which 900,000 passenger records were moved to Tulsa from Minneapolis, JetBlue routed basic calls to

JetBlue Airways, WestJet Airlines, and Others: The Difficult Path to Software Upgrades

REAL WORLD

CASE 2 F ew things in the airline business are more daunting than upgrading to a new reservations system. Do it well and customers are none the wiser; mess it up and a carrier risks losing customers and tarnishing its brand. Dis- count carriers JetBlue Airways Corp. and WestJet Airlines Ltd. both recently switched reservations systems. The differ- ing outcomes are a reminder of how the implementation of new technology can be just as crucial as the technology itself. Despite months of planning, when WestJet flipped the switch on its new system, its Web site crashed repeatedly and its call center was overwhelmed. It took months to resolve all the issues. JetBlue, which later upgraded to the same soft- ware, smoothed its transition by building a backup Web site and hiring 500 temporary call-center workers. Reservations are at the heart of a customer’s relationship with an airline. So messing with the reservations system “is certainly not for the faint of heart,” says Rick Zeni, a vice president of JetBlue who led the Forest Hills, N.Y., carrier through its transition. Both WestJet and JetBlue previously used a system de- signed for start-up airlines with simpler needs. As the carri- ers grew, they needed more processing power to deal with increasing numbers of customers.

Source : © Ryan McVay/Getty Images.

Major software upgrades can become make-or-break scenarios for companies today.

F I G U R E 1 2 . 1 7

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1. In the case, both airlines upgraded to the same applica- tion but approached the upgrade process differently. What were those differences, and how much impact did they have on the outcome of the project?

2. What precautions did the organizations in the case take to prevent software upgrade problems? To what extent do you believe those helped?

3. SAP customers have the choice between upgrading to the most recent version of the application suite or inte- grating third-party products into their existing infra- structure. What are the advantages and disadvantages of each alternative?

1. Why are ERP upgrades so complex and expensive? What role does ERP customization, if any, play in this process? Go online and research other examples discussing ERP upgrades. Can you discern a pattern in what seems to be the major cost drivers of the upgrade process?

2. Place yourself in the position of a WestJet or JetBlue customer while the upgrading was being implemented. What, if anything, would you have done differently had the companies told you that a major software upgrade would be happening soon? Should they have told you? Break into small groups with your classmates and dis- cuss these questions.

CASE STUDY QUESTIONS REAL WORLD ACTIVITIES

the temporary workers, leaving its own call staff to tackle more complex tasks. The extra agents stayed in place for two months, “one of the wisest investments we made,” Zeni says. There were still glitches. Call wait times increased, and not all of the airport kiosks and ticket printers came online right away. JetBlue still must add some booking functions in the future. But having Sabre, says JetBlue CEO Dave Barger, was an important factor in the airline’s recent decision to co- operate on some routes in and out of Boston and New York with AMR Corp.’s American Airlines. The word “upgrade” has long been a virtual bogeyman for SAP customers, given the historical pain, time, and cost of moving to a new version of the vendor’s ERP software. For some time, SAP has been trying to entice users onto the modern ECC 6.0 through its “enhancement pack” program, which promises to let users add new features without the pain of a full technical upgrade. Customers can’t take advan- tage of the packs until they move to 6.0. For legacy customers who don’t yet wish to upgrade, this means an increase in cost for vendor support, a jump to a third- party maintenance provider—which has its own uncertainties, given ongoing high-profile lawsuits—or a decision to go with no paid support at all. The pack strategy is therefore crucial for SAP, which needs to preserve lucrative maintenance revenue while making life easier on customers and stemming defec- tions to other options, particularly SaaS (software as a service) applications, where upgrades are handled by the vendor. SAP’s strategy with the packs “makes a lot of sense,” says Tim Ferguson, CIO at Northern Kentucky University. “Relatively speaking, compared to previous ways that SAP did this, they’re very easy to install.” NKU has served as a beta tester for the packs, which helped the school influence SAP to add key features it desired. While NKU’s core SAP functions for billing, payroll, and other areas are fairly stable, the systems that touch students each day must evolve regularly, Ferguson says. One of the packs provided a new Web service that allows students to register for classes through their iPhones, for example. “The students that are coming out this generation, they expect different types of services. We have to change to meet those needs,” says Ferguson. SAP’s pack strategy is apparently pleasing some custom- ers. But it still involves some work. “I’ve mostly heard good things,” says Jon Reed, an independent analyst who closely

tracks SAP. “But they’re not quite as painless as SAP’s mar- keting sometimes presented it.” System testing remains a crucial factor, Reed says. “Things break during an on-premise implementation and there’s a preferred method of handling that, including sand- boxing and testing, so when you pull that lever there are no problems. Customers still need to anticipate how it might break their system.” But SourceGas, a U.S. natural gas utility, had only one issue when installing the enhancement packs, specifically a problem with the “flexible real estate” functionality in SAP, says Michael Catterall, director of enterprise solutions. The company uses that module to manage information regarding the many property easements and rights-of-way it maintains for its infrastructure around the country. “When we brought up enhancement pack 4, because of how we had it configured, we kind of broke it a little bit,” he says. SourceGas plans to “keep watching the enhancement packs as they are coming out,” Catterall says. “First, we’re looking at where we can improve and get more out of mod- ules we put in.” Meanwhile, there is the substantial task of getting to ECC 6.0 in the first place. Upgrade expenses can amount to 50 to 85 percent of the original implementation costs, with the price tag varying, depending on factors like the number of integration points and customizations, according to analyst Ray Wang, partner with Altimeter Group. “Ultimately, upgrading makes sense for R/3 customers who are still committed to SAP and want new functionality pro vided in the packs,” says Wang. But those customers po- tentially have other options these days, in the form of third- party maintenance from companies such as Rimini Street, as well as SaaS applications. Meanwhile, on-demand products from vendors such as Workday, which makes human-resources software, and CRM (customer relationship management) specialist Salesforce.com are being used by some legacy SAP customers, who are finding that integrating them back to the core ERP system isn’t overly difficult, Wang says.

Source: Adapted from Susan Carey, “Two Paths to Software Upgrade,” Wall Street Journal , April 13, 2010; and Chris Kanaracus, “SAP Users: Upgrading Has Its Benefits,” CIO.com , April 9, 2010.

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meet deadlines or not completing a project. Unless IT becomes skilled at PPM, we’ll never close this credibility gap. Once you put a process in place, the other P-word—politics—will inevitably ap- pear. The magic behind PPM is that, when you do it right, it becomes clear why a given project shouldn’t get done in the context of your overall IT governance strat- egy. Consider the following situation: Your portfolio management process comes up with a “not now” or a “no” for a business unit’s project, but the business unit (which has its own budget and a degree of autonomy) moves ahead without IT’s approval; this rogue project then creates urgent unplanned work for IT as the improperly planned technology spirals out of control or fails to integrate with enterprise sys- tems. What do you do in this case? ITPI’s Milne answers this question with a question: “How do you handle it when your corporate strategy says, ‘We’re not going into the Latin America market,’ and a line business does it anyway?” If your PPM process is sufficiently integrated into executive corporate strategy, units that are totally out of line will not need to be nailed by IT; the organization will rein them in, with or without IT’s participation.

Source: Adapted from Jonathan Feldman, “Project Management Keeps IT from Being a Victim of Success,” InformationWeek , April 5, 2008.

F I G U R E 1 2 . 1 8 An overview of the implementation process. Implementation activities are needed to transform a newly developed information system into an operational system for end users.

Implementation Activities

Acquisition of

Hardware, Software,

and Services

Software Development

or Modification

Data Conversion

End-User Training

Conversion Parallel Pilot Phased Plunge

F I G U R E 1 2 . 1 9 An example of the implementation process activities and timetables for a company installing an intranet-based employee benefits system in its human resource management department.

Intranet Implementation Activities

Acquire and install server hardware and software

Train administrators

Acquire and install browser software

Acquire and install publishing software

Train benefits employees on publishing software

Convert benefits manuals and add revisions

Create Web-based tutorials for the intranet

Hold rollout meetings

Month

1

Month

2

Month

3

Month

4

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Any discussion of information systems design and development would be incomplete without including a discussion of basic project management concepts, techniques, and tools. Before we progress any further in our discussion of implementation, we need to understand how our project, which we hope is on time and within budget, got to this point. Although a thorough discussion of project management is far beyond the scope of this text, we can, nonetheless, look at the big picture and acquaint ourselves with the necessary steps in the process. It is important to note that the skills and knowledge necessary to be a good project manager will translate into virtually any project environ- ment, and most organizations regularly seek people who have acquired these skills.

