Summary with Strategic Management of Information Systems - Pearlson & Saunders - 5th international student edition

Introduction to Information Systems management

Managing information is a critical skill for success in today’s business environment. All decisions made by companies involve, at some level, the management and use of IT.

Understanding the basic fundamentals about using and managing information is worth the investment of time.

The reasons for this investment:

• IS must be managed as a critical source

• IS enable change in the way people work together

• IS are part of almost every aspect of business

• IS enable or inhibit business opportunities and new strategies

• IS can be used to combat business challenges from competitors

In addition to financial issues, a manager must know how to mesh technology and people to create effective work processes. Collaboration is increasingly common, especially with the rise of social networking. Incorporating IS into the design of a business model enables people to focus their time and resources on issues that bear directly on customer satisfaction and other revenue- and profit-generating activities. The proliferation of new technologies creates a business environment filled with opportunities.
Digital natives: individuals who have grown up completely fluent in the use of personal technologies and the web

The changing demographics of the workforce and the integration of digital natives increase the rate of adoption of new technologies beyond the pace of traditional organisations.

Skills a manager needs to participate effectively in IT decisions (fig. I-2, p. 9):

• Visionary: Creativity, confidence and flexibility

• Informational and Interpersonal: Communication, listening and interpersonal skills

• Structural: Project management, analytical skills, organizational skills and planning skills.

See Figure I-4 on page 12 for manager’s roles, and see Figure I-6 on page 14 for Process view of the firm: the value chain

Comparison of data, information and knowledge

Data: simple observations of the state of the world. E.g. Daily inventory report of all inventory items sent to the CEO of a large manufacturing company

Information: Data endowed with relevance and purpose. E.g. Daily inventory report of items that are below economic order quantity levels sent to inventory manager

Knowledge: Information from the human mind. E.g. Inventory manager knowing which items need to be reordered in light of daily inventory report, anticipated labour strikes, and a flood in Brazil that affects the supply of a major component.

Mashup: Term used for applications that combine data from different source to create a new application online.

System hierarchy: See Figure I-10 on page 18: An IS comprises 3 main elements: technology, people and process. IS is defined as the combination of those 3 elements that the organization uses to produce and manage information.

Infrastructure: refers to everything that supports the flow and processing of information in an organization.

Making sure information systems are in line with strategy and the organization - Chapter 1

General managers must take a role in decisions about information systems (IS). General managers, who leave IS decisions solely to there is professionals often put themselves and their companies at a disadvantage. The IS organization manages an infrastructure that is essential to the firm’s functioning.

The Information System Strategy Triangle is a framework for understanding the impact of IS on organizations. It relates business strategies with IS strategy and organizational strategy. See Figure 1.1 on page 24

The Information System Strategy Triangle implies that a successful firm has an overriding business strategy that drives both organizational and IS strategy. The business IS and organizational strategies must constantly be adjusted to be in balance.

1.1 An overview of business strategy frameworks

Strategy = A coordinated set of actions to fulfil objectives, purposes, and goals. The essence of a strategy is setting limits on what the business will seek to accomplish. Strategy starts with a mission.

Mission = A clear and compelling statement that unifies an organization’s effort and describes what the firm is all about. In a few words the mission statement sums up what is unique about the firm. See Figure 1.2 on page 27.

Business strategy = A plan articulating where a business seeks to go and how it expects to get there. Management constructs this plan in response to market forces, customer demands, and organizational capabilities. Market forces create the competitive context for a business.

There are several well-accepted models that frame the discussions of business strategy.

Porter’s generic strategies framework

Michael Porter’s framework helps managers to understand the strategies they may choose to build a competitive advantage. Porter claims that the “fundamental basis of above-average performance in the long run is sustainable competitive advantage”.

He identified three primary strategies for achieving competitive advantage:

• Cost leadership

• Differentiation

• Focus

These advantages derive from the company’s relative position in the marketplace, and depend on the strategies and tactics used by competitors. See fig.1.3, p. 29

Cost leadership = When the organization aims to be the lowest-cost-producer in the marketplace. Only one firm can be cost leader, as soon as another firm aims to be cost leader as well, price wars will make sure one of the two companies will have to leave the market.

