IT Infrastructure Introduction, Chapters 1 & 2

1. IT InfrastructureIntroduction, Chapters 1 & 2 INFO 410 Glenn Booker Images are from the text author’s slides Chapters 1-2

2. IT and business • Information Technology (IT) has had a strained relationship with the business world • Opportunity but uncertainty • Advantage but risk • This course examines their relationships through a series of case studies • IT is a tool, which like any other, can be helpful or misused or ignored Chapters 1-2

3. Scope of IT • US$2 trillion spent on IT worldwide in 2007 • Continued rapid spending growth • Truly global spending distribution • Increasing dependence on, and impact of, IT • Search for opportunity • Avoidance of operational risk Chapters 1-2

4. IT background • IT has evolved at lightning speed compared to business practices • 1950’s first mainframe computers • 1960’s mainframes become common backend tools • 1970’s minicomputers start to appear • 1980’s the first personal computers (microcomputers) Chapters 1-2

5. IT background • 1990’s PCs flourish, and the Internet goes mainstream, leading to the Internet boom/bust • 2000’s can’t exist without computers and the Internet • The role of IT therefore started in the back office, and has become prominent in all aspects of daily business • Name a big business that doesn’t use computers! Chapters 1-2

6. Effects of the IT revolution • As a result, location matters far less • The 1960’s concept of the ‘global village’ is far more true than ever imagined • Virtual organizations easy to establish • Challenges the definition of a organization • Bad part – interdependency has resulted in things like the global financial collapse • Systems are almost impossible to isolate Chapters 1-2

7. Rapid change • With the computer revolution, change occurs much faster than ever possible before • Not just in systems, such as architecture, interfaces, etc. • But also in organizational structures, businesses • Workforce composition and skills Chapters 1-2

8. The challenge • The old ways don’t work, so we need to experiment with new approaches • Before moving forward, helps to understand where we’ve been • Avoid repeating past mistakes • Learn insights from brave new views • That’s why this course is based on case studies Chapters 1-2

9. The CIO viewpoint • The text is for an advanced MIS course • Critical for us to understand not only the technology, but also the business world’s view of it/IT • Business leaders and technical execs often speak different languages, have different priorities • Business thinks IT doesn’t understand their problems; IT thinks business leaders lack vision Chapters 1-2

10. IT is everywhere! • IT now forms the foundation for fundamental business models, industries, markets, strategies, and organizational structures • Wise use of IT can establish competitive advantage, or create products or services that wouldn’t exist without it • IT is an enabler, and primary business channel for many businesses Chapters 1-2

11. Text outline • Module 1 (Ch. 1-4) focus on the executive view of IT, and how it relates to the business model (strategy, capabilities, and value) • Module 2 (Ch. 5-8) looks at how IT affects business operations – what is its impact on how business can be done? • Module 3 (Ch. 9-10) looks at how IT leadership at a strategic scale Chapters 1-2

12. Where do I go? • So we need to understand our foundation – the IT revolution • Learn from its successes and failures • See what we can measure and control to use IT effectively • What decisions do we need to make about the IT we use? How can IT help us make wise business decisions about our organization? Chapters 1-2

13. Chapter 1 - Understanding Business Models Chapters 1-2

14. What is a business model? Chapters 1-2

15. What does that mean? • What environment is relevant? • What are examples of a business strategy? • What kind of capabilities do we mean? • What resources are needed? • Who are the stakeholders? • How do you measure value? Chapters 1-2

16. Dot bust • The Dot Com boom (circa 2000) went bust because of many unsustainable business models • Lots of expenditures, no revenue! • Nevertheless, following a business model is a good thing • New technologies can create new models Chapters 1-2

17. Business model • “A business model … forms the foundation for how executives make decisions about opportunities to pursue, businesses to launch or buy, activities to perform, talent to hire, and ways to organize to deliver value to stakeholders” (text, page 43) Chapters 1-2

18. Business model components • As noted earlier, a business model consists of three main dimensions • Strategy • Capabilities • Value Chapters 1-2

19. Analyzing Strategy • Strategy covers the scope of your business – what do you sell, what services do you offer, what markets are you in, how can people tell you from other companies? • Business context – what business are you in? • Who are your customers? • What competitors and substitutes are there? • What is your supply and distribution network? Chapters 1-2

20. Analyzing Capabilities • Capabilities are the collection and use of resources needed to achieve the strategy • Essentially, the stuff needed to be in business • Capabilities include • Processes and infrastructure • People and partner organizations • Organization and culture • Leadership and governance Chapters 1-2

21. Analyzing Value Created • Who benefits from value created by an organization? • Are there types of value not financial? • Economic value often expressed by various measures • ROE, earnings per share, ROI, etc. Chapters 1-2

22. Analyzing Value Created • Typical tasks to determine value created • Identify all stakeholders, their interests and expectations • How do they affect your ability to find & serve customers? • Analyze the business model for strengths and weaknesses (SWOT); which affect value? • Develop a financial model, and compare to similar businesses; how much uncertainty is there? Chapters 1-2

