Matakuliah
Tahun
: M0624/Information Technology Valuation
: 2008
THE ROLE OF IT AND PLANNING FOR IT VALUE
MODUL 2. SESSION 4 - 6
INTRODUCTION
• THE RATE OF CHANGE IN TODAY’S BUSINESS
ENVIRONMENT HAS PUSHED THE NEED FOR
TECHNOLOGIES AND ACCEPTANCE OF THEM TO A
CONTINUOUSLY ACCELERATING PACE.
• THE NEW TECHNOLOGIES ARE ENABLING
ORGANIZATIONS TO BE FLATTER, AND MORE
FLEXIBLE, REDEFINING OUR NOTIONS ABOUT
EVERYTHING FROM R&D TO DISTRIBUTION, AND IN
THE PROCESS MAKING POSSIBLE SMARTER,
MORE CUSTOMIZED PRODUCTS AND SERVICES.
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INTRODUCTION
• THE ORGANIZATIONS SPEND ENORMOUS SUMS OF MONEY
ON COMPUTER HARDWARE, SOFTWARE, COMMUNICATION
NETWORKS, DATABASES, AND SPECIALIZED PERSONNEL,
COLLECTIVELY KNOWN AS INFORMATION TECHNOLOGY.
THERE IS A GREAT DEAL OF QUESTIONING ABOUT PAYOFF OF
THESE LARGE INVESTMENTS IN IT.
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THE ROLE OF IT
VENKATRAMAN SUGESTS FIVE STAGES OF GROWTH:
• STAGE 1: LOCALIZED EXPLOITATION OF IT.
IT SUPPORTS SUCH AS ORDER ENTRY, CUSTOMMER SUPPORT
SYSTEMS, CIM, PAYROLL.
BENEFIT: EFFICIENCY OF BUSINESS PROCESS.
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THE ROLE OF IT
• STAGE 2: INTERNAL INTEGRATION OF IT.
IT SUPPORTS OF BUSINESS FUNCTION AND THE
INTEGRATION FUNCTIONS AND TASK THROUGH IT.
BENEFIT: RELATIVELY MINOR ORGANIZATIONAL
ADJUSTMENTS FOLLOW IMPLEMENTATION, FUNCTIONAL
DIVISIONS OF THE BUSINESS AND THEIR WORKS METHODS
REMAIN LARGERLY UNCHANGED.
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Figure 2.1 Venkatraman’s Five stage of Growth
HIGH
Five : Business scope redefinition
Four : Business network redesign
Revolutionary levels
Three : Business process redesign
Degree of
business
transformation
Two : Internal integration
Evolutionary levels
One : Localized exploitation
LOW
LOW
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Range of potential benefits
HIGH
THE ROLE OF IT
• STAGE 3: BUSINESS PROCESS REDESIGN,
A FUNDAMENTAL RETHINKING OF THE MOST EFFECTIVE WAY
TO CONDUCT BUSINESS. TO TRANSFORM ANY PROCESS WELL,
ORGANIZATIONS NEED TO MAKE SURE THEY HAVE THE RIGHT
RESOURCES IN PLACE AND IN TIME.
BENEFIT: HUGE MONETARY SAVINGS, MOTIVATED AND
EMPOWERED EMPLOYEE, RESTRUCTURING WORKFLOWS.
THE BENEFITS SHOULD FAR EXCEED THOSE ARISING FROM THE
INCREMENTAL IMPROVEMANTS THROUGH IT IN STAGES 1 AND
2.
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THE ROLE OF IT
• STAGE 4: BUSINESS NETWORK REDESIGN,
THE USE OF IT BY THE ORGANIZATION TO RECONFIGURE THE SCOPE AND
THE TASKS OF THE BUSINESS NETWORK INVOLVED IN THE CREATION AND
DELIVERY OF PRODUCTS AND SERVICES.
BENEFIT: IT IS A MAJOR CONTRIBUTOR TO THE NECESSARY MANY TO
MANY COMMUNICATION, WHILE WORKFLOW MANAGEMENT TOOLS
MAKE COORDINATED PARALLEL ACTIVITY POSSIBLE, ELIMINATING
GEOGRAPHICAL, TIME BASED AND ORGANIZATIONS BOUNDARIES.
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THE ROLE OF IT
• STAGE 5: BUSINESS SCOPE REDEFINITION,
PERTAINING TO THE POSIBILITIES OF ENLARGING OR SHIFTING
THE BUSINESS MISSION AND SCOPE.
