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Strategic Planning for Information Systems. Third Edition. John Ward and Joe Peppard. The Evolving Role of IS/IT in Organizations : A Strategic Perspective. CHAPTER 1. Introduction. IT has become inextricably intertwined with business (Rockart, 1988).
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Strategic Planning for Information Systems Third Edition John Ward and Joe Peppard The Evolving Role of IS/IT in Organizations : A Strategic Perspective CHAPTER 1
Introduction IT has become inextricably intertwined with business (Rockart, 1988) Depends on the effective applications of IT Most organization (all sectors) dependent on their IS Support existing business operations. Source for competitive advantage With e-Commerce, use of technology is accepted (indeed expected) way of conducting business Learning from experience – the success and failures of the past – is one of the most important aspects of strategic management. IS & IT needs to be managed strategically Less strategic approach legacy system Helpful to understand how the role of technology-based IS has evolved in organizations.
Forces Affecting the Pace & Effectiveness of Progress in Using IT/IS & in Delivering Business Benefits:- • The capabilities of the technology; • The economics of deploying the technology; • The applications that are feasible; • The skills & abilities available – in-house or external sources to develop the applications; • The skills & abilities within the organization to use the applications; • The pressures on the particular organization or its industry to improve performance.
IS and IT • IT/ICT refers specifically to technology, essentially hardware, software and telecommunications networks. • Tangible (e.g. servers, PCs, routers, cables), and • Intangible (e.g. software) • IT/ICT facilitates the acquisition, processing, storing, delivery and sharing of information & other digital content. • IS – the means by which people & organizations, utilizing technology, gather, process, store, use & disseminate information (UK Academy of ISs) • Some IS are totally automated by IT. IS ≠ IT
Application • Application refers to the use of IT to address a business activity or process. Two types of applications:- • General uses of IT HW & SW to carry out particular tasks such as word processing, electronic mail or preparing presentation materials. • Use of technology to perform specific business activities or processes such as general accounting, production scheduling or order processing. • Pre-packaged, pre-written SW programs or be developed in-house or outsourced. e.g. ERP packages In order to create a system that effectively supports users, it is first necessary to conceptualize that which is to be supported (the IS), since the way it is described will dictate what would be necessary to serve or support it (the IT).
More terms • E-commerce refers to the conduct of commerce or business electronically –essentially using Internet technologies. • M-commerce refers to the use of mobile devices for the conduct of business transactions while t-commerce refers to a similar use of television. • E-business refers to the automation of an organization’s internal business processes using Internet and browser technologies. This is how Internet should be viewed: Internet is an enabling technology – a powerful set of tools that can be used, wisely or unwisely, in almost any industry and as part of almost any strategy; not the business strategy. Pervasive, interactive, a new medium – the market space.
Why Organizations Fail to Realize Benefits from Investments in IT? • Investments made only in technology; • Not understanding or analyzing the nature of activities that the technology is to support – strategically or operationally – in the organization;
Early Views and Models of IS/IT in Organization • Early 1950s: use of computers in business • Mid to late 1960s: computers usage became more significant with the development of multi-purpose mainframe computers • Batch processing of tasks and activities in organizations became possible through • Increase in processing speed • Cheaper memory • Useful of magnetic disc and tape storage • Better programming language
Continue… • 1970s: Minicomputers used for a variety of business applications • But IS/IT still viewed as a centralized, integrated concept derived from mainframe • Gibson and Nolan (1974) modeled evolution of IS/IT in an organization, based on Anthony’s (1965) hierarchical application portfolio model.
Application Portfolio Model • Described by R. N. Anthony (1965) • Structure of information system in an organization is based on a stratification of management activity into different levels: • Strategic planning • Management control • Operational control
Nolan And Gibson’s 6-stage Model For Evolution of IS/IT Considered 6 aspects of IS/IT management • The rate of IS/IT expenditure; • The technological configuration; • The applications portfolio; • The Data Processing (DP) or IT organization; • DP/IT planning and control approaches; • User-awareness characteristics.
Computer (DP) Management Initiation Contagion Control Information Systems Management Integration Data management Maturity Transition from DP to MIS Change in how IS/IT resources were managed Change in how the role of IS/IT is evaluated Strategy for management of IS/IT Stages of Evolution
Nolan’s Stages of Growth Model A formative influence on much information systems planning was Nolan’s stages of growth model (Nolan, 1979) in which businesses were described as being within one of six stages of data processing growth as follows: • Initiation • Contagion • Control • Integration • Data Management • Maturity
Initiation • Computer-based IT hadrecently been introduced, often in the accounting and finance areas; initial applications were replacement of rule-based labor-intensive computational activities such as payroll, accounts and ledger; analysis and design activities were not formalized and were left to the initiative of a programming unit; project planning and scheduling were undeveloped.
Contagion • Users became aware of possibilities, and began agitating for applications, which proliferated in an uncoordinated manner; the data processing department’s profile increased, it maintained control of the apparently arcane procedures necessary for implementing software, but its promise of new systems exceeded its capacity to produce them.
Control • Budget overruns, implementation failures, and senior management disenchantment, led to stronger financial control, project planning, and a greater attempt to meld management of IT with understanding of business processes, resulting in introduction of management information systems terminology
Integration • Technological progress produced database driven solutions for business processes, which could now be brought together from their disparate and often uncoordinated applications; management information systems were becoming more generic information systems, and decentralized; end user computing began its development and facilities such as information centers were formed for user support.
Data administration • Recognition of the information resource becomes widespread; the orientation of systems becomes one of data use; information management becomes a means of assuring data quality through information repositories, and user responsibility and ownership of information.