A project is a special set of activities with a clear beginning and end. Every project has a set of goals, objectives , and tasks . Every project must also deal with a set of limitations or constraints . Finally, although the content can vary from one project to the next, there are many important similarities in the process. The first, and probably the great- est, contribution of the modern project management approach is to identify the project as a series of steps or phases. The SDLC is a project management approach tailored toward the design and development of information systems. Before we return our focus to a specific project management approach such as the SDLC, let’s look at a more generic picture of project management and see how it compares. No matter what the project, three elements will be necessary to manage it effectively and effi- ciently: process, tools , and techniques .

The modern project management approach has identified five phases in the process. Figure 12.20 illustrates the five phases.

Project Management

What Is a Project?

The Process of Project Management

F I G U R E 1 2 . 2 0 The five phases of project management.

Project Management Phase Example Activities

Initiating/Defining • State the problem(s)/goal(s). • Identify the objectives. • Secure resources. • Explore costs/benefits in feasibility study. Planning • Identify and sequence activities.

• Identify the “critical path.” • Estimate time and resources needed for completion. • Write a detailed project plan.

Executing • Commit resources to specific tasks. • Add additional resources/personnel if necessary. • Initiate project work.

Controlling • Establish reporting obligations. • Create reporting tools. • Compare actual progress with baseline. • Initiate control interventions if necessary.

Closing • Install all deliverables. • Finalize all obligations/commitments. • Meet with stakeholders. • Release project resources. • Document the project. • Issue final report.

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Initiating and Defining. The first phase of the project management process serves as a foundation for all that follows. The most important objective to achieve during this phase is the clear and succinct statement of the problem that the project is to solve or the goals that the project is to achieve. Any ambiguity at this point often spells doom for even the best-executed projects. Also during this phase, it is necessary to identify and secure the resources necessary to execute the project, explore the costs and benefits, and identify any risks. As you have probably recognized, this is exactly what happens during the systems investigation phase of the SDLC.

Planning. The next phase in the project management process involves planning the project. Here every project objective and every activity associated with that ob- jective must be identified and sequenced. Several tools have been created to assist in the sequencing of these activities including simple dependence diagrams, program eval- uation and review (PERT), critical path method (CPM), and a commonly used time- line diagram known as a Gantt chart . Although all of these tools have a particular use in project management, their common use is to help plan and sequence activities associated with the objectives of the project so that nothing is left out, performed out of logical sequence, or done twice. These same tools also help the project man- ager determine how long each activity will take and, thus, how long the project will take. Later in the project process, the tools will help determine whether the project is on schedule and, if not, where the delays occurred and what can be done to remedy the delay.

Executing. Once all of the activities in the planning phase are complete and all de- tailed plans have been created and approved, the execution phase of the project can begin. It is here that all of the plans are put into motion. Resources, tasks, and sched- ules are brought together, and the necessary work teams are created and set forth on their assigned paths. In many respects, this is the most exciting part of the project management process. The phases of systems analysis and system design are the pri- mary phases associated with project execution in the SDLC.

Controlling. Some project management experts suggest that controlling is just an integral part of the execution phase of project management; others suggest it must be viewed as a separate set of activities that, admittedly, occur simultaneous to the execu- tion phase. In either case, it is important to give sufficient attention to the controlling activities to ensure that the project objectives and deadlines are met. Probably the single most important tool for project control is the report. Three common types of reports are generated to assist with project control. The variance report contains information related to the difference between actual and planned project progress. It helps identify when a project is off track but provides little evi- dence as to what is causing the delay. The second and third types of reports are more helpful in determining the cause of delays and the appropriate corrections. The status report is an open-ended report that details the process that led to the current project state. By analyzing this report, a project manager can pinpoint where the delay began and can create a plan to get past it and possibly make up for lost time. This is where the resource allocation report be- comes useful. This report identifies the various resources (people, equipment, and so on) that are being applied to specific project activities, as well as where currently un- used, or slack , resources may be available.

Closing. This last phase of the project management process focuses on bringing a project to a successful end. The beginning of the end of a project is the implementa- tion and installation of all of the project deliverables. The next step is the formal re- lease of the project resources so they can be redeployed into other projects or job roles. The final step in this phase is to review the final documentation and publish the

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F I G U R E 1 2 . 2 1 Examples from the IBM Corporation of the kinds of hardware, software, and IS services that many companies are evaluating and acquiring to support their e-commerce initiatives.

Hardware

Full range of offerings, including xSeries servers, iSeries midrange servers for small and midsize businesses, RS/6000 servers for UNIX customers, and z900 mainframes for large enterprises. Also has full range of storage options.

Software

Web server : Lotus DominoGo Web server.

Storefront : WebSphere Commerce Suite (formerly known as Net.Commerce) for storefront and catalog creation, relationship marketing, and order management. Can add Commerce In- tegrator to integrate with back-end systems and Catalog Architect for content management.

Middleware/transaction services : WebSphere application server manages transactions. MQ Series queues messages and manages connections. CICS processes transactions.

Database : DB2 Universal Database.

Tools : WebSphere Studio includes set of predefined templates and common business logic.

Other applications include : IBM Payment Suite for handling credit cards and managing digital certificates.

Services

IBM Global Services, which includes groups organized by each major industry, including retail and financial. Can design, build, and host e-commerce applications.

final project report. This is where the good and bad news concerning the project are documented, and the elements necessary for a postproject review are identified. Many airline pilots (and passengers, for that matter) identify the final approach and landing as one of the most critical elements of any flight. It is during those re- maining moments that even the smoothest of flights can come to an undesirable con- clusion. Projects are quite similar in this regard. The most beautifully planned, executed, and controlled project can be deemed a failure if it is poorly implemented. As such, we must turn our attention back to the issues of systems implementation; we hope that this time it will be with a clearer understanding of how we arrived at this point and the process we will follow to do it again in another project.

A major activity during the implementation phase of the SDLC is the acquisition of the hardware and software necessary to implement the new system. How do companies eval- uate and select hardware, software, and IT services, such as those shown in Figure 12.21 ? Large companies may require suppliers to present bids and proposals based on system specifications developed during the design stage of systems development. Minimum ac- ceptable physical and performance characteristics for all hardware and software require- ments are established. Most large business firms and all government agencies formalize these requirements by listing them in a document called an RFP (request for proposal) or RFQ (request for quotation). Then they send the RFP or RFQ to appropriate vendors, who use it as the basis for preparing a proposed purchase agreement. Companies may use a scoring system of evaluation when there are several competing proposals for a hardware or software acquisition. They give each evaluation factor a certain number of maximum possible points. Then they assign each competing pro- posal points for each factor, depending on how well it meets the user’s specifications. Scoring evaluation factors for several proposals helps organize and document the eval- uation process. It also spotlights the strengths and weaknesses of each proposal. Whatever the claims of hardware manufacturers and software suppliers, the per- formance of hardware and software must be demonstrated and evaluated. Independent hardware and software information services (such as Datapro and Auerbach) may be used to gain detailed specification information and evaluations. Other users are fre- quently the best source of information needed to evaluate the claims of manufacturers

Evaluating Hardware, Software, and Services

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and suppliers. That’s why Internet newsgroups and Weblogs established to exchange information about specific software or hardware vendors and their products have be- come one of the best sources for obtaining up-to-date information about the experi- ences of users of the products. Large companies frequently evaluate proposed hardware and software by requir- ing the processing of special benchmark test programs and test data. Benchmarking simulates the processing of typical jobs on several computers and evaluates their per- formances. Users can then evaluate test results to determine which hardware device or software package displayed the best performance characteristics.

When you evaluate the hardware needed by a new business application, you should investigate specific physical and performance characteristics for each computer system or peripheral component to be acquired. Specific questions must be answered con- cerning many important factors. Ten of these hardware evaluation factors and ques- tions are summarized in Figure 12.22 . Notice that there is much more to evaluating hardware than determining the fastest and cheapest computing device. For example, the question of obsolescence must be ad- dressed by making a technology evaluation. The factor of ergonomics is also very impor- tant. Ergonomic factors ensure that computer hardware and software are user-friendly, that is, safe, comfortable, and easy to use. Connectivity is another important evaluation factor because so many network technologies and bandwidth alternatives are available to connect computer systems to the Internet, intranet, and extranet networks.

