Strategic Planning for Information Systems

1. Strategic Planning for Information Systems Third Edition John Ward and Joe Peppard CHAPTER 8Strategic Management of IS/IT: Organizing and Resourcing

2. Outlines • Organizing strategies for IS/IT management • Models and framework for guiding management action

3. Objectives of the IS/IT Management Strategy • To ensure IS/IT strategies, policies and plans reflect business objectives and strategies. • To ensure potential business advantages from IS/IT are identified and exploited. • To ensure strategies, etc. are viable in terms of business risks. • To establish appropriate resource levels and reconcile contention/set priorities. • To create a ‘culture’ for the management of IS/IT that reflects the corporate culture. • To monitor the progress of business-critical IS/IT activities. • To achieve the best balance b/w centralization and development of IS/IT decision making.

4. Traditional IT Organization Source: Luftman

5. Centralization Source: Luftman

6. Decentralization Source: Luftman

7. Federal or Hybrid

8. Benefits of Federal Model

9. Factors for Selecting Organizational Structure • The organization’s depend on IT • Its stage of maturity in terms of its application portfolio • The geography of the enterprise, especially for organizations with a global presence • Its business diversity and rate of change of the types of business and competitive pressures in each business • The potential benefits of synergy b/w business in both trading goods and services and information exchange • The economics of resourcing, obtaining and deploying skills

10. La Belle and Nyce • While the business units should be responsible for applications- architecture, development and operation- certain areas should be centralized • These included: telecommunications, hardware, software architecture, information architecture, risk management and security, shared services and utilities, and human resources. • The activities of the units had to be coordinated with the central architecture development via ‘steering group or committee’

11. Division of Responsibility: IT Architecture Management • Function: Develop and maintain information architecture • Central IT group: • Monitor process; provide assistance if requested • Business unit operations • Complete business architectures defining business by location • Complete translation of strategy into technology requirements • Define information architecture

12. Cont.. • Function: Develop and maintain application architecture • Central IT group • Set standards, monitor process • Review architectures and report on adequacy to Technology Committee • Ensure appropriate commonality • Business unit operations • Define requirements and develop architecture • Coordinate b/w units for common business

13. Cont.. • Function: Develop and maintain data architectures • Central IT group • Coordinate development/establishment of common database management process • Create/maintain corporate databases • Business unit operations • Define requirements • Develop in accordance with standards

14. Cont… • Function: develop and maintain hardware/operating system architecture • Central IT group • Monitor development/implementation within sectors • Develop and maintain architecture for corporate users-support operations • Business unit operations • Develop in accordance with corporate standards and business requirements • Request variances as appropriate; make change recommendations

15. Cont… • Function: Develop and maintain telecommunications architectures • Central IT group • Develop in accordance with standards and business requirements • Business unit operations • Define requirements • Report performance/responsiveness problems

16. Balancing IS Demand and IT Supply • Business units receive a responsive service from decentralized IS functions • While at the same time a corporate IS function provides group wide IT services and exerts some degree of central leadership and control of IT activities

17. Summary of Structural Arrangements for IS Function in Multiple BUs

18. Cont..

19. Imperative for the Management of IS/IT: Rockart et al. • Achieve two-way alignment b/w the business and IS/IT strategy • Develop effective relationships with line management • Deliver and implement new systems • Build and manage IT infrastructure • Reskill the IS function with new competencies and knowledge • Manage vendor partnerships • Redesign and manage the federal IS organization

20. Imperative for the Management of IS/IT: Venkatraman • He argued the need for a different approach to managing IT resources that consider the sources of value to be derived from IT resources. • He proposed that resources should be managed as a value centre. • The value centre is an organizing concept that recognizes four interdependent sources of value from IT resources: cost centre, service centre, investment and profit centre.

