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Plain talk about computers
PLAIN TALK ABOUT COMPUTERS I
II
Computers, business, and managers
GEORGE GLASER
Because of new developments in computer technology, solutions to problems heretofore considered "impossible" to achieve are within our grasp. Memory specifications are now stated in nanoseconds-one billionth of a second-and changes in input-output equipment will increase human access to the machine. These and other advances will extend computer functions in business from processing paper work to improving management's decisions. New application~ offer great benefits but create personnel problems and are harder to iustify on a straightforward cost-saving basis, more difficult to design, and far more painful for the organization to assimilate. In view of these complications, feasibility must be determined by careful analysis. In this, as in all phases, success will be determined by managers. A
decade or so ago, at the dawn of the computer era, writers of Sundaysupplement articles were fond of describing the mysterious new electronic gadget as a superbrain possessed of nearly magical powers. More recently it has become fashionable to point out, rather disparagingly, that the computer can do only what it is programmed to do. This sounds a lot more sophisticated, but it misses a crucial point. In the words of Herbert Simon, the observation that the computer can only follow instructions is "intuitively obvious, indubitably true, and supports none of the implications that are Mr. Glaser is a principal with McKinsey and Company, Inc.
FALL, 1967
commonly drawn from it." fin The Shape of Automation ( N e w York: Harper & Row, Publishers, 1965).] For the fact is that the computer's capabilties, though not supernatural, far exceed any use yet made of them. The computer is, first of all, a dutiful and tireless slave in processing huge volumes of paper work-subscriber billing, insurance premium accounting, credit card invoicing, and on and on. Second, it can deal with problems of complexity-problems that are literally insoluble, in any practical sense, by manual methods. Typical problems of complexity are satellite tracking and impact prediction, economic models for long-range corporate planning, and optimization of petroleum refineries. Third, the computer can provide extremely rapid response to external events. This capability of the computer, a relatively recent development, has led to airline reservation systems, on-line monitoring of hospital patients, process control (in the petroleum, paper, and chemical industries, for example), and most important, perhaps, to time-sharing and the muchdiscussed computer public utility.
TECHNOLOGICAL DEVELOPMENTS Most of these applications would have taxed our imagination ten years ago. Today we accept many of them as routine. And we see a continuing series of new developments in computer technology-both hardware and
33
GEORGE CLASER
34
software-that opens up entirely new horizons to us. Massive files, storing hundreds of millions of characters of data and retrieving them in millionths of a second, are being installed. Only months ago a computer manufacturer announced a memory device that will allow storage densities of one million bits per square inch, approximately the amount of information on six pages of a four-column telephone directory. For some time we have had photographic techniques that would reduce these six pages to one square inch of film, but the data stored using the new technique can be retrieved, manipulated, and stored again. This new capability is only one of many developments now being explored. Computer memory specifications are no longer stated in microseconds but in nanoseconds. A nanosecond-one billionth of a second-is a difficult figur e to comprehend, but try this: There are as many nanoseconds in one second as there are seconds in thirty years, or as many nanoseconds in 2.5 seconds as there are seconds in a person's lifetime. These changes in the internal workings of the computer are difficult to understand and appreciate. More obvious changes are occurring in input/output equipment; these changes for the most part are intended to increase human access to the machine. We see increased use of graphic techniques for all kinds of engineering applications. The automobile industry is using graphic display systems to design cars; the aerospace industry is using them for aeronautical engineering and for shortening the production lead times of new types of aircraft. Communication capabilities now allow the computer to switch both data and normal message traffic. In the planning stage are public computing utilities that will provide access to computing power over communication circuits by widely dispersed users, each paying only a fraction of the system's cost. A single computer now can handle multiple programs, processing several independent applications at the same time. This development has led to the introduction of time-sharing systems. Forty or more users in as many different companies
