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Intro to Business Information Systems

WEEK 11
Conclude System Development
A Couple of Voices from The Real World
Skate to Where the Money Will Be (Harvard Business Review, 2001)
Dynamics of Business Information Systems vendors
and Systems Thinking Intro.

Changing the Organization

Building Software to Support an Agile Organization

Business benefits of successful software development


Seven phases of the systems development life cycle
Software development methodologies
Waterfall methodology and the Agile methodology
Managing the methodology
Then an introduction to system thinking

The Question and Where the Answer Lies

Whats the business case for getting the business requirements right, early in the
process of developing a system enhancement?

Logic of an answer:
Hard to know requirementskey is agile learning
Clarify requirements early with examples to create agility
The business case is based on:
Traditional waterfall process only works 10% of the time
More agile methods work 65% of the time
Time to repair one error in financial services software*:
During requirements clarification:
1.2 hours
During coding and unit testing:
8.8 hours (> 7 X)
During integration or system testing:
14.9 hours (> 12 X)
After release:
18.7 hours (> 15 X)

* National Institute of Standards and Technology, on Software Errors, 2002, p. 149

Prototype to Learn Real Requirements Early


Key to New
Methods

Observed Data
About
Time to repair
Development
Errors

Finding the
Returns

Learning Real Requirements Early


(continued)

Users and
Developers MisCommunicate

Learning Real Requirements Early


(continued)

Errors found
early almost 12
x quicker to fix
Adds up to
many hours,
and $

Learning Real Requirements Early


(concluded)
Value of Spending More to Find Requirements Errors Early
Investment to Find Requirement Errors Early

-$

Expected Number of Errors

40

Hours to Fix an Error found in


Requirements Clarification Stage

1.2

Integration Testing Stage

14.9

Difference in Hours/Error

13.7

Total Difference in Hours

548

Cost per Hour

30,000.00

Saves a lot
more than the
cost of an Early
Prototype

$100.00

Total Cost Saving

$54,800.00

Return on Investment (before considering time value of money)

$24,800.00

The Example is Realistic-to-Understated


An industry rule of thumb is that a bug which costs $1 to fix on the programmers
desktop costs $100 to fix once it is incorporated into a build and thousands of dollars if
is identified only after the software has been deployed in the field
The Economist, March 8th, 2008, p 20 of Technology Review.

The example says it is 15 x more expensive if found in testing


The Economist reports it gets very expensive if it isnt found in testing
100 x more expensive if found after integration (the end of testing)
> 1000 x if found by the users after deployment (implementations)
Who finds information like this? Experts like Capers Jones

Latest from Experts: March 2008


One Expert - Capers Jones
Chief scientist emeritus of Artemis
Management Systems and Software
Productivity Research Inc., Burlington, Mass.
International consultant and author on software
management topics (his company's research
programs)
Software Quality
Software Process Improvement
Software Project Management
Formerly,
Assistant director of programming technology at
the ITT Programming Technology Center in
Stratford, Conn.
IBM for 12 years work in software quality and
productivity improvement methods.
Web site: www.spr.com.
E-mail: cjones@spr.com.

Also research on project


management.

Ivey Schools Deborah Compeau


(oddly perhaps, on the same page as Westjet story)
"Management is not the five surefire
ways to make your next IT project a
success I think I could give you
the five surefire ways to make your
next IT project a failure, but the
converse is a lot harder.
You need to develop a deep
understanding of a problem from
multiple perspectives and build
solutions that take into account all
the inter-relationships and
complexities that exist.
Professor of Management Information Systems at the
Ivey Business School, Western Ontario.
HBA and PhD from Ivey.

That's not a new course you teach.


That's a function of how you think about
what you are doing."

Primary Reasons For Project Failure Include

Unclear or missing business requirements


Skipping SDLC phases
Failure to manage project scope

Scope creep as everyone tries to get system needs met by a project

Feature creep extra features are added


Failure to manage project well

Project Management in Govt of Canada


(2004 to 2007 $8.7 Billion in projects)

Auditor General reported in November 2007 (sample of 7 projects)

Only two (2006 Census Online and My Account, My Business Account) projects
met all criteria for well-managed projects.
Government made limited progress 1997 2007 audits
Quality of governance varied widely from project to project (see Six Decisions).

In four projects governance responsibilities were not carried out adequately (key
issues either not reported or not resolved)
Five projects were allowed to proceed with business cases that were incomplete,
out-of-date or contained information that could not be supported.
Four of the projects undertaken by departments that lacked the skills and
experience to manage the projects or to use the system effectively.

