Aula 10 16052013 sii-v1

Sistemas de Informação para Indústria
© António Grilo 2013Departamento de Engenharia Mecânica e Industrial
1
Class 10
Strategic Planning of Information
Systems
Ano 2013
Sistemas de Informação
para a Indústria
António Grilo
Prof. Auxiliar FCT-UNL,

2
What is Information Systems (IS) planning?
Is the process of developing a view of the future that guides decision
making today. It states the direction we want to go and how we intend to
get there.
• There is a need to make the alignment of strategic business goals and
information systems plans.
• Often the Chief Information Officer is not in the inner circle of strategic
decision making
• Technologies are rapidly changing
• Continuous planning (monitoring, adjustments)
• “Built to Change”

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Planning IS and Organizational Factors
When planning and designing a new information system, there are central
organizational factors to consider :
• Environment
• Structure (Hierarchy, specialization, routines, business processes)
• Culture and politics
• Type of organization and style of leadership
• Main interest groups affected by system; attitudes of end users
• Tasks, decisions, and business processes the system will assist

4
Strategic Environmental Challenges for IS Planning
Porter’s Competitive Force:

5
Generic Competitive Strategies and IS
Low-cost leadership
Produce products and services at a lower price than competitors while
enhancing quality and level of service. Examples: Continente, Pingo Doce
Product differentiation
Enable new products or services, greatly change customer convenience
and experience. Examples: Google, Nike, Apple
Focus on market niche
Use information systems to enable a focused strategy on a single market
niche; specialize. Example: Hilton Hotels
Strengthen customer and supplier intimacy
Use information systems to develop strong ties and loyalty with customers
and supplier or increase switching costs. Example: Netflix, Amazon

6
Business Value Chain Model

7
Value Web

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The Process of Strategic IS Planning

9
Selecting Projects
In all but the smallest of firms, there is a considerable organizational
apparatus involved in projects, which is one reason why they can be so
difficult to manage.
The management structure for information systems projects (hierarchy in
large firms):
• Corporate strategic planning group - responsible for firm’s strategic
plan
• Information systems steering committee - reviews and approves plans
for systems in all divisions
• Project management group - responsible for overseeing specific
projects
• Project team - responsible for individual systems project
Portfolio analysis is used to evaluate alternative system projects. Hence, it
is necessary to inventory all of the organization’s information systems
projects and assets, and each system has a profile of risk and benefit

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Portfolio Analysis
To improve return on portfolio, balance risk and return from systems
investments. Companies should analyse their portfolio of projects in terms
of potential benefits and likely risks. Certain kinds of projects should be
avoided altogether and others developed rapidly. There is no ideal mix.
Companies in different industries have different profiles.

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Multicriteria Methods for Selection
For selecting projects a multicriteria method can be used, like the
Analytical Hierarchy Process (AHP), or simplifying with a more linear
scoring model, that can be used to evaluate alternative system projects,
especially when many criteria exist. This method assigns weights to
various features of system and calculates weighted totals.

12
Valuing Information Systems
Information systems capital budgeting models measure value of investing
in long-term capital investment projects. These methods rely on measures
of the firm’s:
Cash outflows
• Expenditures for hardware, software, labor
Cash inflows
• Increased sales
• Reduced costs
There are various capital budgeting models used for IT projects: Payback
method, accounting rate of return on investment, net present value (NPV),
internal rate of return (IRR)

13
Example of Creating a Business Case
Financial modelers use roughly two dozen shared files. When current data
in these shared files is overwritten with obsolete data, financial modelers
must recheck and redo their models. No records are kept for this work, but
anecdotal evidence suggests that up to 40 hours per year may be wasted
redoing financial models. At €50 per hour, this lost time costs ABC
Company up to €2,000 a year.
Costs
ElectroWorkFlow purchase price: €10,000.
Estimated life cycle: three years.
Installation fee: €2,000.
Annual maintenance contract: €500.
Cash Flow Statement (three years)
ABC Company's discount rate is 5%.

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Example of Creating a Business Case (cont.)
The volume of shared files will remain the same or increase over the next
three years.
Significant changes will not occur in the way most shared files are
distributed, used, and updated.
To realize €7,800 in annual labor savings, ABC Company must reduce
administrative assistant (AA) labor by 260 hours per year.
Currently, ABC Company employs three full-time AAs and one part-time
AA who works on average 34 hours per week. In 2005 ABC Company
hired a leased worker to perform 120 hours of AA tasks.
By eliminating the leased worker (120 hours saved) and reducing the part-
time AA to 31 hours per week (140 hours saved), ABC Company will save
260 hours per year in AA labor.

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Example of Creating a Business Case (cont.)
Net present value (NPV):
€13,530
Internal rate of return (IRR):
68%
Payback period: 1.2 years

Aula 10 16052013 sii-v1

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Aula 10 16052013 sii-v1