Maturity The information resources are managed with the strategic planning framework of the enterprise, and there is representation on the senior management group, perhaps under a designated chief officer.
View from a More Distant Perspective • The six stages of the model divide into 2 larger ‘eras’, separated by a transition point between stages 3 and 4 • Transition from computer (DP) management to information (systems) management • Major changes occur in who managed what for whom, and how
Rationale of the Transition • Delivery • Reorientation • Reorganization
Rationale of the Transition: Delivery • Improving the ability to deliver and support the systems and technology. • Achieving top management credibility as a valuable function is a prime objective. Improving delivery performance, not necessarily providing users with what they really need.
Rationale of the Transition: Reorientation • Establishing good relationships with the main business functions, supporting business demands through the provision of a variety of services as computing capability spreads through business. Extended outside the DP department to provide a valued service to all business function management. Different areas will benefit differently without regard to business importance.
Rationale of the Transition: Reorganization • The high level of awareness created both ‘locally’ in the business area and ‘centrally’ in senior management creates the need for a reorganization of responsibilities designed to achieve integration of the IS investment with business strategy and across business functions. Becomes the best way of satisfying each of the differing business needs through a coalition of responsibilities for managing information and systems.
2 Eras from 1960 to early 1980 • DP era • MIS era
DP Lessons • need to understand the process of developing complete information systems, not just the programs to process data. • more thorough requirements and data analysis to improve systems linkages and a more engineered approach to designing systems components • more appropriate justification of investments by assessing the economics of efficiency gains and converting these to return on investment • less creative, more structured approaches to programming, testing and documentation to reduce the problems of future amendments, more discipline was introduced with “change control procedures” and sign off on specifications and tests
DP Lessons • extended project management which recognized the need for coordination of both user and DP functions and the particular need to establish user management in a decisive role in the systems development – the user had to live with the consequences • the need for planning the interrelated set of systems required by the organizations, better planning produced overall improvements in systems relevance and productivity
MIS Lessons • justification of IS investments is not entirely a matter of return on investment / financial analysis • databases require large restructuring projects and heavy user involvement in data definition – data integration had been weak based on the project by project DP approach
MIS Lessons • the IS resource needs to move from a production to a service orientation to enable users to obtain their own information from the data resource – the information centre concept • need for organizational policies, not just DP methodologies • personal computers and office systems enable better MIS to be developed, provided that users and IS people both focus on the information needs rather than the technology
Three Era Model Objectives of the three eras: - • Data Processing (DP) Era • To improve operational efficiency by automating information-based processes • Management Information Systems (MIS) Era • To increase management effectiveness by satisfying their information requirements for decision making • Strategic Information Systems (SIS) Era • To improve competitiveness by changing the nature or conduct of business –IS/IT as a source of competitive advantage
Main Types of Strategic System • Share information via technology-based systems with customers/consumers and/or suppliers and change the nature of the relationship • Linking to Customers and Suppliers • Produce more effective integration of the use of information in the organization’s value-adding processes • Improved Integration of Internal Processes • Enable the organization to develop, produce, market and deliver new or enhanced products or services based on information • Information-based Products and Services • Provide executive management with information to support the development and implementation of strategy. • Executive Information Systems
Other Classification:Notowidigdo, 1984 • Internal systems that have direct benefit for the company • External systems that have direct benefit for the company’s customers
Venkatraman, 1991: 3 Types of Revolutionary Use of IT • Business process redesign • Using IS/IT to realign business activities and their relationships to achieve performance breakthroughs. • Business network redesign • Changing the way information is used by the organization and its trading partners, thereby changing how the industry overall carries out the value-adding processes • Business scope redefinition • Extending the market or product set based on information or changing the role of the organization in the industry.
Success Factors in SIS • External, not internal, focus • Looking at customers, competitors, suppliers, other industries • Adding value, not cost reduction • Doing it better not cheaper • Sharing the benefits • Buy in, commitment to success, a switching cost • Understanding customer • What they do with the product • How they obtain value from it • What problems they may encounter
Success Factors in SIS • Business-driven innovation, not technology-driven • The new or existing technology provides or enables a business opportunity or idea to be converted into reality • Major failures in using IT are often based on much better technology and bad business vision. • Incremental development • Doing one thing and building on and extending the success by a further development
Success Factors in SIS • Using the information gained from the systems to develop the business • Product and market analyses plus external market research information can be merged and then recut in any number of ways to identifying more appropriate marketing segmentation and product mix.
The Management Implications • We must manage IS/IT and its various applications in accord with the type of contribution it is making- improving efficiency, effectiveness and/or competitiveness through business change • We should treat IS/IT like other part of the business => develop strategies for information systems and technology that are derived from and integrated with other components of the strategy of the business.
IS Application Portfolio Strategic High Potential Applications which Applications which are critical to may be of important sustaining future in achieving future business strategy success Applications on which Applications which are the organisation valuable but not critical for success currently depends for success Key Operational Support Developed from Ward Fig., 1.8 which is sourced from McFarlan
Strategic Turnaround Key Operational Support IS Application Portfolio Evolutionary Stages Stage 5 Stage 4 ? Stage 3 Stage 2 Stage 1 Source: Ward et al page 39
What is an IS/IT Strategy • IS/IT strategy is composed 2 parts: an IS component and an IT component • The IS strategy defines the organization’s requirement or ‘demand’ for information and systems to support the overall strategy of the business. • IT strategy is concerned with outlining the vision of how the organization’s demand for information and systems will be supported by technology. • It addresses the provision of IT capabilities and resources and services
The Strategic Alignment Model: Henderson and Venkateaman, 1993