Hardware Evaluation Factors

F I G U R E 1 2 . 2 2 A summary of 10 major hardware evaluation factors. Notice how you can use this to evaluate a computer system or a peripheral device.

Hardware Evaluation Factors Rating

Performance What is its speed, capacity, and throughput?

Cost What is its lease or purchase price? What will be its cost of operation and maintenance?

Reliability What are the risk of malfunction and its maintenance requirements? What are its error control and diagnostic features?

Compatibility Is it compatible with existing hardware and software? Is it compatible with hardware and software provided by competing suppliers?

Technology In what year of its product life cycle is it? Does it use a new untested technology, or does it run the risk of obsolescence?

Ergonomics Has it been “human factors engineered” with the user in mind? Is it user-friendly, designed to be safe, comfortable, and easy to use?

Connectivity Can it be easily connected to wide area and local area networks that use different types of network technologies and bandwidth alternatives?

Scalability Can it handle the processing demands of a wide range of end users, transactions, queries, and other information processing requirements?

Software Are system and application software available that can best use this hardware?

Support Are the services required to support and maintain it available?

Overall Rating

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You should evaluate software according to many factors that are similar to those used for hardware evaluation. Thus, the factors of performance, cost, reliability, availability, compatibility, modularity, technology, ergonomics, and support should be used to evaluate proposed software acquisitions. In addition, however, the soft- ware evaluation factors summarized in Figure 12.23 must also be considered. You should answer the questions they generate in order to evaluate software purchases properly. For example, some software packages are notoriously slow, hard to use, bug-filled, or poorly documented. They are not a good choice, even if offered at attractive prices.

Most suppliers of hardware and software products and many other firms offer a variety of IS services to end users and organizations. Examples include assistance in develop- ing a company Web site; installation or conversion of new hardware and software; employee training; and hardware maintenance. Some of these services are provided without cost by hardware manufacturers and software suppliers. Other types of IS services needed by a business can be outsourced to an outside company for a negotiated price. For example, systems integrators take over complete responsibility for an organization’s computer facilities when an organization out- sources its computer operations. They may also assume responsibility for developing and implementing large systems development projects that involve many vendors and subcontractors. Value-added resellers (VARs) specialize in providing industry-specific hardware, software, and services from selected manufacturers. Many other services are available to end users, including systems design, contract programming, and con- sulting services. Evaluation factors and questions for IS services are summarized in Figure 12.24 .

Software Evaluation Factors

Evaluating IS Services

F I G U R E 1 2 . 2 3 A summary of selected software evaluation factors. Note that most of the hardware evaluation factors in Figure 12.22 can also be used to evaluate software packages.

Software Evaluation Factors Rating

Quality Is it bug-free, or does it have many errors in its program code?

Efficiency Is the software a well-developed system of program code that does not use much CPU time, memory capacity, or disk space?

Flexibility Can it handle our business processes easily, without major modification?

Security Does it provide control procedures for errors, malfunctions, and improper use?

Connectivity Is it Web-enabled so it can easily access the Internet, intranets, and extranets, on its own, or by working with Web browsers or other network software?

Maintenance Will new features and bug fixes be easily implemented by our own software developers?

Documentation Is the software well documented? Does it include help screens and helpful software agents?

Hardware Does existing hardware have the features required to best use this software?

Other Factors What are its performance, cost, reliability, availability, compatibility, modularity, technology, ergonomics, scalability, and support characteristics? (Use the hardware evaluation factor questions in Figure 12.22 .)

Overall Rating

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512 ● Module IV / Development Processes

F I G U R E 1 2 . 2 4 Evaluation factors for IS services. These factors focus on the quality of support services business users may need.

Evaluation Factors for IS Services Rating

Performance What has been their past performance in view of their past promises?

Systems Development Are Web site and other e-business developers available? What are their quality and cost?

Maintenance Is equipment maintenance provided? What are its quality and cost?

Conversion What systems development and installation services will they provide during the conversion period?

Training Is the necessary training of personnel provided? What are its quality and cost?

Backup Are similar computer facilities available nearby for emergency backup purposes?

Accessibility Does the vendor provide local or regional sites that offer sales, systems devel- opment, and hardware maintenance services? Is a customer support center at the vendor’s Web site available? Is a customer hotline provided?

Business Position Is the vendor financially strong, with good industry market prospects?

Hardware Do they provide a wide selection of compatible hardware devices and accessories?

Software Do they offer a variety of useful e-business software and application packages?

Overall Rating

Testing, data conversion, documentation, and training are keys to successful imple- mentation of a new business system.

System testing may involve testing and debugging software, testing Web site perfor- mance, and testing new hardware. An important part of testing is the review of proto- types of displays, reports, and other output. Prototypes should be reviewed by end users of the proposed systems for possible errors. Of course, testing should not occur only during the system’s implementation stage, but throughout the system’s develop- ment process. For example, you might examine and critique prototypes of input docu- ments, screen displays, and processing procedures during the systems design stage. Immediate end-user testing is one of the benefits of a prototyping process.

Implementing new information systems for many organizations today frequently in- volves replacing a previous system and its software and databases. One of the most important implementation activities required when installing new software in such cases is called data conversion . For example, installing new software packages may require converting the data elements in databases that are affected by a new applica- tion into new data formats. Other data conversion activities that are typically required include correcting incorrect data, filtering out unwanted data, consolidating data from several databases, and organizing data into new data subsets, such as databases, data marts, and data warehouses. A good data conversion process is essential because im- properly organized and formatted data are frequently reported to be one of the major causes of failures in implementing new systems.

Other Imple- mentation Activities

Testing

Data Conversion

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During the design phase, the analysts created a data dictionary that not only de- scribes the various data elements contained in the new system but also specifies any necessary conversions from the old system. In some cases, only the name of the data element is changed, as in the old system field CUST_ID becoming CLIENT_ID in the new system. In other cases, the actual format of the data is changed, thus requiring some conversion application to be written to filter the old data and put them into the new format. An example of this might be the creation of a new CUSTOMER_ID format to allow for expansion or to make two merged systems compatible with one another. This type of data element conversion requires additional time to occur be- cause each element must be passed through the conversion filter before being written into the new data files. Yet another issue is the time necessary to transfer the data from the old data files into the files for the new system. Although it is possible that the new system may have been designed to use the existing data files, this is not normally the case, especially in situations where a new system is replacing a legacy system that is fairly old. The time necessary to transfer the old data can have a material impact on the conversion process and on the strategy that is ultimately selected. Consider the following situation. Suppose the conversion to the new system requires the transfer of data from 10 different data files. The average record length across the 10 files is 1,780 bytes, and the total number of records contained in the 10 files is 120 million. With this informa- tion and an estimate of the transfer time in bytes per minute, the total transfer time can be easily calculated as follows: Assume a transfer rate of 10.5 megabytes per sec- ond (Mbps) (Fast Ethernet) with no conversion algorithm.

1,780 bytes � 120 million records � 213,600,000,000 bytes. 213,600,000,000 bytes/10.5 Mbps � 20,343 seconds.

20,343 seconds � 5.65 hours .

Although the preceding calculations appear to be such that the conversion process does not take an inordinate amount of time, we must also be aware that they assume an error-free transfer, no format conversion, and 100 percent use of available network bandwidth. If the transfer is done using a slower communication medium, say 1.25 Mbps, the time jumps to 47.47 hours (just under two days). The important consideration here is not just the time necessary to effect the trans- fer but the preservation of the integrity of the current system data files during the process. If the transfer turns out to be about 4.5 hours, then it could theoretically oc- cur after business hours and be easily accomplished by the opening of the next day’s business. If, however, the process takes two full days, then it would need to begin at the close of business on Friday and would not be complete until late Sunday after- noon. Should any glitches show up in the process, either the transfer would have to wait a week to be rerun, or the possibility of disrupting daily operations or losing new data would be very real. As you can see, careful thought to the logistics associated with data transfer must be given when recommending the most appropriate conversion strategy for the new system.