IT IS NO LONGER PART OF THE STRATEGIC OPTIONS; IT
RATHER IS THE FOCUS OF BUSINESS STRATEGY. THE VALUE OF
IT IS DETERMINED BY THE TOP AND BOTTOM LINES THE
ANNUAL FINANCIAL STATEMENTS.
BENEFIT: BUSINESS SUCCESS INCREASINGLY DEPENDS OF
HOW TO FUSE THE POTENTIAL POWER OF IT INTO
PRODUCTS, SERVICES, AND BUSINESS NETWORKS.
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Figure 2.3 Weaving Information Technology into the organization
Shareholders
Employees
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Customers
THE ROLE OF IT
• MANY OF TODAY’S ORGANIZATIONS APPLY AT ALL LEVEL OF
VENKATRAMAN’S MODEL. IT HAS SIGNIFICANT IMPACT ON
MARKET AND PRODUCT STRATEGIES TO SATISFY THE NEED OF
THE MAIN STAKEHOLDERS (SHARE HOLDERS, CUSTOMERS,
EMPLOYEES).
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THE ROLE OF IT
• PROGRESS IN TECHNOLOGICAL CAPABILITIES IS PARTICULARLY
MADE IN THREE AREAS, EACH OF WHICH IS CENTRAL TO THE
ABILITY OF IT TO CHANGE THE WAY WORK IN
ORGANIZATIONS PERFORMED:
A. EXTENSIVE COMMUNICATION
B. ACCESSIBILITY OF DISTRIBUTED DATABASES AND
KNOWLEDGE BASES
C. ENHANCED WORKSTATIONS AND USER DEVICES.
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THE IT INFRASTRUCTURED
• THE IT INFRASTRUCTURE AS A CORE COMPETENCE IS A
COMBINATION OF SKILL, PROCESSES, PROCEDURES,
ORGANIZATIONAL STRUCTURES, PHYSICAL SYSTEMS, AND
COMPONENT, FORMING THE CONTINUING BASIS FOR A
FIRM’S COMPETITIVENESS.
• IT INFRASRUCTURE AS THE ROLL-UP OF TECHNOLOGY
INTO
THREE DISTINCT LAYERS OF SERVICE, HELD TOGETHER BY
PROCEDURES AND KNOWLEDGE.
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THE IT INFRASTRUCTURED
MCKAY AND BROCKWAY DISTINGUISH:
A.
SHARED IT COMPONENTS
B.
C.
SHARED IT SERVICES
SHARED BUSINESS CAPABILITY
THESE “BRICKS” COMPRISING THE THREE LAYERS OF IT
STRUCTURE, ARE HELD TOGETHER BY MORTAR CONSISTING
OF THE SPESIFIC KNOWLEDGE AND SKILLS REQUIRED TO
COMBINE THE IT INFRASTRUCTURE COMPONENTS INTO
ROBUST IT SERVICES AND BUSINESS CAPABILITIES.
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PLANNING FOR IT
• MANAGEMENT IS TYPICALLY DEFINED AS A SYSTEMATIC
PROCESS OF PLANNING, ORGANISING, LEADING
AND CONTROLLING THE EFFORTS OF
ORGANIZATION MEMBERS AND OF USING OTHER
ORGANIZATION RESOURCES TO ACHIEVE STATED
ORGANIZATIONAL GOALS.
• THE FOUR KEY WORDS: PLANNING, ORGANIZING, LEADING,
CONTROLLING.
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Figure 2.5: The Planning and Control Cycle
Definition of
objectives
Planning
Controlling
Execution
• Organizing
• leading
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TRADITIONAL PLANNING FOR IT AND PROBLEMS
IN RELATIONS WITH IT, PLANNING HAS TRADITIONALLY
BEEN PERFORMED AT THREE DISTINCT LEVELS:
A. BUSINESS PLANNING
B. IT PLANNING
C. IT SUPPLY PLANNING
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TRADITIONAL PLANNING FOR IT AND PROBLEMS
• OBJECTIVES OF BUSINESS PLANNING:
BUSINESS PLANNING IS AIMED AT CONFIGURING SKILLS AND
CAPABILITIES, INCLUDING IT, IN SUCH A WAY THAT THE MOST
PROFITABLE AND COMPETITIVE ADVANTAGE IS ATTAINED IN
THE FUTURE.
• THE FIRST OBJECTIVE OF BUSINESS IS TO CREATIVELY AND
INNOVATIVELY ANSWER THE QUESTIONS “WHAT BUSINESS ARE
WE REALLY IN?”
