McGraw-Hill/Irwin
Copyright © 2008
2008,The
TheMcGraw-Hill
McGraw-HillCompanies,
Companies,Inc.
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rightsreserved.
reserved.
Chapter
14
Enterprise and Global
Management of Information
Technology
McGraw-Hill/Irwin
Copyright © 2008
2008,The
TheMcGraw-Hill
McGraw-HillCompanies,
Companies,Inc.
Inc.All
Allrights
rightsreserved.
reserved.
Learning Objectives
• Identify each of the three components
of information technology management
• Use examples to illustrate how they might
be implemented in a business
• Explain how failures in IT management can
be reduced by the involvement of business
managers in IT planning and management
14-3
Learning Objectives
• Identify several cultural, political, and geoeconomic challenges that confront managers
in the management of global information
technologies
• Explain the effect on global business/IT strategy
of the trend toward a transnational business
strategy by international business organizations
14-4
Learning Objectives
• Identify several considerations that affect the
choice of IT applications, IT platforms, data
access policies, and systems development
methods by a global business enterprise
• Understand the fundamental concepts of
outsourcing and offshoring, as well as the
primary reasons for selecting such an approach
to IS/IT management
14-5
Business and IT
• As the 21st century unfolds, many companies
are transforming themselves into global
powerhouses via major investments in
• Global e-business
• E-commerce
• Other IT initiatives
• There is a need for business managers and
professionals to understand how to manage
this vital organizational function
14-6
Case 1: Alternative Governance Models
• The management of IT falls into five major
governance decision areas
•
•
•
•
•
IT principles
IT architecture
IT infrastructure
Business application needs
Prioritization and investment decisions
• How companies organize their business and
IT management teams to make such decisions
varies widely
14-7
Case 1: Alternative Governance Models
• UPS’s IT Governance
• An IT steering committee: four top executives
who have primary responsibility for principles
and investment decisions
• An IT governance committee: senior IT
executives responsible for key architecture
• A formal “charter” process: winnows down
IT project proposals to those best aligned
with strategic objectives
• An escalation process to handle exceptions
to architecture standards
14-8
Case 1: Alternative Governance Models
• Manheim Interactive
• Like most high-growth start-ups, the company did
not tightly govern its IT architecture or
infrastructure
• The focus on speed of IT delivery was
unsustainable as the online business matured
• IT governance has now transitioned to a blend
of centralized and decentralized arrangements
14-9
Case 1: Alternative Governance Models
• JPMorgan Chase
• Encourages autonomy to generate innovation and
recognize the very different requirements of its
businesses
• The company encourages the use of standardized
technologies where they can provide economies
of scale
14-10
Case 1: Alternative Governance Models
• ING Direct
• The company is organized into nine countrybased businesses
• Each country operates autonomously, but the
units share a common business model
• Business solutions, IT technical components,
and the infrastructure as standardized
• A council comprised of CIOs and COOs
makes enterprisewide principles, architecture,
infrastructure, and investment decisions
14-11
Case Study Questions
• Is there a need for different IT governance
arrangements among companies?
• Why or why not?
• Use UPS, JPMorgan Chase, and ING Direct
as examples to defend your answer
14-12
Case Study Questions
• Should the IT governance of an e-commerce
start-up like Manheim Online differ from that
used by its parent company, as Manheim
Auctions was in this case?
• Should the IT governance of an e-commerce
venture change over time, as occurred with
Manheim Online?
14-13
Case Study Questions
• The five major governance decision areas
outlined in the case tell us a lot about what
is involved in the management of IT
• Which of the decision areas should primarily
be the province of the business management
of the company?
• Which should primarily be the responsibility
of IT management?
• Should all decisions be made jointly by both
management groups?
