Chapter 1
The Information
Technology Dilemma
With excerpts from
Executive’s Guide to IT
Learning Objectives
• Awareness of the issues and concerns
regarding Information Technology (IT)
• Awareness of the impact and importance
of IT to the corporation
• Discussion of the dilemmas surrounding
IT
Slide 1 - 2
1
What Non-IT Executives Are
Saying:
“The entire executive team has lost
confidence in IT”
“IT is always asking for additional headcount
or capital”
“I don’t know enough about technology to
understand the issues”
Slide 1 - 3
Questions Non-IT Executives are
Asking:
“What is it about IT departments that seem
to so often result in such dysfunctional
relationships with senior management?”
“Why do successful corporate senior
management teams, who manage every
other aspect of their businesses with
incredible acumen and ability, turn into
confused neophytes when it comes to
managing IT?”
Slide 1 - 4
2
Questions Non-IT Executives are
Asking:
“Why do IT managers have so much trouble
communicating with the senior
management team?”
“If IT departments are so bad, why are they
tolerated and even given enormous
spending power?”
Slide 1 - 5
Questions Non-IT Executives are
Asking:
“How can senior managers learn to work
with the IT team so that the organization
can avoid all of the torment and pain?”
Slide 1 - 6
3
What Good Is IT?
• Stand-alone IT departments – Shrinking
• Firms that invest more in IT have greater
productivity improvements and productivity
continues to improve over time
– [Since 1998; Micro- vs. Macro-economics]
• IT improves productivity, reduces costs,
drives revenues, offers new capabilities to
customers and suppliers, and maintains
competitive parity
Slide 1 - 7
U.S. Productivity Attributed to IT Investments
Finally!!
Exhibit 1.1, Page 6
Slide 1 - 8
4
Reasons for Productivity
Improvements?
• Critical Mass of IT investments reached—Finally!
– Hardware and Software Standards; Microsoft; CA; IBM
– Compatibility & Integration Capabilities; Open source.
• Moore’s Law:
– Cost/Performance of Computer memories doubles every
18 months.
• Grove’s Law:
– Bandwidth doubles every 15-24 months.
• Critical mass of IT Training & Education
• The Internet & World Wide Web
– Costs of Tele-computing has plummeted
– Communication standards
Slide 1 - 9
Log of Growth
Moore’s Law vs. Grove’s Law
New Paradigm Shift
5
IT Impacts on Business
• Advanced technology redistributes
knowledge among all employees and
undermines traditional authority that is
based on privileged access to information
• Rapid, constant, and deep access to
institutional knowledge will radically
transform organizations, collapsing levels
of management, and flattening
organizational hierarchy
Slide 1 - 11
IT Misery – Lessons Learned!
• CIO = “Career Is Over” 
– Chief Information Officer; C-Level Executive
– CTO: Chief Technology Officer
• Generally reports to CIO
• IT initiatives:
٠ 53% overrun their schedules and budgest
٠ 31% are cancelled
٠ 222% is the average overrun time
Slide 1 - 12
6
The CIO in the 21st-Century
Corporation
C-Level
a.k.a,
VP IS
Refer to CIO Reporting slides
Courtesy: Jessup & Valacich
Slide 1 - 13
Management Tasks
• Line Responsibilities – directly related to
accomplishing the responsibilities of the
organization
• Staff Responsibilities - support line
functions in accomplishing their primary
mission
• Senior IT managers have a hybrid role,
blending both staff and line missions
Slide 1 - 14
7
How Much Do They Spend on IT?
Revenue
($
billions)
Company
AT&T
79.60
Chase Manhattan
24.50
Ford
137.14
General Motors
168.83
Hewlett-Packard
31.52
IBM
71.94
MCI
15.27
Prudential Insurance
42.91
UPS
21.05
IT budget
($ billions)
Budget
Ranking
IT/Revenu
e Ratio
Ratio
Ranking
Slide 1 - 15
Are you surprised?
Revenue
($
billions)
IT budget
($ billions)
Budget
Ranking
IT/Revenu
e Ratio
Ratio
Ranking
AT&T
79.60
4.00
1
5.03%
4
Chase Manhattan
Company
24.50
1.80
4
7.35%
1
Ford
137.14
1.40
5
1.02%
9
General Motors
168.83
3.60
2
2.13%
8
Hewlett-Packard
31.52
1.24
7
3.93%
5
IBM
71.94
2.30
3
3.20%
6
MCI
15.27
1.00
9
6.55%
2
Prudential Insurance
42.91
1.26
6
2.94%
7
UPS
21.05
1.20
8
5.70%
3
Slide 1 - 16
8
A Burning Platform
• 2% - 9% of annual revenues spent on IT
• 4% - 5% is median
* Statistics are from Information Week magazine
Slide 1 - 17
IT Spending As a Percentage of Revenue
2002 2004 2006
Exhibit 1.5, Page 18
Slide 1 - 18
9
Evolution of IT Management
• 1950s to 1960s – automation of routine
business data handling
• 1970s – connection of terminals to
mainframes shifted focus from providing
data to creating knowledge (Decision
Support Systems)
• 1980s – Widespread telecommunications
and data networking moved computing
from the mainframe to the desktop
Slide 1 - 19
Evolution of IT Management
• 1990s – Internet technologies and
applications extended the boundaries of
the enterprise. New business models took
hold with e-business and ASPs
• 2000s – Wireless apps. Re-entrenchment.
