IS 466 ADVANCED TOPICS IN INFORMATION SYSTEMS

LECTURER : NOUF ALMUJALLY

10 – 10 – 2011

College Of Computer Science and Information, Information Systems Department

Lessons Learnt from Lecture5

The main organisational element of FI - CO - MM – SD

Procurement process 3-Way Match for Payment

Objectives

• SD module

• Importance of measuring success?

• Facets of ES success: Cameron and

Whetton 7 questions of evaluating ES

success

• What success measurement models are

available?

Sales and distribution Module

Sales and distribution

• Mechanisms to execute the business process used in the selling, shipping, and billing of products and services.

• It includes the following information and processes:• Customer Master and Material Master data• Sales Orders• Deliveries• Pricing• Billing• Credit Management

Components of Sales and Distribution

Sales andDistribution

(SD)

SalesSupport

Sales

CreditMgmt.

ShippingTransport

Billing

ForeignTrade

SalesInformation

SystemMasterData

Sales OrderEntry

Post Goods Issue

Invoice Customer

Pick Materials

Receipt ofCustomer Payment

Pack Materials

Check Availability

Sales Order Process (Order-to-Cash)

Measuring Enterprise Systems Success, Impact and Performance

9

Importance of IT performance measurement

“If you cannot measure it – you cannot manage it. Without systematic

measurements, managers have very little to guide their actions other than their own experience and judgement”

10

Enterprise Systems – Horror stories

• Geneva Steel declared bankruptcy after going ‘live’ with a 8 Million SAP system

• FoxMeyer ‘invested’ USD 65 Million on SAP and declared bankruptcy

• SAP implementation at HERSHEY (project cost – USD 112 Million, 19% loss of production and delays during the Halloween season). 2000-Q3 profit increased by 23%

11

Importance of measuring IT performance

1. It is the most important question for IT executives?

2. It’s a BIG investment

A typical ERP installation has a total cost of approximately USD 15 Million

By 2006 ERP market = USD 70 Billion

12

Importance of measuring IT performance

3. Despite the big investments, there are drawbacks of ES

• Deloitte Consulting (Survey of 100 companies)• The study identified that about one third (37%) of the

companies reported significant and quantifiable benefits from their ES investments. 15% of the companies studied, believe that they have received ‘nothing’ out of their ES. 25% of the organizations have received modest results of the ES, and they are not positive about gaining higher benefits. The remaining 23% had been unable to report any specific benefits

13

Importance of measuring IT performance

4. Allocate future investments in Information Technology(Do you need to upgrade – do you need to reengineer business process)

5. Understand stakeholder needs and perspectives(Way of grouping people in the organisation)

7. Simply to understand the benefits of IT (ES)

14

Measuring ES Success / Performance

ES generate Financial (Quantitative) and

Non-Financial (Qualitative) results, making it

difficult to clearly see the gains of the

system, thus a comprehensive measurement

method is needed, to evaluate the

performance of the ES

15

2 Methods of measuring ES success

• There are two main methods• Objective measures

Mainly based on financial indicators Examples: Return on Investment, Net present Value

• Perceptual measures Based on attitudes, perceptions of individuals Examples:, Accuracy of Information, Individual

performance improvements

ES success facets

17

Cameron and Whetton 7 questions of evaluating ES success

• Cameron and Whetton (1983) identified 7 questions that need to be answered when evaluating ES success and organizational effectivenss. These questions are:

1. What is the perspective? 2. What is the domain of activity? 3. What is the level of analysis? 4. What is the purpose of evaluation? 5. What is the time frame employed? 6. What types of data are to be used? 7. Against what referent is effectiveness to be judged?

18

Q1. From whose perspective is effectiveness being judged ?

• Independent stakeholder • Individual user • A group of people• Project manager• IT management • Owner/senior management• Society

19

Q2. What is ‘the system’ being evaluated?

• part of an information system (e.g., GUI)• one particular system (e.g., the HR module)• a type of system (e.g., ERP)• all IT applications in an organization• an inter-organizational information system • an IT implementation process (e.g., ASAP)• the IT function in an organization

20

Q3. What is the level of analysis?

• Organizational level analysis and/or• Functional level analysis

21

Q4. What is the purpose of the evaluation?

• Planning • Management• Improvement

22

Q5. What is the time frame is employed?

• Short term (e.g., “on time and within budget” for implementation projects)

• Long term

23

Q6. What type of data to be used?

• Objective measures Tangible figures that can be measured using formulas

or calculations Mainly based on financial indicators Example: Cost - Reduce errors

• Subjective measures intangible measures They are evaluated through methods such as

interviewing staff for their opinions and views of the system.

Example: Staff Dissatisfaction - Customer Satisfaction

24

Q7. Against what referent is effectiveness to be judged?

Compared to: • some other organization (benchmarking) • some ideal level of performance • past performance of the organization• other desirable characteristics

ES Success measurement models

26

Enterprise Systems success models

• IT Balanced Scorecard

• Delone and McLean (1992) IS success model

• Shang and Seddon ERP Benefits framework

• Organizational performance frameworks• Malcolm Baldridge National Quality Award• European Foundation for Quality Management• Deming Application Prize• IT Capital gain using Tobin’s Q

1 -Balanced scorecard

Balanced Scorecard

• The Balanced Scorecard (BSC) is a technique developed by Kaplan and Norton (1992).

• Balanced scorecard – A strategic planning and management system enables organizations to clarify their vision and strategy and translate them into action

Balanced Scorecard

• Balanced scorecard views the organization from four perspectives Financial Customer Internal business process Learning and growth

30

Balanced Scorecard (General)

Example of The ERP implementation Balanced Scorecard

2 -Delone and McLean’s IS Success Model

The Original Delone and McLean’s IS Success Model

• In 1992, DeLone and McLean proposed a model of IS success as shown below:

The Original Delone and McLean’s IS Success Model

• McLean’s IS success model identified six interrelated dimensions of IS success: System Quality: measure of the information processing system

itself

Information Quality: measure of information system output

Information Use: measure of recipient consumption of the

output of an information system

User Satisfaction: measure of recipient response to the use of

the output of an information system

Individual Impact: measure of the effect of information on the

recipient

Organizational Impact: measure of the effect of information on

organizational performance.

The Updated Delone and McLean’s IS Success Model

• As the IS success model that was originally proposed needed further validation, DeLone and McLean also proposed an updated model.

• The six dimensions of the updated model were1. System quality2. Information quality3. Service quality4. Intention to use, Use5. User satisfaction6. Net benefits

The Updated Delone and McLean’s IS Success Model

The differences between the two models

• The primary differences between the original and updated models included:

1. They have added the service quality variable to show

the importance of service.

IS move from production function to production & service

function => importance of service quality

2. Adding a measure for user attitude, i.e. intention to use

3. Impacts on whom? Individuals, groups, org., industry,

economy => Net Benefits dimension with contextual

definition

38

Questions ??

What should you do this week ?• Review the lectures.• Do the Tutorial and submit it online:

ccis466@gmail.comDue date: Friday.

• Quiz: Next Monday (17-10-2011) • If you have any question related to the

assignment please ask me during the tutorial, by email or during the consultation hours.

• My consultation hours: Wed (10 – 12 )