Matakuliah
Tahun
Versi
: J0422 / Manajemen E-Corporation
: 2005
:1/2
MODULE 2 :
The Challenge of Information System
Technology
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Learning Outcomes
 In this chapter, we will study:
 How the IT was implemented for concept of
management?
 What is the issues in Information Technology to
achieve the concept of IT Management?
 Are the IT resources appropriately placed in the firm?
Organizational issues such as where the IT resource
should report, how development and hardware
resources should be distributed within the company.
 Sample Case Study about Tale of Two Airlines in the
Network Age
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Outline Topic
 Challenges in Managing IT Assimilation.
 Concept of IT Management.
 Issues in Information Technology.
 Case Study : Tale of Two Airlines in the Network Age
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Content
The rapid evolution and spread of information systems
technology during the last 40 years is challenging
both business and IT management to rethink the very
nature of the business. New industry players are
emerging (e.g., cable operators, system integrators),
and new internal organizational structures are being
defined. Major investments in computer hardware
and software are required to capture the benefits of
powerful new technologies.
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Challenges in Managing IT Assimilation
A Young Technology
Technological Growth
IT End-User Coordination
Specialization
Shift in Focus
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Challenges in Managing IT Assimilation
 A Young Technology
 Throughout the 1900s, significant changes in knowledge and
theory have occurred in these established disciplines and
have been assimilated into an organized field of thought.
 The challenge in IT, conversely, has been that of harnessing
an exploding body of knowledge within a very short time
frame.
 Technological Growth
 Over a billion-fold improvement in processing and storage
capacity has occurred since 1953, and the rate of change is
expected to continue through the 1900s and early 21st
century.
 The technology explosion has enabled the development of
new value added applications, as well as improvements in
old ones.
 The natural tendency to resist change has been exacerbated
by the prevailing accounting practice of writing off software
expense as it is incurred, rather than capitalizing it and
amortizing it over a period of years.
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Challenges in Managing IT Assimilation
 IT End-user Coordination
 The complexities of developing IT systems have created
departments filled with specialists who remain with the firm
even through the reasons for their presence have
disappeared.
 Specialization is required to develop expertise and
competence within a given discipline, but in the process,
specialists often develop their own language systems.
 Specialization
 The increased complexity of contemporary technology has
created a number of IT subspecialties in increasingly narrow
area of expertise.
 As IT evolved, the number of experts required to manage the
wide range of application development languages, data
management approaches, telecommunications
methodologies, and operating environments proliferated,
which in turn increased the complexity of coordination and
control.
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Challenges in Managing IT Assimilation
 Shift in Focus
 A fifth challenges is the significant shift in the types of
applications being developed. Each applications that
automated clerical and operational control functions (e.g.,
inventory management, airline seat reservations, and credit
extension).
 Increasingly, today’s use of IT are targeted toward less
structured types of problems ( for example, decision support,
electronic commerce).
 The design and implementation of applications that
transform work, processes, organizations, and industries
require a very different approach than would be used to
design and implement systems that automate existing
business systems and structures.
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Concept of IT Management
The following four concepts are essential for an
understanding of the successful management of IT.
Strategic Relevance.
Corporate Culture.
Contingency
Technology Transfer.
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Concept of IT Management
 Strategic Relevance
 The strategic impact of the IT activity varies among
industries and firms and, over time, within an individual firm.
Like the telephone, IT can be used in all firms to enhance
operations.
 IT maybe more significant to some operating units and
functions within a firm than to others. This notion of a
variation in strategic relevance is critical for understanding
the diversity of potential IT management and operational
approaches.
 Corporate Culture
 The corporate culture-embodied by the organization’s
shared value and operationalized in its processes (e.g., the
approach to corporate planning, philosophy of control, and
speed of core product/technological change).
 There are also generic tools that define the “state-of-the-art”;
client-server IT architectures and graphical user interfaces
are examples of generic IT tools for the mid-1990s.
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Concept of IT Management
 Contingency
 IT Management is also influenced by the notion of
contingency. Because IT management systems were often
introduced during the 1960s and early 1970s to simplify
information-intensive transaction processing, structured and
mechanistic approaches resulted in great improvement.
 More complex and flexible IT management approaches and
tools were required to fit with the needs of a complex,
changing business environment.
 Technology Transfer
 The dramatic rate of IT evolution demands careful
management attention. Failure to successfully manage the
introduction and assimilation of emerging technologies
results in a costly and ineffective collection of disjointed
“island of technology”.
 IT must be considered a tool to expand the “intelligence” of
the people within the organization.
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Issues in Information Technology
The IT Environment
IT Architecture and Organization
Management Processes
Project Management
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Issues in Information Technology
The IT Environment
 Era I, from the 1950s to the early 1970s, the manager of data
processing was the single source for providing information
processing services and for managing technology expertise.
 Era II, began with the introduction of minicomputers and time
sharing in the early 1970s. It was dramatically accelerated in the
early 1980s by the personal computer, which introduced a wide
range of new channels for users to acquire technology expertise