Differentiation = The organization qualifies its products or service in a way that allows it to appear unique in the marketplace. Multiple firms can apply a differentiation strategy, firms have to do their very best to produce and market their products in such a way that customers see a clear difference with a similar product of a competitor.

Focus = The organization limits its scope to a narrower segment of the market and tailors its offerings to that group of customers. Two variants:

• Cost focus: Organization seeks a cost advantage within its segment

• Differentiation focus: Organization seeks to distinguish its products or services within the segment.

Hypercompetition Framework (by D’Aveni)

Porter’s model is not suitable to any situation. Markets are characterized more and more by fast-changing circumstances. Hypercompetition models suggest that the speed and aggressiveness of the moves and countermoves in any given market create an environment in which advantages are “rapidly created and eroded”. Markets are dynamic, and competitive advantages can be achieved by being able to change very quickly and along with the market. Firms seek to achieve this relatively transitory competitive advantage under hypercompetition in four ways:

• Cost/quality

• Timing/know-how

• Strongholds

• Deep pockets

Furthermore, firms willing to compete under hypercompetition circumstances should be able to adapt and change their organizational strategy quickly, which requires the firm to have a suitable culture. Also, the firm should be able to surprise and confuse the competition with their actions.

Why are these models essential to planning for Information Systems?

Business strategy should derive IS decision making, and changes in business strategy should entail reassessments of IS. Moreover, changes in IS potential should trigger reassessments of business strategy.

For the purposes of the Information Systems Strategy Triangle, understanding business strategy means answering the following questions:

• What is the business goal or objective?

• What is the plan for achieving it? What is the IS role in this plan?

• Who are the crucial competitors and partners, and what is required of a successful player in this marketplace?

• What are the industry forces in this marketplace?

Figure 1.4 on page 33 gives you a summary of strategic approaches and IT applications.

1.2 An overview of organizational strategies

Organizational strategy = The organizational design, as well as the choices it makes to define, set up, coordinate, and control its work processes. It must complement business strategy.

The business diamond model

The business diamond = Identifies the crucial components of an organization’s plan as its information/control, people, structure and tasks.

See Figure 1.5 on page 33 for Levitt’s Business Model.

Social Business Lens- Building a Social Business Strategy

A social business strategy = A plan of how the firm will use social IT, aligned with organization strategy and IS strategy. It includes a vision of how the business would operate if it incorporated social and collaborative capabilities throughout the business model.

3 categories:

1. Collaboration = Using social IT to extend the reach of stakeholders, both employees and those outside the enterprise walls.

2. Engagement = Using social IT to involve stakeholders in the traditional business of the enterprise

3. Innovation = Using social IT to identify, describe, prioritize, and create new ideas for the enterprise.

Managerial levers strategy

Managerial levers strategy = Suggests that the successful execution of a business’s organizational strategy comprises the best combination of organizational, control, and cultural variables. These variables are managerial levers.
See Figure 1.6 on page 35 for the managerial levers model.

For a summary of the organizational strategy frameworks see Figure 1.7 on page 36

1.3 An overview of information systems strategies

IS strategy = The plan an organization uses to provide information services. IS allow a company to implement its business strategy. IS help to determine the company’s capabilities.

Organizational strategy and IS must complement each other. They must be designed so that they support, rather than hinder each other. If a decision is made to change one corner of the triangle, it is necessary to evaluate the other two corners to ensure that balance is preserved. Changing business strategy without thinking through the effects on the organizational and IS strategies will cause the business to struggle until balance is restored. Likewise, changing the IS or the organization alone will cause an imbalance.

The strategic use of information resources - Chapter 2

Innovative use of a firm’s information resources can provide companies with substantial advantages over competitors.

2.1 Evolution of Information Resources

IS strategy from the 1960s to the 1990s was driven by internal organizational needs. First came the need to lower existing transaction costs. Next was the need to provide support for managers by collecting and distributing information. An additional need was to redesign the business process.

As each era begins, organizations adopt a strategic role for IS to address not only the firm’s internal circumstances but its external circumstances as well. The IS Strategy Triangle introduced in chapter 1 reflects the link between IS strategy and organizational strategy and the internal requirements of the firm. The link between IS strategy and business strategy reflects the firm’s external requirements.