Developing good user documentation is an important part of the implementation process. Sample data entry display screens, forms, and reports are good examples of documentation. When computer-aided systems engineering methods are used, documen- tation can be created and changed easily because it is stored and accessible on disk in a system repository . Documentation serves as a method of communication among the people responsible for developing, implementing, and maintaining a computer-based system. Installing and operating a newly designed system or modifying an established application requires a detailed record of that system’s design. Documentation is ex- tremely important in diagnosing errors and making changes, especially if the end users or systems analysts who developed a system are no longer with the organization.

Documentation

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514 ● Module IV / Development Processes

F I G U R E 1 2 . 2 5 How one company developed training programs for the implementation of an e-commerce Web site and intranet access for its employees.

Enable e-commerce Web site access by employees with custom- ized intranet connections to customers and critical information.

Install e-commerce applications on servers.

Upgrade order-fulfillment system for e-commerce.

Develop a corporate intranet to support e-commerce.

Upgrade LAN systems and hardware.

Implement security and monitoring system.

Finalize security policy and plan.

Outsource e-commerce Web development.

Develop Internet e-commerce plan.

Provide Internet access for selected secure systems.

Provide Internet access for mainframe system users.

Identify early adopters; develop training plan.

Put e-mail address on business cards.

Develop plan for e-mail customer connections.

Connect IS to Internet.

Choose Internet access provider.

Electronic mail gateway.

No Internet connection.

e-Business Training

Required

Desktop applications: Hands-on.

Technical: Security and e-commerce.

Awareness: Internet for e-commerce.

Internet information servers: Hands-on.

Internet tools and resources: Hands-on.

Awareness: What is m y competitor doing on the Internet?

Technical: Internet connection and administration.

Awareness: What can the Internet do for me?

E-mail software: End user hands-on.

Internet

Implementation

Plan

Training is a vital implementation activity. IS personnel, such as user consultants, must be sure that end users are trained to operate a new business system or its implementa- tion will fail. Training may involve only activities like data entry, or it may also involve all aspects of the proper use of a new system. In addition, managers and end users must be educated in how the new technology affects the company’s business operations and management. This knowledge should be supplemented by training programs for any new hardware devices, software packages, and their use for specific work activities. Figure 12.25 illustrates how one business coordinated its end-user training program with each stage of its implementation process for developing intranet and Internet access within the company.

The initial operation of a new business system can be a difficult task. This typically requires a conversion process from the use of a present system to the operation of a new or improved application. Conversion methods can soften the impact of introduc- ing new information technologies into an organization. Four major forms of system conversion are illustrated in Figure 12.26 . They include:

• Parallel conversion • Phased conversion • Pilot conversion • Direct conversion

The simplest conversion strategy, and probably the most disruptive to the organiza- tion, is the direct cutover approach. This method, sometimes referred to as the slam dunk or cold-turkey strategy , is as abrupt as its name implies. Using this approach,

Training

System Conversion Strategies

Direct Conversion

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Parallel Old System

New System

PhasedOld System New System

DirectOld System New System

PilotOld System New System

the old system is just turned off, and the new system is turned on in its place. Although this method is the least expensive of all available strategies and may be the only viable solution in situations where activating the new system is an emergency or when the two systems cannot coexist under any conditions, it is also the one that poses the greatest risk of failure. Once the new system becomes operational, the end users must cope with any errors or dysfunctions, and depending on the severity of the problem, this approach can have a significant effect on the quality of the work performed. Di- rect conversion should be considered only in extreme circumstances where no other conversion strategy is viable.

At the opposite end of the risk spectrum is the parallel conversion strategy. Here, the old and new systems are run simultaneously until the end users and project coordina- tors are fully satisfied that the new system is functioning correctly and the old system is no longer necessary. Using this approach, a parallel conversion can be effected with either a single cutover , where a predetermined date for stopping the parallel operation is set, or a phased cutover , where some predetermined method of phasing in each piece of the new system and turning off a similar piece of the old system is employed. Although clearly having the advantage of low risk, the parallel approach also brings with it the highest cost. To execute a parallel approach properly, the end users must liter- ally perform all daily functions with both systems, thus creating a massive redundancy in activities and literally double the work. In fact, unless the operational costs of the new system are significantly less than the old system, the cost of parallel operation can be as much as three to four times greater than the old system alone. During a parallel conver- sion, all outputs from both systems are compared for concurrency and accuracy, until it is determined that the new system is functioning at least as well as the one it is replacing. Parallel conversion may be the best choice in situations where an automated system is replacing a manual one. In certain circumstances where end users cannot cope with the often-confusing redundancy of two systems, the parallel conversion strategy may not be viable. Also, parallel conversion may not be possible if the organization does not have the available computing resources to operate two systems at the same time.

In some situations, the new system may be installed in multiple locations, such as a se- ries of bank branches or retail outlets. In other cases, the conversion may be able to be planned from a geographic perspective. When these types of scenarios exist, the possi- bility of using a pilot conversion strategy exists. This approach allows for the conversion to the new system, using either a direct or parallel method, at a single location. The advantage to this approach is that a location can be selected that best represents the conditions across the organization but also may be less risky in terms of any loss of time

Parallel Conversion

Pilot Conversion

F I G U R E 1 2 . 2 6 The four major forms of conversion to a new system.

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516 ● Module IV / Development Processes

or delays in processing. Once the installation is complete at the pilot site, the process can be evaluated and any changes to the system made to prevent problems encountered at the pilot site from reoccurring at the remaining installations. This approach may also be required if the individual sites or locations have certain unique characteristics or idiosyncrasies making either a direct or parallel approach infeasible.

A phased or gradual conversion strategy attempts to take advantage of the best fea- tures of both the direct and parallel approaches, while minimizing the risks involved. This incremental approach to conversion allows for the new system to be brought online as a series of functional components that are logically ordered to minimize disruption to the end users and the flow of business. Phased conversion is analogous to the release of multiple versions of an application by a software developer. Each version of the software should correct any known bugs and should allow for 100 percent compatibility with data entered into or processed by the previous version. Although it has the advantage of lower risk, the phased approach takes the most time and, thus, creates the most disruption to the organization over time.

When all is said and done, the single most costly activity occurs after the system im- plementation is complete: the postimplementation maintenance phase . The pri- mary objectives associated with systems maintenance are to correct errors or faults in the system, provide changes to effect performance improvement, or adapt the system to changes in the operating or business environment. In a typical organization, more programmers and analysts are assigned to application maintenance activities than to application development. Further, although a new system can take several months or years to design and build and can cost hundreds of thousands or millions of dollars, the resulting system can operate around the clock and last for 5 to 10 years, or longer. One major activity in postimplementation involves making changes to the system after the users have finally had an opportunity to use it. These are called change requests . Such requests can range from fixing a software bug not found during testing to de- signing an enhancement to an existing process or function.

Managing and implementing change requests is only one aspect of the systems maintenance phase activities. In some ways, once the maintenance phase begins, the life cycle starts over again. New requirements are articulated, analyzed, designed, checked for feasibility, tested, and implemented. Although the range and nature of specific maintenance requests vary from system to system, four basic categories of maintenance can be identified: (1) corrective, (2) adaptive, (3) perfective, and (4) preventive. The activities associated with corrective maintenance are focused on fixing bugs and logic errors not detected during the implementation testing period. Adaptive maintenance refers to those activities associated with modifying existing functions or adding new functionality to accommodate changes in the business or operating envi- ronments. Perfective maintenance activities involve changes made to an existing sys- tem that are intended to improve the performance of a function or interface. The final category of maintenance activities, preventive maintenance , involves those activities intended to reduce the chances of a system failure or extend the capacity of a current system’s useful life. Although often the lowest-priority maintenance activity, preven- tive maintenance is, nonetheless, a high-value-adding function and is vital to an or- ganization realizing the full value of its investment in the system.

The maintenance activity also includes a postimplementation review process to ensure that newly implemented systems meet the business objectives established for them. Errors in the development or use of a system must be corrected by the maintenance process. This includes a periodic review or audit of a system to ensure that it is operat- ing properly and meeting its objectives. This audit is in addition to continually moni- toring a new system for potential problems or necessary changes.

