Identifying Appropriate MIS/DSS Support: A Cost Analysis Approach

This paper describes a microeconomic theory-based tool, called cost analysis, which can be used in MIS research to develop guidance for systems analysts and information resource managers. An example of this guidance is a matrix of decision making contexts versus appropriate MIS/DSS support. Systems analysts can use this matrix to help identify appropriate MIS/DSS design alternatives. Information resource managers can use this matrix to help plan for the proper evolution of MIS/DSS support. Introduction to reduce the average decision quality produced. This quality can be increased to its initial level via increased This paper describes an approach for determining what investment in MIS (e.g., more sophisticated MIS) and/or kind of management information systems (MIS) or deciin management (e.g., spending for management training sion support systems (DSS) are appropriate for various or hiring more competent managers). Thus, the cost of decision making contexts. This approach, called cost producing decisions at the intitial guality level increases analysis, is useful in research developing guidance for as problem complexity increases. systems analysts choosing information support for decision makers, and in research developing guidance for Alternative MIS can be compared based upon the cost of information resource managers planning the MIS* portproducing equal quality decison in an environment folio. One result of cost analysis is a matrix of decision described in terms of problem complexity. If the commaking contexts versus appropriate MIS support. This plexity assocated with a specific context results in higher matrix can be used by systems analysts to identify viable decision production costs using one MIS than that using design alternatives. The matrix can also be used by inforanother MIS, then the second MIS is preferred. This cost mation resource managers to identify and plan for approanalysis approach is described in greater detail below, priate changes in the firm's MIS portfolio. and applied to determining appropriate MIS support for contexts within the following descriptive frameworks: Cost analysis maps appropriate MIS support to various decision contexts based upon problem complexity, and • product life cycle the impact of complexity upon the cost of making decisions. It is hypothesized that the cost of making decisions • Gorry-Scott Morton management planning and of a given quality increases as problem complexity control activities increases.** Problem complexity is defined along four dimensions: The product life cycle framework provides a vehicle for understanding the application of cost analysis to MIS • Problem Duration-the time allowed for problem portfolio planning. A profile of appropriate MIS is develsolution oped, in accord with changing decision making contexts associated with the manufacture of products progressing • Problem Homogeneity-the lack of problem type through their life cycles. These changing decision convariety texts reflect changes in marketing and manufucturing strategies. The Gorry-Scott Morton framework provides • Problem Predictability-the ability to forcast the an opportunity for understanding the application of cost occurrence of problems analysis to systems design. Categories of appropriate MIS are developed for specific management planning • Problem Knowledge-the understanding of the and control activities. These catagories can be used by problem; problem structure systems analysts to identify appropriate MIS support of managerial activities. A decrease in any of these dimensions represents an increase in problem complexity. For example, a decrease Using these two frameworks as examples also allows a in problem knowledge in a decision context is expected demonstration of support for the validity of cost analysis.