and information processing capabilities.
 Era III, A growing number of companies became aware of the
opportunities to use IT to cause significant shifts in market share
and competitive positioning and to produce organizational
restructuring.
 Era IV, is emerging in which the power of widely distributed, flexible
information management systems and communication networks
enabled virtually instantaneous delivery of information and
knowledge to the desktop (and laptop) of individuals located all
over the globe.
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Issues in Information Technology
Administrative
Framework
Primary
Target
Justification/
Purpose
Era I
Regulated
monopoly
Organizational
Productivity/
Efficiency
Era II
Free
Market
Individual
Individual/Group
effectiveness
Era III
Regulated
Free market
Business process/
Inter-organizational
Strategic/
competitive
Era IV
Collaborative
Electronic
integration
Organizational
effectiveness
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Issues in Information Technology
IT Architecture and Organization
 The technologies of computing and telecommunications are
integrated with organizational design and industry issues.
Resolving these architecture issues goes well beyond the
technology itself and is heavily contingent on such influences
as the corporate organization and culture.
 The networked corporation is increasingly a reality,
international coordination issues are more complicated than
those in the domestic arena.
 There are issues of organization reporting chains, levels of
reporting, IT leadership styles, and other coordinating
processes, which we believe can be examined more
thoroughly in the 1990s than a decade ago.
 The performance of operations can be measured on a
number of dimensions; cost control, ability to meet batch
report deadline.
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Issues in Information Technology
Management Processes
 The appropriate balance between user and IT responsibility
for costs must be established. Decisions concerning whether
IT will operate as a cost center, profit center, investment
center.
 Firms must design and implement an appropriate IT
budgeting policy. While many components of the IT budget
are either fixed or transaction driven in the short run, others
are discreationary.
 The appropriate level and frequency of IT performance
monitoring must be established. Reporting should reflect
performance against goals and also against objective
standards wherever possible.
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Issues in Information Technology
Project Management
 The first challenge lies in the area of implementation risk.
The advocates of these project management methodologies
have implied that, by utilizing their approach. Implementation
risk will be eliminated.
 A common framework for defining and managing
implementation risk can lead to a common language that can
be used by business managers, user, and IT managers
throughout the IT implementation process.
 The second challenge revolves around the fact that different
types of projects are best attacked by quite different
management methodologies.
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Case Study : A Tale of Two Airlines
Case Study : A Tale of Two Airlines
in the Information Age
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Case Study : A Tale of Two Airlines
 Inter-organizational IS, databases, and global
interconnectivity together creates platforms for higher
service levels.
 What assumptions did Prof. McPherson make regarding
information technology support at the London-based airlines?
• Do you believe they are realistic assumptions for the technology
environment of the mid-1990s
 What factors do you think lead to the difference between Prof.
McPherson’s expectations and the reality of the situation?
• What alternative approaches could have been taken to resolve
the situation?
 What were the differences between the Atlanta-based and the
London airline’s approach?
• In approaching the problem, did the Atlanta-based airline have any
special advantages?
 What advice would you give the London-based airline’s
management?
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Case Study : A Tale of Two Airlines
 What did Prof. McPherson assume the British Airway's gate
agent would know about him and what are the enabling
technologies that would be required to execute them?
Assumptions
Enabling IT
Ticket Fare
The reservation record (stored in
London or downloaded to a USA
server
Gold Card Member and a regular
patron
The reservation system should
have his Gold Card data and
should be able to use it to their
advantage
That they will know he is on a
Integration of two computers
connecting flight and the data on
reservation systems which
the connecting flight.
historically had no need to be
interconnected with one
another. The information
accessible will show when the
plane touches down and when it 20
actually attached to the gate
Case Study : A Tale of Two Airlines
 What are the possible service alternatives for British
Airways?
1. Hold the airplane for Prof. McPherson
2. Hold the plane at the gate until the scheduled departure time
3. Send an agent to meet McPherson at his arrival gate and
attempt to get him to the plane.
4. Have an agent at the London-based Airways departure gate
briefed on McPherson’s situation and action alternative in hand.
 “we held the plane until last moment. We have reserved a seat for
you on flight number and is there anyone in London we can call to
notify them of your delay”
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Case Study : A Tale of Two Airlines
 Delta (Atlanta-based airline) situation?
 Different tradeoffs are possible in bad weather.
• They held the plane for 15 minutes to pick up an extra 8 known
connecting passengers.
• There information systems had identified the 8, the time they needed to
connect, plus analyzed the tailwind data
 A clearly empowered gate staff and crew existed.
Information, guidelines and training had allowed a partial
transfer of operational decision-making to the customer
interface
 It is easier to do this at the hub than in the outlying
regions. Service failures tend to take place at a distance.
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Case Study : A Tale of Two Airlines
 Reaction from Chairman of British Airways in London
 He had the head of British Airways in USA and his marketing manager
visit Prof. McPherson three weeks later.
 What do you think will be the focus of the discussion?
• Inflexibility of the British Airways information architecture
• Difficulties of getting London-based files and other airline data to the gate
agent
• Conflict between operational excellence and now the additional need for
high touch customer service
– Facilitated by flexible use of the new technologies
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Case Study : A Tale of Two Airlines