• THE SECOND OBJECTIVE IS TO DEVELOP THE STRATEGIES TO
SATISFY THE NEEDS OF STAKEHOLDER VIS-A-VIS THE
ORGANIZATION’S COMPETITIVE POSITIONING
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PROBLEMS OF TRADITIONAL BUSINESS PLANNING IN
THE PAST
• TRADITIONAL BUS. PLAN HAS 2 STEP:
1. DEVELOPMENT THE STRATEGY
2. STRATEGY EXECUTION AND IMPLEMENTATION
• THE PROBLEMS ARE:
THE PROCESS OF STRATEGY DEVELOPMENT AND BUSINESS
PLANNING ARE NOT AS SEQUENTIAL, NOT AS LOGICAL AND
STRAIGHT FORWARD, AND NOT AS RELIABLE AS ONE WOULD
HOPE WHEN PLANNING FOR EFFECTIVE IT.
LET SEE EXH 2.1.
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OBJECTIVE OF IT PLANNING
• IT PLANNING IS THE PLANNING ACTIVITIES UNDERTAKEN BY AN
ORGANIZATION TO SYSTEMATICALLY DETERMINE ITS
REQUIREMENTS IN BROAD TERMS SO THAT IT CAN PREPARE TO
MEET ITS SHORT TERM (1-2 Y), MEDIUM TERM (2-4 Y) AND
LONG TERM (5-7 Y) IT PLAN.
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OBJECTIVE OF IT PLANNING
• THE MOST IMPORTANT GOALS OF IT PLANNING ARE TO
ALLOW FOR:
A. ALIGNMENT OF IT WITH THE BUSINESS
AND REQUIREMENTS
OBJECTIVES
B. DECISION MAKING ON THE SCOPE, SCALE AND PACE OF IT
PROJECTS
C. INVESTMENT DECISIONS AND IT BUDGETING
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OBJECTIVE OF IT PLANNING
D. ALLOCATION OF RESOURCES TO IT ACTIVITIES
E. COMMUNICATION BETWEEN IT MANAGEMENT AND TOP
MANAGEMENT
F. OVERALL QUALITY OF IT.
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PROBLEMS OF TRADITIONAL IT PLANNING IN
THE PAST
• TRADITIONAL IT PLANNING APPROACH HAVE POORLY
ALIGNED WITH BUSINESS PLANNING APPROACHES FROM
METHODOLOGICAL AND PRACTICAL PERSPECTIVES.
LET SEE EXH. 2.2. AND EXH. 2.3.
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OBJECTIVES OF IT SUPPLY PLANNING
• IT IS CONCERNED WITH PLANNING IT SUPPLY ACTIVITIES - IT
OPERATIONS AND DEVELOPMENT OF NEW OR ENHANCED IT
PRODUCTS AND SERVICES (E.G. INFORMATION SYSTEMS) WITHIN AN ORGANIZATION.
• NEW IT PRODUCTS AND SERVICES MUST BE PLANNED IN
RESPONSES TO BUSINESS NEEDS, AND SHOULD BE GUIDED BY
AN IT ARCHITECTURE.
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PROBLEMS OF TRADITIONAL IT SUPPLY
PLANNING IN THE PAST
• THE EMPHASIS OF IT PLANNING WAS ON THE EFFICIENCY OF
OPERATIONS AND USE OF SCARCE RESOURCES AND MOST
ORGANIZATIONS HAD A CENTRALIZED, FULL SERVICE IT
DEPARTMENT AS A STAFF FUNCTION
• NOW, MANY ORGANIZATIONS HAVE DECENTRAL-IZED PARTS OF
IT SUPPLY TO BUSINESS FUNCTIONS AND OUTSOURCED OTHER
PARTS TO EXTERNAL, COMMERCIAL IT SERVICE PROVIDERS.
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PROBLEMS OF TRADITIONAL IT SUPPLY
PLANNING IN THE PAST
• MANY ORGANIZATIONS HAVE OUTSOURCED THEIR ENTIRE IT
DEPARTMENT OR HAVE TURNED OVER PIECES OF THEIR IT
OPERATIONS TO IMPROVE SERVICE, REDUCE COST, OR FREE
UP MANAGE-MENT ATTENTION.
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
• AS BUSINESS AND ITS ENVIRONMENT HAVE CHANGED, IT
MANAGEMENT PRACTICES HAVE ALSO CHANGED. AND AS
CAPABILITIES OF IT HAS CHANGED, BUSINESS PLANNING
APPROACH HAVE CHANGED ACCORDINGLY TO INCORPORATE
THE POTENTIAL OF IT.