Off-shoring. Focus on cost savings and
profitability. Improving relationships with
business partners. IT Governance (SOX).
• 2010s – Cloud Computing. Focus on
Measurement of IT impacts. IT Service
Slide 1 - 20
Management realization!
10
Service Lifecycle vs. SDLC
Service Management
Lifecycle
–
–
–
–
–
Service Strategy
Service Design
Service Transition
Service Operation
Continuous Service
Improvement
Systems Development
Lifecycle (a.k.a.,
Waterfall)
–
–
–
–
–
Analysis & Definition
Design Specifications
Development/Implementation
Operation/Maintenance
Assessment
Information Technology
Assimilation
• Over the past several decades, IT has spread
from isolated, single-dimensioned functions to
sophisticated, multi-faceted and integrated
systems
• Shifts have occurred in application development,
transitioning from largely in-house creations to
more off-the-shelf products (ERPs)
• Increased focus on Outsourcing & the decision
to Off-Shore or keep in USA, creating a global
enterprises and subsequent many partnerships.
Slide 1 - 22
11
Types of Information Systems
Three Letter Acronyms [TLA]
• Transaction Processing Systems [TPS]
• Management Information Systems [MIS]
• Decision Support Systems [DSS; GDSS; and
Collaborative Support Systems]
• Office Automation Systems [OAS]
• Expert Systems [ES]
• Executive Information Systems [EIS]
• Enterprise-Wide Information Systems [EWIS;
Oracle, SAP, etc.]
• Global Information Systems [GIS]
Slide 1 - 23
Internet-Based Business Systems
• Prior to 1990, IT systems focused on
supporting the value chains within an
organization
• With widespread Internet technology,
value chain management could extend
outside an organization, becoming much
more complex and responsive
Slide 1 - 24
12
IT Satisfaction: 2x2 Matrix?
How can IT navigate this matrix?
Exhibit 1.7, Page 20
Slide 1 - 25
The IT Dilemma
• Why is IT an absolute requirement yet
has such low satisfaction levels?
• How can IT thrive as an integral and vital
function?
• Why do companies spend as much a 9%
of their annual revenue while not deriving
full value or satisfaction?
Slide 1 - 26
13
IT Management Issues
•
Even though Information Technology is
evolving at a phenomenal pace, critical
issues facing IT managers have remained
largely unchanged for years [See MISQ
Article; handout]
1. Aligning IT and corporate goals
2. Re-engineering business processes [BPR]
3. Defining IT’s role and measuring its
contribution. IT Service Management.
4. Developing an information architecture
Slide 1 - 27
IT Management Issues
•
Three issues have arisen as IT has entered
the Internet Age [really, WWWW]:
AAA : Anytime, anyplace, anything
1. Using IT to improve productivity, quality, and
effectiveness; Balanced Scorecards
2. Creating or maintaining competitive advantage
through IT. Role of Standards, e.g., ITIL
3. Redesigning business processes to better support
corporate strategy; i.e., Virtual Organizations:
–
–
–
New Customer Interfaces [GUIs, RFID, etc.]
Partnerships & Alliances; Collaborative Tools
Business Process Re-engineering [BPR]
Slide 1 - 28
14
IT Effectiveness (Satisfaction?) –
A Surprising Finding!
• Meeting Expectations (Jonathan Miller)
• Educate Non-IT Management
– “What to Expect from IT and
– … for How Much?”
• CIOs that consistently align their firms
expectations and their IT performance achieve
the highest levels of satisfaction
• Even low cost IT, with bare bones performance,
can be highly regarded!
– Fina Chemical, Phil Farr, CIO (circa 1998)
– IT expenses typically ran at about 2% of revenues
– But satisfaction was High
Slide 1 - 29
Summary
• IT is a powerful force in today’s global
society
• These technologies are enabling important
transformations that profoundly affect
people, organizations, industries, and
nations
• Proper measurement and assessment of
IT’s functions in the enterprise has
dramatically increased in importance.
Slide 1 - 30
15