The bottom line of this case is that in the information age, the
expectation of what constitute good service have increased
dramatically. Making it happen seamlessly requires the integration of
large amount of different technologies and databases being passed
across organizations in a seamless fashion.

The new technologies require fundamental changes in training and
attitudes. One airline had done it and the other had experienced a
collapse in outlying region.

In the today's networked economy business environment distance is
no longer an excuse for inferior customer services

There has been an increased in global customer and global business
customers

Customers are highly knowledgeable and therefore the level of
expecting has increased significantly.

Ability to use IT appropriately (including empowerment) will continue
to be a source of completive advantage.
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Chapter Summary
 Executives should consider the following questions as they
attempt to forecast the value of digital business strategies and the
ability of their organizations to execute them:
• Do the perspective and skills of the IT team, IT users, and general
management team fit the firm’s changing strategy and organization
and the IT applications, operating environment, and management
processes?
• Is the firm organized to identify, evaluate, and assimilate new
information technologies on a timely basis?
• Are there strategic planning, the management control, and the project
management systems – the three main management systems for
integrating the IT environment with the firm-defined and appropriately
implemented and managed?
• Are the security, priority-setting, and control systems for IT operations
appropriate for the role it plays in the firm?
• Are appropriate organizational structures and coordinating
mechanisms in place to ensure IT is appropriately aligned to the
needs of the firm?
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