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Cost-Benefit Analysis: Identify Costs

Cost-Benefit Analysis: Identify Costs

Cost-Benefit Analysis: Identify BenefitsTangible

Cost-Benefit Analysis: Identify BenefitsIntangible

Comparing Costs and BenefitsTwo common methods are used for evaluating the costs and benefits of information systems:The Net Present Value Method: deduct the present value of the costs from the present value of the benefits over the life of the system. The optimal choice is the project with the greatest net present value.The Payback Method: break-even analysis. Total costs consist of the one-time costs plus the present value of the recurring costs over the life of the project. Total benefits are the present value of the tangible benefits. The intersection of these values represents the number of years into the future when the project breaks even. Afterward, the system earns future profits. The optimal choice is the project with the greatest future profits. 2007 Prentice Hall, Inc.5Information Systems for Problem SolvingInformation systems can be used to solve problems.

Problem definitionA problem is a perceived difference between what is and what is not.A problem is a perception. A good problem definition defines the differences between what is and what ought to be by describing both the current and desired situations. 2007 Prentice Hall, Inc.6Information Systems for Problem SolvingProblem definition (continued)Different problem definitions require the development of different information systems.

All personnel in the organization must have a clear understanding of which definition of the problem the information system will address. 2007 Prentice Hall, Inc.7A Customer Relationship Management SystemA Customer Relationship Management (CRM) system is an information system that maintains data about customers and all of their interactions with the system.

CRM systems vary in their size and complexity. 2007 Prentice Hall, Inc.8Knowledge Management SystemA knowledge management system (KMS) is an information system for storing and retrieving organizational knowledge.This knowledge can be in the form of data, documents, or employee know-how.KMS goal is to make the organization knowledge available toEmployeesVendorsCustomersInvestorsPress and who else who needs the knowledge

2007 Prentice Hall, Inc.9Figure 2-8 Example Customer Relationship Management (CRM) System

2007 Prentice Hall, Inc.10Figure 2-9 Customer Support Knowledge Management System

2007 Prentice Hall, Inc.11A Manufacturing Quality-Control Information SystemMany organizations believe that the optimal way to provide customer service is to eliminate the need for it.

One way to improve customer service is to improve manufacturing quality.

The type of system to develop depends on the way the organization defines the problem.

Before developing the system, the organization must have a complete, accurate, and agreed-upon problem definition.

2007 Prentice Hall, Inc.12Information Systems for Decision MakingDeveloping an information system is to facilitate decision making.

Decision making in organizations is varied and complex.

2007 Prentice Hall, Inc.13Decision LevelDecisions occur at three levels in organizations.

Operational decisions concern day-to-day activities.Information systems that support operational decision making are called transaction processing systems (TPS).

2007 Prentice Hall, Inc.14Decision Level (Continued)Managerial decisions concern the allocation and utilization of resources.Information systems that support managerial decision making are called management information systems (MIS).

Strategic decision making concern broader-scope organizational issues.Information systems that support strategic decision making are called executive information systems (EIS). 2007 Prentice Hall, Inc.15Decision-Making DimensionsFigure 2-10

2007 Prentice Hall, Inc.16The Decision ProcessTwo decision processes (method by which a decision is to be made) are structured and unstructured.Structured decision process is one for which there is an understood and accepted method for making the decision.Unstructured process is one for which there is no agreed on decision making process.

The terms structured and unstructured refers to the decision process-not the underlying subject. 2007 Prentice Hall, Inc.17Figure 2-11 Relationship of Decision Level and Decision Type Figure

2007 Prentice Hall, Inc.18Different Types of Information Systems for Different Types of DecisionsAutomated information systems are those by which the computer hardware and program components do most of the work.Humans start the programs and use the results.

Augmentation information systems are those in which humans do the bulk of the work.These systems augment, support, or supplement the work done by People (email, instant messaging, video-conferencing, etc) to aid in decision making.

