Strategic Planning
for Information
Systems
Third Edition
John Ward and Joe Peppard
CHAPTER 8
Strategic Management
of IS/IT: Organizing
and Resourcing
1
Outlines
• Organizing strategies for IS/IT
management
• Models and framework for guiding
management action
2
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
3
development of IS/IT decision making.
Traditional IT Organization
IT
Executive
Finance and
admin.
Consulting
Plans and
control
Plan
Development
Service
Systems
development
Operational
services
Implement
Deliver
4
Source: Luftman
Centralization
CIO
Administration
Systems
Development
Operations
Planning
Design
Data Centers
Research
Programming
Telecomm.
HR
Maintenance
Help Desk
...
...
Data
Management
...
...
...
5
Source: Luftman
Decentralization
CEO
CIO
VP Finanace
VP Marketing
VP Product ABC
VP Product XYZ
Function 1
Function 1
Function 1
Function 1
Finance IT
Marketing IT
ABC IT
XYZ IT
6
Source: Luftman
Federal or Hybrid
CEO
CIO
VP
Finance
Systems development
for finance
VP PLA
Systems development
for product line A
VP PLB
Systems development
for product line B
Administration
Operations
7
Benefits of Federal Model
IT vision
and
leadership
Scale
economics
Leverage
standards
and tools
Unresponsive
No BU ownership
No BU control of central
Control
overhead $
architecture
Does NOT meet every
BU need
Critical mass
of skills
Centralized IT
-
+
Users control
IT priorities
Excessive $ to group
BU ownership Variable standards of IT
competence
Responsive to Reinvention of wheels
BU’s needs No synergy and
integration
Strategic control
synergy
+
Decentralized IT
-
8
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
9
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’
10
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
11
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
12
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
13
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
14
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
15
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
16
Summary of Structural Arrangements
for IS Function in Multiple BUs
Structural arrangements Strategies for managing
for the IS Function
IS/IT activities
Advantages
Critical management
issues
Independent IS/IT · BUs pursue
· BUs have ownership · Integration
activities in business
independent system · Users control IS/IT · Lack of quality control
units
initiatives
priorities
of data
· Responsive to BU’s · Variable standards of
needs
IS/IT competency
· ‘Reinvention of wheels’
and duplication of
effort
· Little synergy across
Bus
· Managing cost
Centrally-driven IS/ · Corporate wide
IT activities
IS/IT solutions
imposed on BUs
· Scale economics
· Politics
· Control of standards · Unresponsive
· Critical mass of skill · Does not meet every
Bus’ needs
17
· Effect on customer
Cont..
Structural arrangements Strategies for managing
Advantages
for the IS Function
IS/IT activities
Critical management
issues
· Awareness of IS/ · Coordination &
· Informal social
Informal
IT issues across
networking b/w the
cooperation in IS/
direction setting
the enterprise
centre & Bus
IT activities across
· Leaving too much to
BUs
· Usually brought about
chance
by movement of key
IS/IT personnel
across BUs
‘Federalism’
(integrated IS/IT)
·
· Balancing central
control & BU autonomy
without losing the
advantage of global
coordination &
integration
Group-wide IS/IT
strategy &
architecture with
devolution where
appropriate
·
·
·
·
Complexity
Execution
Timing
Defining ‘where
appropriate’
18
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
19
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.
20
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 ITenabled business capability to support
current strategies.
21
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 worldclass IS function.
22
Imperative for the Management
of IS/IT: Gartner Group
1
2
3
4
5
IT Leadership
Architecture
Development
Business
Enhancement
Technology
Advancement
Vendor
Management
Supply
side
1
Demand
side
2
3
4
Embedded
in the
business
5
Outsourced to
external
service
providers
23
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 24
and purchasing.
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
25
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
26
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.
27
Trading-offs in the Organization
and Resourcing of IS/IT
Distributed
Location of
decision
rights
Traditional
IS function
Centralized
Internal
Interorganizational
Provisioning of
IS resources
28
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
29
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)
30
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
31
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.
32
Enabling and Restraining Policies
• 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
.
.
.
33
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.
34
Outsourcing Rationales
• Financial and economic reasons
• Technical reasons
• Business reasons
35
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.
36
Classifying Sourcing Options
Resource
BUY IN
PREFERRED
SUPPLIER
CONTRACT
OUT
PREFERRED
CONTRACTOR
Purchasing
focus
Result
Transaction
Relationship
Purchasing
style
37
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.
38
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.
