CISB444 Strategic Information Systems Planning · CISB444 Strategic Information Systems Planning ... – It b i di it d t f h f th t f b iIts business diversity and rate of change

CISB444CISB444Strategic Information g

Systems PlanningChapter 8: Strategic Management of IS/IT: Organising and Resourcing 1

Course OverviewCourse Overview

• Strategic Planning for Information Systems explores the impact• Strategic Planning for Information Systems explores the impact that information systems (IS) and information technology (IT) have on business performance and the contribution that they make to the strategic options of organisations.

• It describes tools, techniques and management frameworks to both align strategies for IS and IT with business strategy asboth align strategies for IS and IT with business strategy, as well as seek out new opportunities through innovative deployment of technology.

Chapter 8: Strategic Management of IS/IT: Organising and Resourcing 2

Course OverviewCourse Overview

• This course demonstrates why strategic planning for• This course demonstrates why strategic planning for information systems is essential to organisational success, especially in times of increasingly rapid change.

• Over the long term any organisation will get the information systems it deserves, according to the approach adopted to the use and management of IS/ITuse and management of IS/IT.

• To obtain the whole range of benefits available from IS/IT and avoid the potential pitfalls, every organisation must establishavoid the potential pitfalls, every organisation must establish the means to manage IS/IT as an integral part of its approach to strategic management.


Course ObjectivesCourse Objectives

• To provide an understanding that strategic planning for information• To provide an understanding that strategic planning for information systems is both essential and feasible.

• To demonstrate that organisation must establish a way of managing IS/IT strategically as part of the business development process in order to deliver the benefits available from IS/IT and to avoid the potential pitfalls in IS/IT implementationavoid the potential pitfalls in IS/IT implementation.

• To assess alternative approaches to developing information systems (IS) strategies.

• To highlight the importance of information as one of the organisation’s strategic resources


Chapter 8

Strategic Management of IS/IT:g gOrganising and Resourcing


Chapter 8: OverviewChapter 8: Overview

• Chapter 8 considers a wide range of aspects related to• Chapter 8 considers a wide range of aspects related to structuring and organising IS resources and the governance of IS/IT activitiesg


Chapter 8: Main TopicsChapter 8: Main Topics

• Organising strategies for IS/IT management• Organising strategies for IS/IT management• Framework guiding action• Provisioning of IS/IT resources• Provisioning of IS/IT resources• Who should manage IS/IT and where should it report?

M i th IS f ti b dl f• Managing the IS function as a bundle of resources• Bridging the gap: Improving the contribution of the IS

functionfunction


Introduction

• In order to develop an overall organisational• In order to develop an overall organisational capability to exploit IS/IT effectively over an extended period further aspects of IS/IT requireextended period, further aspects of IS/IT require coherent and consistent strategic management.


Introduction• These key strategy areas are:• These key strategy areas are:

– For managing investments in IS/IT, to deliver the maximum value in terms of benefits to the business;;

– For managing the data, information and knowledge resources of the organisation to ensure that its business

l i f ll l it d d t t dvalue is fully exploited and protected– For managing the acquisition, deployment and utilisation of

information technologies through IS/IT services to theinformation technologies, through IS/IT services, to the benefits of the organisation and relationships with technology and service suppliers


Introduction• These key strategy areas are:• These key strategy areas are:

– For organisational management of the range of IS/IT related resources, the activities they perform and the governance , y p gand administration of IS/IT, both in its unique features and in relationships with other parts of the business


Introduction

• Earl (1996) notes that it is the ‘organisational• Earl (1996) notes that it is the organisational issues in the strategic management of IT that matter most’matter most .

• Many research highlights that what distinguishes i ti th t f l ith IT i torganisations that are successful with IT is not

technical sophistication, but how they manage IS/IT t tIS/IT strategy.