Quality of project management ranged from good to seriously flawed.


In 2 cases, poor project management long delays and large cost overruns

Scott Adams (Dilbert) View


From a student Winter Term, 2010

business cases that were incomplete, out-of-date or


contained information that could not be supported.

2011 Update on Govt of Canada Projects


In June 2011, the Auditor General reported to Parliament: unsatisfactory progress
on commitments from 2006-7 recommendations re. governance & business cases.
Two of five projects met most criteria for well-managed projects.
Many departments just reduced the scope and extended the timelines of projects.
Two projects deferred important deliverables with little analysis of impacts and costs.
Three projects business cases did not identify benefits or benefits not measured.
Three projects adequately assessed their capacity to manage the projects and
demonstrated they were ready to accept the business transformation that followed
Three projects departments have adequately managed projects risks
Treasury Board has completed a policy suite renewal (new policies,
standards, and guidance that will directly impact IT projects) in five years.

What Are We Talking About Here?


Department or
Agency/Project

Initial
Schedule

Initial Budget 2010


Schedule

2010 Budget

Scope Change

Treasury Board
expenditure
management system

2000 ongoing (?)

$16 million

2000-2007

$51 million
(actual)

Of 4 phases, 2 deferred
indefinitely

Citizenship and
Immigration global
case management

2000-2005

$195 million

2000-2011

$387 million

Scope reduced in 2008, rest


deferred until after 2011.

CRA Integrated
revenue collection

2001-2004

$2.5 million

2001-2014

$144 million

Scope increased

PWSSC and TB
secure channel

1999-2002

$96 million

1999-2004

$377 million
(actual)

Citizenship and
Immigration biometrics

2008-2013

$180 million

Project risk reduced by


targeting 25% of original
people

But dont worrythereve been renewals of policy suites

Need for IT System Change


(March 23, 2010)

Need for IT System Change at a Large European Bank


(March 23, 2010)

Need for IT System Change at a Middle Eastern Bank


(March 23, 2010)

Is Net Present Value a Mystery?

http://www.youtube.com/watch?v=PCrBvhTJiAw
U Michigan open
university lecture
50:15
Excel examples

Business Information Systems Vendors


Vendors: companies who sell, deliver and profit from:

Hardware,
Software (operating system, applications, etc.)
Networks (Local, Metro, Wide Area)
Services (outsourcing, system development)

How vendors might think about buyers


How smart buyers think about vendors an example
This style of thinking is Systems Thinking
Examples

Skate to Where the Money Will Be

Winning strategy for IT vendors in early 21 st Century:


Mix and match the best components from top suppliers to meet
customers needs (create interdependence to meet challenging needs)
Control one or more of the interdependent links in the industrys value
chain
Control thru selection of core competencies
Dont outsource interdependent components
Re-configure them as the industry evolves
Sell interdependent link(s) in the value chain to other vendors

Example
Business Model

Clayton M. Christensen, Michael Raynor, Matthew Verlinden,


Skate to Where the Money Will Be, HBR, November 2001

Skate to Where the Money Will Be

Winning strategy:

Mix and match the best components from top suppliers to meet customers needs
(creating interdependence to meet challenging needs)
Control the the interdependent links in the industrys value chain
Control thru selection of core competencies
Dont outsource interdependent components
Flexibly re-configure them as the industry evolves
Sell the interdependent links in the value chain to other vendors
Example (not from HBR article)

Operating systems
Early 1980s Apple: Motorola Processor + beautifully integrated applications
Microsoft: windows icons pasted onto QDOS + Intel processor + anyones
applications
Choice over-whelmed integration.Apple falls from #1 to <10%

Microsoft sold an ugly paste up but it chose the right skills:

Assembling applications, recruiting and co-opting application developers


Bundling and integrating where the market would pay

Business Model
Clayton M. Christensen, Michael Raynor, Matthew Verlinden,
Skate to Where the Money Will Be, HBR, November 2001

Skate to Where the Money Will Be

Winning strategy:

Mix and match the best components from top suppliers to meet customers needs
(creating interdependence to do so)
Control the the interdependent links in the industrys value chain
Control thru selection of core competencies
Dont outsource interdependent components
Flexibly re-configure them as the industry evolves
Sell the interdependent links in the value chain to other vendors