2007 Prentice Hall, Inc.19Figure 2-12 Automated vs. Augmentation IS

2007 Prentice Hall, Inc.20Figure 2-13 How Decision Level, Decision Type and IS Type Are Related

2007 Prentice Hall, Inc.21Information Systems and Decision StepsA way to examine the relationship between information systems and decision making is to consider how an information system is used during the steps of the decision making process.

There are five stepsIntelligence gatheringAlternative formulationChoiceImplementationReview

2007 Prentice Hall, Inc.22Figure 2-14 Decision-Making Steps

2007 Prentice Hall, Inc.23Information Systems for Problem SolvingInformation systems can be used to solve problems.

Problem definitionA problem is a perceived difference between what is and what is not.A problem is a perception. A good problem definition defines the differences between what is and what ought to be by describing both the current and desired situations. 2007 Prentice Hall, Inc.24Information Systems for Problem SolvingProblem definition (continued)Different problem definitions require the development of different information systems.

All personnel in the organization must have a clear understanding of which definition of the problem the information system will address. 2007 Prentice Hall, Inc.25A Customer Relationship Management SystemA Customer Relationship Management (CRM) system is an information system that maintains data about customers and all of their interactions with the system.

CRM systems vary in their size and complexity. 2007 Prentice Hall, Inc.26Knowledge Management SystemA knowledge management system (KMS) is an information system for storing and retrieving organizational knowledge.This knowledge can be in the form of data, documents, or employee know-how.KMS goal is to make the organization knowledge available toEmployeesVendorsCustomersInvestorsPress and who else who needs the knowledge

2007 Prentice Hall, Inc.27Figure 2-8 Example Customer Relationship Management (CRM) System

2007 Prentice Hall, Inc.28Figure 2-9 Customer Support Knowledge Management System

2007 Prentice Hall, Inc.29A Manufacturing Quality-Control Information SystemMany organizations believe that the optimal way to provide customer service is to eliminate the need for it.

One way to improve customer service is to improve manufacturing quality.

The type of system to develop depends on the way the organization defines the problem.

Before developing the system, the organization must have a complete, accurate, and agreed-upon problem definition.

2007 Prentice Hall, Inc.30Information Systems for Decision MakingDeveloping an information system is to facilitate decision making.

Decision making in organizations is varied and complex.

2007 Prentice Hall, Inc.31Decision LevelDecisions occur at three levels in organizations.

Operational decisions concern day-to-day activities.Information systems that support operational decision making are called transaction processing systems (TPS).

2007 Prentice Hall, Inc.32Decision Level (Continued)Managerial decisions concern the allocation and utilization of resources.Information systems that support managerial decision making are called management information systems (MIS).

Strategic decision making concern broader-scope organizational issues.Information systems that support strategic decision making are called executive information systems (EIS). 2007 Prentice Hall, Inc.33Decision-Making DimensionsFigure 2-10

2007 Prentice Hall, Inc.34The Decision ProcessTwo decision processes (method by which a decision is to be made) are structured and unstructured.Structured decision process is one for which there is an understood and accepted method for making the decision.Unstructured process is one for which there is no agreed on decision making process.

The terms structured and unstructured refers to the decision process-not the underlying subject. 2007 Prentice Hall, Inc.35Figure 2-11 Relationship of Decision Level and Decision Type Figure

2007 Prentice Hall, Inc.36Different Types of Information Systems for Different Types of DecisionsAutomated information systems are those by which the computer hardware and program components do most of the work.Humans start the programs and use the results.

Augmentation information systems are those in which humans do the bulk of the work.These systems augment, support, or supplement the work done by People (email, instant messaging, video-conferencing, etc) to aid in decision making.

2007 Prentice Hall, Inc.37Figure 2-12 Automated vs. Augmentation IS

2007 Prentice Hall, Inc.38Figure 2-13 How Decision Level, Decision Type and IS Type Are Related

2007 Prentice Hall, Inc.39Information Systems and Decision StepsA way to examine the relationship between information systems and decision making is to consider how an information system is used during the steps of the decision making process.

There are five stepsIntelligence gatheringAlternative formulationChoiceImplementationReview

2007 Prentice Hall, Inc.40Figure 2-14 Decision-Making Steps