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Strategic IT Management: Maximizing Competitiveness with IT

This chapter examines the role of IT in improving competitiveness, the problems that IT can solve, and the need for a realistic IT strategy to support the organization's goals.

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Strategic IT Management: Maximizing Competitiveness with IT

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  1. Ida750 IT Strategy • Strategy work – macro perspective • System specification – micro perspective • Strategy: • What kind of problems do we have? • How IT can solve these problems? • Realistic plan for IT • IT to support the organization MS Ch. 1

  2. Strategic IT-management Goal: • Employ IT to improve the competitiveness of the company • Computer equipment (PC, servers...) is not enough! • Neither is software (Office, accounting…) • These are only tools that we can use to get where we want to be • The major questions are therefore: • Where are we going? • How can IT support us in getting there?

  3. OECD • OECD: Norway will get a lower development rate than other countries • OECD: Because we are not good enough to employ IT • But, we have PC’s everywhere, some of the best telecom systems in the world… • Or…. MS Ch. 1

  4. Our experience • Many companies do not have a clear idea of where they are • They have no clear idea of where they are going • They use IT for simple functions • Use IT to make their business more effective, but uses a lot of money on IT • Complex processes are often manual – with little or no IT support • Do not have the knowledge of how they can use IT strategically MS Ch. 1

  5. Course contents • Management • Organizations • Social relationships • Business ideas • Information Technology MS Ch. 1

  6. Atoms to bits Percent employed MS Ch. 1

  7. The development of the IT center • Three phases (hardware): • Centralized: Operating a mainframe • Then decentralized: Mini computers, private networks, equipment in the user environments • The users get their own computer - PC development. • More and more happens locally • Connection: client-server, local area networks (LAN), and then the Internet • More centralization…? MS Ch. 1

  8. Software • Three phases: • All software from mainframe manufacturer (operating system, file system, development systems, applications). Proprietary development. • Software from many vendors. Proprietary development still important, but more systems available in the market. Decentralization. • Abundance of ”Off-the-shelf” products (Office package o.l.). Parameterization of large systems (SAP, Baan). Less proprietary development. Software architecture. Centralization. • Is proprietary development passé? MS Ch. 1

  9. The organization’s external environment • Quality, from the removal of exceptions to custom orientation • The customer gets IT • Deregulation • Crossing of industrial barriers • Globalization • Shorter development and life expectancy for products MS Ch. 1

  10. The organization’s internal environment • Team • Work everywhere, at any time • Outsourcing, strategic alliances • Flatter organizations, reduced hierarchy • People as a resource, learning, building competence, focus on knowledge MS Ch. 1

  11. ”Mission” for Information systems • From: automating stand-alone functions (accounting, stock keeping, salary, invoice handling…) • Through: Correct information at the correct time • To: Use IT to improve the competitiveness of the organization • Textbook definition: • ”To improve the performance of people in organizations through the use of information technology” MS Ch. 1

  12. Different models of Technology use MS Ch. 1

  13. Model for IS (Inf. System): • Technologies • Users • A model for delivery (for development, delivery and installation of IS) • Management ofIS/IT MS Ch. 1

  14. Technologies • Powerful PCs • Cheap memory components and processors • Powerful server • Internet • Physical networks (fiber, wireless) • Multimedia • Integration (electrical products, IT) MS Ch. 1

  15. Users • More experienced • Interactive systems, ”empowerment of users” • Procedure oriented tasks • Goal based tasks MS Ch. 1

  16. System development and delivery • Hardware at the bottom level • On the top, the goal of the organization and user requirements • The task of the software is to map from the one to the other • We shall distinguish between systems for procedure oriented activities and systems for goal based information work. MS Ch. 1

  17. Automation vs. support functions MS Ch. 1

  18. Framework for IS management(and for the textbook) MS Ch. 1

  19. Case: MeadWestvaco Corporation • Produces paper (as Norske Skog), chemicals, consumer and office products in United States and Canada • 1960: Centralized IT function • 1967: Decentralization of IT (the divisions established their own IT centers) • Centralized organization in six groups. MS Ch. 1