Example
Operating systems
Early 1980s Apple: Motorola Processor + beautifully integrated applications
Microsoft: windows icons pasted onto QDOS + Intel processor + anyones
applications
Choice over-whelmed integration.Apple PCs fall from #1 to almost gone

Microsoft sold an ugly paste up but it chose the right skills:

Assembling applications, recruiting and co-opting application developers


Bundling and integrating where the market would pay

Business Model
Outsource the modular components
Competency: integration for fast customized delivery, competitive prices
Extraordinary skill at valued, hard to imitate part of product or service
Clayton M. Christensen, Michael Raynor, Matthew Verlinden,
Skate to Where the Money Will Be, HBR, November 2001

Where the Money Went in Personal Computers

Fast hardware customization and delivery with negative working capital needs $$$$
Systems design, implementation, maintenance and management services

$$$$

Where the Money Went in Personal Computers

Microsoft

Intel/AMD
Dell
Fast hardware customization and delivery with negative working capital needs $$$$
Systems design, implementation, maintenance and management services

$$$$

IBM

Ways of Thinking
Vendors about Buyers

How do Buyers systems work


Where are the challenges today,
tomorrow?
The challenges where money is made
Where will future challenges be?
How can we meet them
Creating value for buyers
At cost < value
In ways hard to imitate?
Who is trying to disrupt our position?
What can we do?

This is beyond knowledge


Its based on understanding

Buyers about Vendors

How Buyers think about vendors.

Business Information Systems Vendors


Vendors: companies who sell, deliver and profit from:

Hardware,
Software (operating system, applications, etc.)
Networks (Local, Metro, Wide Area)
Services (outsourcing, system development)

How vendors might think about buyers


How smart buyers think about vendors an example
This style of thinking is Systems Thinking
Next examples

A Framework for Locating Sources of Performance

Core
Systems

Environment
Customers

Competitors

Components
Mission/
Strategy

Tasks

Prescribed
Networks

People

Processes

Technical

Political

Cultural

Sowhat did the research say were the sources?

Emergent
Networks

Management Knowledge/Reasons for Performance (simplified)

Core
Systems

Environment
Customers

Components

Competitors

Mission/
Strategy

Tasks

Prescribed
Networks

Technical

School 1
Political

School 2
Cultural

People

Processes

Emergent
Networks

Reasons: Relationships within Management System

Core
Systems

Environment
Customers

Competitors

Components
Mission/
Strategy

Tasks

Prescribed
Networks

E4

E3

Technical

Political

Cultural

E1

People

E2

Processes

Emergent
Networks

Ways of Thinking
Vendors about Buyers

How do Buyers systems work


Where are the challenges today
The challenges where money is made
Where will future challenges be?
How can we meet them
Creating value for buyers
At cost < value
In ways hard to imitate?
Who is trying to disrupt our position?
What can we do?

This is beyond knowledge


Its based on understanding

Buyers about Vendors

Knowledge - in the upper left hand corner


Understand vendors lower right hand
Interaction across the Vendors and
Buyers and Competitors management
systems
Beyond knowledge into understanding

Introduction: Systems Thinking

System: a whole of two or more parts that each can effect the whole
The management systems of mainframe vendors and their buyers

Analysis (of parts) doesnt reveal character:


British cars on left side: knights rode on left side (to have sword arm available)
(who decided this would matter?)
American cars in 1970: built for 6 (family size) and
go fast, wont turn or stop (how did the USA come to have those Interstates?)

Need to look outside the car to see reasons


Systems thinking: a fusion of analysis and synthesis, in search of
understanding, with the scope determined by what youre trying to understand.
Analysis vs. synthesis?

Russell Ackoff, From Mechanistic to Social System Thinking, November 1993

Scope of System: Depends on Goal

Want to sell enterprise servers?


Understand the management systems of buyers, competitors and shape your
management system to compete
Analyze the technical opportunities and competitive advantages of your products,
compared to competitors
Synthesis is how you winall the analysis in the world wont do it

Google synthesized Search and Advertizing (and wants to synthesize much more)
Want to make money in an evolving IT industry?

Understand buyers future challenges


Analyze how to sustain a competitive advantage around those challenges
Synthesize and skate to where the money will be
Is the PC a broad-enough scope today?

More thoughts next week.


New Media businesses
Global outsourcing and employment growth

Reminder: Course Outline

Read for next Week:


New Media (Economist 2006)
Who Wins in Off-shoring (McKinsey Quarterly, 2003)

Uses of system thinking

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