may each sit at a typewriter-like console connected by teletype or telephone to a computer located miles, or thousands of miles, away. The computer's response time is so fantastically quick that it can serve forty masters at once without strain. For each user, it is precisely as ff he alone had sole and complete access to the computer. For all practical purposes, he does. COST TRENDS Despite these fantastic increases in the power and complexity of hardware, hardware costs are failing. In the past few years, they have declined from 50 to 40 per cent of the total cost of a typical data processing installation. With further progress in lowcost mass storage and high-speed microcircuitry, indications are that the trend will continue. Cost-performance curves show a steady improvement in output per dollar, and no leveling-out is in sight. Software and applications development costs, on the other hand, have continued to rise despite the best efforts of equipment manufacturers and software houses to develop higher-level languages. These efforts, for the most part successful, have greatly eased the burden of the programmer in translating systems logic into operating instructions for the computer, but they have not reversed the upward trend of costs. There are two reasons for this. First, the systems themselves are more complex, span larger portions of the business enterprise, and thus increase the di/ficulty of analysis and design. Second, the severe shortage of experienced systems design and programming personnel has rapidly driven up their salary levels. PERSONNEL TRENDS
In terms of immediate practical effects, people-not technological trends-are the overriding issue of tomorrow. Already the supply of talented programmers and systems analysts is far short of the demand, and the gap is widening inexorably. For the fore-
BUSINESS HORIZONS
PLAIN TALK ABOUT COMPUTERS
seeable future, there is literally no possibility that we shall have enough trained people to go around. All three categories of special skills needed to use the computer effectively are in short supply: 1 Operations researchers and management scientists, who apply mathematical and statistical techniques directly to the problems the decision maker faces and to the information he needs to run his business. They also must determine the means for providing management with the best alternatives on which to make decisions. 2 Systems analysts, who design the complex mechanisms for applying the computer to the detailed activities of the entire operation. 3 Computer programmers, who translate the work of the operations research and systems analysts into the language of the computer. There are somewhat more than 100,000 qualified computer specialists in America today. By the end of 1970, roughly 300,000 will be n e e d e d - a n increment of well over 50,000 each year between now and then. Quite obviously, this is not going to happen. Alarmingly, however, company managements are acting and thinking exactly as ff it were. We asked a few leading computer users to compare the number of computer personnel on their staffs in 1965 with the number they had employed in 1960 and with their anticipated requirements for 1970. In aggregate, these companies had more than tripled their computer staffs between 1960 and 1965. Between 1965 and 1970, they were planning an increase of another 50 per cent. In this sample, the company with the longest computer history and the largest and slowest-growing staff will have recorded a personnel increase of 200 per cent from 1960 to 1970. By way of contrast, two companies that did not become active computer users until 1960 have increased their staffs since then by ten times and fourteen times, respectively, and will have increased them by about twenty times by 1970--i~ their present plans are realized. Clearly, a five-yearold company computer effort has not yet
F A L L , 1967
come of age. Observation suggests, in fact, that maturity and stability seldom come until about the ten-year mark. The scramble for skilled computer personnel in private industry will be seriously aggravated by competition from federal, state, and local governments, whose rate of growth in computer activity almost certainly will exceed that of private industry in the next few years. This, of course, means a further intensification of demand for trained oxa specialists, systems analysts, and programmers in the biggest business of all. Clearly, the competition for talented people is going to get fiercer-and management's use of computer systems five years hence will probably be seriously hobbled by a lack of competent people to analyze applications and program their machines. Companies leading the field today will, in all probability, continue to attract the best people available, thereby extending their lead. The rich, in other words, will get richer, while the company attempting to build an organization from scratch will find itself at a very serious disadvantage-not least because it will have trouble convincing hightalent people that it is a progressive company to work for. The frustration of being unable to find and hold enough qualified specialists to develop needed systems will almost surely impel many companies to pressure their operating executives into taking an important hand in systems design and development. Yet, the more complex the new applications become, the dimmer is the hope of salvation offered by this alternative. To see why, let us look at the nature of some of the changes now occurring. APPLICATIONS In just a few years, the nature of computer applications has changed dramatically. In most companies, the first applications were designed to process routine transactions, mostly in accounting. Here the computer proved itself a swift, accurate, and insatiable processor of mountains of paper work. In many cases, clear-cut savings were achieved
35
Gzonc~. GLASma
36