Phased Conversion

Postimplementation Activities

Systems Maintenance

Postimplementation Review

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There is no mystery as to why most projects succeed or fail; people have been writ- ing about effective project management for millennia. More than 2,000 years ago, Sun Tzu described how to organize a successful, highly complex project (a military campaign) in The Art of War . Fred Brooks’s classic book, The Mythical Man-Month , offers management advice targeted at running large IT projects. The U.K. National Audit Office recently published an excellent guide to delivering successful IT-enabled business change. Over the past 10 years, virtually every major IT publication has printed articles on why large projects succeed or fail. Despite all the excellent advice available, more than half of the major projects undertaken by IT departments still fail or get canceled. We know what works. We just don’t do it. An ineffective executive sponsor. A weak or, even worse, nonexistent executive sponsor almost guarantees business project failure. Under weak executive leadership, all projects become IT projects rather than business initiatives with IT components. A poor business case . An incomplete business case allows incorrect expectations to be set—and missed. The business case is no longer valid. Marketplace changes frequently invali- date original business assumptions, but teams often become so invested in a project that they ignore warning signs and continue as planned. The project is too big. Bigger projects require more discipline. A lack of dedicated resources. Large projects require concentration and dedi- cation for the duration. But key people are frequently required to support critical projects while continuing to perform their existing full-time jobs. Out of sight, out of mind. If your suppliers fail, you fail, and you own it. Don’t take your eyes off them. Unnecessary complexity. Projects that attempt to be all things to all people usually result in systems that are difficult to use, and they eventually fail. Cultural conflict . Projects that violate cultural norms of the organization sel- dom have a chance. No contingency. Stuff happens. Projects need flexibility to address the inevita- ble surprises. Too long without deliverables. Most organizations expect visible progress in six to nine months. Long projects without intermediate products risk losing executive interest, sup- port, and resources. Betting on a new, unproven technology. Enough said. An arbitrary release date . Date-driven projects have little chance of success. Companies should learn to plan the project before picking a release date, not the other way around. Anything here that doesn’t make sense? That’s exactly the point .

Source: Adapted from Bart Perkins, “12 Things You Know About Projects but Choose to Ignore,” Computerworld , March 12, 2007.

Project Success (or Failure): What We Know but Choose to Ignore

• The Systems Development Life Cycle . Business end users and IS specialists may use a systems approach to help them develop information system solutions to meet business opportunities. This frequently involves a systems development life cycle where IS specialists and end users conceive, design, and implement business

S u m m a r y

systems. The stages, activities, and products of the in- formation systems development life cycle are summa- rized in Figure 12.3 .

• Prototyping . Prototyping is a major alternative meth- odology to the traditional information systems devel- opment life cycle. It includes the use of prototyping

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518 ● Module IV / Development Processes

F I G U R E 1 2 . 2 7 An overview of the implementation process. Implementation activities are needed to transform a newly developed information system into an operational system for end users.

Implementing New Systems

• Acquisition Evaluate and acquire necessary hardware and software resources and information system services. Screen vendor proposals.

• Software Development Develop any software that will not be acquired externally as software packages. Make any necessary modifications to software packages that are acquired.

• Data Conversion Convert data in company databases to new data formats and subsets required by newly installed software.

• Training Educate and train management, end users, customers, and other business stakeholders. Use consultants or training programs to develop user competencies.

• Testing Test and make necessary corrections to the programs, procedures, and hardware used by a new system.

• Documentation Record and communicate detailed system specifications, including procedures for end users and IS personnel and examples of input screens and output displays and reports.

• Conversion Convert from the use of a present system to the operation of a new or improved sys- tem. This may involve operating both new and old systems in parallel for a trial period, operation of a pilot system on a trial basis at one location, phasing in the new system one location at a time, or a direct cutover to the new system.

tools and methodologies, which promote an iterative, interactive process that develops prototypes of user in- terfaces and other information system components. See Figure 12.9 .

• End-User Development . The application develop- ment capabilities built into many end-user software packages have made it easier for end users to develop their own business applications. End users should focus their development efforts on the system components of business processes that can benefit from the use of information technology, as summarized in Figure 12.14 .

• Implementing IS . The implementation process for in- formation system projects is summarized in Figure 12.27 . Implementation involves acquisition, testing, documen-

tation, training, installation, and conversion activities that transform a newly designed business system into an operational system for end users.

• Evaluating Hardware, Software, and Services . Business professionals should know how to evaluate the acquisition of information system resources. IT vendors’ proposals should be based on specifications developed during the design stage of systems develop- ment. A formal evaluation process reduces the pos- sibility of incorrect or unnecessary purchases of hardware or software. Several major evaluation fac- tors, summarized in Figures 12.22 , 12.23 , and 12.24 , can be used to evaluate hardware, software, and IS services.

1. Conversion (514)

2. Cost/benefit analysis (488)

3. Data conversion (512)

4. Documentation (513)

5. Economic feasibility (487)

6. End-user development (497)

7. Feasibility study (486)

8. Functional requirements (492)

9. Human factors feasibility (489)

1 0. Implementation process (503)

11. Intangible (488)

a. Benefits (488) b. Costs (488)

12. Legal/political feasibility (489)

13. Logical model (491)

These are the key terms and concepts of this chapter. The page number of their first explanation is in parentheses.

K e y Te r m s a n d C o n c e p t s

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14. Operational feasibility (487)

15. Organizational analysis (490)

16. Postimplementation review (516)

17. Project management (507)

18. Prototyping (493)

19. Systems analysis and design (485)

20. Systems approach (482)

21. Systems development life cycle (485)

22. Systems implementation (503)

23. Systems maintenance (516)

24. System specifications (497)

25. Systems thinking (482)

26. System testing (512)

27. Tangible (488)

a. Benefits (488) b. Costs (488)

28. Technical feasibility (488)

29. User interface design (495)

1. Using an organized sequence of activities to study a problem or opportunity using systems thinking.

2. Trying to recognize systems and the new inter- relationships and components of systems in any situation.

3. Evaluating the success of a solution after it has been implemented.

4. Your evaluation shows that benefits outweigh costs for a proposed system.

5. The costs of acquiring computer hardware, software, and specialists.

6. Loss of customer goodwill caused by errors in a new system.

7. Increases in profits caused by a new system.

8. Improved employee morale caused by efficiency and effectiveness of a new system.

9. A multistep process to conceive, design, and implement an information system.

10. A diagram or blueprint of a system that shows what it does without regard to how it does it.

11. Determines the organizational, economic, technical, and operational feasibility of a proposed information system.

12. The goal of this feasibility analysis category is to determine whether the proposed system will provide positive economic benefits.

13. Reliable hardware and software are available to implement a proposed system.

14. Determining whether or not any copyright or patent infringements may exist as the result of a new system.

15. Do we have the right people to operate the new system?

16. A multistage process for studying in detail the information needs of users and any information systems presently used, and then developing a system to correct a problem or improve operations.

17. A detailed description of user information needs and the input, processing, output,

storage, and control capabilities required to meet those needs.

18. Systems design should focus on developing user- friendly input and output methods for a system.

19. A detailed description of the hardware, software, people, network, and data resources and information products required by a proposed system.

20. Acquiring hardware and software, testing and documenting a proposed system, and training people to use it.

21. Making improvements to an operational system.

22. An interactive and iterative process of developing and refining information system prototypes.

23. Managers and business specialists can develop their own e-business applications.

24. Correcting, converting, filtering, consolidating, and organizing data when replacing an old system.

25. Operate in parallel with the old system, use a test site, switch in stages, or cut over immediately to a new system.

26. Checking whether hardware and software work properly for end users.

27. A user manual communicates the design and operating procedures of a system.

28. Keeping an IS project on time and within its budget would be a major goal.

29. Cost and benefits that can be quantified with a high degree of certainty.

30. The degree to which a proposed system fits with the business environment and organizational objectives.

31. Costs and benefits of a new system that are hard to quantify.

32. A phase within systems analysis focused on understanding the organization and its environment.

33. The process by which a system goes from designs and blueprints to becoming a working system.

R e v i e w Q u i z

Match one of the key terms and concepts listed previously with each of the brief examples or definitions that follow. Try to find the best fit for answers that seem to fit more than one term or concept. Defend your choices.

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520 ● Module IV / Development Processes

D i s c u s s i o n Q u e s t i o n s

1. Why has prototyping become a popular way to develop business applications? What are prototyping’s advan- tages and disadvantages?

