Textbook: IT Strategy Issues and Practices 3rd edition Answer the following Ques
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Question
Textbook: IT Strategy Issues and Practices 3rd edition
Answer the following Questions based on the Mini Case: Investing in TUFS
Discussion Questions
1. What went wrong with the TUFS investment, and what can be done to prevent these problems in the future?
2. What does Northern need to do to realize the benefits that were projected for TUFS?
3. How can Northern measure these benefits?
4. Chapter 4 of the text discusses how to build a strong relationship with the business in implementing IT projects. If you could go back in time to develop a plan to investigate and implement a TUFS-like system, how would you approach it differently based on the concepts presented in Chapter 4. Be specific.
Mini Case: Investing in TUFS
“Why do I keep this around?” Martin Drysdale wondered. “It infuriates me every time I see all that satisfaction over something that is now the bane of my existence.”
He looked gloomily at the offending photo, which showed the project team happily “clinking” pop cans and coffee cups in a toast: “Here’s to TUFS!” The Technical Underwriting Financial System (TUFS) was the largest single investment in IT ever made by Northern Insurance, and it was going to transform Northern by streamlining the underwriting processes and providing strategic e-business capabilities. The TUFS team had brought the project in on time and on budget, so the party was a thank-you for all of the team’s dedicated, hard work. But it was two years ago when the camera captured the happy moment for posterity, and Martin, CIO for Northern, had celebrated with the rest.
“Yeah, right,” Martin grimaced as he turned from the photo to the e-mail message on his computer screen, summoning him to a meeting with his boss that morning to discuss TUFS. The system had turned into a nightmare in its first few months of operation. Now his job was on the line. What was supposed to have brought efficiency to the underwriting process and new opportunities for top-line growth had become a major corporate money pit. TUFS was still eating up the vast majority of Northern’s IT budget and resources to fix the underwriting errors that kept appearing, and resistance to the system had grown from sniping and grumbling into calls for Martin’s head. “No wonder we’re not saving any money, though, with senior underwriting managers still insisting on receiving some of their old reports, even though TUFS lets them look up the same information online anytime they want,” Martin fumed. The meeting with the CFO was to discuss TUFS and the company’s “very significant investment in this system.” Feeling like a condemned prisoner on his way to the gallows, Martin grabbed his suit jacket, straightened his tie, and headed up to the seventh-floor executive suite.
An hour later Martin was feeling very well grilled as he was confronted with a long list of the problems with TUFS. The CFO, Melissa Freeman, had done her home- work. Before her was a binder full of TUFS documentation, stretching back almost three years from when the project had been first identified. “According to my calculations, Northern has spent almost $4 million on this system, if you include all of the resources dedicated to fixing the problems identified after implementation,” she noted. “And I have yet to see any cost savings in the underwriting department. Why?”
“It’s true that there have been some unanticipated changes to the system that have cost us, but the underwriters have never bought into the system,” Martin conceded. “They insist on following their old procedures and then using the system at the last possible moment as a double-check. What can we do if they won’t use the system the way it was designed?”
“Could there possibly be a reason why they don’t like the system?” Freeman asked. “It seems to me from looking at these change reports that the system hasn’t been meeting our basic underwriting needs.”
Martin acknowledged that there had been some problems. “But my guys are technicians, not underwriters. They didn’t get much participation from the underwriters in the first place. The underwriting department wouldn’t take the time to bring my people up to speed on what they needed and why. As well, we were facing a very tight deadline, which meant that we had to defer some of the functionality we had originally intended to include. That was senior management’s decision, and everyone was informed about it when it was made.” He added that they were now asking for a TUFS training program and a help desk to handle questions that underwriters might face while using the system!
“A help desk and training program weren’t in our original plan,” Martin reminded Freeman. “These extras are eating away at the system’s benefits.” According to the business case prepared by the users, TUFS was supposed to pay for itself over its first two years of operations from savings realized from the underwriting process. The system’s problems certainly accounted for some of the extra costs, but the users hadn’t made any of the process changes that would help those savings be realized. “They think we can just plug in the system and cost savings will appear like magic. And other parts of the system are going to take time to deliver benefits.”
