Managing the Digital Firm, Seventh Canadian Edition
CHAPTER 14
Project Management, Business
Value, and Managing Change
LEARNING OBJECTIVES
After reading this chapter, you will be able to answer the following questions:
1. What are the objectives of project management, and why it is so essential in
developing information systems?
2. What methods can be used for selecting and evaluating information systems projects
and evaluating information systems projects and aligning them with the firm’s
business goals?
3. How can firms assess the business value of information systems projects?
4. What are the principal risk factors in information systems projects?
5. What strategies are useful for managing project risk and system implementation?
Teaching Suggestions
The opening case, “Coca-Cola: “Opening Happiness” with a New Project Management
System”, illustrates a common theme among large corporations and conglomerates –
multiple data repositories and reporting systems serving fragmented divisions. The older
legacy systems prevented the company from tracking cost elements, such as labour and
material costs. The company wasted time and money gathering data from several
locations and performing ad hoc analyses on spreadsheets.
Coke’s new project management software created a centralized repository of the cash
flow and capital requirements of projects. The system helped the company reduce its
financing costs because managers can request the amount of capital they need with a high
degree of accuracy from the start of a project. Coke can manage its human resources and
Managing the Digital Firm, Seventh Canadian Edition
Section 14.1, “The Importance of Project Management”
Spend some time discussing why so many information system projects fail. Is it because
the system wasn’t built correctly or was it really how the project was managed or
mismanaged that caused the failure? You should remind students of the biggest problems
with IT projects: It takes too long to build systems and they often do not work as intended.
WINDOW ON MANAGEMENT: BC ABORIGINAL MINISTRY
TURNS TO PROJECT MANAGEMENT SOFTWARE FOR TREATY
MANAGEMENT
Case study questions
1. What are some of the challenges MARR faces as an organization? Why is
project management so critical for MARR and its ILU division?
MARR needed to create a centralized system for reporting and tracking treaty
obligations. They could not report on the status of the treaties.
2. What features of MS Project Server 2010 were most useful to MARR?
Employees were used to working with MS products, therefore were familiar with the
interface and look-and-feel.
3. What management, organization, and technology factors had to be addressed
before MARR could implement and successfully use MS Project Server 2010?
Management: needed management support for implementation
4. Evaluate the organizational impact of adopting MS Project Server 2010 at MARR.
– can be linked up with other government databases; can be used by other
governments and groups
WINDOW ON ORGANIZATIONS: MANAGING IT IN THE
MERGER AND ACQUISITION GAME
Combining the information systems of two different companies usually requires
considerable organizational change and complex systems projects to manage. If the
Case study questions
1. What are some of the risks involved when one firm acquires another firm’s IT
infrastructure?
A number of risks are stated in the case. The target company:
• May have stopped spending on maintenance years ago to decrease costs and
increase profits.
2. Why do firms often fail to take the target firm’s information systems and IT
infrastructure into account when purchasing other firms?
Traditionally, M&A’s were entered into for financial reasons (greater market share,
3. How would you go about assessing the value of another firm’s IT infrastructure
and operational capabilities? What questions would you ask?
Some management tactics for dealing assessing the value of another firm’s IT
infrastructure and operational capabilities include:
• Classify the assets your firm is about to acquire
o Transaction systems
o Informational systems
• Create an inventory of the target firm’s IT assets in order to value their potential
contribution to the new firm.
o Keep the target company systems if they are better than your own
o Keep your own systems and retire the target company systems if yours are
better
• Educate management on the risks involved in mergers and acquisitions
o Education and caution will go a long way towards reducing the threat to
shareholder value and falling stock prices.
o Avoid overvaluing the assets of the target firm while at the same time
Managing the Digital Firm, Seventh Canadian Edition
Section 14.2, “Selecting Projects”
Throughout the textbook, the authors have stressed that information systems are
sociotechnical and part of the organization. This is an important point to reiterate to your
students. A new information system changes the way the organization operates.
Successful organizations choose to change their structure and operations over time. They
choose information systems designed to mirror organizational changes. New systems can
change organizational political arrangements and power relationships. The information
systems plan is the first step to link the business plan to information systems. The
information systems plan helps an organization answer the following questions: What do
we need to do? Who needs the information? Who creates it? How can we create a system
that will change our strategy or even the business we are in?
Section 14.3, “Establishing the Business Value of Information Systems”
This section focuses heavily on mathematical models to evaluate the costs and benefits of
information system projects. The Learning Tracks for this chapter may help you present
Section 14.4, “Managing Project Risk”
This section begins by describing three dimensions of project risk: size, structure, and
experience with technology. It goes on to explain how change management can diminish
the potential failure rate of projects regardless of these dimensions. Many organizations’
Managing the Digital Firm, Seventh Canadian Edition
Review Summary
1. What are the objectives of project management, and why is it so essential in
developing information systems?