by reduction of clerical costs. These routine applications could be justified economically by relatively straightforward extensions of known cost factors, and apart from some procedural adjustments, little in the company had to change. The next era of computer applications saw the rise of business systems for inventory control, production scheduling, cash management, and the like. At the time these applications were designed and implemented, they were considered very complex. Their designers took considerable pride in making them work-and a few resounding fiascoes resulted. But, in general, these systems brought about lower inventory levels, faster deliveries to customers, and smoother production. Their benefits, however, were harder to estimate. On occasion, managements authorized these efforts without any guarantee of dollar results appearing on the profit-and-loss statement. Significantly, companies began to realize that these more complex systems could raise sticky issues of corporate policy. What, for example, is the objective of inventory control: reduced working capital, improved customer service, or lower production costs? Can all these objectives be satisfied at once? Top executives had to help answer such questions. It became apparent that computer systems were introducing a new dimension of dit~culty. Close coordination of the individual requirements of several functional and staff departments had become necessary. Today, with increased hardware and software capabilities, we see opportunities for tackling still more important business problems on a still higher level of complexity. Our new goal is the most ambitious yet: to improve management's decisions. In terms of potential benefits-better planning, better allocation of resources, more timely decisions, explicit consideration of risk and uncertainty-these systems offer an economic potential far greater than the most successful paper-work processing applications of a few years ago. But t h e y are far harder to justify on a straightforward costsaving basis, far more di~cult to design, and
far more painful for the organization and its people to assimilate. Management information systems (especially the "total" or 'integrated" variety) are currently much in vogue. The ultimate objective of such a system, in grossly oversimplified terms, is to collect all the data pertaining to a company's operations and to amass it in vast computer files from which any information and all reports can be readily extracted. Of course, only a few zealots would seek to realize this objective literally. More practical systems designers realize that it would be technically impossible and economically untenable to collect a / / t h e relevant data. Their approach is to integrate certain Closely related functions of the business-inventory control and production scheduling in a manufacturing company, for example. Such systems are now being designed, but not even the most expert of systems analysts would argue that they all offer clear sailing. By definition, a system consists of interrelated parts functioning together toward a single goal or objective. A television set is a system that receives a signal, processes it, and displays a picture; similarly, a n automobile ignition system responds to a signal and delivers electrical energy to the spark plugs. Such electrical and mechanical, systems have a completely unambiguous objective; their design is single-purpose and they are relatively reliable. We are not so blessed in the ease of business systems. Business systems involve people-and people, with their individual designs and conflicting objectives, are of questionable reliability from the systems designer's point of view. Most of the functioning computer systems of today were designed for a single purpose; in many cases, they served only a single user department. Their design and implementation, accordingly, posed relatively few problems. Now, however, we are designing systems that affect entire organizations; every operating function of the business will be part of the information system needed to control it. And, since systems are characteristically susceptible to the failure of their weakest link, a management information sys-
BUSINESS HOBIZONS
P L A I N TALK ABOUT COMPUTERS
tem may be crippled or wrecked if just one operating manager providing data to the system does his job poorly. It would seem that the applications now confront us with an entirely new level of difficulty. First, the technical problems are considerably more difficult, a point that can easily be confirmed by asking any data processing manager how many of his people are qualified to modify the operating system that controls the flow of programs through third-generation computers. Second, it is becoming increasingly di~eult to estimate the expected benefits as problems deal more and more with factors that cannot be quantified in advance. Third, the new applications require far more organizational discipline and coordination than did the earlier singlepurpose systems. FEASIBILITY
A data processing project should be considered an investment; benefits are expected, costs will be incurred, and risks are involved. On the basis of an evaluation of these costs, benefits, and risks, the company allocates resources of manpower, equipment, and time to specific projects. In principle, this approach is not very different from any other investment of resources, but in practice a computer systems proposal poses special complexities that call for detailed analysis. This analysis is usually conducted as part of a feasibility study. Three aspects of feasibility-technical, economic, and operational-should be evaluated in a feasibility study. They deal, respectively, with (1) whether the project can l~e implemented, given existing constraints on known technology and the company's ability to exploit it; (2) whether the economic benefits will outweigh the costs, and whether they represent the best available return for the resource investment; and (3) whether the implemented system will function successfully in the given environment. Technical feasibility, primarily the province of the computer systems staff, involves defining alternative approaches to the problem and specifying the technical resources
F A L L , 1967