See Figure 2.1 on page 46 for the eras of information usage in organizations.

2.2 Information Resources as Strategic Tools

Information resources = The available data, technology, people, and processes within an organization to be used by the manager to perform business processes and tasks. Information resources can either be assets or capabilities.

IT Asset = Anything, tangible or intangible, that can be used by a firm in its processes for creating, producing, and/or offering its products.

Two major types of IT assets:

1. IT infrastructure = Includes each of an information resource’s constituent components

2. Information repository = Data that is captured, organized, and retrievable by the firm.

In the ever-expanding Web 2.0 space, the view of IT assets is broadening to include potential resources that are available to the firm, but that are not necessarily owned by the firm. These additional information resources are often available as a service, rather than as a system to be procured and implemented internally (e.g. Web-based software such as SalesForce.com, Linked-In).

IT Capability = Something that is learned or developed over time for the firm to create, produce, or offer its products.

>> An IT capability makes it possible for a firm to use its IT assets effectively.

Three major categories of IT capabilities:

1. Technical skills = Are applied to designing, developing, and implementing information systems.

2. IT management skills = Are critical for managing the IT function and IT project.

3. Relationship skills = Can either be externally focused or spanning across departments:

   • Externally focused: Includes ability to respond to the firm’s market and to work with customers and suppliers.

   • Spanning skill: Relationship between firm’s IS managers and its business managers.

To understand better the type of advantage the information resource can create, consider the following questions:

• What makes the information resource valuable?

• Who appropriates the value created by the information resource?

• Is the information resource equally distributed across firms?

• Is the information resource highly mobile?

• How quickly does the information resource become obsolete?

See Figure 2.2 on page 49 for a summary of Information Resources

2.3 How can companies use their information resources strategically?

Information resources exist in a company alongside other resources. The general manager is responsible for organizing all resources so that business goals are met.

Five competitive forces model by Michael Porter

See Figure 2.3 on page 52 for the 5 competitive forces with potential strategic use of information resources.

The 5 competitive forces are explained below:

Potential threat of new entrants

Existing firms within an industry often try to reduce the threat of new entrants to the marketplace by erecting barriers to entry. Information resources also can be used to build barriers that discourage competitors from entering the industry.

Example:

Massachusetts Mutual Life Insurance Company created an IS infrastructure that connects the local sales agent with comprehensive information about products and customers. An insurance company entering the marketplace would have to spend millions of dollars to build the telecommunications and IS required to provide its sales force with the same competitive advantage.

Bargaining power of buyers

Customers often have substantial power to affect the competitive environment. Information resources can be used to build switching costs that make it less attractive for customers to purchase from competitors. Switching costs can be any aspect of a buyer’s purchasing decision that decreases the likelihood of “switching” his or her purchase to a competitor.

Bargaining power of suppliers

Supplier’s bargaining power can reduce a firm’s profitability. This force is strongest when a firm has few suppliers from which to choose, the quality of supplier inputs is crucial to the finished product, or the volume of purchases is insignificant to the supplier.

Threat of Substitute products

The potential of a substitute product in the marketplace depends on the buyers’ willingness to substitute, the relative price-to-performance of the substitute, and the level of switching costs a buyer faces. Information resources can create advantages by reducing the threat of substitution.

Example:

Internet auction site eBay used innovative IT to create a set of services for their small businesses, a major source of revenue for the online auctioneer.

At a time when customers were beginning to complain, sellers were wondering about the fees, and competition was trying to lure them both away, eBay brought out ProStores, a service to help all sellers build their own Web site. eBay managers noticed that many sellers did not have any Web presence other than eBay, and the move was another way to lock in these customers to the eBay environment.

Substitutes that cause a threat are not just products offered form the initial company or products that are similar but offered by a competitor. The threat often comes from potentially new innovation that make the previous product obsolete.

Industry Competitors

Rivalry among the firms competing within an industry is high when it is expensive for a firm to leave the industry, the growth rate of the industry is declining, or products have lost differentiation. Intense rivalry in an industry ensures that competitors responds quickly to any strategic actions.

