MEASURES OF THE EFFECTIVENESS OF ITMODUL 5. SESSION 17 – 20

Matakuliah : M0624/Information Technology ValuationTahun : 2008

Bina Nusantara

INTRODUCTION• EFFECTIVENESS OF IT (QUALITY OF IT), ALTHOUGH WELL

RESEARCHED, REMAINS A CONFUSING SUBJECT FOR MANY BUSINESS MANAGER, PARTLY DUE TO THE LACK OF STANDARD TERMS OR DEFINITIONS.

• GARFVIN CLASSIFIED THE VARIOUS DEFINITIONS OF QUALITY:

A.TRANSCENDENT: QUALITY CANNOT BE DEFINED, “YOU KNOW WHAT IT IS”

B.PRODUCT BASED: DIFFERENCES IN QUALITY AMOUNT TO DIFFERENCES IN THE QUANTITY OF SOME DESIRED INGREDIENT OR ATTRIBUTE.

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INTRODUCTION

C. USER BASED: QUALITY IS FITNESS FOR USED. MANUFACTURED BASED: QUALITY MEANS

CONFORMANCE TO REQUIREMENTSE. VALUE BASED: QUALITY MEANS BEST FOR

CERTAIN CUSTOMER CONDITIONS.

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INTRODUCTION

• THE EFFECTIVENESS OF IT SHOULD BE RELATED FIRST TO THE ROLE OF IT IN SUPPORTING AND ENABLING THE EFFECTIVE AND EFFICIENT EXECUTION OF BUSINESS PROCESSES AND BUSINESS ACTIVITIES, AND TO AVAILABILITY AND CHARACTERISTICS OF IT AS PERCEIVED BY THE PEOPLE WHO USE IT.

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INTRODUCTION

• THE APPROPRIATE MEASURES OF IT EFFECTIVE-NESS WILL BE CLASSIFIED, BASED ON BUSINESS REQUIREMENTS OF 3 PERSPECTIVES:

A.BUSINESS PRODUCTS AND SERVICES, PROCESSES, AND BUSINESS ACTIVITIES

B.USERS OF ITC.IT SUPPLY

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IT EFFECTIVENESSTECHNIQUES TO MEASURE IT AVAILABILITY IN USE TODAY WERE DEVELOPED IN THE ‘70 AND ‘80 MAINLY TO MEASURE THE DEGREE OF DATA PROCESSING COVERAGE OF FUNCTIONALITY ORGANIZED BUSINESS ACTIVITIES.

THEY MEASURE, FOR EACH BUSINESS FUNCTION:A. THE ACTUAL DEGREE OF AUTOMATION, BY FIRST

REVIEWING THE OUTPUT OF THE FUNCTION, THEN ESTIMATING THE AMOUNT OF HUMAN WORK THAT WOULD HAVE BEEN REQUIRED TO PRODUCE THAT OUTPUT, ESTIMATING THE OART OF HUMAN LABOR THAT HAS BEEN ELIMINATED BY IT.

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IT EFFECTIVENESS

B. THE POTENTIAL DEGREE OF AUTOMATION, BY ESTIMATING THE MAXIMUM POSSIBLE ELIMINATION OF HUMAN LABOR BY IT.

C. ACTUAL AUTOMATION AS % OF POTENTIAL AUTOMATION.THE RESULT OF THIS EXERCISE IS A PICTURE OF THE AGGREGATED LEVEL OF AUTOMATION, WHICH IS BASICALLY A BALANCE SHEET OF OPPORTUNITIES FOR AUTOMATION OF BUSINESS FUNCTIONS VERSUS THE ACTUAL DEGREE OF AUTOMATION THROUGHOUT THE COMPANY.

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IT EFFECTIVENESS

• BUSINESS PROCESSES HAVE BECOME THE PRIMARY ORGANIZATIONAL AXIS OF TODAY’S NETWORKED ORGANIZATION.

• IN DEFINITION TERMS, A PROCESS IS A STRUCTURED SET OF ACTIVITIES, ORDERED ACROSS TIME AND PLACE, WITH A BEGINNING, AND END, AND CLEARLY DEFINED INPUTS AND OUTPUTS.