each approach will require. Given today's advanced equipment and software, few business systems are likely to prove technically impossible, but their feasibility, in terms of available corporate resources, often cannot by any means be taken for granted. And the "best" technical approach can seldom be identified without imaginative and painstaking systems analysis. Economic ~easibiIity cannot be determined by the systems staff alone. To be sure, they can and should weigh the economic benefits of the proposed system, as estimated by the line managers for whom it would be developed, against predictable development and operating costs. But these calculations, although necessary, are not sufficient-the same resources invested in a different project might have produced a greater return. Assessment of the opportunity cost of a particular application is the key to the question of economic feasibility. Operational ~easibility, though seldom formally evaluated, is no less important. Because the constraints on operational feasibility are motivational and organizational, they frequently are overlooked by managers and technicians alike. Computer systems do not operate in a vacuum; they serve and are served by people. Unless the people involved are sold on the system, want to make it work, and are eager for the help it can give them, its technical and economic feasibility are simply irrelevant. The necessary motivation, in turn, depends on whether the system will enable the people affected to perform better in ways that are rewarded by the company's established value system. The most detailed computer-aided sales analysis and reporting system, for example, will fail to achieve its objective of concentrating salesmen's attention on profitable accounts and lines if their compensation plan continues to reward them solely on the basis of volume. Again, how enthusiastic will the head of one department be about incurring additional costs to supply another department with data that will enable it to make a significant added contribution to over-all company profits? The answer depends en-
37
GEORGE GLASER
tirely on how Department A's performance is evaluated. If the sole yardstick is control of departmental expense-if, in other words, the responsible executive is paid to be myopic about matters outside his immediate authority-his department may well prove to be the reef on which the entire project goes aground. Only top management is really in a position to insure operational feasibility. The analysis need not be formal, but it had better be thoughtful and thorough, for the pitfalls in this area are m a n y - a n d some are far from obvious. WHAT THE MANAGER CAN DO
38
No set of rules will guarantee success with any undertaking as complex as a corporate computer systems effort, but a few guidelines for the individual can be formulated. 1 He should identify how his job is related to the objectives of the company. This obligation, of course, applies to every manager, quite apart from any consideration of the computer effort. But it applies with singular force to the manager whose company is pushing ahead into strategic applications of the computer. 2 He should consider how the computer can contribute to performance in working toward these objectives. In doing so, he should seek the help of the data processing department. If the manager identifies an opportunity to use the computer, he must be willing to put a value on i t - b u t not confine his search to applications that will generate a measurable dollar return, in reduced clerical costs, for example. Even ff these applications develop as anticipated, the effort may consume valuable developmental resources that would be better spent on projects of more strategic significance. 3 He should insist on helping to design the system and on approving the costs/ benefit trade-offs-shorter development time vs. better system performance, for example. Such trade-offs arise in any major system development, and since the data processing staff cannot really evaluate potential bene-
fits, they should not be compelled or permitted to make the trade-off decisions. 4 He should encourage his people to use installed systems well. If a system does not work as it should, he should recommend changes. The manager can complain ff he does not like the results, but he is not to carp; if the system does not live up to expectations, it may be his fault. He, after all, is an integral part of any system he uses. 5 Finally, he should agree to an audit of the results after systems are installed. This aspect is most important in systems development. It will help not only the manager but the data processing deparhnent to do a better job the next time. THE COMPUT~ is synonymous with change-changes in the way business is conducted, in its internal organization, and in the decision prerogatives of its managers. Those companies, and those managers, who have the ability to accept and take advantage of change generally use the computer well and find it a powerful and profitable adjunct to their operations. Those who shrink from change and revere the status quo generally find it di~cult to absorb the computer's impact on their operations. The computer requires more than toleration, or the attitude that "it's here to stay and we may as well learn to live with it." Companies that are living with the computer begrudgingly are usually unhappy with the results, and will be for a long time. The computer is a mechanical beast, and its master, the human, is a fantastically complex and wonderful creature possessed of powers to think, reason, judge, and feel. So if an intelligent human being decides to scuttle the computer, it is generally no contest. A good systems designer tries to make his system not only foolproof but/d/or-proof, since the odds are that the system will, in fact, have to ward off a few attacks by idiots. But this kind of preventive is not enough. The company that expects to use the computer effectively must not only accept change, but reach out and grasp it. And managers-not technicians or hardware-will determine its Success.