39
When to Outsource
•
•
•
•
•
Position on the strategic grid
Development portfolio
Organizational learning
A firm’s position in the market
Current IT organiztion
40
Position on the Strategic Grid
IT Impact on Core Operations
High
Factory- uninterrupted service-oriented
information resource management
Outsourcing presumption: Yes, unless
company is huge and well managed
Strategic information resource management
Reasons to consider outsourcing:
· Possibilities of economies of scale for small
and midsize firms
· Higher-quality service and backup
· Management focus facilitated
· Fiber-optic and extended channel technologies
facilitate international IT solutions
Reasons to consider outsourcing:
· Rescue an out-of-control internal IT unit
· Tap source of cash
· Facilitate cost flexibility
· Facilitate management of divestiture
· Provide access to technology applications and
staffing skills otherwise not available
Support-oriented information resource
management
Outsourcing presumption: Yes
Turnaround information resource
management
Reasons to consider outsourcing:
· Access to higher IT professionalism
· Possibility of laying off is of low priority and
problematic
· Access to current IT technologies
· Risk of inappropriate IT architecture reduced
Reasons to consider outsourcing:
· Internal IT unit not capable in required
technologies
· Internal IT unit not capable in required project
management skills
· Access to technology applications and staffing
otherwise not available
Low
Outsourcing presumption: Mixed
Outsourcing presumption: Mixed
IT Impact on Core Strategy
High
41
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
42
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.
43
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
44
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
45
Who should Manage IS/IT and
Where should IT Report
Pluses
Minuses
IT
• Technical expertise
directors • Accurate Systems
• Sound technology
• Systems integration
• IT not aligned
• Education omitted
• Information overload
• Technical solutions
Finance • Tight cost control
directors • Department
coordination
• Training costs
integrated
• Strict authorization
• Not always best value
for money
• Insufficient time to
devote to IT
• Opportunities missed
• Short-term approach 46
Cont…
Pluses
Business • IT investments linked to
-unit
the business direction
head
• Locally-focused systems
• Continuous development
• Shorter reporting
structure
Board of
directors
• Strategic direction
• Appreciation of broader
impact of decisions
• Major problems tackled
• Funding allocated
Minuses
• Systems not
coordinated
• Incompatibility across
BUs
• Duplication of data
• Unnecessary costs
incurred
• Logistical details omitted
• IS/IT underexploited
• Infrastructure weak
• Slow to exploit
technology
47
Changing Role of the CIO
Application portfolio
• Mainframe era
– Transaction processing-automation for
efficiency
• Distributed era
– Knowledge-worker support,
interorganizational systems, ERP systems
• Web-based and Internet era
– Electronic commerce, knowledge
management, virtual organizations, supply
chain re-engineering
48
Cont…
Senior business executive attitudes to IS/IT
• Mainframe era
– IT for cost displacement and automation
• Distributed era
– Increased involvement in IT issues and governance
– Polarization of attitudes: IT as strategic asset or cost
to be minimized
• Web-based and Internet era
– IT, particularly the Internet, viewed as
transformational
– IT investments now more attractive in terms of costs
and timescales
– IS/IT now part of ongoing business conversation
49
Cont…
Input to business
• Mainframe era
– Advisor on ‘How to do’, not ‘What to do’
• Distributed era
– Access to senior executives
– Invited ‘seat at table’
• Web-based and Internet era
– Member of executive team having a ‘seat at the table’
– Helps define ‘what to do’
50
Cont…
Major tasks
• Mainframe era
– On-time delivery
– Reliable IT operations
• Distributed era
– Manage IS function
– Provide infrastructure
– Manage vendors
• Web-based and Internet era
– Jointly develop business/IT model
– Introduce management processes that leverage
technologies, particularly the Internet
51
Role
• Mainframe era
Cont…
– Functional head
– Operational manager
– Deliver on promises
• Distributed era
–
–
–
–
Strategic partner
Relationship builder
Technology advisor
Align IS/IT with business
• Web-based and Internet era
–
–
–
–
Visionary
Relationship builder
Technology opportunist
Drive and shape strategy
52
5 Roles for the Success CIO
•
•
•
•
•
Leadership
Visionary
Relationship builder
Politician
Deliverer
53
Leadership: Characteristics
• Broad business and organizational
knowledge
• Broad set of relationships in the firm and
the industry
• Excellent reputation and a strong track
record in a broad set of activities
• Keen mind and strong interpersonal skills
• High integrity and personal values
• High level of motivation
54
Leaders VS Managers
Vision
A sensible and appealing
picture or the future
A logic for how the vision
can be achieved
Leaders define
WHAT
Strategies
Plans
Managers
define HOW
Specific steps and timetables
to implement the strategies
Plans converted into financial
projections and goals
Budgets
55
Profile of the CIO
• Behavior
– Is loyal to the
organization
– Is open in management
style
– Is perceived to have
integrity
• Motivation
– Is goal oriented
– Comfortable as a
change agent
– Creative and
encourages ideas
• Competencies
– 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 system
analysis)
56
Coordinating Mechanisms for the
Strategic Management of IS/IT
• Steering group or committee
• Reasons
– Ensuring top management involvement in IS
planning
– Ensuring the fit b/w IS and business strategy
– Improving communication with top and middle
management
– Changing user attitudes to IT
57
Causes of the Problems with
Steering Committee
• The wrong people involved
• The activities of the steering committee
and the decisions taken have to be
integrated with the overall strategy
processed in the business.