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
• TODAY’S BUSINESS PLANNING
MINTZBERG: COMPANIES MUST DIFFERENTIATED BETWEEN
PLANNING AND STRATEGIC THINKING, WHICH CAPTURE
WHAT MANAGEMENT LEARNS FROM ALL SOURCES, AND
THEN SYNTHESIZE THAT LEARNING INTO A VISION OF THE
DIRECTION THAT THE BUSINESS SHOULD PURSUE.
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
• SUCH STRATEGIES OFTEN CANNOT BE DEVELOPED ON
SCHEDULE AND IMMACULATED CONCEIVED. THEY MUST BE
FREE TO APPEAR AT ANY TIME AND AT ANY PALCE IN
ORGANIZATIONS TYPICALLY THROUGH MESSY PROCESS OF
INFORMAL LEARNING THAT MUST NECESSARILY BE CARRIED
OUT BY PEOPLE AT VARIOUS LEVELS WHO ARE DEEPLY
INVOLVED IN THE SPECIFIC ISSUES AT HAND.
LET SEE FIG 2.6
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
• TODAY’S IT PLANNING
AT THE IT PLANNING LEVEL, THE TRADITIONAL TOP-DOWN
PLANNING PROCESS BE GRADUALLY REPLACED BY A MORE
ITERATIVE, GOAL ORIENTED, EVOLUTIONARY, AND
CONTINUOUS PROCESS OF ORGANIZATIONAL LEARNING AND
SOME DEGREE OF EXPERIMENTATION FOR A GREAT DEAL OF
UT PLANNING ASPECTS.
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
• THE TRADITIONAL TOP DOWN PLANNING PROCESS COULD BE
LABELED AS ALIGNMENT PLANNING, THE BOTTOM UP
PLANNING AS IMPACT PLANNING.
• A CONTEMPORARY IT PLANNING PROCESS COMBINES BOTH
DIRECTIONS, STARTING FROM THE BUSINESS ORGANIZATIONS
AND NEEDS, GENERATING AN IT ARCHITECTURE (TOPDOWN); WHILE OPPORTUNITIES FROM EXISTING IT AND IT
SUPPLY CAN BE GENERATED AND DEPLOYED TO CHANGE
BUSINESS PLANS AND/OR ALIGN WITH BUSINESS NEED
(BOTTOM UP)
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
• SUCH A PRAGMATIC IT PLANNING APPROACH CONSISTS OF
THE FOLLOWING PRINCIPAL STEPS:
A. THE BUSINESS IDENTIFIES ABROAD, BUT CLEARLY
ARTICULATED STRATEGIC VISION (A COMBINATION OF
CHALLENGING BUT ATTAINABLE MEDIUM) TERM GOALS, AND
A MORE GENERAL EXPRESSION OF THE ORGANIZATION’S
STRATEGIC INTENT, ITS VALUES AND BELIEFS.
B. IN PARALLEL WITH THE DEVELOPMENT OF THE BUSINESS
VISSION, THE MAIN THRUSTS OF THE APPLICATION AND
DEVELOPMENT OF IT ARE EXPRESSED IN A SERIES OF IT
PRINCIPLES.
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
C. THE BUSINESS IDENTIFIES AND DEFINES ITS KEY AND
SUPPORTING PROCESSES. PROCESSES ARE STRUCTURED SETS
OF ACTIVITIES, ORDERED ACROSS TIME AND PLACE, WITH A
BEGINNING, AN END, AND CLEARLY DEFINED INPUT AND
OUTPUT.
D. HAVING IDENTIFIED YHE PRINCIPLED PROCESSES CRITICAL TO
THE BUSINESS’S SUCCESS, ANOTHER STEP IS TO ANALYZE THE
WORKFLOW AND WORK ACTIVITIES AND THE LOCATIONS
WHERE WORK IS PERFORMED, AND IMPROVE (RE-ENGINEER)
THEM.
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CONTEMPORARY BUSINESS, IT, AND IT SUPPLY
PLANNING
E. BASED ON REENGINEERED PROCESSES, NEW JOB (OR RATHER
ROLES OF EMPLOYEES, CUSTOMERS, AND OTHER
PARTICIPANTS WITHIN THE RENEWED BUSINESS PROCESSES)
ARE IDENTIFIED.
F. THE TOTAL SET OF REENGINEERED BUSINESS PROCESSES,
WORKFLOWS, LOCATIONS, ROLES, AND INFORMATION NEEDS
IS FURTHER EXPANDED INTO THE TARGET IT ARCHITECTURE.