21. Cont… • The cost centre has an operational focus that minimizes risks with an emphasis on operational efficiency. Cost-centre activities are good candidates for outsourcing. • The service centre, although still minimizing risk, aims to create an IT-enabled business capability to support current strategies.

22. Cont… • The investment centre has a long-term focus and aims to create new IT-based business capabilities. It seeks to maximize business opportunity from IT resources. • The profit centre is designed to deliver IT services to the external marketplace for incremental revenue and for gaining valuable experience in becoming a world-class IS function.

23. Imperative for the Management of IS/IT: Gartner Group

24. Cont… • IT leadership, which includes IT envisioning, fusing IT strategy with business strategy, and managing IS resources. • Architecture development, which is concerned with developing a blue-print for the overall IT technical design. • Business enhancement, which includes business process analysis and design, project management and managing relationships with users. • Technology advancement, which is application design and development. • Vendor management, which includes managing and developing relationships with vendor and suppliers, negotiating and monitoring contracts and purchasing.

25. A Framework Guiding Action • What needs to be managed? • Where IS/IT resources should be outsourced? • Who should manage IS/IT? • Coordinating mechanisms for the strategic management of IS/IT • Define IS competency • Managing relationships

26. What Needs to be Managed? • The activities that are traditionally seen as necessary for ‘IT’, and consequently considered as taking place within the IS function, can be portrayed as delivering a range of services to the business. • Strategy and planning services • Application development services • Application and technical services • Technology delivery and maintenance services

27. Deciding on the organization of IS/IT Resources • 2 key issues must be considered • Location of IS/IT decision rights • What decisions should be centralized and what aspects of IS/IT management should be devolved into the business and out of the IS function? • The organization needs to define authority, responsibilities, policies, coordinating mechanism and control procedures. • Sourcing of IS/IT resources • Internal or interorganizational resources • The interorganizational arrangement places new stresses, demanding additional coordination and vendor relationship management.

28. Trading-offs in the Organization and Resourcing of IS/IT

29. Cont… • Organizations engaging in outsourcing at some stage identify the need to realign, change and/or develop different parts of their IS/IT structures, competencies and skills to enable them to maintain the link b/w IS/IT and business prerequisites. • Increase the complexity in managing IS/IT

30. Aspects Required for Distributing IS/IT Decision Making • Content – the decision areas that are being managed (Table 8.4) • Authority – the individuals or groups that have the power actually to make decisions in the various areas • Responsibilities – the individuals or bodies responsible for day-to-day execution in decision areas. The definition of responsibility needs to be integral to each person’s job role and function • Coordination – the mechanism and processes for ensuring coherence across all decision areas (eg. Steering committees, management groups)

31. Cont… • Policies – statements of principles or actions defining acceptable behaviour. They provide a basis for consistent decision making and resource allocation. • Control – outlining the approached to policing decisions, ensuring conformance across the organization

32. IS/IT Policies • Restraining policies are seen as describing the rules of federation. They define the parameters within which decisions are made. • Enabling policies relate to the dissemination of best practice.

33. Restraining Policies Technical compatibility standards Standards for buying equipment & services Common systems mandate Disaster recovery, security & quality policies Group systems standards Group job specifications Any conformance to industry standards . . . Enabling Policies Making group-resourced services available to division Negotiating volume discounts Managing supplier relationships Influencing behaviour through charge-out rules Setting criteria for selecting common systems Funding share assets . . . Enabling and Restraining Policies

34. Provisioning of IS/IT Resources • Insourcing – IS/IT resources are provided by a central IS function • Outsourcing – delegation, through a contractual arrangement, of all or part of the technical resources, the human resources and the management responsibilities associated with providing IT services, to an external vendor.

35. Outsourcing Rationales • Financial and economic reasons • Technical reasons • Business reasons

36. Classifying Sourcing Options • Purchasing style • Transaction style refers to one-time or short-term contracts with enough detail to be the original reference document • Relationship style refers to less detailed, often incentive-based contracts, centred around the expectation that the customer and vendor will do business for many years. • Purchasing focus • Resource option, organizations buy vendor resources such as HW, SW or expertise, but manage the use of the resources in-house. • Result option, vendors manage the delivery of the IT activities, using whatever resources are necessary, to provide the customer with specified results.