2. Refer to the Real World Case on Microsoft, SiCortex, and Others in the chapter. Does the ability of virtualiza- tion technology to provide developers with multiple combinations of operating systems and applications mean that companies should be required, or expected, to support all possible ones? Discuss.

3. Review the real-world example about Walmart and Others in the chapter. How could these companies prepare for the unexpected changes in demand that brought down their Web sites? Explain your reasoning.

4. What are the three most important factors you would use in evaluating computer hardware? Computer soft- ware? Explain why.

5. Assume that in your first week on a new job you are asked to use a type of business software that you have never used before. What kind of user training should your company provide to you before you start?

6. Refer to the Real World Case on WestJet, JetBlue, and Others in the chapter. In general, is it a good idea for

companies to make major software upgrades public be- forehand? What are the advantages and disadvantages of doing so? Do they have an ethical responsibility to tell their customers? Discuss.

7. What is the difference between the parallel, direct, phased, and pilot forms of IS conversion? Which conversion strategy is best? Explain why.

8. Review the Google real-world example in the chapter. How might you change the user interface of Google’s search pages and those of some of its other products on the Web? Defend your proposals.

9. Review the real-world example discussing the factors involved in project failure in the chapter. If these are well-known, why would companies choose to ignore them over and over again? What could be the reasons behind such behavior?

10. Pick a business task you would like to computerize. How could you use the steps of the information systems development life cycle as illustrated in Figure 12.3 to help you? Use examples to illustrate your answer.

1. SDLC in Practice Community Action

The systems development life cycle (SDLC) provides a structured problem-solving software development meth- odology. What works for information system–related problems, however, also works for many business problems, too. The SDLC provides a framework that requires adherents to follow a logical sequence. This sequence promotes careful analysis and helps ensure that you are doing the right thing as well as doing the thing right. You can use the SDLC to address many business problems. Think about a problem in your community. Your community may include your campus, your work, or your neighborhood. Your instructor may provide additional guidelines. Select a problem, complete each step in turn, and prepare a report detailing each step. Due to the location-specific nature of this exercise, expect to conduct firsthand research and interviews.

a. Select a problem and quantify its effects. b. Identify the cause or causes of the problem. c. Describe various solutions to this problem. Include

estimated costs and benefits for each solution. d. Select a solution and prepare a plan for its

implementation. e. Identify the parties responsible for monitoring and

maintaining the solution. What metrics should they use to monitor the results?

2. Planning for Success Project Planning

Projects have many dependencies, any of which could become points of failure. Without the cooperation or input from even one vital resource, a project may fail to meet its objectives. Effective project planning helps project managers think through a project before it starts and prepare communication strategies in advance.

a. Read the article “How to Create a Clear Project Plan,” Darwin Magazine , August 2004 ( http:// tinyurl.com/24oub5a ), and summarize its main points.

b. Read through the “SDLC in Practice” exercise above, and select a problem as directed by your professor.

c. Prepare a project plan for the problem you selected above.

d. Present your project plan to your class. Solicit your peers’ suggestions for improvement.

3. Americans with Disabilities Act Enabling Technologies

The Americans with Disabilities Act prohibits discrimination on the basis of disability in regard to public accommodations and commercial facilities. This act has been interpreted to include certain information systems as well. All information systems development

A n a l y s i s E x e r c i s e s

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projects should take ADA issues into consideration during development. Accommodating employees and customers with disabilities must never become an afterthought. Even if you do not presently have physical limitations, you may either have limitations in the future or have employees under your supervision who require special tools to enable access to information systems. Research information systems access solutions. Be sure to include a detailed description of the hardware or software solution, solution provider, and cost of accommodating each limitation listed below.

a. Partial visual impairment b. Total visual impairment c. Manual dexterity impairment

4. Central London Congestion Charging Scheme Conversion Strategies

The city of London has been well known for its many historic sites, live theater, and heavy traffic. In spite of a sophisticated underground subway system known locally as the “tube,” traffic delays, car exhaust, noise pollution, and vehicle-pedestrian accidents have plagued Londoners for decades. After long deliberation, London’s city government adopted the Central London Congestion Charging Scheme. This plan involved establishing a toll perimeter around London’s center. Rather than stopping cars to collect tolls, however, London set up video cameras at each toll zone crossing. These cameras link to a billing system that charges each vehicle’s registered owner a one-day access toll with

same-day reentrance privileges. The steep toll, about $8, discourages vehicle traffic into London’s city center. Londoners who live within the toll zone receive a special discount, as do residents living near the toll zone boundary, certain government workers, and businesses operating fleets of vehicles. Tolls remain in effect during working hours on workdays. Car owners have until the end of the day to pay their toll through e-mail, SMS messaging, telephone, Web site, or kiosk. The tolls have resulted in a significant decrease in automobile traffic, increased use of mass transit, fewer accidents, and faster driving times. The tolls have had a negligible effect on business operations and most residents. They have also generated significant revenue that London uses to maintain the system and to enhance public transportation. Consider the massive work involved in educating the public, marking all streets entering the toll zone, setting up cameras, and building the information systems. The information systems alone must process the raw images, match license plates to a payment database, receive payments, send out nonpayment notices, and process appeals. Police also use the system’s databases for a variety of law enforcement–related work.

a. Briefly describe the advantages and disadvantages of each conversion strategy (parallel, pilot, phased, and plunge) as they apply to the Central London Congestion Charging Scheme project.

b. Which conversion strategy would you recommend for this project?

c. Defend your recommendation in detail.

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ence, you have to translate it, and we’re an Internet com- pany; we update the site every six weeks. How do you not slow the company down with the process of translation?” PayPal’s decision to custom-develop a solution is unu- sual and interesting. Few software vendors compete in the translation tools arena. Also, many companies can’t even overcome the organizational hurdles related to translation. “There’s a whole organizational issue that has to be looked at who’s in charge of what,” says Rogowski. For example, he notes, a consumer electronics company may not even have similar-looking content, never mind identical content, on Web sites in multiple countries. “A lot of times Web content springs up without any plan for cen- tralization,” he says. “Before your company can translate all of its sites efficiently, you may get embroiled in organiza- tional messes,” Rogowski warns, which is why some compa- nies are tackling the problem silo by silo. Not Paypal. Five years ago, Mengerink and a team of localization experts inside of IT began their project to fix the problem in a very centralized way. Often, Mengerink says, companies facing this problem try to cut and paste code, and then translate it into different languages; this can lead to trouble because it’s not simple to keep compressing and uni- fying the code. “It’s far easier to manipulate text than code, he says. PayPal decided that it had to re-architect its code to ac- commodate the language localization issue—purely for rea- sons of business speed. He says, “If you get the architecture right, you can get into new countries faster.” No commercial tools existed that fit the bill, Mengerink says, so all the devel- opment was done in-house with a small IT team; PayPal will not disclose the exact size of the team or the cost metrics. “There’s this notion of a country code and a language code,” Mengerink says. “Your software has to understand two things: What country am I in and what language is being read? This is extremely important because there are countries out- side the United States where customers cannot imagine not having multiple languages, Canada, for example. The first thing we said is put both codes everywhere,” Mengerink says. Then his developers had to create a code base with much more flexibility than the original; it had to convince the soft- ware, for instance, that strings of information such as e-mail addresses, customer support phone numbers, and time of day would change depending on the country code. The second key to the project’s success for PayPal: Ghassan Haddad, PayPal’s director of localization, and the development team created a tool that color codes text in the software code base to note newly added strings of text that will need translating. “People just program as if it’s in English, Mengerink says. “At the same time, the software extracts the new pieces.” Then PayPal can send only the new pieces, instead of whole paragraphs, to the translation house. “This can take 5, 10 days depending on the size of the