• The committee has no infrastructure to
support it and carry out its actions which
become the strategy.
58
Steering Organization for IS/IT
Strategic Management
BUSINESS-LED
BUSINESS
(or functional)
IS STRATEGY
GROUPS
APPLICATION
MANAGEMENT
GROUPS
DEMAND
MANAGEMENT
EXECUTIVE
STEERING
GROUP
IT-LED
IT STRATEGY
GROUP
SERVICE
MANAGEMENT
GROUPS
TECHNICAL
MANAGEMENT
GROUPS
SUPPLY
MANAGEMENT
59
Responsibilities:
Executive Steering Group
• Interpreting business strategy and
agreeing overall IS/IT policies
• Establishing priorities, agreeing resource
and expense levels, authorizing major
investments
• Ensuring that strategic applications
achieve their objectives
• Establishing the appropriate organizational
responsibilities and relationships
60
Responsibilities:
Business IS Strategy Groups
• Identifying business needs, interpreting
CSFs, assessing opportunities and threats
and IS implications in that business area
• Prioritizing, planning and coordinating IS
activities and expenditure in the area and
ensuring planned benefits are delivered
• Ensuring appropriate user resources are
allocated to projects and appoint
application managers
61
Responsibilities:
IT Strategy Group
• Interpreting IT trends and developments in the
context of the organization’s business
• Ensuring resources are deployed to meet
business priorities
• Developing IT resources and services in line
with business IS plans and monitoring the
performance of those resources
• Managing the supply of technology and
specialist bought-in services
• Ensuring technical risks are minimized
62
Responsibilities:
Application Management Groups
• Identifying and specifying the needs, benefits,
business resources and costs of applications to
enable management to evaluate investments
and set priorities
• Managing developments and ongoing use of
systems to ensure benefits are maximized
• Ensuring business changes necessary to get the
benefits carried out
• Ensuring that user resources are made available
as needed and used effectively on projects
63
Responsibilities:
Service Management Groups
• Translating business needs into technical
requirements and resource implications
• Selecting the optimum means of meeting the
business needs
• Monitoring performance against budgets/service
levels agreed with the business
• Ensuring technical solutions are tested and
quality assured to avoid application failure
• Planning the development of services and
resources to meet evolving demands
64
Responsibilities:
Technology Management Groups
• Understanding technology development,
formulating options and communicating the
implications
• Assessing the capabilities of the technologies
against known and potential needs
• Planning and managing infrastructure
developments and migrations to minimize the
risk to business applications
• Resolving technical issues/problems with
suppliers and ensuring service groups are
effectively supported
65
Managing the IS Function
• 3 enduring challenges in the exploitation of
IT
– The challenge of business and IS/IT vision is
to address the need for two-way alignment
b/w business and technology
– The challenge of delivery of IS services at low
cost and high quality is being transformed by
the evolving, vibrant service market
– The challenge of IT design architecture – the
choice of technical platform on which to
mount IS services
66
Core IS Competencies
IS/IT leadership
Integrating IS/IT effort with business
purpose and activity
Business
system thinking
Envisioning the business process that
technology makes possible
Relationship
building
Getting the business constructively
engaged in IS/IT issues
Architecture
planning
Creating a coherent blueprint for a
technical platform that responds to
current and future business
Making
Rapidly achieving technical progress by
technology work one means or another
67
Cont..
Informed buying Managing the IS/IT sourcing strategy that
meets the interests of the business
Contract
facilitation
Ensuring the success of existing
contracts for IS/IT services
Contract
monitoring
Protecting the business’s contractual
position, current and future
Vendor
development
Identifying the potential added value of
IS/IT service suppliers
68
Other Framework for IS
Competencies
Strategy
Define the IS
Capability
Define the IT
Capability
Exploitation
Supply
Deliver
solution
69
Cont…
• Strategy: the ability to identify and evaluate the
implications of IT- based opportunities as an
integral part of business strategy formulation
and define the role of IS/IT in the organization.