The Strategic Management Requirement• Strategic management is a combination of formal• Strategic management is a combination of formal

planning, creativity, innovation, informal thinking, and opportunism, all of which must be effectively exploited pp y pand integrated.

• This set of activities also requires some feedback or control mechanism.

• Sometimes, the strategy as originally formulated has to be i it d t t i t trevisited as a new strategic context emerges

• At other times, the implementation processes have to be reconsidered in the light of the strateg itselfreconsidered in the light of the strategy itself.


Strategic Management Processes

AchieveDefineEstablishstrategic

FORMAL STRATEGIC PLANNING

Feedback Feedback

Achievestrategiesstrategies

strategicdirection

Feedback

Define mission and objectivesAssess situation and optionsand select

Strategic planning of options selected

implement


INFORMAL STRATEGIC THINKING

Avoiding the DisintegrationAvoiding the Disintegration of the Applications Portfolio

• Many organisations have suffered the• Many organisations have suffered the consequences of lack of coordination in IS/IT management, which can cause the existing and g , gpotential applications portfolios effectively to disintegrate.

• Why?– The strategic direction is disregarded as localised g g

opportunistic development and/or uncoordinated business initiatives effectively disable the overall IS/IT strategIS/IT strategy



• In the longer term this failure can have 3 major• In the longer term, this failure can have 3 major effects:

Th t th t d l d d i l t d– The systems that are developed and implemented do not meet overall business needs;R i d– Resources are misused

– Strategy formulation is essentially a retrofitting d i kprocess, producing enormous rework



• The cause can usually be attributed to 3 main• The cause can usually be attributed to 3 main reasons:– Lack of alignment between the business and ISLack of alignment between the business and IS

strategies– Uncoordinated management of IS demand and IT g

supply– Over-centralisation or decentralisation of

responsibility regarding IS/IT investments with lack of mechanisms to ensure coherence across centralised and devolved IS/IT decisions andcentralised and devolved IS/IT decisions and activities


Central Objectives of the IS/IT Management Strategy:Central Objectives of the IS/IT Management Strategy: Requirements of Strategic Management

• To ensure IS/IT strategies policies and plans reflect businessTo ensure IS/IT strategies, policies and plans reflect business objectives and strategies

• To ensure potential business advantages from IS/IT are identified and l it dexploited

• To ensure strategies, etc. are viable in terms of business risks• To establish appropriate resource levels and reconcile contention/setTo establish appropriate resource levels and reconcile contention/set

priorities• To create a ‘culture’ for the management of IS/IT that reflects the

t ltcorporate culture• To monitor the progress of business-critical IS/IT activities• To achieve the best balance between centralisation and devolvementTo achieve the best balance between centralisation and devolvement

of IS/IT decision making


Organising Strategies for IS/IT Management• Factors to consider (based on the approaches adopted for• Factors to consider (based on the approaches adopted for

information, application, and technology management):– Overall organisational alternatives and the position of IS functions g p

in the organisation– Organising options (structure and resource configuration)

All ti f d i i i ht ( t li ti d l ti )– Allocation of decision rights (centralisation versus devolution)– Resourcing strategies (both insourcing and outsourcing)

• It is most critical that the IS function is organised to satisfy• It is most critical that the IS function is organised to satisfy its customers (internal and external) requirements as well as to manage itself effectively.g y


Centralisation versus Decentralisation• Centralisation or decentralisation: getting it wrong can be very costly, but howCentralisation or decentralisation: getting it wrong can be very costly, but how

can an organisation know when it is right?• Many examples shows that swings between extreme centralisation and

decentralisation proves unsuccessful because some things are bestdecentralisation proves unsuccessful because some things are best centralised and others devolved (as discussed in Chapter 7)

• Example: in a decentralised engineering group, a very centralised monopolistic IS function was failing to provide a satisfactory servicemonopolistic IS function was failing to provide a satisfactory service.