BUSINESS HORIZONS
II
Computers, business, and managers
GEORGE GLASER
Because of new developments in computer technology, solutions to problems heretofore considered "impossible" to achieve are within our grasp. Memory specifications are now stated in nanoseconds-one billionth of a second-and changes in input-output equipment will increase human access to the machine. These and other advances will extend computer functions in business from processing paper work to improving management's decisions. New application~ offer great benefits but create personnel problems and are harder to iustify on a straightforward cost-saving basis, more difficult to design, and far more painful for the organization to assimilate. In view of these complications, feasibility must be determined by careful analysis. In this, as in all phases, success will be determined by managers. A
decade or so ago, at the dawn of the computer era, writers of Sundaysupplement articles were fond of describing the mysterious new electronic gadget as a superbrain possessed of nearly magical powers. More recently it has become fashionable to point out, rather disparagingly, that the computer can do only what it is programmed to do. This sounds a lot more sophisticated, but it misses a crucial point. In the words of Herbert Simon, the observation that the computer can only follow instructions is "intuitively obvious, indubitably true, and supports none of the implications that are Mr. Glaser is a principal with McKinsey and Company, Inc.
FALL, 1967
commonly drawn from it." fin The Shape of Automation ( N e w York: Harper & Row, Publishers, 1965).] For the fact is that the computer's capabilties, though not supernatural, far exceed any use yet made of them. The computer is, first of all, a dutiful and tireless slave in processing huge volumes of paper work-subscriber billing, insurance premium accounting, credit card invoicing, and on and on. Second, it can deal with problems of complexity-problems that are literally insoluble, in any practical sense, by manual methods. Typical problems of complexity are satellite tracking and impact prediction, economic models for long-range corporate planning, and optimization of petroleum refineries. Third, the computer can provide extremely rapid response to external events. This capability of the computer, a relatively recent development, has led to airline reservation systems, on-line monitoring of hospital patients, process control (in the petroleum, paper, and chemical industries, for example), and most important, perhaps, to time-sharing and the muchdiscussed computer public utility.
TECHNOLOGICAL DEVELOPMENTS Most of these applications would have taxed our imagination ten years ago. Today we accept many of them as routine. And we see a continuing series of new developments in computer technology-both hardware and
33
GEORGE CLASER
34
software-that opens up entirely new horizons to us. Massive files, storing hundreds of millions of characters of data and retrieving them in millionths of a second, are being installed. Only months ago a computer manufacturer announced a memory device that will allow storage densities of one million bits per square inch, approximately the amount of information on six pages of a four-column telephone directory. For some time we have had photographic techniques that would reduce these six pages to one square inch of film, but the data stored using the new technique can be retrieved, manipulated, and stored again. This new capability is only one of many developments now being explored. Computer memory specifications are no longer stated in microseconds but in nanoseconds. A nanosecond-one billionth of a second-is a difficult figur e to comprehend, but try this: There are as many nanoseconds in one second as there are seconds in thirty years, or as many nanoseconds in 2.5 seconds as there are seconds in a person's lifetime. These changes in the internal workings of the computer are difficult to understand and appreciate. More obvious changes are occurring in input/output equipment; these changes for the most part are intended to increase human access to the machine. We see increased use of graphic techniques for all kinds of engineering applications. The automobile industry is using graphic display systems to design cars; the aerospace industry is using them for aeronautical engineering and for shortening the production lead times of new types of aircraft. Communication capabilities now allow the computer to switch both data and normal message traffic. In the planning stage are public computing utilities that will provide access to computing power over communication circuits by widely dispersed users, each paying only a fraction of the system's cost. A single computer now can handle multiple programs, processing several independent applications at the same time. This development has led to the introduction of time-sharing systems. Forty or more users in as many different companies
may each sit at a typewriter-like console connected by teletype or telephone to a computer located miles, or thousands of miles, away. The computer's response time is so fantastically quick that it can serve forty masters at once without strain. For each user, it is precisely as ff he alone had sole and complete access to the computer. For all practical purposes, he does. COST TRENDS Despite these fantastic increases in the power and complexity of hardware, hardware costs are failing. In the past few years, they have declined from 50 to 40 per cent of the total cost of a typical data processing installation. With further progress in lowcost mass storage and high-speed microcircuitry, indications are that the trend will continue. Cost-performance curves show a steady improvement in output per dollar, and no leveling-out is in sight. Software and applications development costs, on the other hand, have continued to rise despite the best efforts of equipment manufacturers and software houses to develop higher-level languages. These efforts, for the most part successful, have greatly eased the burden of the programmer in translating systems logic into operating instructions for the computer, but they have not reversed the upward trend of costs. There are two reasons for this. First, the systems themselves are more complex, span larger portions of the business enterprise, and thus increase the di/ficulty of analysis and design. Second, the severe shortage of experienced systems design and programming personnel has rapidly driven up their salary levels. PERSONNEL TRENDS