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IT EFFECTIVENESS• ANTHONY SAID, THREE TYPES OF MANAGEMENT

PROCESS CAN BE DEFINED:A. STRATEGIC MANAGEMENT: PROCESSES OF DECID-

ING THE OBJECTIVES OF THE ORGANIZATIONS, CHANGES IN THESE OBJECTIVE, THE RESOURCES USED TO ATTAIN THESE OBJECTIVE AND THE POLICIES THAT GOVERN THE ACQUISITION, USE, AND DISPOSITION OF RESOURCES.

B. MANAGEMENT CONTROL: PROCESSES BY WHICH MANAGERS ASSURE THAT RESOURCES ARE ACTUALLY OBTAINED AND USED EFFECTIVELY AND EFFICIENTLY IN THE ACCOMPLISHMENT OF THE ORGANIZATIONS OBJECTIVES.

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IT EFFECTIVENESS

C. OPERATIONAL CONTROL: PROCESSES OF ASSURING THAT SPECIFIC TASKS ARE CARRIED OUT EFFECTIVELY AND EFFICIENTLY. OPERATIONAL CONTROL PROCESSES FOCUS ON THE SUPERVISORY LEVEL OF MANAGEMENT WHERE SPECIFIC ACTIVITIES ARE EXECUTED.

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IT EFFECTIVENESSDAVENPORT ELEBORATES EVEN FURTHER AND LISTS 9 TYPES OF IT, EACH WITH THE POTENTIAL TO IMPROVE THE EFFECTIVE AND EFFICIENT MAKE UP THE PRODUCTS AND SERVICES.THEY ARE:

1. AUTOMATIONAL: ELIMINATING HUMAN LABOR FROM A PROCESS2. INFORMATIONAL: DELIVERING INFORMATION TO CUSTOMER AS A

SERVICE OR A PRODUCT, AND CAPTURING PROCESS INFORMATION FOR PURPOSES OF MANAGEMENT

3. SEQUENTIAL: CHANGING PROCESS SEQUENCE, OR ENABLING PARALLELISM

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IT EFFECTIVENESS4. TRACKING: CLOSELY MONITORING PROCESS STATUS

AND OBJECTS5. ANALYTICAL: IMPROVING ANALYSIS OF INFORMATION

AND DECISION MAKING6. GEOGRAPHICAL: COORDINATING PROCESSES ACROSS

DISTANCES7. INTEGRATIVE: COORDINATING BETWEEN TASKS AND

PROCESSES8. INTELLECTUAL: CAPTURING AND DISTRIBUTING

INTELLECTUAL ASSETS9. DISINTERMEDIATING: ELIMINATING INTERMEDIARIES

FROM PROCESSES PASSING INFORMATION

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Type of IT Management Processes Operational Processes

Strategic Management

Management Control

Operational Control

Production Innovation/ development

Problem solving

Automational IT √ √ √

Informational IT √ √

Sequential IT √ √

Tracking IT √ √ √

Analytical IT √ √ √ √ √

Geographical IT √ √ √

Integrative IT √ √ √ √

Intellectual IT √ √ √ √

Disintermediat-ing IT √ √

Figure 5.1: IT Characteristics per Type of Business Process

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Firm InfrastructureOffice automation tools, workflow management tools, groupware tools, electronic mail, financial

management systems, etc.

Human Resource ManagementHuman resource information systems, demand-supply and career development modeling tools, etc.

Technology DevelopmentCAD/ CAE, simulation tools, concurrent engineering systems, project management tools, etc.

ProcurementInventory/ production planning systems, vendor evaluation systems, EDI, JIT control systems, etc

Inbound Logistics

• Production planning systems

• inventory systems

• incoming goods inspection and quality control

• Management information

Operations

• Production planning & monitoring

• Inventory systems

• Fixed assets management

• Shop floor control

• Management information

Outbound Logistics

• Customer information systems

• Distribution planning and monitoring

• Truck planning

• Route planning

Marketing & Sales

• Customer information systems• Sales history• Inventory & production systems• Analysis and presentation tools• Order entry and billing systems• Account receivable systems• Expense reports • Sales administration• Management information

Service

• Customer information systems

• Product information systems

• Service history

• Dialog scripts

• Management information

Figure 5.2: Normative IT Application portfolio (Manufacturing Example)

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IT EFFECTIVENESS• AS IN FIG 5.2. AN ORGANIZATION SHOULD MAP ITS

BUSINESS PROCESSES AND ANALYSIS THE EXTENT OF CURRENT IT SUPPORT VERSUS TODAY’S IT OPPORTUNITIES.