2. What methods can be used for selecting and evaluating information systems
projects and aligning them with the firm’s business goals?
3. How can firms assess the business value of information systems projects?
4. What are the principal risk factors in information systems projects?
5. What strategies are useful for managing project risk and system
implementation?
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The
page number for each key term is provided.
Capital budgeting 445
Change agent 447
Change management 447
PERT chart 449
Portfolio analysis 442
Project 435
Managing the Digital Firm, Seventh Canadian Edition
Review Questions
1. What are the objectives of project management and why is it so essential in
developing information systems?
Describe information system problems resulting from poor project management.
When an information system fails to work properly or costs too much to develop,
companies may not realize any benefit from their information system investment, and
Define project management. List and describe the project management activities
and variables addressed by project management.
Project management refers to the application of knowledge, skills, tools, and
techniques to achieve specific targets within specified budget and time constraints.
Project management activities include planning the work, assessing the risk,
estimating and acquiring resources required to accomplish the work, organizing the
work, directing execution, and analyzing the results. Project management must deal
with five major variables:
• Scope: Defines what work is or is not included in a project
2. What methods can be used for selecting and evaluating information systems
projects and aligning them with the firm’s business goals?
Name and describe the groups responsible for the management of information
systems projects.
Large corporations will have a management structure to ensure the most important
systems projects receive priority.
• Corporate strategic planning group: Responsible for developing the firm’s
Managing the Digital Firm, Seventh Canadian Edition
Describe the purpose of an information systems plan and list the major
categories in the plan.
An information systems plan helps executives, managers, and users identify
information systems projects that will deliver the most business value. The
information systems plan must support the overall business plan. It serves as a road
map indicating the following principles:
2. strategic business plan rationale
4. new developments to consider
6. implementation plan
7. budget requirements
The major categories of an information systems plan are further broken down in
Table 14–1.
Explain how critical success factors, portfolio analysis, and scoring models can
be used to select information systems projects.
Critical success factors (CSFs) help an organization clearly understand both its long–
and short-term information requirements. CSFs are shaped by the industry, the firm, the
manager, and the broader environment. This method uses personal interviews with top
Managing the Digital Firm, Seventh Canadian Edition
3. How can firms assess the business value of information systems projects?
List and describe the major costs and benefits of information systems.
Table 14–3 lists all of the major costs and benefits of information systems. It divides
Distinguish between tangible and intangible benefits.
Students can use Table 14.3 to answer this question.
Tangible benefits can be quantified and assigned a monetary value. They include:
Increased productivity, lower operational costs, reduced workforce, lower computer
expenses, lower outside vendor costs, lower clerical and professional costs, reduced
rate of growth in expenses, reduced facility costs, and increased sales.
Explain how real options pricing models can help managers evaluate
information technology investments.
Appropriate strategies, such as real options pricing models (ROPM), can be applied to
evaluate and value the information system when the benefits cannot be established in
advance. Real options pricing models apply the same techniques for valuing financial
Managing the Digital Firm, Seventh Canadian Edition
4. What are the principal risk factors in information systems projects?
Identify and describe each of the principal risk factors in information systems
projects.
Project size: The larger the project (dollars spent, the size of the implementation
staff, the time allocated, and the number of organizational units affected), the greater
Explain why builders of new information systems need to address
implementation and change management.
An information system is a sociotechnical entity, an arrangement of both technical
and social elements. Information systems change involves hardware and software, but
in addition, it involves changes in jobs, skills, management, and organization. When
Explain why eliciting support of management and end users is so essential for
successful implementation of information systems projects.
The user-designer communication gap deals with the relationship that exists between
Managing the Digital Firm, Seventh Canadian Edition
Explain why there is such a high failure rate for implementations involving
enterprise applications, business process reengineering, and mergers and
acquisitions.
These projects are very challenging, partly because they usually require extensive
organizational change. They also often replace deeply entrenched old technologies
5. What strategies are useful for managing project risk and system
implementation?
Identify and describe the strategies for controlling project risk.
Strategies you can follow to increase the chances of a successful system include:
• New systems that involve challenging and complex technology can be helped by
recruiting project leaders with strong technical and administrative experience.
• If the firm does not have staff with the required technical skills or expertise,
Identify the organizational considerations that should be addressed by project
planning and implementation.
The term implementation refers to the entire process of organizational change
surrounding the introduction of a new information system. Information systems
Managing the Digital Firm, Seventh Canadian Edition
Explain how project management software tools contribute to successful project
management.