In terms of immediate practical effects, people-not technological trends-are the overriding issue of tomorrow. Already the supply of talented programmers and systems analysts is far short of the demand, and the gap is widening inexorably. For the fore-
BUSINESS HORIZONS
PLAIN TALK ABOUT COMPUTERS
seeable future, there is literally no possibility that we shall have enough trained people to go around. All three categories of special skills needed to use the computer effectively are in short supply: 1 Operations researchers and management scientists, who apply mathematical and statistical techniques directly to the problems the decision maker faces and to the information he needs to run his business. They also must determine the means for providing management with the best alternatives on which to make decisions. 2 Systems analysts, who design the complex mechanisms for applying the computer to the detailed activities of the entire operation. 3 Computer programmers, who translate the work of the operations research and systems analysts into the language of the computer. There are somewhat more than 100,000 qualified computer specialists in America today. By the end of 1970, roughly 300,000 will be n e e d e d - a n increment of well over 50,000 each year between now and then. Quite obviously, this is not going to happen. Alarmingly, however, company managements are acting and thinking exactly as ff it were. We asked a few leading computer users to compare the number of computer personnel on their staffs in 1965 with the number they had employed in 1960 and with their anticipated requirements for 1970. In aggregate, these companies had more than tripled their computer staffs between 1960 and 1965. Between 1965 and 1970, they were planning an increase of another 50 per cent. In this sample, the company with the longest computer history and the largest and slowest-growing staff will have recorded a personnel increase of 200 per cent from 1960 to 1970. By way of contrast, two companies that did not become active computer users until 1960 have increased their staffs since then by ten times and fourteen times, respectively, and will have increased them by about twenty times by 1970--i~ their present plans are realized. Clearly, a five-yearold company computer effort has not yet
F A L L , 1967
come of age. Observation suggests, in fact, that maturity and stability seldom come until about the ten-year mark. The scramble for skilled computer personnel in private industry will be seriously aggravated by competition from federal, state, and local governments, whose rate of growth in computer activity almost certainly will exceed that of private industry in the next few years. This, of course, means a further intensification of demand for trained oxa specialists, systems analysts, and programmers in the biggest business of all. Clearly, the competition for talented people is going to get fiercer-and management's use of computer systems five years hence will probably be seriously hobbled by a lack of competent people to analyze applications and program their machines. Companies leading the field today will, in all probability, continue to attract the best people available, thereby extending their lead. The rich, in other words, will get richer, while the company attempting to build an organization from scratch will find itself at a very serious disadvantage-not least because it will have trouble convincing hightalent people that it is a progressive company to work for. The frustration of being unable to find and hold enough qualified specialists to develop needed systems will almost surely impel many companies to pressure their operating executives into taking an important hand in systems design and development. Yet, the more complex the new applications become, the dimmer is the hope of salvation offered by this alternative. To see why, let us look at the nature of some of the changes now occurring. APPLICATIONS In just a few years, the nature of computer applications has changed dramatically. In most companies, the first applications were designed to process routine transactions, mostly in accounting. Here the computer proved itself a swift, accurate, and insatiable processor of mountains of paper work. In many cases, clear-cut savings were achieved
35
Gzonc~. GLASma
36