• THE ABOVE DESCRIBED TYPE OF QUANTITATIVE MEASUREMENT OF COVERAGE DOES NOT YET SHOW WHETHER OR NOT EXISTING IT SUPPORTS USERS EFFECTIVELY.

• FOR THIS REASON, IT IS NECESSARY TO ESTABLISH CRITERIA FOR DETERMINING THE EFFECTIVENESS OF IT IN SUPPORTING THE USERS OF IT, AND MEASURING THE DEGREE OF SUCCESS.

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IT EFFECTIVENESS FROM A USER PERSPECTIVE

• MEASURING USER SATISFACTION IS A WAY TO UNDERSTAND USER REQUIREMENTS AND NEEDS FOR EFFECTIVE IT, BY ASCERTAINING THE FUNCTIONAL CHARACTERISTICS OF IT, AS WELL AS BY DETERMINING THE NEED FOR USER TRAINING AND USER SUPPORT.

• USERS WILL ONLY BE SATISFIED IF THE RETURN ON THE TIME THEY INVEST IN LEARNING IT CAPABILITIES IS COMMENSURATE WITH THE BENEFITS OBTAINED FROM USING IT.

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IT EFFECTIVENESS FROM A USER PERSPECTIVE

• IT EFFECTIVENESS CRITERIA FROM USERS PERSPECTIVE (BOEHM, GORRY, SCOTT MORTON, 20 YEARS AGO):

A.RELIABILITY OF IT APPLICATIONS: DEGREE TO WHICH APPLICATIONS ARE AVAILABLE WHEN NEEDED, OUTPUT IS RECEIVED ACCORDING TO SCHEDULE, AND AVAILIBILITY PROBLEMS ARE QUICKLY CORRECTED.

B.RELIABILITY OF INFORMATION: DEGREE OF CORRECTNESS AND INTEGRITY OF THE DATA PROVID-ED BY IT APPLICATIONS, AND THE DEGREE TO WHICH OUTPUT AND DATA CAPTURED IN APPLICATIONS KEEPS PACE WITH ACTUAL EVENTS

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IT EFFECTIVENESS FROM A USER PERSPECTIVE

C. ACCESSIBILITY OF INFORMATION: PROMPTNESS WITH WHICH INFORMATION REQUESTED FROM IT APPLICATIONS IS RECEIVED

D. SECURITY OF INFORMATION: DEGREE TO WHICH DATA IN APPLICATIONS IS PROTECTED FROM UNAUTHORIZED ACCESS

E. EASE OF USE: SIMPLICITY OF USING IT APPLICATIONS AND THE ADEQUACY OF OUTPUTS IN ANY FORMS, E.G: SCREEN LAYOUTS, REPORT FORMATS, ETC.

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IT EFFECTIVENESS FROM A USER PERSPECTIVE

• MANY ACTIVITIES HAVE CHANGED OR HAVE BEEN REPACKAGED INTO NEW, BROADER ROLES FOR EMPLOYEES.

• LESS COMPLEX ACTIVITIES HAVE BEEN ELIMINATED TO A GREAT EXTENT THROUGH IT, SO THAT WORK HAS BECOME MORE SUBSTANTIVE IN TERMS OF GREATER EMPHASIS ON KNOWLEDGE AND INFORMATION SHARING AND A GREATER DIVERSITY OF TASKS.

• DOWNSIZING, AS THE FLATTENING OF THE HIERARCHICAL ORGANIZATIONAL STRUCTURE, HAS REMOVED SEVERAL LAYERS OF MANAGEMENT IN GOOD NUMBERS.

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IT EFFECTIVENESS FROM A USER PERSPECTIVE• EMPLOYEES IN INFORMATION BASED ORGANIZATION

HAVE BECOME “EMPOWERED”, MEANING THAT COMPANIES MORE AND MORE RELY ON EXTENSIVE EMPLOYEE “SELF MANAGEMENT”

• RELIABILITY CHARACTERISTICS OF INDIVIDUAL IT APPLICAT-IONS HAVE BEEN REPLACED BY REALI-BILITY CHARACTERISTICS OF THE WHOLE SET OF IT CAPABILITIES.

• RELIABILITY OF DATA PROVIDED BY IT APPLICATIONS AND THEIR SECURITY REQUIREMENTS ARE BROAD-ENED TO THE RELIABILITY AND SECURITY OF COMPL-TE SETS OF DATABASES.