PayPal: Going Global All Languages at a Time

REAL WORLD

CASE 3 W hen you’re a global company that keeps ex-panding into new countries, how do you keep all of your consumer sites updated in the local language—without spending a ton of time and money? PayPal realized five years ago that if it didn’t solve this problem it would hinder the e-commerce payment compa- ny’s ability to grow, says Matthew Mengerink, the company’s vice president of core technologies; his IT responsibilities include PayPal’s architecture and payment system infrastruc- ture. Today, PayPal has re-architected the software code for its site to allow simultaneous refreshes for 15 locales ranging from France to Poland. In the development community, they call this unusual achievement “polylingual simultaneous shipping” or “SimShip.” “This is a big problem that’s been around a long time,” says Ron Rogowski, a principal analyst for Forrester Re- search, who specializes in globalization issues. “For the most part, companies really do a poor job localizing content,” he says, noting that technology solutions in this area aren’t plentiful, and companies also must conquer organizational battles over who controls what content. “Companies would like to manage their translations better,” Rogowski says, “to realize internal and external cost savings. But the real benefit is the potential for revenue growth, the ability to roll into markets quickly.” That ability today translates into a large portion of PayPal’s bottom line: For PayPal, international business now represents 44 percent of net revenue, which was $582 mil- lion for the first quarter of 2008, a 32 percent increase year- over-year. As of late 2007, PayPal handled about $1,806 in payment volume per second; the company’s re-architected code played a key role in this increase. PayPal, now part of online auction giant eBay, had to go global to support customer desire, Mengerink says. People outside of the United States were demanding that eBay let them use PayPal (the primary purchase mechanism on eBay) and that PayPal be presented to them as seamlessly as it had been presented in English, he says. The company had to do more than present a stilted translation of English into, say, French or German, he adds. “Imagine you’re going into a bank and you want to speak French,” Mengerink says. “The teller can speak French. But that’s not enough. You want to feel you’re in France. You want to see the French flag on the wall. Especially in the banking industry, it was very important to express something that people trust in such a way that it is natural and native for them,” he says. Traditionally, companies solve the localization issue by working with third-party translation companies, whose staff- ers convert an English-based site into multiple languages, says Mengerink. The problem: “If you can’t send them the smallest amount of text, it gets fantastically expensive,” Mengerink says. “Here at PayPal you have a full site experi-

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1. One of the challenges that PayPal faces now that it has managed to overcome the polylingual obstacle is find- ing the best way to put this functionality in the hands of the business, so that they do not have to go through IT each time. How do you balance this need for respon- siveness and flexibility versus IT’s need to keep some degree of control to make sure everything keeps work- ing with everything else? Provide some recommenda- tions to managers who find themselves in this situation.

2. PayPal opted to deviate from industry standards and build its own custom technology that would better suit its needs. When is it a good idea for companies to take this alternative? What issues factor into that decision. Provide a discussion and some examples.

3. Although the new system has been quite successful, PayPal has chosen not to license this technology to others, forgoing a potentially important revenue stream given the lack of good solutions to this problem. Why do you think PayPal chose not to sell this technology? Do you really think this can be made into a strategic ad- vantage over their competitors? How easy would it be for their competitors to imitate this accomplishment?

1. Choose two or three companies with global operations that interest you and visit their Web sites for countries other than the United States. Even if you are not famil- iar with the language, do the Web sites have the same look and feel of the U.S. site? In which ways are they similar, and in which ways are they different? If you did not know, would you have guessed it was the same com- pany? Prepare a presentation with screenshots to share your findings with the rest of the class.

2. Although PayPal opted for a centralized approach to keep consistency across Web site appearance and con- tent, other companies let both of these vary for each of the countries in which they operate. When would you use one or the other approach? Would it depend on the company, products offered, markets, countries, or on another factor? Break into small groups with your class- mates to discuss these issues.

CASE STUDY QUESTIONS REAL WORLD ACTIVITIES

release,” Mengerink says. “Then off we go to the races, re- leasing simultaneously in all locales.” So what’s the next challenge for Mengerink and his de- veloper team at PayPal? “We got very good at managing content with engineering,” he says. “Now the question is, how we put that content management in the hands of busi- ness. They want to change it themselves without an interme- diary. The business folks are saying ‘we respect you but pretty please can we do it ourselves?’ That’s a challenge, he says, given that the development toolset will continue to grow. By the way, PayPal isn’t looking to license the technol- ogy it developed. “Our tools are built for PayPal, Mengerink says. “We’re encouraging others to build it for themselves.” Although his team worked primarily in HTML, the pro- gramming language is not the important choice, he says. “Think about the methodology. That’s a really critical part. We built custom tools and they literally change every six months. This is a nascent industry. When you start looking at the publishing tools and content tools, most are appropri- ate for preview and publish,” he says. That’s a simpler model than what PayPal does, for exam- ple, frequently linking new content with new features, he notes. “There was a lot of fear, a lot of people saying, ‘Why aren’t we being industry standard?’ Leverage what you can, but you have to be good at creating your own tools. In the begin- ning, there was a lot of healthy skepticism, even internally,”

Mengerink says. “Some of your execs and developers will note that their last company tried to do simultaneous shipping and failed,” he says. “Some people in the developer community still don’t think it’s possible,” he adds. “Once it was done, we saw that it’s not just manageable, it’s a core advantage.” The sooner your company can start working on a Sim- Ship project, the better: “Once you get too big, you can’t afford the interrupt to the cycle,” he notes. “Very early on, you have to create the generic structures for the code,” he says. “Build every next thing correct.” What’s the bottom line for PayPal from Mengerink’s team’s work? “Today, we have 15 languages, 17 currencies, 190 markets,” he says. “Our code base has grown a lot. All of the new code is being built using the right structure. You have to build internationalized.” PayPal’s re-architected code base now keeps e-commerce humming as the company continues to expand: PayPal’s net total payment volume for 2007, the total value of transactions, was $47 billion, a gain of 33 percent over the previous year. To put that in context, PayPal’s net total payment vol- ume for fourth quarter 2007, $14 billion, represented almost 12 percent of U.S. e-commerce, and almost 8 percent of glo- bal e-commerce.

Source: Adapted from Laurianne McLaughlin, “How PayPal Keeps E-Commerce Humming in 15 Languages at Once,” CIO Magazine , March 14, 2008.

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Still, application demand remained. There may have been less development during the years when companies were focused on survival and keeping costs down, but users “still had their wish lists,” says Stephen Rood, CIO of Strategic Technology. an IT consulting firm that advises small and midsize companies. Now, those needs are out in the open again, fueling CIOs’ concerns about project backlogs. How one defines and deals with any backlog boils down to two factors: the source of the demand and the project’s stage of development. Holstein identifies two different types of backlogs: a backlog of desire (applications that users are yearning for) and a backlog of commitment (projects that are approved but not started). CIOs need to pay attention to both. If internal customers can’t get an IT project on a CIO’s radar screen, “they perceive there’s a backlog because the IT shop can’t do what they want,. Holstein says. When projects have been promised but not delivered, he says, “expectations have been set and not fulfilled.” It may be that an IT organization hasn’t planned properly, or that managers aren’t tracking projects well, or that developers are taking time to assess the ins and outs of a project. Whatever the reason, users have not gotten what they were promised. One way to look at the backlog is to consider the whole spectrum of projects that IT is currently working on but has not finished, in addition to the ones ready to go. Powers has a list of 100 projects at Worldspan that have funding and that IT has started. Outside the top 100 are projects that are on deck. “When you finish [project] three, you bring in [project] 101,” she explains. If she doesn’t have the right staff with the right skills available for the next project on the list, she may skip to another. “We tend to have a backlog of about one year’s worth of work. But because we prioritize every two weeks, some items never make it to the active list,” Powers says. No matter how good CIOs are at keeping a grip on their backlog, ever-shifting business priorities always threaten to shake up the IT agenda. One of the toughest tasks for CIOs is to align the jumble of projects vying for resources with the company’s strategic needs. In a fast-paced business climate, new projects—especially those that come from the top floor—scream for attention. “They can also come about quite innocently,” Holstein says, due to external factors that cause the business climate to shift. “What was a top priority becomes priority number 10.” A major contributor to the application backlog has been compliance-related projects, such as investments for Sarbanes-Oxley and HIPAA regulations. IT has to complete those projects by set dates, and in many cases, these infrastruc- ture projects require substantial IT resources. Invariably, notes Holstein, implementing compliance projects pushes others farther down the to-do list. At Worldspan, Powers says, compliance-related projects trumped even a project that aimed to improve how the company prioritizes its IT projects.