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TODAY’S IT SUPPLY PLANNING
• THE MAJORITY OF IMPROVEMENTS IN THE PLANNING OF IT
SUPPLY, COMPARED WITH THE PAST, HAVE AIMED AT
MEETING AGREED UPON DEADLINES, COST REDUCING, AND
IMPROVED QUALITY LEVELS OF IT SUPPLY.
• FOR EXAMPLE:
A. FOR MANY OPERATIONAL SERVICES CARRIED OUT ON A DAILY
BASIS BY A DATA CENTER, SLA’S ARE PUT INTO PLACE.
B. STANDARD S/W PACKAGE MIGHT BE PREFERABLE TO THE
DEVELOPMENT OF IT APPLICATIONS
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TODAY’S IT SUPPLY PLANNING
C. FOR APPLICATION DEVELOPMENT PROJECTS, THE
CONVENTIONAL, SEQUENTIAL “WATERFALL” METHOD IS
BEING REPLACED BY A MORE ITERATIVE, GOAL ORIENTED
AND CONTINUOS PROCESS OF EVOLUTIONARY
DEVELOPMENT.
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PLANNING FOR VALUE FROM IT
• 5 MAIN BUSINESS PURPOSES OF IT INVESTMENTS CAN BE
IDENTIFIED:
1. MANDATORY IT, REQUIRED TO SATISFY REGULAT-ORY
REQUIREMENTS (SUCH AS CHANGES TO THE PAYROLL SYSTEM),
TO MEET INTERNAL ORGANIZA-TIONAL REQUIREMENTS (SUCH
AS CONSOLIDATION OF FINANCIAL REPORTING FOR A
MULTINATIONAL COMPANY)
2. TO IMPROVE THE EFFICIENCY AND EFFECTIVENESS OF THE
ORGANIZATION, AIMED AT REDUCING OR AVOIDING
OPERATIONAL AND LABOR COST, INCREASING BUSINESS
PRODUCTIVITY
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PLANNING FOR VALUE FROM IT
3. TO CHANGE THE BUSINESS, THE BUSINESS NET-WORK AND THE
BUSINESS SCOPE. OFTEN CALLED “STRATEGIC IT”
4. IT INFRASTRUCTURES WHICH ENABLES THE BENEFITS OF
OTHER IT APPLICATIONS TO BE REALIZED. THEY DO NOT OFFER
DIRECT BENEFITS.
5. IT RESEARCH WHICH EXECUTED TO ENSURE THAT THE
BUSINESS IS NOT LEFT BEHIND BY TECHNOLO-GICAL PROGRESS.
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CONCLUSION
• IT NOT ONLY SUPPORTS AND CHANGES BUSINESS
OPERATIONS, IT ALSO INTRODUCES IT ENABLED PRODUCTS
AND DISTRIBUTION CHANNELS AND IT ALLOWS INDIVIDUALS
AND ORGANIZATIONS TO WORK TOGETHER EFFECT-IVELY AND
AFFICIENTLY, WHILE SIMULTANEUSLY WEAVING IN THE
ENABLING IT APPLICATIONS AND IT INFRASTRUCTURES
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CONCLUSION
• THE WHOLE PROCESS OF IT PLANNING IS MORE
APPROPRIATELYTHOUGHT OF AS “ WORK TRANSFORMATION”
AND “BUSINESS SCOPE REDEFINITION”. APPLICATION OF IT
NEEDS TO BE A BROAD, CROSS FUNCTIONAL, AND CROSS
BUSINESS PROCESS THAT ENTAILS UNDER-STANDING
BUSINESS GOALS AND STRATEGIES, REFASHIONING BUSINESS
PROCESS AND WEAVING IT INTO THE FABRIC OF THE
ORGANIZATION.
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CONCLUSION
• IT PLANNING CAN BE MOVED FAOR A GREAT DEAL OF ITS
APPLICATION TO FAST TRACKED, ITERATIVE, PROTOTYPING
ORIENTED APPROACH THAT INVOLVED BUSINESS EXECUTIVES
IN EVERY STEP OF THE PROCESS.
• ALTHOUGH IN PRINCIPLE THE BUSINESS LEADS AND IT
FOLLOWS, REALITY SHOWS SYNERGISTIC INTERACTION AND
PARTNERSHIPS BETWEEN IT AND BUSINESS PEOPLE,
BUSINESS AND IT INITIATIVES.
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CONCLUSION
• A CONTEMPORARY IT PLANNING APPROACH
ACKNOWLEDGES THAT VARIATIONS EXIST IN THE DEGREE OF
RIGOR TO BE APPLIED TO PLANNING DIFFERENT CLASSES OF
IT.
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• THE END OF MODUL 2
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