• ETC

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IT EFFECTIVENESS FROM A USER PERSPECTIVE

• MATHEMATICALLY EXPRESSED, USER SATISFACTION CAN BE DEFINED AS THE SCORE FOR EFFECTIVENESS THAT SPESIFIC USER REALLY NEEDS TO PERFORM HIS OR HER WORK WITH SUPPORT OF THE GIVEN IT CAPABILITY.

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New Models of work IT Effectiveness Requirements

Working on a fast clock• Short cycles, great intensity• Rapid recognition of consequences of actions• Hardly downtime, limited relaxation

High Availability, high “intelligence”• Sub – second response times• On-line, real-time processing of every thing• Automation of low – value work

Working with an eye on the customer• Close and intensive customer contact• Broad insight in customer requirements• Focus on world – class service

Open – ended, informative• Access to ubiquitous information bases• Access to ubiquitous transaction history• Decision support and office automation aids

Working in the open• Performance directly measurable• Work – in – process clearly visible • Shared work with team members

Workflow – oriented, team – supportive• Automated performance tracking• Workflow management support• Groupware support

Working for oneself• Decision making as well as doing• Emphasis on results, not on process persè• End – to – end responsibility, limited hand – offs

Flexible, user friendly• Minimizing hassle, reflecting personal style• Easy – to – configure processing capabilities• Consistent foolproof integration of systems

Working anywhere, anytime• From the office • At the client, in the field • At home , from a hotel

Reliable, connective, secure• Information synchronization all the time • compatibility of tools

• Easy up load, download and output facilities

Figure 5.3 : New Models of Work and IT Effectiveness Requirements

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• IT EFFECTIVENESS FROM IT SUPPLY PERSPECTIVE STEMS FROM OPERATIONAL AND MAINTENANCE RELATED INTEREST OF THE PEOPLE RESPONSIBLE FOR EFFECTIVE AND EFFICIENT IT SUPPLY, RATHER THAN FROM USAGE OF IT CAPABILITIES BY BUSINESS PEOPLE.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

OPERATIONAL ASPECTS:• OPERATIONS RELATED EFFECTIVENESS CRITERIA

FOCUS ON THE ABILITY TO SUPPORT THE DAY TO DAY SUPPLY OF IT SERVICES WITHOUT PROBLEMS.

• THEY REFER TO THE EASE OF OPERATION OF IT CAPABILITIES, INCLUDING INCIDENT HANDLING, PROBLEM RESOLUTION. OUTAGES REPAIR, INVESTIGATION INTO MALFUNCTION, ETC.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• MAINTENANCE ASPECTSMAINTENANCE RELATED EFFECTIVENESS CRITERIA CHARACTERIZE THE SUITABLE OF IT CAPABILITIES FOR USE OVER TIME.

• MAINTENANCE RELATED CRITERIA ARE:A. TESTABILITY: THE EASE WITH WHICH IT CAN BE

TESTED TO ENSURE THAT IT PERFORMS ITS INTENDED FUNCTION, AND THE AVAILIBITY OF THE TEST DATA.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

B. MAINTAINABILITY: THE EASE WITH WHICH CORRECTIVE MAINTAINANCE CAN BE CARRIED OUT, INFLUENCED BY COMPLEXITY, QUAILITY OF DOCUMENTATION, ETC

C. FLEXIBILITY: THE EASE WITH WHICH PERFECTIVE AND ADAPTIVE MAINTAINANCE CAN BE DONE.

D. RE-USABILITY: THE EXTENT TO WHICH ALL OF PARTS OF THE CAPABILITY CAN BE RE USED IN OTHER CAPABILITIES.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• ARCHITECTURAL ASPECTSDEAL WITH IMPORTANT CRITERIA SUCH AS ENSURING LONGER TERM DURABILITY AND RELIABILITY OF IT CAPABILITIES, TO COPE WITH CONTINUOS BUSINESS CHANGE AND TECHNOLOGICAL RENEWAL, AND AT THE SAME TIME PROTECTING EXISTING IT INVESTMENTS IN IT CAPABILITIES AS MUCH AS POSSIBLE.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• ARCHITECTURAL EFFECTIVENESS INDICATORS ARE:A.PORTABILITY: EASE WITH WHICH AN IT CAPABILITY