Queen’s Medical Center, National Public Radio, Worldspan, and Others: Your IT Project Has Been Backlogged

REAL WORLD

CASE 4 Everyone at The Queen’s Medical Center in Honolulu wants some shiny new piece of technology. Doctors and nurses who have seen a new pharmacy manage- ment system demonstrated at a recent conference think the hospital should have it. An administrator wants his depart- ment to have PDAs for wireless access to e-mail. Someone else wants a hospitalwide dietary management system but doesn’t have the budget to fund it. All of these people want CIO and vice president of IT Ken Kudla to get it all for them. Yet before he even thinks about eking new systems out of his $13 million annual operating budget, Kudla has to contend with the 30 projects he has going on right now. He’s in the middle of upgrading the hospital’s network and de- ploying an antispam management system. He’s due to re- place the seven different systems that make up his hospital information system. Meanwhile, he’s trying to finish a docu- ment imaging project begun back in 2002, for which funding has been scarce. “CIOs are being bombarded,” he says. “There’s a pent-up demand for things.” Kudla isn’t alone. According to “The State of the CIO 2006,” an annual survey by CIO Magazine, demand for IT is back with a vengeance. It’s almost like the late 1990s, except that what’s missing now is the money, staff, and late-night takeout to deal with today’s demand. In turn, the requests for IT projects are piling up. CIOs say that managing this ap- plication backlog is the number-one barrier to their job ef- fectiveness today, regardless of industry or company size. How CIOs manage this burgeoning demand has a direct impact on whether or not business leaders view IT as re- sponsive to their needs. “Any CIO who sets an expectation that something will get done—and it doesn’t—will be com- mitting career suicide,” says Bob Holstein, CIO at National Public Radio. The challenge for CIOs, then, is to ensure that projects already in the queue are aligned with ever- changing business priorities, to manage business-side expec- tations, and to control new sources of application demand from today’s more sophisticated users. “One way you can in- terpret this problem is that users have a lot more apprecia- tion of what’s possible,” says Holstein, “Or that the technology world has moved very quickly, and those business units want more, and they want it faster.” Whatever the source of the application backlog, CIOs should follow this cardinal rule. Don’t complain; nobody— especially your CEO—likes a whiner. “I tell my staff, ‘You can’t be a victim,’ ” says Susan Powers, CIO of Worldspan. “I don’t accept the victim mentality.” To some extent, backlogs have always been around be- cause users have always cried for the latest applications. Ten years ago, during the Internet buildout, everyone got what they wanted. Then Y2K put the brakes on many less-critical projects. “Perhaps that started some of the backlog,” Kudla says. Then came the dot.com bust, 9/11, and bad times for many companies.

524

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1. The case notes that a changing environment or business priorities can render an ongoing project obsolete even before it has been completed. What alternatives do CIOs who find themselves in this situation have with respect to dealing with the troubled project? Would you go ahead and finish it, or scrap it altogether? How would you justify either position?

2. Do you agree with the statement: “Application backlog is not a problem one solves; it’s a condition one lives with”? Why or why not? To the extent that it is true, how can IT executives manage things differently to make this situation more approachable? Provide some specific suggestions.

3. Susan Powers at Worldspan says she addresses the backlog problem by positioning her IT organization as a resource that should be used and managed in the most effective manner, like any other resource a company may have. What do you think of this approach? Is IT really like any other resource?

4. In which way is IT different from other areas of a com- pany like marketing or finance?

1. Go online and search the Internet to discover how typi- cal the experiences reported in the case are for other companies in different industries. How are the ones you discover addressing these issues? How similar or differ- ent are those strategies with the ones discussed in the case? Prepare a report to summarize your findings.

2. Which of the following strategies do you think IT exec- utives should adopt to improve their current situation: reject new projects, attempt to increase staff and fund- ing, prioritize often, or all of the above? Break into small groups with your classmates to discuss these and other strategies you may have thought of; compare and contrast advantages and disadvantages of each.

CASE STUDY QUESTIONS REAL WORLD ACTIVITIES

The backlog generated by a new corporate agenda is worse for the CIO, who has to scramble to execute a deci- sion she wasn’t consulted about. Rood has seen it happen: A CEO and COO decide that they want a CRM system. When the CEO tells the CIO about it, the CIO is clueless as to why the project is necessary. The new project sends the IT department scrambling to jump-start the CRM project and pushes everything else to the side. “That will upset what the priorities are in terms of technology needs for the entire or- ganization,” observes Rood. At The Queen’s Medical Center, Kudla wages a constant battle to ensure that all of his constituents know that every IT project has to be in sync with the center’s strategic initia- tives. As a member of the senior management team, he con- siders it his most important task to make sure his peers are aware of and agree to the center’s priorities. Everyone, from senior executives on down, should know that a pharmacy management system is important for the hospital; they should also understand that rolling out the wireless PDAs for e-mail is “low on my food chain.” Rood, who’s been in the IT field for 26 years, says he learned this lesson early in his career. “When you’re new, everyone wants to shake your hand, welcome you on board, take you out to lunch, and at the end of the day you’ve got 50 things from everyone to do,” he recalls. “It all adds up to a backlog, and then you’re going to be crying to the CEO: ‘I can’t do this.’ ” At that point, he says, CIOs either have to

take the hit and not deliver what they promised (which could get them fired), “enter a crash mode, where they push their staff to the point of exhaustion to complete a project,” or spend extra on contract labor to meet a deadline. “In any case, it becomes a no-win situation,” he says. Powers gets around the problem of not wanting to say no by sending the message that IT is a resource to be man- aged like any other; her organization can do anything given enough time and money. Then the onus is on users to justify and manage their requests through Worldspan’s project jus- tification process. Kudla of The Queen’s Medical Center expects that once he upgrades the hospital’s seven major systems, new demand will surface.“Once the system is stabilized and users realize the potential of the new system, I anticipate a demand for new functionality,” he says. Kudla anticipates requests for, among other things, auto- mating the capture of data from patient monitors and expan- sion of wireless access on the hospital campus. In other words, the application backlog isn’t a problem one solves, it’s a condi- tion one lives with as technology matures and expands into new areas of the business, enabling growth and greater efficiency. “Of course, working harder and more funding help,” concludes Worldspan’s Powers.

Source: Adapted from Thomas Wailgum, “The Number-One Problem of CIOs: The Project Backlog,” CIO Magazine , December 11, 2007.

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MODULE V

MANAGEMENT CHALLENGES

hat managerial challenges do information systems pose for today’s business enterprises? The two chapters of this module emphasize how managers and business professionals can manage the successful

use of information technologies in a global economy.

• Chapter 13: Security and Ethical Challenges discusses the threats against and defenses needed for the performance and security of business information systems, as well as societal impact and ethical implications of information technology.

• Chapter 14: Enterprise and Global Management of Information Technology discusses the major challenges that information technology presents to business managers, the components of information systems management, and the managerial implications of the use of information technology in global business.

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W

Management

Challenges

Foundation

Concepts

Information

Technologies

Business

Applications M o d u l e V

Development

Processes

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Management

Challenges

Foundation

Concepts

Information

Technologies

Business

Applications M o d u l e V

Development

Processes

C h a p t e r H i g h l i g h t s Section I Security, Ethical, and Societal Challenges of IT Introduction Ethical Responsibility of Business Professionals Real World Case: Texas Health Resources and Intel: Ethics, IT, and Compliance Computer Crime Privacy Issues The Current State of Cyber Law Other Challenges Health Issues Societal Solutions Section II Security Management of Information Technology Introduction Tools of Security Management Real World Case: Wyoming Medical Center, Los Angeles County, and Raymond James: End-Point Security Gets Complicated Inter-Networked Security Defenses Viral Defenses Other Security Measures System Controls and Audits Real World Case: Ethics, Moral Dilemmas, and Tough Decisions: The Many Challenges of Working in IT Real World Case: Raymond James Financial, BCD Travel, Houston Texans, and Others: Worrying about What Goes Out, Not What Comes In

L e a r n i n g O b j e c t i v e s 1. Identify several ethical issues regarding how the

use of information technologies in business affects employment, individuality, working conditions, privacy, crime, health, and solutions to societal problems.

2. Identify several types of security management strategies and defenses and explain how they can be used to ensure the security of business applica- tions of information technology.

3. Propose several ways that business managers and professionals can help lessen the harmful effects and increase the beneficial effects of the use of information technology.

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CHAPTER 13

SECURITY AND ETHICAL CHALLENGES

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