by reduction of clerical costs. These routine applications could be justified economically by relatively straightforward extensions of known cost factors, and apart from some procedural adjustments, little in the company had to change. The next era of computer applications saw the rise of business systems for inventory control, production scheduling, cash management, and the like. At the time these applications were designed and implemented, they were considered very complex. Their designers took considerable pride in making them work-and a few resounding fiascoes resulted. But, in general, these systems brought about lower inventory levels, faster deliveries to customers, and smoother production. Their benefits, however, were harder to estimate. On occasion, managements authorized these efforts without any guarantee of dollar results appearing on the profit-and-loss statement. Significantly, companies began to realize that these more complex systems could raise sticky issues of corporate policy. What, for example, is the objective of inventory control: reduced working capital, improved customer service, or lower production costs? Can all these objectives be satisfied at once? Top executives had to help answer such questions. It became apparent that computer systems were introducing a new dimension of dit~culty. Close coordination of the individual requirements of several functional and staff departments had become necessary. Today, with increased hardware and software capabilities, we see opportunities for tackling still more important business problems on a still higher level of complexity. Our new goal is the most ambitious yet: to improve management's decisions. In terms of potential benefits-better planning, better allocation of resources, more timely decisions, explicit consideration of risk and uncertainty-these systems offer an economic potential far greater than the most successful paper-work processing applications of a few years ago. But t h e y are far harder to justify on a straightforward costsaving basis, far more di~cult to design, and
far more painful for the organization and its people to assimilate. Management information systems (especially the "total" or 'integrated" variety) are currently much in vogue. The ultimate objective of such a system, in grossly oversimplified terms, is to collect all the data pertaining to a company's operations and to amass it in vast computer files from which any information and all reports can be readily extracted. Of course, only a few zealots would seek to realize this objective literally. More practical systems designers realize that it would be technically impossible and economically untenable to collect a / / t h e relevant data. Their approach is to integrate certain Closely related functions of the business-inventory control and production scheduling in a manufacturing company, for example. Such systems are now being designed, but not even the most expert of systems analysts would argue that they all offer clear sailing. By definition, a system consists of interrelated parts functioning together toward a single goal or objective. A television set is a system that receives a signal, processes it, and displays a picture; similarly, a n automobile ignition system responds to a signal and delivers electrical energy to the spark plugs. Such electrical and mechanical, systems have a completely unambiguous objective; their design is single-purpose and they are relatively reliable. We are not so blessed in the ease of business systems. Business systems involve people-and people, with their individual designs and conflicting objectives, are of questionable reliability from the systems designer's point of view. Most of the functioning computer systems of today were designed for a single purpose; in many cases, they served only a single user department. Their design and implementation, accordingly, posed relatively few problems. Now, however, we are designing systems that affect entire organizations; every operating function of the business will be part of the information system needed to control it. And, since systems are characteristically susceptible to the failure of their weakest link, a management information sys-
BUSINESS HOBIZONS
P L A I N TALK ABOUT COMPUTERS
tem may be crippled or wrecked if just one operating manager providing data to the system does his job poorly. It would seem that the applications now confront us with an entirely new level of difficulty. First, the technical problems are considerably more difficult, a point that can easily be confirmed by asking any data processing manager how many of his people are qualified to modify the operating system that controls the flow of programs through third-generation computers. Second, it is becoming increasingly di~eult to estimate the expected benefits as problems deal more and more with factors that cannot be quantified in advance. Third, the new applications require far more organizational discipline and coordination than did the earlier singlepurpose systems. FEASIBILITY
A data processing project should be considered an investment; benefits are expected, costs will be incurred, and risks are involved. On the basis of an evaluation of these costs, benefits, and risks, the company allocates resources of manpower, equipment, and time to specific projects. In principle, this approach is not very different from any other investment of resources, but in practice a computer systems proposal poses special complexities that call for detailed analysis. This analysis is usually conducted as part of a feasibility study. Three aspects of feasibility-technical, economic, and operational-should be evaluated in a feasibility study. They deal, respectively, with (1) whether the project can l~e implemented, given existing constraints on known technology and the company's ability to exploit it; (2) whether the economic benefits will outweigh the costs, and whether they represent the best available return for the resource investment; and (3) whether the implemented system will function successfully in the given environment. Technical feasibility, primarily the province of the computer systems staff, involves defining alternative approaches to the problem and specifying the technical resources
F A L L , 1967
