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Information Technology Investment: Decision Making Methodology Chapter 2 Needs Analysis and Alternative Information Technology Information Technology Investment: Decision Making Methodology Chapter 2 Needs Analysis and Alternative Information Technology Investment Strategies

I. III. IV. V. Chapter Outline: Introduction What is Needs Analysis? Determining IT Processing I. III. IV. V. Chapter Outline: Introduction What is Needs Analysis? Determining IT Processing Capacities and Specifications Alternative IT Investment Strategies What is IT Outsourcing?

I. Introduction STRATEGIC PLANNING STEPS Process and systems engineering Configuration and functionality analysis TACTICAL I. Introduction STRATEGIC PLANNING STEPS Process and systems engineering Configuration and functionality analysis TACTICAL PLANNING STEPS IT system evaluation and justification OPERATIONAL PLANNING STEPS In Chapter 1 we introduced the tactical steps of the MIS planning process for IT projects

STRATEGIC PLANNING STEPS I. Introduction 1. Perform a “needs analysis” to determine IT resources STRATEGIC PLANNING STEPS I. Introduction 1. Perform a “needs analysis” to determine IT resources needed for new system 2. Determine processing volumes to meet new system requirements 3. Develop IT specifications to achieve new processing volumes 4. Develop set of IT project alternatives to meet the new processing volumes 5. Analyze and evaluate project alternatives using IT investment methodology OPERATIONAL PLANNING STEPS TACTICAL PLANNING STEPS In this chapter we refine and explain the tactical steps of the MIS planning process for IT projects

II. What is a Needs Analysis? A needs analysis consists of determining what technology, II. What is a Needs Analysis? A needs analysis consists of determining what technology, software, human resources or a complete MIS are necessary to achieve an organization’s stated strategic goals and objectives A needs analysis seeks to determine: (1) a current status or capacity of an organization’s IT, and (2) future needs that define what new or additional requirements are necessary to help the firm achieve their strategic goals

n “Understanding user needs is essential to the design and evaluation process and core n “Understanding user needs is essential to the design and evaluation process and core to the user-centred design methodology. Interviews with stakeholders and end users are used to elicit user needs, map out user tasks and to establish the general workflow. Personas and use case scenarios are developed to provide context and to ensure user needs are top of mind throughout the design and evaluation process 1. “ 1 http: //www. humanfactors. ca/user-needs-analysis

n n n The users in Health Care is critical to all of this n n n The users in Health Care is critical to all of this But who are the users? How do we gain their buy in and trust?

Example http: //www. humanfactors. ca/chemotherapy-daycarepharmacy-workflow-and-workspace-assessment Example http: //www. humanfactors. ca/chemotherapy-daycarepharmacy-workflow-and-workspace-assessment

II. What is a Needs Analysis? n n n The current status is called II. What is a Needs Analysis? n n n The current status is called a needs report A needs report documents the present IS systems and state of IT capacities This information can be found in manuals, interviews with IT staff or other staff, forms and by observation Future needs are found usually by questionnaire using experts on technology and IT staff, subject experts as well as organizational senior leaders IT project teams are often given the responsibility of performing the needs analysis

II. What is a Needs Analysis? n n n The current status is called II. What is a Needs Analysis? n n n The current status is called a needs report A needs report documents the present MIS system or state of IT capacities This information can be found in computer manuals, interviews with IT staff, or just with check lists Future needs are found usually by questionnaire using experts on technology and IT staff, as well as organization CIO and CEO IT project teams are often formed to perform the needs analysis

III. Determining IT Processing Capacities and Specifications Type of cost Purchasing, renting, leasing Software III. Determining IT Processing Capacities and Specifications Type of cost Purchasing, renting, leasing Software Cost assessments are important in the first three steps of the MIS tactical planning process. Typical cost considerations in a needs analysis can be seen in this table. Description Investments in hardware can be purchased outright, rented, or leased. While bundling makes software application difficult to compare, the costs of the basic purchase decision can and must be compared to make a decision. Other support services (e. g. , discounts on upgrades, diagnostic support, etc. ) must also be factored into the decision process.

III. Determining IT Processing Caps and Specs (Continued) Type of cost Description Personnel Some III. Determining IT Processing Caps and Specs (Continued) Type of cost Description Personnel Some systems require additional personnel and others only require a reassignment of existing staff. This would also include management costs Hardware maintenance Monthly or yearly fees that are required as a part of a purchase agreement on the IT. Warranty Some warrantees are included in the purchase price of IT and some require additional fees for maintenance service or replacement. Other extended service contracts might also be necessary to permit an equal comparison with differing vendor purchase offers. Communication The costs of communicating data from a main facility to intra-organization and extra-organization facilities. Cost estimates might be based on size of data facilities, type of line (e. g. , dial-up verses dedicated), line speed (i. e. , baud rate), and line quality.