– The management rapidly devolved IS/IT resources to the business units– Systems development virtually ceased and support for existing systems was

adversely affectedadversely affected.– Many of the best people left and at no site was there sufficient resource to achieve

major developments, while local management had no experience of running and IS group

– Gradually it was realised that some aspects of IS/IT should be recentralised to avoid duplicated expertise, avail of synergies, etc. and some aspects, reinforced by user resource investments should remain in the units.


Centralisation versus Decentralisation:Centralisation versus Decentralisation:Ideal Organisational Arrangement for IS/IT Resources

• A number of factors to consider:• A number of factors to consider:– The organisation’s dependence on IT– Its stage of maturity in terms of its application portfoliog y pp p– The geography of the enterprise, especially for organisations with

a global presenceIt b i di it d t f h f th t f b i– Its business diversity and rate of change of the types of business and competitive pressures in each business

– The potential benefits of synergy between businesses in both p y gytrading goods and services and information exchange

– The economics of resourcing, obtaining and deploying skills


Centralisation versus Decentralisation• Study by La Belle and Nyce (1987) concluded:Study by La Belle and Nyce (1987) concluded:

– Business units should be responsible for applications:• Architecture• Development• Development• Operation

– Certain areas should be centralised:• Telecommunications• Hardware and software architecture• Information architecture• Risk management and security• Shared services and utilities• Human resources

– In each of these areas, the central IT group would be able to assist, advise and, if necessary, control the activities of the business units where they could provide improved economies or supply-related options and/or


demonstrate added value from corporate synergy (See Table 8.2).

Centralisation versus Decentralisation• Other factors to consider:• Other factors to consider:

– Geographically dispersion level of the organisation – The degree to which information is a shared businessThe degree to which information is a shared business

resource– How closely technologies need to be coordinated

• In addition, where there are potential benefits to the organisation as a whole that are greater than the sum of

( f )the parts (of the business units), then some planning and coordination at the centre can add value to ensure that these additional benefits are achievedthese additional benefits are achieved.


Balancing IS Demand and IT Supply

Federal• Vision and leadership: themes• Group-wide IT strategy for core infrastructure• Strategic accountability to stakeholders• Strategic accountability to stakeholders• Synergy/Exploitation mechanisms

Decentralised Centralised U iDecentralised- Excessive overall cost- Variable standards of

IS/IT competence

- Users control IS priorites- Business unit ownership- Responsive to changing

Centralised- Economies of scale- Control of standards- Critical mass of skills

- Unresponsive- No business ownership

of systems- No business

- Reinvention of wheels- No synergy or integration

business needs accountability for cost- Does not satisfy all

business needs

See also Table 8 3 page 352


See also Table 8.3 page 352

Imperatives for the Management of IS/IT• Rockart et al (1996) suggested a number of imperatives• Rockart et. al (1996) suggested a number of imperatives

for the new IS function to take account of the changing business and technical environment:– Achieve two-way alignment between the business and IS/IT

strategyD l ff ti l ti hi ith li t– Develop effective relationships with line management

– Deliver and implement new systems– Build and manage IT infrastructureBuild and manage IT infrastructure– Reskill the IS function with new competencies and knowledge– Manage vendor partnerships– Redesign and manage the federal IS organisation


Imperatives for the Management of IS/IT• Venkatraman (1997) proposed that IT resources should be managedVenkatraman (1997) proposed that IT resources should be managed

as a value centre.– The value centre is an organising concept that recognises 4

i t d d t f l f ITinterdependent sources of value from IT resources:• Cost centre

– Operational focus, emphasis on operational efficiency, good y gcandidates for outsourcing

• Service centre– Aims to create an IT-enabled business capability to support currentAims to create an IT enabled business capability to support current

strategy

• Investment centre– Long term focus aims to create new IT-based business capabilities– Long term focus, aims to create new IT-based business capabilities

• Profit centre– Designed to deliver IT services to the external marketplace


Imperatives for the Management of IS/IT

• IS Lite:– With this structure for the management of g

IS/IT:• much conventional IS/IT work is either outsourced

or embedded in the business, • the IS function remain as an intermediary to perform

an important value-adding service between suppliers and users.