each approach will require. Given today's advanced equipment and software, few business systems are likely to prove technically impossible, but their feasibility, in terms of available corporate resources, often cannot by any means be taken for granted. And the "best" technical approach can seldom be identified without imaginative and painstaking systems analysis. Economic ~easibiIity cannot be determined by the systems staff alone. To be sure, they can and should weigh the economic benefits of the proposed system, as estimated by the line managers for whom it would be developed, against predictable development and operating costs. But these calculations, although necessary, are not sufficient-the same resources invested in a different project might have produced a greater return. Assessment of the opportunity cost of a particular application is the key to the question of economic feasibility. Operational ~easibility, though seldom formally evaluated, is no less important. Because the constraints on operational feasibility are motivational and organizational, they frequently are overlooked by managers and technicians alike. Computer systems do not operate in a vacuum; they serve and are served by people. Unless the people involved are sold on the system, want to make it work, and are eager for the help it can give them, its technical and economic feasibility are simply irrelevant. The necessary motivation, in turn, depends on whether the system will enable the people affected to perform better in ways that are rewarded by the company's established value system. The most detailed computer-aided sales analysis and reporting system, for example, will fail to achieve its objective of concentrating salesmen's attention on profitable accounts and lines if their compensation plan continues to reward them solely on the basis of volume. Again, how enthusiastic will the head of one department be about incurring additional costs to supply another department with data that will enable it to make a significant added contribution to over-all company profits? The answer depends en-
37
GEORGE GLASER
tirely on how Department A's performance is evaluated. If the sole yardstick is control of departmental expense-if, in other words, the responsible executive is paid to be myopic about matters outside his immediate authority-his department may well prove to be the reef on which the entire project goes aground. Only top management is really in a position to insure operational feasibility. The analysis need not be formal, but it had better be thoughtful and thorough, for the pitfalls in this area are m a n y - a n d some are far from obvious. WHAT THE MANAGER CAN DO
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No set of rules will guarantee success with any undertaking as complex as a corporate computer systems effort, but a few guidelines for the individual can be formulated. 1 He should identify how his job is related to the objectives of the company. This obligation, of course, applies to every manager, quite apart from any consideration of the computer effort. But it applies with singular force to the manager whose company is pushing ahead into strategic applications of the computer. 2 He should consider how the computer can contribute to performance in working toward these objectives. In doing so, he should seek the help of the data processing department. If the manager identifies an opportunity to use the computer, he must be willing to put a value on i t - b u t not confine his search to applications that will generate a measurable dollar return, in reduced clerical costs, for example. Even ff these applications develop as anticipated, the effort may consume valuable developmental resources that would be better spent on projects of more strategic significance. 3 He should insist on helping to design the system and on approving the costs/ benefit trade-offs-shorter development time vs. better system performance, for example. Such trade-offs arise in any major system development, and since the data processing staff cannot really evaluate potential bene-
fits, they should not be compelled or permitted to make the trade-off decisions. 4 He should encourage his people to use installed systems well. If a system does not work as it should, he should recommend changes. The manager can complain ff he does not like the results, but he is not to carp; if the system does not live up to expectations, it may be his fault. He, after all, is an integral part of any system he uses. 5 Finally, he should agree to an audit of the results after systems are installed. This aspect is most important in systems development. It will help not only the manager but the data processing deparhnent to do a better job the next time. THE COMPUT~ is synonymous with change-changes in the way business is conducted, in its internal organization, and in the decision prerogatives of its managers. Those companies, and those managers, who have the ability to accept and take advantage of change generally use the computer well and find it a powerful and profitable adjunct to their operations. Those who shrink from change and revere the status quo generally find it di~cult to absorb the computer's impact on their operations. The computer requires more than toleration, or the attitude that "it's here to stay and we may as well learn to live with it." Companies that are living with the computer begrudgingly are usually unhappy with the results, and will be for a long time. The computer is a mechanical beast, and its master, the human, is a fantastically complex and wonderful creature possessed of powers to think, reason, judge, and feel. So if an intelligent human being decides to scuttle the computer, it is generally no contest. A good systems designer tries to make his system not only foolproof but/d/or-proof, since the odds are that the system will, in fact, have to ward off a few attacks by idiots. But this kind of preventive is not enough. The company that expects to use the computer effectively must not only accept change, but reach out and grasp it. And managers-not technicians or hardware-will determine its Success.
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