• Define the IS contribution: the ability to translate
the business strategy into processes,
information and system investments and change
plans that match the business priority- IS
strategy
• Define the IT capability: the ability to translate
the business strategy into long-term information
architecture, technology infrastructure and
resourcing plans that enable the implementation
of the strategy- IT strategy
70
Cont…
• Exploitation: the ability to maximize the benefits
realized from the implementation of IS/IT
investments through effective use of information,
applications and IT services.
• Deliver solutions: the ability to deploy resources
to develop, implement and operate IS/IT
business solutions that exploit the capabilities of
the technology.
• Supply: the ability to create and maintain an
appropriate and adaptable information,
technology and application supply chain and
resource capacity.
71
Cont…
Strategy
• Business strategy
• Technology innovation
• Investment criteria
• Information governance
Define the IS contribution
• Prioritization
• IS strategy alignment
• Business process design
• Business performance
improvement
• Systems and process innovation
Define the IT capability
• Infrastructure development
• Technology analysis
• Sourcing strategy
Exploitation
• Benefit planning
• Benefit delivery
• Managing change
Deliver solutions
• Applications development
• Service management
• Information asset management
• Implementation management
• Apply technology
• Business continuity and security
Supply
• Supplier relationships
• Technology standards
• Technology acquisition
• Asset and cost management
72
• IS/IT staff development
Mapping Location of Resources
against IS Components
Resources from IS function
Technology
focused
Supply
Define the IT
capability
Deliver solutions
Exploitation
Define the IS
contribution
Strategy
Resources from ‘the business’
Business
focused
73
IS Competencies
74
Hygiene Factors for Keeping Key
Staff
• Training new recruits from school or university,
which is expensive
• Recruiting experienced staff from other
organizations, which can be risky
• Training existing non-IS people, especially in
application skill in user areas, which may require
the development of new job roles
• Using external resources, either on a short-term
basis to overcome peak loads, or long-term to
provide the organization with particular skills
75
Use of Resources
STRATEGIC
HIGH POTENTIAL
Technology
specialist
Users
Train users in
application-based
skills (use own
resources)
IS/IT professionals
Recruit
and/or train
specialists
Buy in expert help
and transfer
knowledge
Train users in
exploitation of
package software
to displace IT
professionals
Users
Outsource to
release resources
KEY OPERATIONAL
SUPPORT
Application service provider
Facilities management
Contractors
Software development
76
Keen’s 4 Major Role Categories
• Business services – requiring strong
business, organizational and planning
skills
• Business support – business and
organizational as well as some technical
skills
• Development support – strong technical
and good business skills
• Technical services - strong technical skills
77
Managing Relationships: 3 Key
Relationships (Venkatraman & Loh)
• With outside IT suppliers, who will inevitably do
increasingly more of the work through
outsourcing arrangement.
• With the business managers and system users,
to enable the business to identify and realize the
benefits from the applications investments and
to obtain maximum value from the services
provided.
• With IT specialists in other companies,
especially trading partners
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Internal Organizational Relationships
• Organizations contain subcultures often
associated with functional specialism or
geographical location.
• These subculture can be dyfunctional.
• IT as a functional specialism has introduced new
subculture and one that is often difficult to
reconcile with the dominant culture in the
organization.=> culture gap
• This implies that the viability of the IS strategy
will depend on the extent to which it is derived
from the ‘shared values’ of those who have to
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implement the strategy.
6 Staged Model Regarding
Shared Value
Stage 1
Adhocracy
Very few shared values since the focus of IT is
internal and they are unable or unwilling to
seek a coherent relationship with the business.
They relate more closely to IT supplier
Stage 2
‘Starting the
foundations’
The ‘priesthood’ of IT begins to develop and IT
staff perhaps cultivate a unique culture based
on technology worship – often seriously at
odds with the business
Stage 3
‘Centralized
dictatorship’
When IT management often reacts to business
managers’ concern over ‘excessive spending’
on IT and views of poor delivery performance
by becoming defensive and exerting control
over what it does to redress the balance
80
Cont…
Stage 4
‘Democratic
dialectic and
cooperation’
IT specialists recognize the need to work in
cooperation with business managers
toward achieving business goals, but still
expect the business to cooperate with IT’s
set of values
Stage 5
‘Entrepreneurial
opportunity’
Recognition in the business that IT can
deliver new, potentially strategic, benefits
through innovative use often leaves the IT
department looking after the legacy and
struggling to provide any value to the newly
‘liberated’ users
Stage 6
‘Integrated
harmonious
relationship’
Rarely achieved, due to the difficulties in
reconciling differing values, overcoming
historical precedents and prejudice, and
requiring a new openness in all aspects of81
IT activity
Bridging the Gap
CEO
The
business
Leadership
Structure and
Processes
Roles
CIO
IS
Function
Relationships
Behaviours
82
Models for Improving the Relationship
b/w IS Function & the Business
• Earl and Sampler
–
–
–
–
Recognize disequilibrium
Emphasize supply management
Emphasizing demand management
Maintain equilibrium
• Peppard
–
–
–
–
–
–
Get the basics right
Enlist key influencers
Build credibility
Seek involvement early in project
Place responsibility for IS with business
Cultivate and maintain partnership
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Earl and Sampler:
Recognize Disequilibrium
• The organization articulates, explores and
analyses the crisis or loss of confidence in
IT in general and IS function in particular.