(See Figure 2.4 on page 56 for an application of 5 competitive forces model for Zara to use as an example/extra explanation)

General managers can use the five competitive forces model to identify the key forces currently affecting competition, to recognize uses of information resources to influence forces, and to consider likely changes in these forces over time. The changing forces drive both the business strategy and the IS strategy.

Value chain model

The value chain = Addresses the activities that create, deliver, and support a company’s product or service. See Figure 2.5 on page 57 for a value chain

Porter divided these activities into two broad categories:

1. Primary activities = Relate directly to the value created in a product or service (Inbound logistics, operations, outbound logistics, marketing and sales, services)

2. Support activities = Make it possible for the primary activities to exist and remain coordinated (Organization, human resources, technology, purchasing)

The value chain framework suggests that competition stems from two sources:

1. Lowering activity costs; Only the cost to perform activities achieves an advantage if the firm possesses information about its competitors’ cost structures.

2. Adding value to a product or service so that buyers will pay more; Adding value can be used to gain strategic advantage only if a firm possesses accurate information regarding its customer.

Supply chain management (SCM) = An approach that improves the way a company finds raw components it needs to make a product or service, manufactures that product or service, and delivers it to customers. By sharing information across the network, guesswork about order quantities for raw materials and products can be reduced, and suppliers can make sure they have enough on hand if demand for their products unexpectedly rises.

Sharing information across firms requires collaboration and, increasingly, the IT to support its seamless processing across firm boundaries.

Enterprise resource planning (ERP) = A tool that automates functions of the operations activities of the value chain.

Customer relationship management (CRM) = Includes management activities performed to obtain, enhance relationships with, and retain customers.

CRM is a coordinated set of activities designed to learn more about customers’ needs and behaviours to develop stronger relationships with them and to enhance their value chains.

Attain and sustain competitive advantage by using the resource-based view

The resource-based view = Useful in determining whether a firm’s strategy has created value. Unlike Porter’ competitive forces framework, this view maintains that competitive advantage comes from the information and other resources of the firm. The RBV concentrates on what adds value to the firm.

The RBV has been applied in the area of IS to help identify two subsets of information resources:

1. Those that enable a firm to attain competitive advantage

2. Those that enable a firm to sustain the advantage over the long term

A resource is considered valuable when it enables the firm to become more efficient or effective.

From the IS perspective, some types of resources are better than others for creating attributes that enable a firm to attain and sustain competitive value (i.e., value, rarity, low substitutability, low mobility, low imitability).

It is harder to rate the value attributes of an information repository. Some information repositories are filled with internally oriented information designed to improve the firm’s efficiency. These repositories are of less value than those that tap the external environment and contain significant knowledge about the industry, competitors, and the customers.

2.4 Strategic Alliances

A strategic alliance = An inter-organizational relationship that affords one or more companies in the relationship a strategic advantage. IT can help produce the product developed by the alliance, share information resources across the partners’ existing value systems, or facilitate communication and coordination among the partners.

Strategic alliances are often based on trust and respect that can only develop over time as a result of a repeating pattern of interactions.

Co-opetition

Co-opetition = A strategy whereby companies cooperate and compete at the same time with companies in its value net. The value net includes a company and its competitors and complementers, as well as its customers and suppliers, and the interactions among all of them.

Complementer = A company whose product or service is used in conjunction with a particular product or service to make a more useful set for the customers.

2.5 Risks

When information systems are chosen as the tool to outpace their firm’s competitors, executives should be aware of the many risks that may surface:

• Awaking a sleeping giant; A firm can implement IS to gain competitive advantage, only to find that it nudged a larger competitor with deeper pockets into implementing an IS with even better features

• Demonstrating bad timing; Sometimes customers are not ready to use the technology designed to gain strategic advantage

• Implementing IS poorly; Speaks for itself

• Failing to deliver what users want; Speaks for itself

• Web-based alternative removes advantages; Managers must consider the risk of losing any advantage obtained by an information resource that later becomes available as a service on the Web

• Running afoul of the law; Firms have to use Information Systems carefully, and in line with the law of the country they are operating in. This can be a big challenge for large multinationals

Managerial levers - Chapter 3

In order for IS to support an organization in achieving its goals, they must reflect the business strategy and be coordinated with the organizational strategy

3 components of organizational strategy:

1. Organizational design; Decision rights, formal reporting relationships and structure, informal networks

2. Management control systems; Planning, data collection, performance measurement, evaluation, incentives and rewards

3. Organizational culture; Organizational, national

See also Figure 3.3 on page 77

Organizational strategy = Includes the organization design as well as the managerial choices that define, set up, coordinate and control its work processes. It works best when it meshes well with the IS strategy.