23. Business model connections Chapters 1-2

24. Business model concepts • What’s ROE? • Fish eggs? A Supreme Court ruling from 1973? • What is asset efficiency? Chapters 1-2

25. The DuPont Formula for ROE Chapters 1-2

26. ROE components • What are income, revenue, and assets? • What is shareholder’s equity? • What’s a typical or good value for profit margin? • What does leverage mean? • What does ROE boil down to, as an equation? Chapters 1-2

27. Business model evolution - Amazon Chapters 1-2

28. Business model evolution • Business models can change to accommodate changes in technology, culture, Presidents, etc. • What do these dimensions mean, markets versus products? • Is change good or needed? Chapters 1-2

29. Business model evolution • Major approaches to changes in business model • Enhance; small improvement to existing strategy or capability • Expand into new products, markets, or capabilities • Explore new businesses or capabilities • Exit a product, market, or capability Chapters 1-2

30. How does IT fit in the business model? Chapters 1-2

31. IT influence on structure and relationships Chapters 1-2

32. IT influence on structure and relationships • What kind of structure are we talking about? • Relationships to whom or what? • What role does IT play in changing both of these dimensions? Chapters 1-2

33. How to do a case study From http://plato.acadiau.ca/courses/Busi/IntroBus/CASEMETHOD.html Chapters 1-2

34. What is a case study? • A case study focuses on a decision to be made or a problem to be solved • Could be entirely real, or partly disguised (“based on a true story”) • Often written from the view of the manager • Might examine the decisions actually made, but often asks what you would do Chapters 1-2

35. What’s the “right answer?” • In case studies, there is often no single correct answer • This is based on you exploring the case, then reaching a conclusion about what to do and WHY • Your rationale is just as important as your conclusion, if not more so! Chapters 1-2

36. Our approach for case studies • We’ll do case studies in groups of two or three people • You pick with whom you’ll work Chapters 1-2

37. Preparation is critical • The key for case studies lies in your preparation • Key for preparing for case studies is to read them several times • Once for the general idea • Again to look for key problems and decisions • And again to see how those challenges were handled, or could be handled differently Chapters 1-2

38. The Short Cycle process • Each case study will start with the short cycle process, a quick overview • Read the case study, or skim it if it’s long • Answer the four questions in the handout • Look at the exhibits (data tables). What questions do you have about them? • Review the questions I’ve provided for the case study, if any Chapters 1-2

39. The Long Cycle process • Now for the real work, the long cycle process • Read the full case study, looking for:Introductory materialBackground and contextWhat functional areas are affected?What is the problem or decision?What alternatives or choices are there? Chapters 1-2

40. The Long Cycle process What conclusion did the case study reach? • Then analyze the case studyDefining the issue(s)Analyzing the case dataGenerating AlternativesKey Decision CriteriaEvaluation of AlternativesRecommendation Chapters 1-2

41. Write up the case study • Use the suggested outline • Each section can be brief – a couple sentences, or paragraphs, but should be clearly stated and well thought out • Keep attention on where and how IT plays a role in business processes and the decisions made • You’ll want to have two copies – one to turn in, and one to keep for reference during class Chapters 1-2

42. Write up the case study • Keep in mind basics of formal writing • Make it look clean and professional • Use third person – no “I,” “we,” “our” • Don’t restate the case study, except specific facts to back up your opinion • Check each others’ work • Use the Writing Center for help if your writing is poor; which means you’ll need to plan ahead! Chapters 1-2

43. Chapter 2 - IT Impact on Business Models Chapters 1-2

44. Chapter 2 objectives • See how IT can impact the business model through its effects on strategy and/or organizational capabilities • Analyze the potential of IT to create strategic opportunities • Evaluate IT as a potential source of strategic risk Chapters 1-2

45. IT becomes visible • IT has emerged from being a back office automation tool, to play a major role in strategic opportunities, and establish the capability needed to achieve them • All kinds of IT investment; computers, communications, software, services, and staffing • But about 40% of IT investments fail to achieve their intended return Chapters 1-2

46. Reward for performance • Executive pay is often linked to company performance • Correspondingly, IT investments are often linked to the projected benefit to business performance • Can show the intent of IT changes in terms of strategy and capabilities using an IT Impact Map Chapters 1-2

47. IT Impact Map • Two central dimensions • What is the core strategy of an organization? • What are the core capabilities of an organization? Chapters 1-2

48. IT Impact Map for IBM Chapters 1-2

49. IT Impact Categories • Incremental (or Local) Improvement – use IT to improve local performance of the business • Tends to be low risk, and locally administered • Business Process Design/Reengineering – use IT to improve operating processes • Affects entire business unit and suppliers • Riskier, often involves major process changes, integration with old ways, and org changes Chapters 1-2

50. IT Impact Categories • Emerging Opportunities – use IT to launch new products, enter new markets, or start new businesses • Very risky, so needs executive support • May involve new technologies • Business Transformation – reinvent the organization and strategy, maybe industry • Huge risk, hard to connect to previous business Chapters 1-2