• Symptoms and prescription
– Business needs not satisfied
– Technological problems
– Management assessment
– Start of new regime
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Earl and Sampler:
Emphasize Supply Management
• The organization seeks radical performance
improvement of the supply side by setting
delivery goals and beginning to rebuild the
technology platform.
• Prescriptions
–
–
–
–
Setting ambitious performance targets
Beginning to rebuild technical platform
Seeking early, visible results
Setting application priorities
85
Earl and Sampler:
Emphasizing Demand Management
• Emphasizes demand management,
shifting the focus from supply to demand.
• The concern is with building IT capabilities
and creating future value.
• Prescriptions
– Work out the vision
– Define demand management processes
– Define value propositions
– Plan the infrastructure
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Earl and Sampler:
Maintain Equilibrium
• The organization completes the transformation
process by implementing final radical changes in
both demand and supply sides.
• If business or technological discontinuities occur
and the company does not deal with them, it can
initiate a new transformation process by
returning to Stage 1.
• Prescriptions
–
–
–
–
Recognizing that it is a continuous journey
Rethinking governance
Reskilling IT personnel
Creating a partnership with business and vendor
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Peppard’s Model
• Get the basics right
– IT leadership
– Get business focused
– Focus on internal quality
of IT organization
– Examine internal
structures and
processes
– Define value-added
aspect of IS/IT
– Get buy-in and
commitment from all IS
staff
• Enlist key influencers
– Get key influencers on
board
– Agree role of the IT
organization
– Listen to the business
– Define key priority areas
– Establish relationship
roles within IT
organization
– Establish service level
agreements
– Open communication
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channels
Cont…
• Build credibility
– Build a dialogue with
business
– Address values and
beliefs of business
management
– Demonstrate business
value
– Initiate education
program to address
‘mindset’ blockages
– Initiate internal
marketing programme
• Seek involvement
early in project
– Focus on benefits
delivery
– Ensure IT involvement
early in business
projects and visaversa
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Cont…
• Place responsibility
for IS with business
– Move responsibility for
IS demand out into the
business
– Reframe IS/IT
governance structure
– Create IT/business
processes
– Define informational
roles
• Cultivate and
maintain partnership
– Emphasis continual
communication
– Revisit previous
stages
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Managing Relationships with
Vendors
• 4 critical areas that require close attention
– The CIO function
– Performance measurement
– Mix and coordination of tasks
– Customer-vendor interface
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The CIO Function
• Partnership/contract
management
• Emerging technologies
– A company must develop a
clear grasp of emerging
technologies and their
potential applications
– Assessing technology
alternatives cannot be
delegated to a third party
– An informed CIO who
monitors performance
against the contract and
plans for and deals with
issues that arise helps an
outsourcing alliance adapt to
change.
• Continuous learn
• Architecture planning
– A firm should create an
– A CIO’s staff must visualize
internal IT learning
and coordinate a long-term
environment to bring users
approach to networks, HW
up to speed so that they are
and SW standards and
comfortable in a climate of
database architectures
continuous change
92
Performance Measurement
• Companies must develop performance
standards, measure results.
• Most important measures of success are
intangible and play out a long period of
time
93
Mix and Coordination of Tasks
• If not carefully managed, both the
contracts and the different geographic
locations of the outsourcing vendor’s
development staff may inhibit discussion
and lead to additional cost
94
Customer- Vendor Interface
• The interfaces b/w customer and the vendor are
very complex and usually must occur at multiple
levels.
• The senior levels, there must be links to deal
with major issues of policy and relationship
restructuring
• The lower levels, there must be mechanisms for
identifying and handling more operational and
tactical issues.
• CEO level- policy discussion
• Both side need regular full-time relationship
managers and coordinating groups lower in the
organization to deal with operational issues and
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potential difficulties