  20. Mead: Pre 1980 organisering MS Ch. 1

  21. Mead: Focus on end users (1980) • Decision Support Applications (DSA) organized user support for the whole organization (choice of system, installation, user support) • Information Services had the responsibility for traditional IT functions (network, database, development of a company wide system, etc.) • Information Resources Planning and Control had responsibility for planning future systems, the next technology, etc. MS Ch. 1

  22. Mead: Organization (1980) MS Ch. 1

  23. Mead: Leverage the IT infrastructure (1990) • Decentralization: Local experts • Application system consultants: To control the development of end user systems • All user support in one group • A network team (which also had as its task to look at network connections to suppliers and customers) MS Ch. 1

  24. Mead: Corporate Information Resource Group (1990) MS Ch. 1

  25. Mead: Hindsight (1990) • Focus on technology • Focus on internal systems • Focus on traditional products and processes • i.e., this had been a technology plan MS Ch. 1

  26. Mead: Strategic Opportunities Framework External markets Internal operations MS Ch. 1

  27. Mead: Business process reengineering • Demand significant changes • We will not find these in internal functions only • Business processes are important • Think ahead • Gave results at Mead (but not in all companies) MS Ch. 1

  28. Customer orientation • Terminals at the customers already from 1980 • EDI (Electronic Data Interchange) • Now over the Internet • eBusiness, motto: ”it is easy to do business with us” MS Ch. 1

  29. Mead: Strategy ahead • New organizational structure • Include customers and suppliers • Support reengineering • Internet as an important element in the implementation of new strategies • Web simplifies, link to Web instead of inserting and maintaining data in own databases MS Ch. 1

  30. Mead: Vision MS Ch. 1

  31. Mead: ERP (Enterprise Resource Planning) system • SAP • Considered several times, but was not found to be appropriate for the forest industry • The divisions wanted SAP • One system for the whole company • Implementation from 1999, division by division • Controlled by management, consultants from the outside (IBM) • Learnt from others • Lotus Notes in addition (just as STATOIL until now) MS Ch. 1

  32. Mead: SAP • Very big and complex • Must follow framework and rules within SAP • Defines roles (tasks), workflow between roles • Divisions looses freedom and flexibility, larger updates must now be synchronized with the whole company • Replaces proprietary systems MS Ch. 1

  33. Mead: eCommerce • Largest effect internally • The Intranet defines how Mead conducts its business processes • Web interface in existing systems • B2B - ”old wine in new bottles” • Full B2B cannot be realized before the customers are ready, i.e., before they rebuild their systems • IT is a strategic tool MS Ch. 1

  34. Mead – New structure MS Ch. 1

  35. MeadWestvaco – today • IT is 3% of their budget (0.75% in the 1970s) • Important that IT support business ideas • 4 main areas for IT investments: • Infrastructure • Standard applications • Business applications • Experimental systems • Goes with SAP MS Ch. 1

  36. Norwegian SMB companies • Two approaches to IT: • By off-the-shelf products • Develop proprietary systems • The answer is dependent of the type of company: • Standard • Niche MS Ch. 1

  37. A “standard” company • Similar to many other businesses, e.g.: • Grocer • Plumber • Power company • The competitiveness of the company is often based on its location • Can use software developed for this type of business • Advantage: Development costs are shared by many MS Ch. 1

  38. Niche company • Its competitiveness is based on its idiosyncrasy, there are few competitors • The company tries to be best within its niche • With standard software it will, at the best, just be as good as the others, i.e., IT is not a competitive factor • With proprietary software it has the possibility to be better than its competitors, i.e., IT as a competitive factor MS Ch. 1

  39. Proprietary development • Small and medium sized enterprises (SME) can reduce development costs by: • Using application tools (such as MS Access) • Employ the Office package to its limits (e.g., link between applications) • Important: IT-development must be an integrated part of BPR (Business Process Reengineering) MS Ch. 1

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