>> Optimized organizational designs support optimal business processes and reflect the firm’s values and culture.

Types of managerial levers:

1. Organizational

2. Control

3. Cultural

3.1 IS and organizational design

Ideally, an organizational structure is designed to facilitate the communication and work processes necessary to accomplish goals.

Decision rights

Decision rights: indicate who in the organization has the responsibility to initiate, supply information for, approve, implement and control various types of decisions ideally the person who has the most information about a decision and the best position to understand the relevant issues (but unfortunately, not always the case).

IS make it easier for the person holding the decision right to receive the information needed.

Accountability = Has to do with the person who is responsible for the decision.

Organisational design = Is about making sure that decision rights are properly allocated in the structure of formal reporting relationships.

Business processes = The set of ordered tasks needed to complete key objectives of the business.

Organizational structures

Formal reporting relationships = The structure set up to ensure coordination among all units within the organization; reflects allocation of decision rights.

See Figure 3.4 on page 80 for a comparison of organizational structures

The 4 structures:

• Hierarchical = Bureaucratic form with defined levels of management

• Flat = Decision making pushed down to the lowest level in the organization

• Matrix = Workers are assigned to 2 or more supervisors in an effort to make sure multiple dimensions of business are integrated

• Networked = Formal and informal communication networks that connect all parts of the company.

An organization is seldom a pure form of 1 of the 4 structures described. It is more common to see a hybrid structure.

Furthermore, IS are enabling even more advanced organization forms such as the adaptive organization and the zero time organization. Common to these advanced forms is the idea of agile, responsive organizations that can configure their resources and people quickly. These organizations are flexible enough to sense and respond to changing demands.

Informal networks

Informal network = Mechanism, such as ad hoc groups, which work to coordinate and transfer information outside the formal reporting relationship.

Informal networks also exist and can play an important role in an organization’s functioning. Not all informal relationships are a consequence of a plan by management. Some networks unintended by management develop for a variety of factors including work proximity, friendship, shared interest, family ties, etc.

Informal networks also arise for political reasons. Employees can cross over departmental, functional, or divisional lines in an effort to create political coalitions to further their goals.

Social network = An IT-enabled network that links individuals together in ways that enable them to find experts, get to know colleagues, and see who has relevant experience for projects across traditional organization lines.

What differentiates a social network from previous IT solutions to connect individuals is that it is integrated with the work processes themselves.

3.2 IS and organizational control

Controls are the second type of managerial lever. Not only does IS change the way organizations are structured, also affects the way managers control their organizations.

Management control = Concerned with how planning is performed in organizations and how people and processes are monitored, evaluated, and compensated or rewarded.

IS offer new opportunities for collecting and organizing data for 3 management control processes:

1. Data collection: IS enable the collection of information that helps managers determine if they are satisfactorily progressing toward realizing the organization’s mission as reflected in its goals.

2. Evaluation: IS facilitate the comparison of actual performance with the desired performance that is established as a result of planning

3. Communication: IS speed the flow of information from where it is generated to where it is needed. This allows an analysis of the situation and a determination about what can be done to correct for problematic situations.

Planning and IS

Planning = The processed by which future direction is established, communicated and implemented.

IS can play an important role in planning in four ways:

• IS can deliver the necessary data to develop the strategic plan

• IS can provide scenario and sensitivity analysis through simulation and data analysis

• Automating planning processes

• An IS can be a component of a strategic plan

Data collection and IS

Information Systems can collect data in order to monitor what employees and customers do, if employees show up at work in time, or if their productivity is high enough. The challenge, here, is twofold: (1) to embed monitoring tasks within everyday work, (2) to reduce the negative impacts to workers being monitored, respect employee’s privacy for example

Performance measurement and evaluation

The set of measures that are used to assess success in the execution of plans and the processes by which such measures are used to improve the quality of work. Today’s Information Systems make it possible to collect data on a lot of aspects of the organization, which allows managers to analyse performance on the basis of a lot of metrics. The pitfall, here, is that managers can start to over-analyse, which is called analysis-paralysis.