• Gartner (2000) have identified 5 key competencies of IS Lite:– IT leadership

• Includes IT envisioning, fusing IT strategy with business strategy and managing IS resourcesstrategy, and managing IS resources

– Architecture development• Concerned with developing a blue-print for the overall ITConcerned with developing a blue print for the overall IT

technical design

– Business enhancement• Includes business process analysis and design, project

management, and managing relationships with users



• Gartner (2000) have identified 5 key competencies of IS Lite:– Technology advancement

• Application design and development

V d t– Vendor management• Includes managing and developing relationships with vendors

and suppliers, negotiating and monitoring contracts andand suppliers, negotiating and monitoring contracts and purchasing


A Framework Guiding Action:A Framework Guiding Action:What Needs to be Managed? – Examples of IS Activities

• Strategy and planning services• Strategy and planning services– IS strategy development– IT strategy developmentgy p– IT planning and resource development– New technology options ‘evaluation’ (technology road map)– ‘Account’ management– Consultancy/business analysis

Contingency planning– Contingency planning– Capacity planning– New service developmentp



• Application development services• Application development services– System analysis– Systems designy g– Package evaluation– Systems implementation– Programming and software development– Software acquisition

Project management– Project management– Information management



• Application and technical servicesApplication and technical services– Training– Application maintenance and change control– First line user-support/problem resolution– Advice centre– Security/access controlSecurity/access control– Information procurement

• Technology delivery and maintenance services– Installing, PC, servers, cables– Keeping network running– Maintenance of hardwareMaintenance of hardware– Upgrading software/version control– Supplier and contracts management


A Framework Guiding Action• In deciding on the organisation of IS/IT resources 2 keyIn deciding on the organisation of IS/IT resources, 2 key

issues must be considered:– Location of IS/IT decision rights regarding IS/IT activity in the

i tiorganisation. • What to centralised or devolved?• Need to define authority, responsibilities, policies, coordinating

h i d l dmechanisms, and control procedures.– Sourcing of IS/IT resources.

• Traditionally most IS/IT resources were provided from an in-house y pfunction under its direct control.

• Now there are a range of sourcing options.• Even if an IT activity is deemed business critical, it does not mean y

that all its elements have to be kept in-house.• This interorganisational arrangement places new stresses in the

management of IS/IT resources, demanding additional coordination d d l ti hi t


and vendor relationship management

A Framework Guiding Action:A Framework Guiding Action:Trade-offs in the Organisation and Resourcing Of IS/IT

Distributed

Location ofLocation of decision rights

TraditionalIS function

Centralised

Provisioning of IS resources

Internal Interorganisational


Provisioning of IS/IT Resources

• Insourcing• Insourcing– Most IS/IT resources have traditionally been provided in-

house by a central IS functiony• Outsourcing

– Many organisations have looked to the market to provide y g pthem with the IS/IT resources that the business requires

– Definition (Clark et al., 1998): “the delegation, through a t t l t f ll t f th t h i lcontractual arrangement, of all or part of the technical

resources, the human resources and the management responsibilities associated with providing IT services, to an p p g ,external vendor”


Provisioning of IS/IT Resources

• Outsourcing rationales:• Outsourcing rationales:– Financial and economic reasons– Technical reasons

Business reasons– Business reasons


Classifying Sourcing Options

• Contract out strategy• Contract out strategy– Vendor is responsible for delivering the results of IT activity:

strictly outsourcing contractsy g• Buy-in strategy

– Organisation buying in resources from the external market, g y goften to meet a temporary requirement. Contracts often specify the skills required and cost, with the resources then managed in housemanaged in-house