The “other parts” he was referring to were the e-business capabilities that TUFS provided. “If you will recall, this system was approved in the days when we had to have ebusiness or we were going to be dinosaurs. In retrospect, we could have cut back on this functionality more easily and left some of the underwriting functionality in, but who knew?”
“Well, as you know, our financial resources are very limited at present.” Freeman leaned forward. “I’ve been asked to make some recommendations to the executive committee about whether or not we should put more money into this system. TUFS has been our number-one priority for two years now, and quite a few people are saying that enough is enough—that we need to make some major changes around here.”
Martin took a deep breath, waiting for the ax to fall. Freeman continued, “What I need to know now from you is this: What went wrong with our TUFS investment, and what can we do to prevent these problems in the future? What do we need to do to realize the benefits that were projected for TUFS? How can we measure these benefits? And how can we best decide how to apportion our IT budget between TUFS and these other projects?”
As he slowly exhaled and felt his pulse resume, Martin nodded. “I’ve got some ideas. Can I get them to you in writing by the end of the week?”
Explanation / Answer
1. What went wrong with the TUFS investment, and what can be done to prevent these problems in the future?
Answer:
A clear analysis of this case the major failure experienced when implementing TUFS wasthe lack of involvement from the business sector. The success of any business that has an ITdepartment is the formation of a clear line of communication between every department. WhatNorthern insurance failed in was the lack of this line of communication. It was clear that thebusiness needed an IT department; the business sector was also going to be a vital part in thetesting of the new system. Northern insurance needed to create a business strategy that statedsome of the requirements derived from the feedback of various departments about the running ofthe system. These documents were to define what was to be expected once the project wascomplete. The document detailing the requirements from the various departments would need to beconverted into several reports detailing issues such as systems requirements, design and technicaldesign reports. Some of the major departments of Northern insurance would assist the technicalteams in two fundamental areas to ensure TUFS succeeds. They were to first of all ask anyquestions before the project completed. They were also to ask for clarifications before the testingperiod ended. They were expected to formulate questions regarding this. The complete lack ofadequate business participation during the project would result in the recognition of errors far toolate, when the system was out of the testing phase. To avoid such disastrous situations in future, Northern insurance or any other companywould need to fully involve all the departments being affected by the system upgrades in the testing phase as well
2. What does Northern need to do to realize the benefits that were projected for TUFS?
Answer:
The primary concern is to build up a decent communication methodology between the IT group and the underwriting groups. The new system should to be disclosed well to underwriting group so as to benefit the new system this should be finished by the IT department. Likewise the underwriting group should know the significance of the new system and should accept it to execute (“ Measuring Underwriting Productivity and Quality,” n.d .). The IT group should prepare the Underwriting group for utilizing the new structure and should Explain them how it will help the business. This training process should be incorporated into the plan and development, as this will assist and plays a vital part in adding to the structure successful
How Can Northern Measure These Benefits? In this case, some revelations pointed out by Martin reveal that TUFS was not error free. A majority of the errors would have completely been eradicated had the business departments tried the system out and gave their feedback to the IT department. there were no feedbacks, and the errors dragged on for a lengthy period before Northern Insurance acted. a reason for this testing deferral was partly because deadlines on installing the system were tightly scheduled. All the departments that were to handle this software needed intense training on it, a factor that Northern insurance may have overlooked. As Mckeen (2012) pointed out, there are five factors that a Return On Investment (ROI) is based on. Operations and administration costs is the first factor. These five factors include usability, operations cost, maintenance costs, maximizing run time and thus maximizing productivity.
The usability of the system will determine the costs to be planned for because the employees would need special training. The costs that fall under the operations costs include installation costs and managing the losses that would be encountered during the upgrading period when Northern insurance would halt or slowdown some of its services. The maintenance costs can cause a challenge when estimating but will in some cases be cheap since system upgrades happen once a year and these are mostly security patches. The running of TUFS by Northern insurance will then be used to factor in the other costs not seen. The more the employees utilize TUFS, the more profitable Northern will be and the more savings will be made. The maximization of profitability by TUFS will push Northern into an efficient company, bringing it more clients and more business
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