Incentives and rewards

Incentives = The monetary and non-monetary devised used to motivate behaviour within an organization.

Information Systems can be used to track which employees are performing above average and deserve incentives, or to put a notification on the website of the company which employees are performing above average.

3.3 IS and culture

The third managerial lever of organizational strategy is culture. Culture is playing an increasingly important role in IS development and use. Since IS development and use is complicated by human factors it is important to consider culture’s impact on IS.

Culture = A set of share values and beliefs that a group holds and that determines how the group perceives, thinks about, and reacts to its various environments. Culture has been compared to an iceberg: only a small part of the culture is visible from the surface.

Beliefs = The perceptions that people hold about how things are done in their community.

Values = Reflect the community’s aspirations about the way things should be done.

• Observable artefacts = The most visible level of culture

• Espoused values = Are the explicitly stated should be consistent with thepreferred organizational values enacted values (ideally)

• Enacted values = Which are the values and norms that are actually exhibited or displayed in employee behaviour.

• Assumptions = Are unobservable since they reflect organizational values that have become so taken for granted that they guide organizational behaviour without any of the group members thinking about them.

Levels of culture and IT

Culture can be found in countries, organizations, or even within organizations. IS development and use can be impacted by culture at all these levels. IS can even play a role in promoting it.

See Figure 3.5 on page 91 for the levels of culture

Both national and organizational cultures can affect the IT issues and vice versa. Differences in national culture may affect IT in a variety of ways impacting IS development, technology adoption an diffusion, system use and outcomes, and management strategy.

Variations across national cultures may lead to different perceptions and approaches to IS development. System designers may have different perceptions of the end users and how the systems would be used.

• National cultures that are more willing to accept risk appear to be more likely to adopt new technologies

• Cultures that are less concerned about power differences among people are more likely to adopt technologies that help promote equality.

If a new technology is implemented: either the technology must fit with the organization´s culture, or the culture must be shaped to fit the behavioural requirements of the technology.

Research has shown that differences in culture results in differences in the use and outcomes of IT:
Example: Countries that are likely to avoid uncertainty (Japan/Brazil) use IT often for planning and forecasting, whereas countries that are less concerned about risk and uncertainty, IT is more often used for maintaining flexibility.

Geert Hofstede: national cultural dimensions

See Figure 3.6 on page 93 for an summary of the cultural dimensions of Hofstede (related GLOBE dimensions), and examples of the effect on IT.

Those dimensions are:

1. Uncertainty avoidance = Extent to which society tolerates uncertainty and ambiguity

2. Power distance = Degree to which members of an organization or society expect and agree that power should be equally shared

3. Individualism/Collectivism = Degree to which individuals are integrated into groups

4. Masculinity/Femininity = Degree to which emotional roles are distributed between genders.

5. Confucian work dynamism = Extent to which society rewards behaviour related to long- or short-term orientations

Work design that enables global collaboration - Chapter 4

The Information Systems Strategy Triangle, discussed in chapter 1, suggests that changing information systems results in changes in organizational characteristics. Virtual organizations provide a good example of this.

Virtual organization = A structure that makes it possible for individuals to work for an organization and live anywhere. The Internet and corporate intranets create the opportunity for individuals to work from any place they can access a computer.

The structure of an virtual organization is networked. Everyone has access to everyone else using technology. Hierarchy may be present in the supervisory roles, but work is done crossing boundaries.

The basis of success in a virtual organization is the amount of collaboration that takes place between individuals. Virtual organization uses its IS as the basis for collaboration.

4.1 The work design framework

By the mid-20^th century the concept of job had evolved into an ongoing, often unending stream of meaningful activities that allowed the worker to fulfil a distinct role. More recently organizations are moving away from organization structures built around particular jobs to a setting in which a person’s work is defined in terms of what need to be done.