14-14
Components of IT Management
14-15
Managing Information Technology
• Managing the joint development and
implementation of business and IT strategies
• Use IT to support strategic business priorities
• Align IT with strategic business goals
• Managing the development and implementation
of new business/IT applications and technologies
• Information systems development
• Managing the IT organization and infrastructure
• Hardware, software, databases, networks, and
other resources
14-16
Comparing IT Management Approaches
• Insert Figure 14.3 here
14-17
Managing the IT Function
• Three things happened in the past few years
• The Internet boom inspired businesses
to connect their networks
• Companies on on their intranets essential
applications without which their businesses
could not function
• It became apparent that maintaining PCs
on a network is very, very expensive
• These things created an urgent need for
centralization
14-18
Organizing IT
• Early Years
• Centralization of computing with large
mainframes
• Next
• Downsizing and moving back to decentralization
• Current
• Centralized control over the management of IT
while serving the strategic needs of business units
• Hybrid of centralized and decentralized components
14-19
Avnet Marshall Organizational Components
14-20
Managing Application Development
• Application development management involves
•
•
•
•
•
•
Systems analysis and design
Prototyping
Applications programming
Project management
Quality assurance
System maintenance
14-21
Managing IS Operations
• IS operations management is concerned with
the use of hardware, software, network, and
personnel resources in data centers
• Operational activities that must be managed
•
•
•
•
Computer system operations
Network management
Production control
Production support
14-22
System Performance Monitors
• Software packages that
• Monitor the processing of computer jobs
• Help develop a planned schedule of computer
operations that can optimize computer system
performance
• Product detailed statistics that are invaluable
for effective planning and control of computing
capacity
14-23
Features of System Performance Monitors
• Chargeback Systems
• Allocates costs to users based on the
information service rendered
• Process Control Capabilities
• Systems that not only monitor but
automatically control computer operations
at large data centers
14-24
IT Staff Planning
• Recruiting, training and retaining qualified
IS personnel
• Evaluating employee job performance and
rewarding outstanding performance with
salary increases and promotions
• Setting salary and wage levels
• Designing career paths
14-25
IT Executives
• Chief Information Officer (CIO)
• Oversees all uses of information technology
in many companies, and brings them into
alignment with strategic business goals
• Chief Technology Officer (CTO)
• In charge of all information technology
planning and deployment
• Manages the IT platform
• Second in command
14-26
Other IT Positions
•
•
•
•
E-commerce architect
Technical team leader
Practice manager
Systems analyst
14-27
Technology Management
• All information technologies must be managed
as a technology platform for integrating
business applications
• Both internally or externally focused
• The Internet, intranets, electronic commerce
and collaboration technologies, CRM software,
enterprise resource planning, and supply chain
management
• Often the primary responsibility of a chief
technology officer
14-28
Managing User Services
• Business units that support and manage end
user and workgroup computing
• Can be done with information centers
staffed with user liaison specialists or with
Web-enabled intranet help desks
• Key roles
•
•
•
•
Troubleshooting problems
Gathering and communicating information
Coordinating educational efforts
Helping with end user application development
14-29
Outsourcing
• The purchase of goods or services from
third-party partners that were previously
provided internally
14-30
Outsourcing’s Top Ten
14-31
Why Outsource?