CAN BE TRANSFERRED FROM ONE COMPUTING ENVIRONMENT TO ANOTHER

B.CONNECTIVITY OR INTEROPERABILITY: EASE WITH WHICH AN IT CAPABILITY CAN BE INTERLINKED WITH OTHER CAPABILITIES; E.G: LINKING A WORKSTATION BASED SPREADSHEET WITH A MAINFRAME DATABASE

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

C. SECURITY: FROM AN IT SUPPLY PERSPECTIVE, THE EXTENT TO WHICH SECURITY AND SAFETY REQUIREMENTS CAN BE MET EFFECTIVELY AND EFFICIENTLY.THE COMBINATION OF FLEXIBILITY AND PORTABILITY REQUIRE--MENTS OF IT INFRASTRUCTURE IS REFLECTED IN THE INCREASINGLY USED TERM SCALABILITY.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• SCALABILITY OF THE IT INFRASTRUCTURE AS THE NUMBERS OF IT APPLICATION, RESOURCE REQUIRE-MENTS AND USERS GROW, AN IT INFRASTRUCTURE SHOULD BE ABLE TO SATISFY THESE INCREASING DEMANDS ON ITS RESOURCES (I.E., SHOULD PROVIDE SCALABLE PERFORMANCE)

• SCALABILITY DOES NOT MEAN THAT AN OVER-CAPACITY OF IT INFRASTRUCTURE COMPONENTS SHOULD BE BOUGHT AT EXTRA COST AS A “SAFETY STOCK” TO ALLOW FOR POSSIBLE, BUT CURRENTLY UNKNOWN FUTURE CAPACITY REQUIREMENTS.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• ON THE CONTRARY, THE IT INFRASTRUCTURE SHOULD SATISFY CURRENT REQUIREMENTS AND, AT THE SAME TIME, BE EASY TO EXPAND.

• THE DEGREE OF SCALABILITY IMPROVES WHEN THE IT INFRASTRUCTURE IS DEVELOPED ON THE BASIS OF EMERGING OPEN-SYSTEMS STANDARD, SUCH AS APPLIED IN THE INTERNET ENVIRONMENT.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

• TRADEOFFSWHEN EVALUATING THE EFFECTIVENESS OF IT, IT MUST BE UNDERSTOOD THAT IT IS NOT ALWAYS POSSIBLE TO MEET ALL EFFECTIVENESS REQUIREMENTS OF BOTH USERS AND IT SUPPLY.

• THE REASONS ARE:A. A HIGH LEVEL OF EFFECTIVENESS IN ONE FACTOR MAY

IMPLY A LOW LEVEL OF EFFECTIVENESS IN OTHER FACTORS, I.E., A HIGH LEVEL OF SECURITY MIGHT IMPACT THE EASE OF USE AND THE EASE OF CONNECTIVITY, AND VICE VERSA.

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IT EFFECTIVENESS FROM AN IT SUPPLY PERSPECTIVE

B. TRADEOFFS HAVE TO BE MADE BETWEEN HIGH EFFECTIVENESS LEVELS AND THE ASSOSIATED COSTS TO ATTAIN AND MAINTAIN THEM.

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CONCLUSION

• LET SEE FIG. 5.4.

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Effectiveness Requirement stemming

Effectiveness Criteria Sample Measures (not limitative)

Business Processes and Business Activities

IT coverage of management processes and activities

Per types of IT: actual application of IT as % of potential

IT coverage of operational processes and activities

Per type of IT: actual application of IT as % of potential

Users of IT Reliability of IT applications Mean times between failures and to repair

Reliability of Information Correct data as % of total data available

Accessibility of Information Mean response time, batch turnaround time

Security of Information Number of secured data sets as % of total

Ease of use User – friendliness, rated on a ratio scale

IT Architecture and IT supply

Operational criteria, e.g.• Handling• Problem solving• Outages repair

Number of outages, file recoveries, incidents, etc. per month; ease of operation, rated on a ratio scale; mean time to repair outages

Maintenance related criteria:• Maintainability• Flexibility• Testability• Reusability

Mean effort / time to repair/ adapt / test; number of reused components as % of total; quality of documentation rated on a ratio scale

Architectural criteria:• Portability• Connectivity• Security • Scalability

Mean time/ effort to transfer IT components, to connect IT components; number of IT components not adhering to standards as % of total, secured data sets of % of total

Figure 5.4: Measures of IT Effectiveness

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• THE END OF SESSION 17 – 20