Key questions for identifying where IS can affect how the work is done (See Figure 4.1 on page 103):

• What work will be performed? The value chain model helps understand the workflow for key tasks that are performed. Work is increasingly demanding for knowledge

  • Who is going to do the work? Work can sometimes be automated, but may also require a skilled individual, or a diverse team with people from different departments

  • Where will the work be performed? Information Systems allow for flexible locations of doing the work. Work can be done at the office, but sometimes at home or on the road as well

  • When will the work be performed? Does the work require a 9-5 schedule, or can it be performed at night as well?

>> How can IT increase the effectiveness of the workers doing the work? That is what will become clear during this chapter.

4.2 How IT supports communication and collaboration

IT communication facilitation

The IT support for communication is considerable and growing. It includes:

• E-mail: a way of transmitting messages over communication networks.

• Intranet: looks and acts like the Internet, but It is comprised of information used exclusively with a company and unavailable to the general public via the Internet.

• Instant messaging: an Internet protocol (IP)-based application that provides convenient communication between people using a variety of different device types, including computer-to-computer and mobile devices, such as digital cellular phones.

• Voice over Internet Protocol (VoIP): a method for taking analogue audio signals, like the kind you hear when you talk on the phone, and turning them into digital data that can be transmitted over the Internet.

• Video teleconference: a set of interactive telecommunication technologies which allow two or more locations to interact via two-way video and audio transmissions simultaneously.

• Unified communications: evolving communications technology architecture which automates and unifies all forms of human and device communications in context, and with a common experience.

• Really Simple Syndication (RSS): refers to a structured file format for porting data from one platform or information system to another. It is an umbrella term that refers to several different XML (Extensible Markup Language) formats. The main benefit of RSS Web feeds is that the user can aggregate frequently updated data such as news, blog entries, changing stock prices, and recent changes on wiki pages into one easily manageable location.

• Virtual private network (VPN): a private network that used a public network such as the internet to connect remote sites or users. With a VPN, users at remote sites are treated as if they were on a local network.

• File transfer: consists simply of transferring a copy of a file from one computer to another on the Internet. The most common procedure, file transfer protocol (FTP), allows entire files to be transferred over the Internet more quickly and securely than with e-mail.

IT collaboration facilitation

Collaboration is a key task in many work processes, and IS greatly changes how collaboration is done. Thomas Friedman argues that collaboration is the way that small companies can “act big” and flourish in today’s flat world. The key for success for such companies is “to take advantage of all the new tools for collaboration to reach farther, faster, wider and deeper”.

Collaboration tools include:

• Social networking site: a web-based service that allows its members to create a public profile with their interests and expertise, post text and pictures and all manner of data, list other users with whom they share a connection, and view and communicate openly or privately with their list of connections and those made by others within the system.

• Virtual world: a computer based simulated environment intended for its users to inhabit and interact via avatars.

• Web logs (blogs): online journals that link together into a very large network of information sharing.

• Wiki: software that allows users to work collaboratively to create, edit, and link web pages easily. Anyone who has access to the wiki can contribute or modify content.

• Groupware: software that enables group members to work together on a project, even from remote locations, by allowing them to simultaneously access the same files.

4.3 How IT changes the nature of work

Creating new types of work

IT has changed the way work is done drastically. Many traditional jobs are currently done by computers, which is not always appreciated. Many employees have to get used to the fact that the jobs they used to perform are now done by a computer. The increasing presence of computers also led to a great decline in jobs, and complete jobs that disappeared.

Changing communication patterns

The way people communicate has changed a lot over the last few years. People increasingly communicate via e-mail, WhatsApp or Facebook. Also, everywhere you go you see people walking around with their mobile phones, calling people, or sending them text messages.

Changing organizational decision making and information processing

Managers have access to huge databases about past performance, present performance, their employees, customers, suppliers and competitors. They can use these databases for analyses and to fasten decision making. Information System also lead to faster processing of information, leading to managers being able to spend more time on strategic issues rather than administrative issues.

Changing collaboration

Information Systems and Information Technology make it possible to collaborate with each other without having to be present at the same location at the same time.