37. Classifying Sourcing Options

38. 4 Outsource Strategies • Contract out strategy - the vendor is responsible for delivering the results of IT activity. • Buy-in strategy – the organization buy in resources from the external market, often to meet a temporary requirement. Contracts often specify the skills required and cost, with the resources then managed in-house. • Preferred contract strategy – organizations contract long term with a vendor to reduce risk, with the vendor responsible for the management and delivery of an IT activity or service. • Preferred supplier strategy – this strategy takes buy-in approach further, with an organization seeking to develop a long-term close relationship with a vendor in order to access its resources for ongoing IT activities. The organization takes responsibility for managing these resources.

39. Vital Competencies for Maintaining In-House • The ability to track, assess and interpret changing IS/IT capability and relate them to organization need. • The ability to work with business management to define the IT requirements over time. • The ability to identify appropriate ways to use the market, specify and manage IS/IT sourcing. • The ability to monitor and manage contractual relations.

40. When to Outsource • Position on the strategic grid • Development portfolio • Organizational learning • A firm’s position in the market • Current IT organiztion

41. Position on the Strategic Grid

42. Development Portfolio • Maintenance or high-structured projects=> candidate for outsourcing • High-technology, highly structured work => strong candidate for outsourcing • Large, low-structured projects => difficult coordination problems for outsourcing

43. Organizational Learning • A firm’s organizational learning ability influences whether it can manage an outsourcing arrangement effectively. • Many firms’ development portfolios include a large number of projects aimed at process reengineering and organizational transformation. • The success of both types of projects depends on having the internal staff radically change the way it works.

44. A Firm’s Position in the Market • Firms that are far behind their peers often do not have the IT leadership, staff skills, or architecture to upgrade quickly to state-of-the-art technology. • Must go forward with contemporary practice and technology. • A firm whose IT capabilities have become obsolete, it is not worth dwelling on how the firm got where it is but vital to determine how it can extricate itself

45. Current IT Organization • The more IT activities are already segregated in organizational and accounting terms, the easier it is to negotiate an enduring outsourcing contract. • A stand-alone IT unit has already developed the fundamental integrating and control mechanisms necessary for an outsourcing contract

46. Who should Manage IS/IT and Where should IT Report

47. Cont…

48. Changing Role of the CIO Aplikasi portofolio • Mainframe era • Pemrosesan transaksi-otomatisasi untuk efisiensiterdistribusi era • Distributed era • Knowledge-worker support,interorganizational systems, ERP systems • Web-based and Internet era • Electroniccommerce, Knowle \ DGE manajemen, organisasi virtual,rantaipasokan rekayasa ulang

49. Cont… Senior eksekutif sikap bisnis untuk IS / IT • Mainframe era • TI untuk perpindahan biaya dan otomatisasi • Distributed era • Peningkatan keterlibatan dalam masalah IT dan pemerintahan • Polarisasi sikap: TI sebagai aset strategis atau biaya yang harus diminimalkan • Web-based and Internet era • TI, terutama internet, dipandang sebagai transformasional • Investasi TI sekarang lebih menarik dalam hal biaya dan rentang waktu • IS / IT sekarang bagian dari percakapan bisnis yang sedang berlangsung

50. Cont… Masukan untuk bisnis • Mainframe Era • Penasehat 'Bagaimana melakukan', 'Apa yang harus dilakukan'’ • Distributed era • Akses ke eksekutif senior • Diundang 'kursi di meja' • Web-based and Internet era • Anggota tim eksekutif memiliki 'kursi di meja‘ • Membantu mendefinisikan 'apa yang harus dilakukan'