You can use special tools to help you manage the implementation of a new
information system (internal integration tools). The software features these
capabilities:
• Define and order tasks
• Assign resources to tasks
Discussion Questions
1. How much does project management impact the success of a new information
system?
Clearly, any project that is not properly thought out and managed will result in a
dismal failure. Without proper management things quickly fall off the rails. Cost
overruns mount, delays are unavoidable, frustration levels rise, and lack of
Managing the Digital Firm, Seventh Canadian Edition
2. It has been said that most systems fail because system builders ignore
organizational behaviour problems. Why might this be so?
System building efforts often fail because there is too much emphasis on the
technology and not enough attention to changes in organizational structure, job
3. What is the role of end users in information systems project management?
End users play the most important role in systems development. There are two
positive outcomes from having high levels of user participation in designing and
operating information systems:
• users have more opportunities to mold the system according to their priorities and
Hands-on MIS Projects
Management Decision Problems
1. U.S. Census Bureau: Signed a $600 million contract with Harris corporation in 2006
to build 500,000 devices, but still weren’t sure which features they wanted included
in the units. Census officials did not specify the testing process to measure the
performance of the handheld devices. Four hundred change requests were added to
the project requirements. Two years and hundreds of millions of taxpayer dollars
Managing the Digital Firm, Seventh Canadian Edition
later, the handhelds were far too slow and unreliable to be used for the 2010 U.S.
census. What could Census Bureau management and the Harris Corporation have
done to prevent this outcome?
2. Caterpillar: The company wants to end its support for its Dealer Business System
(DBS) which it licenses to its dealers to help them run their businesses. The software
is becoming out of date and senior management wants to turn support over to
Accenture Consultants. The dealers were never required to use the system but it had
become a de facto standard for business processes. Approximately 150 dealers
worldwide use some version of the system. Before Caterpillar turns the product over
to Accenture, what factors and issues should it consider? What questions should it
ask? What questions should its dealers ask?
Using an information systems plan, senior managers can analyze the idea of turning
the system over to outside consultants and determine strategies for doing so. Step 2,
Improving Decision Making: Using Spreadsheet Software for Capital Budgeting for
a New CAD System
Software skills: Spreadsheet formulas and functions
Business skills: Capital budgeting
Your company would like to invest in a new computer-aided-design (CAD) system that
requires purchasing hardware, software, and networking technology, as well as
expenditures for installation, training, and support. The Companion Website, MyMISlab,
Managing the Digital Firm, Seventh Canadian Edition
Improving Decision Making: Using Web Tools for Buying and Financing a Home
Software skills: Internet-based software
Business skills: Financial planning
You have found a new job in Charlottetown, Prince Edward Island, and would like to
purchase a home in that area. Ideally, you would like to find a single-family house with at
least three bedrooms and one bathroom that costs between $150 000 and $225 000 and
finance it with a 30-year fixed rate mortgage. You can afford a down payment that is 20
When you are finished, evaluate the whole process. For example, assess the ease of use of
the site and your ability to find information about houses and mortgages, the accuracy of
the information you found, and the breadth of choice of homes and mortgages.
Managing the Digital Firm, Seventh Canadian Edition
CASE STUDY: JETBLUE AND WESTJET: A TALE OF TWO IS
PROJECTS
Case Study Questions
1. How important is the reservation system at airlines such as WestJet and
JetBlue? How does it impact operational activities and decision making?
Reservation systems for airlines can be classified as their transaction processing
systems upon which all other systems rely for information and decision making.
2. Evaluate the key risk factors of the projects to upgrade the reservation systems
of WestJet and JetBlue.
Upgrading reservations systems carries special risks. From a customer perspective,
only one of two things can happen: Either the airline successfully completes its
overhaul and the customer notices no difference in the ability to book flights, or the
implementation is botched, angering customers and damaging the airline’s brand.
Both airlines use the low-cost, good service formula to interact with customers.
Ensuring that customers did not notice any difference when interacting with the
airlines was critical to both airlines succeeding in implementing their new systems.
Dimensions of a project’s risks are influenced by three factors:
3. Classify and describe the problems each airline faced in implementing its new
reservation system. What management, organization, and technology factors
caused those problems?
4. Describe the steps you would have taken to control the risk in these projects.
The first step in managing project risk involves identifying the nature and level of risk
confronting the project. Implementers can then handle each project with the tools and
Managing the Digital Firm, Seventh Canadian Edition
risk-management approaches geared to its level of risk. Internal integration tools
would have helped users manage the complexity of the technology
The project management team at WestJet and Sabre should have developed an
information systems plan that would have identified the purpose of the plan, the