• Save money – achieve greater ROI
• Focus on core competencies – organizations
can focus on the business that they are in
• Achieve flexible staffing levels
• Gain access to global resources
• Decrease time to market
14-32
Offshoring
• Relocation of an organization’s business
processes to a lower cost location
• This location is typically overseas
• Can be either production or service
• Growth of services offshoring is linked to
• Availability of large amounts of reliable
and affordable communication infrastructure
• Digitization of many services
14-33
Failures in IT Management
• IT not used effectively
• Computerizing traditional business processes
instead of developing innovative e-business
processes
• IT not used efficiently
• Poor response times
• Frequent downtimes
• Poorly managed application development
14-34
Management Involvement & Governance
• Managerial and end user involvement
• Key ingredient to high-quality information
system performance
• Involve business managers in IT management
• Governance structures, such as steering
committees
14-35
Sr. Management’s Involvement in IT
14-36
The International Dimension
• Companies around the world are developing
new models to operate competitively in a
digital economy
• These models are structured, yet agile,
global, yet local
• They concentrate on maximizing the risk
adjusted return from both knowledge and
technology assets
14-37
Case 2: Offshoring & Giving Away Technology
• Only services can provide growth on the scale
that IBM needs to make shareholders happy
• To combat cheaper offshore companies, IBM
is giving away technology
• In theory, giving away software, patents, and
ideas will
• Help the entire industry grow faster
• Open new frontiers
• Create opportunities for IBM to sell high-value
products and services
14-38
Case 2: Offshoring & Giving Away Technology
• To cut costs, IBM is also offshoring
• India accounts for the largest number of
IBMers outside the United States
• By the end of next year, IBM Services head
count in India will top 52,000
• More than one-fourth of all services personnel
• About one-sixth of IBMers worldwide
14-39
Case Study Questions
• Do you agree with IBM’s employment response
to competition from software development
contractors in India like Wipro that are
expanding into IT consulting services?
• Will IBM’s plan to give away some of its IT
assets and intellectual property and increase
support of opensource software products be a
successful growth strategy in the “brutally
competitive marketplace” in which it operates?
14-40
Case Study Questions
• Do you agree with IBM researchers’ assumption
that IT will remain “hard to use, expensive, and
labor-intensive, with customers continuing to
need help solving business problems” for along
time to come?
• Should IBM bet its business on that assumption?
14-41
Global IT Management Dimensions
14-42
Global IT Management Challenges
• Political challenges
• Many countries regulate or prohibit the
transfer of data across their national boundaries
• Others severely restrict, tax, or prohibit
imports of hardware and software
• Some have local content laws that specify the
portion of the value of a product that must be
added in that country if it is to be sold there
• Others require a business to spend part of the
revenue they earn in a country in that nation’s
economy
14-43
Global IT Management Challenges
• Geoeconomic challenges
• Physical distances are still a major problem
• It may take too long to fly in specialists
• It is difficult to communicate in real time
across 24 time zones
• Many countries do not have good telephone
and telecommunications services
• It may be hard to find skilled local workers
• There can be great differences in the cost of
living and labor costs between countries
14-44
Global IT Management Challenges
• Cultural challenges
•
•
•
•
•
•
Languages
Cultural interests
Religions
Customs
Political philosophies
Global IT managers need cultural training
before they are sent on assignment
• Different work styles and business relationships
14-45
Transnational Strategies
• Companies are moving toward a transnational
strategy
• Business depends heavily on information
systems and Internet technologies to help
integrate global business activities
• Requires an integrated and cooperative
worldwide IT platform
14-46
Transnational Business/IT Strategies
14-47
Global Business Drivers
• Business requirements caused by the nature
of the industry and its competitive or
environmental forces
• Examples of global drivers:
•
•
•
•
•
Customers
Products
Operations
Resources
Collaboration
14-48
Global IT Platforms
• Hardware Difficulties
•
•
•
•
•
•
High prices
High tariffs
Import restrictions
Long lead times for government approvals
Lack of local service or spare parts
Lack of documentation tailored to local
conditions
14-49
Global IT Platforms
• Software Difficulties
• Packages developed in Europe may be
incompatible with American or Asian versions
• The software publisher may refuse to supply
markets that disregard software licensing and
copyright agreements
14-50
International Data Communications Issues
14-51
The Internet as a Global IT Platform
• The Internet
• An interconnected matrix that reaches tens
of millions of users in over 100 countries
• Business environment is free of traditional
boundaries and limits
• Without incurring massive cost outlays
for telecommunications, companies can
• Expand markets
• Reduce communications and distribution costs
• Improve profit margins
14-52
Key Questions for Global Websites
• Will you have to develop a new navigational
logic to accommodate cultural preferences?
