Matakuliah
Tahun
Versi
: J0422 / Manajemen E-Corporation
: 2005
:1/2
MODULE 11 :
Organizing and Leading the IT Function
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Learning Outcomes
 In this chapter, we will study:
 Centralized IT Driven innovation to decentralized, user
driven innovation.
 Decentralized, user driven innovation to centralized IT
Management.
 A number of pressures encourage firms to consolidate
IT development resources into a more centralized unit
like staff professionalism, corporate data management,
and cost estimation and analysis.
 Budgets are an important control mechanism. By
adjusting the size of budgets and defining their range
of acceptable use, companies can increase or
decrease constituencies control over priorities and
resources.
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Outline Topic
 Organization Issues in the Control of IT Activities.
 Implications and Conclusions.
 Drivers toward Centralized IT Structure
 IT Leadership and the Management of Budgets.
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Content
 Two sets of tensions guide policies for developing,
deploying and managing IT systems.
 The first set is between innovation and control.
 The emphasis a firm should place on aggressive
innovation depends on a broad assessment of the
potential strategic impact of IT on a firm and on
management’s willingness to take risks.
 If IT can help a firm achieve its strategic objectives and
managers are not too risk-averse, a greater investment in
innovation is called for than is the case if IT is considered
merely helpful or if managers want to avoid risks.
 In today’s IT, benefits promised by real-time
Internetworking systems have shifted the emphasis
toward more innovation.
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Organizational Issues in the Control of IT Activities
 A second set of tensions may develop between the IT staff
and business users.
 Users are inclined to focus on short-term need fulfillment,
solving today’s problems now, frequently at the expense of
long-term IT architectural concerns, maintenance needs, or
orderly deployment.
 In contrast, the IT department tends to be pre-occupied with
standardization of solutions, mastery of technology,
maintenance difficulties, and orderly deployment at the cost of
a slow response, or no response, to legitimate business
needs.
 Balancing the tension between the two groups is difficult and
must take into account many factors, including corporate
culture, IT’s potential strategic impacts, and the urgency of
short-term problems.
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Organizational Issues in the Control of IT Activities
 As the following four examples demonstrate, there is no
perfect prescription for successful IT innovation.
 From Centralized, IT-Driven Innovation to Decentralized, UserDriven Innovation
 User Driven Innovation Over IT Department Protests
 From Decentralized, User-Driven Innovation to Centralized IT
Management
 From Decentralized, User-Driven Innovation to Unexpected
Centralized Innovation
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Implications and Conclusions
 Implications :
 Too much focus on prescriptive policies, centralized
control, or rapid proof of favorable results in the early
stages of the adoption of new technology can prevent
important learning that may lead to even more useful
applications.
 A general manager’s role therefore is to facilitate the
assimilation of new technology by continuously monitoring
tensions and shifting emphases as appropriate between
centralzed and decentralized IT and user control-driven
innovation.
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Implications and Conclusions
 Conclusions
 Address the key drivers in business user’s desire to gain
control over IT development, deployment, and
management activities.
 Analyze the need for centralized coordination of systems
development and the pitfalls of uncontrolled proliferation of
user-develop systems.
 Identify and discuss core policies that IT management,
user management, and general management must
implement to balance tensions and produce favorable
results.
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Drivers Toward A Centralized IT Structure
 A number of pressures encourage firms to consolidate IT
development resources into a more centralized unit.
These pressures can be grouped into the following
categories:
 Staff Professionalism
 Standard Setting and Ensuring System Maintainability
 Envisioning Possibilities and Determining Feasibility
 Corporate Data Management
 Cost Estimation and Analysis
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Drivers Toward A Centralized IT Structure
 Staff Professionalism
• Maintaining a central IT department enhances an organization’s
ability to recruit and retain specialized technical personnel by
providing more obvious career paths for talented IT employees.
• The inability of some firms to manage the personal development of
the IT staff is a key driver for outsourcing IT activities.
 Standard Setting and Ensuring System Maintainability
• Many organizations experience periodic swings of the
centralize/decentralize pendulum because over time the benefits of
change often given way to new problems. Standardized computing
infrastructure pays dividends by reducing the complexity and cost of
maintaining a firm’s IT capabilities.
• Central staff expertise is particularly important for reviewing userdesigned systems before they go live. Lacking practical systems
design experience, users often ignore data management and
security policies, corporate standards, and costing practices that
incorporate the full cost of running an application.
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Drivers Toward A Centralized IT Structure
 Envisioning Possibilities and determining feasibility
• Users often focus on obtaining a specific service to address an
immediate need without recognizing the fact that successful first
applications tend to generate unanticipated second applications
(and then third applications, etc.)
• The limited experience of the users with IT makes it difficult for
business users to see the full implications of the application of a
technology; an example is planning that fails to account for possible
growth or future expansion of applications.
• Inability to envision what a system may someday become and to
make choices consistent with those possibilities can make future
expansion expensive or even infeasible.
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Drivers Toward A Centralized IT Structure
 Corporate Data Management
• A modern data management strategy requires central coordination
of physically distributed databases so that users, regardless of their
physical location, can access data file as needed.
• The narrow perspective of development driven by the short-term
problems of a particular business unit may produce data definitions,
structures, and systems that lock up data in a nonstandardized
format and in inaccessible locations so that they can’t be used
enterprise wide.
• Security issues are best addressed through centralized control.
Security standards are more easily achieved with centrally
organized electronic files.
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Drivers Toward A Centralized IT Structure
 Cost Estimation and Analysis
• Users seldom understand the true costs of operating the existing
services.
• Cost analysis and management, using an activity-based computing
utility framework, is the only way to assure that local decision
making is consistent with overall company objectives.
• The benefits of central control are long term cost avoidance and
technological risk reduction.
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IT Leadership and the Management Budgets
 Budgets are an important control mechanism. By adjusting the size
of budgets and defining their range of acceptable use, companies
can increase or decrease constituencies control over priorities and
resources.


For example, giving business users a larger budget to allocate for IT
expenditures increases user power over IT decisions. Limiting the
portion on the budget that can be used for, say, outsourcing or for
technology that does not confirm to corporate standards reduce
control.
Companies with the most decentralized IT management award IT
budget control to business units with no strings attached.
 Many firms allocate a certain portion of the IT budgets to users
while retaining an other portion fo the IT department. The guiding
principles is to place decision rights in the hands of those best
capable of making certain classes of decisions.
 The IT department in a large manufacturing company was
interested in phasing out an obsolete computing platform that each
year was harder to support and more expensive to maintain.
 The whole IT budget was under user control, the phase-out of this
platform might not have occurred until the aging systems began to
perform badly.
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Chapter Summary
 The quality and location of existing IT resources are the basis
for future change. According to business users, how
responsive and competent are existing IT resources?
 Executives can answer the following questions to assess
whether they are adequately addressing issues of leadership
and organization of IT activities:
 What is the appropriate balance of emphasis between innovation
and control in your organizations? Do you IT budgets and
organizational structures fit well with that balance?
 Have the IT staff or business user perspective become too
dominant in the organization?
 Does your company have a central IT policy group?
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