III. Determining IT Processing Capacities and Specifications One of the commonly used method for III. Determining IT Processing Capacities and Specifications One of the commonly used method for determining processing capacities and specifications for systems is reengineering. This procedure is diagrammed in the figure. 1. Strategic objectives declared 2. IT goals for improvement in process performance 3. Map out current process design 4. Suggest alternative reengineered process design changes that seek to: ·remove complexity in process flow ·remove non-value added activities ·update IT where possible to improve efficiency ·maximize flow and output ·maximize communication the sharing of information 5. Pilot study new process design 6. Implement final process design

IV. Alternative IT Investment Strategies It is necessary to offer alternatives to solve IT IV. Alternative IT Investment Strategies It is necessary to offer alternatives to solve IT resource problems. Some of these alternatives include… Continue using system without change Continuing with the present system with little or no change assumes the present in-house processing capacity is adequate for present and future needs. This is the least costly and demanding alternative. If, on the other hand, the present system is not adequate in functionality, processing capacity, or it is no longer supported by its vendor, then this strategy may not be appropriate. Reorganize system Some firms have been able to reap economies of scale by reorganizing their IT technology into “service centers. ” A service center typically is a physical location where data processing and IT services is provided at a main facility to branch or satellite locations geographically dispersed over a larger area. By concentrating IT in one location it is assumed they can be better utilized with less management and staff. As a result it is expected that fewer staff and other IT resources are needed to accomplish the save level of work. The result is increased productivity, better IT utilization, and lower costs of processing transactions. If, on the other hand, no real economies of scale are possible, then this strategy may not be appropriate.

IV. Alternative IT Investment Strategies (Continued) Upgrade existing system Minor or major system changes IV. Alternative IT Investment Strategies (Continued) Upgrade existing system Minor or major system changes with a series of upgrades to modules can permit a less costly and less potential disruption to the system as a whole, particularly with regard to the integration of modules and the retaining of personnel who will be familiar with the existing systems. If, on the other hand, the upgrade does not provide the desired functionality or limits processing capabilities in the future, particularly where the business processing environment is highly unstable and requires a quick adjustments to market conditions, this strategy may not be appropriate. Replace system Replacing entire modules or enterprise-wide systems can be very costly and time consuming. This strategy can result is a quick turnaround and substantial improvement in functionality

V. What is IT Outsourcing? IT outsourcing can be defined as the process of V. What is IT Outsourcing? IT outsourcing can be defined as the process of using outside companies or vendors to perform internal organization IT tasks It has been estimated that one in four US IT jobs will be outsourced by the year 2010

V. What is IT Outsourcing ? It can be a strategy for success. There V. What is IT Outsourcing ? It can be a strategy for success. There are several alternative outsourcing strategies… Outsourcing strategy Description Subcontracting, limited work assignments Short-term, over flow work beyond existing capacity is assigned to the subcontractors or vendors. This is just a temporary assignment in much the same way that temporary staffers are hired to fill in for summer vacation assignment of full-time staffers. This strategy is ideal with security issues or when cost prohibits more inclusion from a subcontractor. Subcontracting, project assignments Whole IT projects are assigned to subcontractors or vendors. These assignments would entail a complete project where the management of the project would be delegated to the subcontractor and not under the control of the MIS staff of the hiring firm. This strategy is ideal when a company has unique skill or technology requirements too expensive for them to maintain but affordable for contractors to offer their clients. Total outsource assignment Where part (i. e. , staff, IT, facilities, etc. ) or all of the entire MIS function is subcontracted out to a subcontractor or vendor. Here a company may lease all their IT from a subcontractor but run the equipment with their own staff. This strategy is ideal when a company may have a market that requires constant changes in IT or can not afford to tie up capital in IT.

V. What is IT Outsourcing? The benefits of outsourcing include: • • Technology improvements: V. What is IT Outsourcing? The benefits of outsourcing include: • • Technology improvements: Allows the hiring firm to avail itself with the latest in technology Financial gains: Reduces IT payroll and moves the costs from fixed to variable. Permits the salvage sale of existing equipment and recouping of some of those capital expenses. Reduces budgets: Bidding by subcontractors on a yearly basis permits ever increased pressure on subcontractors and vendors to reduce costs, thereby reducing budgets costs Productivity improvement: The latest in technology usually brings with it improved productivity and efficiency that the firm could not afford if it had to make the entire capital investment

V. What is IT Outsourcing? The benefits of outsourcing include (Continued): • • Tax V. What is IT Outsourcing? The benefits of outsourcing include (Continued): • • Tax benefits: Firms can deduct outsourcing costs from current income, in contrast to depreciating computer hardware purchases over a number of years Enhances core business activities: Allows firm to concentrate its limited staff on work that is at their core while permitting other MIS tasks to be performed by vendor Facilities management: Acts to insulate the firm from unexpected shifts in processing transactions, which would other wise require the firm to incorrectly invest longer-term capital in IT to handle short-term demand requirements Management planning: It is easier for most firms to outsource unexpected fluctuations of processing transactions than to plan and adjust in-house MIS resources to handle them

V. What is IT Outsourcing? The problems with outsourcing include: • • • Failure V. What is IT Outsourcing? The problems with outsourcing include: • • • Failure to achieve client needs Poor service quality Failure to meet timely objectives

V. What is IT Outsourcing? The barriers to outsourcing that inhibit or limit its V. What is IT Outsourcing? The barriers to outsourcing that inhibit or limit its use include: • • Questionable past and observed performance A lack of experience with outsourcing in general Organizational resistance to change Inadequate preparation and planning

V. What is IT Outsourcing? The following are guidelines in selecting outsourcing partners: • V. What is IT Outsourcing? The following are guidelines in selecting outsourcing partners: • • Develop specific and complete service agreements and measure to monitor their compliance Include cash penalties for non-compliance Establish a trial period in which to evaluate the outsourcer Measure all IT activities during the trial period and report performance to outsourcer Include clauses in agreements that permit the firm to alter business operations if need be The firm should closely manage the inevitable cost escalation in contracted services The firm should closely measure and manage service quality The firm should avoid becoming too dependent on the outsourcer