• What content will you translate, and what
content will you create from scratch to address
regional competitors or products that differ
from those in the U.S.?
• Should your multilingual effort be an adjunct
to your main site, or will you make it a separate
site, perhaps with a country-specific domain?
14-53
Key Questions for Global Websites
• What kinds of traditional and new media
advertising will you have to do in each country
to draw traffic to your site?
• Will your site get so many hits that you’ll need
to set up a server in a local country?
• What are the legal ramifications of having your
website targeted at a particular country, such as
laws on competitive behavior, treatment of
children, or privacy?
14-54
Internet Users by World Region
14-55
Global Data Access Issues
• Transborder Data Flows may be viewed as
violating
• A nation’s sovereignty because it avoids
customs duties and regulations
• Laws protecting the local IT industry
from competition
• Laws protecting local jobs
• Privacy legislation
14-56
U.S.-E.U. Data Privacy Requirements
• Key data privacy provisions
• Notice of purpose and use of data collected
• Ability to opt out of third-party distribution
of data
• Access for consumers to their information
• Adequate security, data integrity, and
enforcement provisions
14-57
Internet Access in Restrictive Countries
• The struggle between Internet censorship and
openness at the national level revolves around
• Controlling the conduits
• Filtering the flows
• Punishing the purveyors
• Most of the world has decided that restricting
Internet access is not a viable policy
• Restricting access also hurts a country’s
opportunities for economic growth and prosperity
14-58
Global Government Internet Restrictions
• High Government Access Fees
• Kazakhstan, Kyrgyzstan
• Government Monitored Access
• China, Iran, Saudi Arabia, Azerbaijan, Ubekistan
• Government Filtered Access
• Belarus, Cuba, Iraq, Tunisia, Sierra Leone,
Tajikistan, Turkmenistan, Vietnam
• No Public Access Allowed
• Burma, Libya, North Korea
14-59
Global Systems Development
• Key development issues
• Conflicts over local versus global system
requirements
• Trying to agree on common system features
• Disturbances caused by systems implementation
and maintenance activities
• Global standardization of data definitions
14-60
Systems Development Strategies
• Key strategies for global systems development
• Transform an application used by the home
office or a subsidiary into a global application
• Set up a multinational development team
• Parallel development
• Centers of excellence
• Offshore development
14-61
Internet-Enabled IT Development
14-62
Case 3: Thinking & Acting Globally
• Globalization means different things to
different people
• There’s no single method for how it operates
• Too often, strategic motivations for globalization
aren’t matched by operational approaches to
meet enterprise needs
• Operating globally means striking a balance
between central and local control of operations
14-63
Case 3: Thinking & Acting Globally
• To ensure that IT-globalization decisions match
the enterprises core needs and approaches
• Determine the balance of global integration
versus local responsiveness
• Align IT’s major processes with the enterprise’s
governance orientation
• Assign staff, roles, and competencies
appropriately
14-64
Case 3: Thinking & Acting Globally
• Other issues to consider
• The diversity of countries in which the
company operates
• The IT maturity in these countries
14-65
Case Study Questions
• What are some of the forces driving IT
organizations to globalize?
• What are some of the local forces and
challenges facing modern IT organizations?
• How does a CEO manage the requirement to
both globalize and localize the IT function?
14-66
Case 4: The Hard Road to Outsourcing
• Outsourcing IT work abroad can cut the cost
of IT by 39 percent
• It carries privacy risks
• It threatens U.S. jobs
14-67
Case Study Questions
•
The law does not provide for companies to
disclose to their customers that they have
outsourced or offshored access to their data
•
•
Is this a potential problem for either the
company or the customer?
What is meant by the term “best-of-breed
model?”
•
Why has this approach worked for Boeing?
14-68
Case Study Questions
• GE wants to outsource its entire ERP system
based, in part, on its successes with other
outsourcing projects
• Is it possible to outsource too much?
14-69