Classifying Sourcing Options

• Preferred contractor strategy• Preferred contractor strategy– Organisations contract long term with a vendor to reduce

risk, with the vendor responsible for the management and , p gdelivery of an IT activity or service: strictly outsourcing contracts

P f d li t t• Preferred supplier strategy– Takes the buy-in approach further, with an organisation

seeking to develop a long term close relationship with aseeking to develop a long-term close relationship with a vendor in order to access its resources for ongoing IT activities. The organisation, not the vendor, takes responsibility for managing these resources


Who Should Manage IS/IT and Where Should it Report?:Consequences of Locating Overall Authority for IS/IT

Plusses Minuses

IT directors/CIOs Technical expertiseAccurate systems

IT not alignedEducation omitted

Sound technologySystems integration

Information overloadTechnical solutions

Finance directors Tight cost controlDepartment coordination

Not always best value for moneyInsufficient time to devote to ITDepartment coordination

Training costs integratedStrict authorisation

Insufficient time to devote to ITOpportunities missedShort-term approach

Business-unit head IT investments linked to the business directionL ll f d t

Systems not coordinatedI tibilit b i itLocally-focused systems

Continuous developmentShorter reporting structure

Incompatibility across business unitsDuplication of dataUnnecessary costs incurred

Board of directors Strategic direction Logistical details omittedAppreciation of broader impact of decisionsMajor problems tackledFunding allocated

IS/IT underexploitedInfrastructure weakSlow to exploit technology


See also the evolution of the role of the CIO across the main technology shifts, Table 8.7

5 Critical Roles for the Success of Today’s CIO

• Leadership• Leadership– Ability to create a set of value expectations shared across all areas of the

business – one sensitive to the realities of competency, competition, and culture

– Ability to deliver on those expectations measurably. CIOs must understand and express IT’s value in a way that’s meaningful to all executives.

• Visionary• Relationship builder• Politician• Deliverer


Profile of the CIO Who Adds Value• BehaviourBehaviour

– Is loyal to the organisation– Is open in management style– Is perceived to have integrityIs perceived to have integrity

• Motivation– Is goal oriented

Comfortable as a change agent– Comfortable as a change agent– Creative and encourages ideas

• CompetenciesI l /f ili– Is a consultant/facilitator

– Good communicator– Has IT knowledge– Able to achieve results through others

• Experience– Sound experience in an IS development role (especially in systems analysis)


Bridging the Gap Between the IS Function and theBridging the Gap Between the IS Function and the Rest of the Business

• Get the basics right• Enlist key influencers• Build credibility• Seek involvement early in projectsy p j• Place responsibility for IS with the business• Cultivate and maintain partnershipCultivate and maintain partnership



• Stage 1: Get the basics right– IT leadership– Get business focussed– Focus on internal quality of IT organisation– Examine internal structures and processes– Define value-added aspect of IS/IT– Get buy-in and commitment from all IS staff



• Stage2: Enlist key influencers– get key influencers on board– agree role of the IT organisation– listen to the business– define key priority areas– establish relationship roles within IT organisation– establish service level agreements– open communication channels



• Stage3: Build credibility– build a dialogue with business– address values and beliefs of business management– demonstrate business value– initiate education programme to address ‘mindset’

blockages– initiate internal marketing programme



• Stage 4: Seek involvement early in projects– focus on benefits delivery

ensure IT involvement early in business projects and vice versa– ensure IT involvement early in business projects and vice-versa• Stage 5: Place responsibility for IS with the business

– move responsibility for IS demand out into the businessp y– reframe IS/IT governance structure– create IT/business processes– define informational roles

• Stage 6: Cultivate and maintain partnership h i ti l i ti– emphasis continual communication

– revisit previous stages


Chapter 8 CompleteChapter 8 Complete


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CISB444 Strategic Information Systems Planning · CISB444 Strategic Information Systems Planning ... – It b i di it d t f h f th t f b iIts business diversity and rate of change