New challenges in managing people

Modern multinational organizations face the challenge of managing people that are dispersed across the world and are not under constant supervision. IT led to changes in the supervision, evaluations, compensation and hiring of people. Figure 4.3 on page 114 shows a comparison of the traditional approach and the new approach. Today, hiring people is different because of IT for three reasons:

1. In IT-savvy firms, workers must either know how to use the technologies that support the work of the firm before they are hired, or they must be trainable in the requisite skills.

2. IT makes it possible not to focus on administrative aspects, which enables the manager to analyse the candidate more properly

3. IT has become an essential part of the hiring process for many firms. Vacancies are placed online and people react on vacancies online. Also, firms are increasingly scanning the Facebook profiles of applicants

4. Firms become more and more aware of the fact that people look for jobs differently than before. People are using MonsterBoard and LinkedIn to look for jobs

4.4 How IT changes where and when work is done and who does it

Telecommuting and mobile work

Telecommuting, sometimes called teleworking, refers to work arrangements with employers that allow employees to work from home, at a customer site, or from other convenient locations instead of coming into the corporate office.

Mobile workers are those who work from wherever they are.

A recent survey indicates that currently 12% of organizational workforces are at remote locations, and this number is expected to grow.

Drivers of telecommuting

• Shift to knowledge based work

• Changing demographics and lifestyle preferences

• New technologies with enhanced band-with

• Increasing reliance on Web-based technologies

• Energy concerns

Disadvantage of telecommuting

• Remote work challenges managers in addressing performance evaluation and compensation.

• Virtual offices make it more difficult for managers to appreciate the skills of the people reporting to them, which in turn makes performance evaluation more difficult.

• Virtual work also raises the spectre of off shoring, or foreign outsourcing of software development and computer services.

Figure 4.5 on page 120 shows the advantages and disadvantages of telecommuting

Virtual teams

Virtual teams = Geographically and/or organizationally dispersed co-workers that are assembled using a combination of telecommunication and information technologies to accomplish an organizational task. Refer to Figure 4.6 on page 123 for the key activities in the life cycle of virtual teams.

Advantages virtual teams:

• Managers can draw team members with needed skills or expertise from around the globe, without having to commit the huge travel expenses.

• Virtual teams can benefit from following the sun.

Disadvantages virtual teams:

• Different time zones

• Major communication challenge: virtual teams face stems from the limitations of having to primarily communicate electronically. Electronic media allow team members to transcend the limitation of space and even store messages for future reference. But, electronic communications may not allow team members to convey the nuance that are possible with face-to-face communication.

• Hassle of learning new technologies

Communication challenges for virtual teams:

• Multiple time zones

• Communication dynamics such as facial expressions, vocal inflections, verbal cues, and gestures are altered.

Technology challenges virtual teams:

• Team members must have proficiency across a wide range of technologies; VT membership may be biased toward individuals skilled at learning new technologies.

• Technology offers an electronic repository that may facilitate building an organizational memory.

• Work group effectiveness may be more dependent on the ability to align group structure and technology with the task environment.

Team diversity challenges virtual teams:

• Members typically come from different organizations and/or cultures. This makes it:

  • Harder to establish a group identity

  • Necessary to have better communication skills

  • More difficult to build trust, norms, and shared meanings about roles, because team members have fewer cues about their teammates’ performance.

  • More likely that they have different perceptions about time and deadlines.

4.5 Gaining acceptance for IT-induced change

Employees may resist changes if they view the changes as negatively affecting them. In the case of a new information system that they do not fully understand or are not prepared to operate, they may resist in several ways:

• They may deny that the system is up and running

• They may sabotage the system by distorting or otherwise altering inputs.

• They may try to convince themselves, and others, that the new system really will not change the status quo.

• They may refuse to use the new system where its usage is voluntary.

To avoid the negative consequences of resistance to change, system implementers and managers must actively manage the change process and gain acceptance for the new IS.

To help explain how to gain acceptance for a new technology, professor Fred Davis and his colleagues developed the Technology Acceptance Model (TAM). See Figure 4.9 on page 130 for a simplified technology acceptance model 3

TAM suggests that managers cannot get employees to use a system until they want to use it. Managers need to change the employees attitude about the system. TAM assumes that technology will be accepted if people’s attitudes and beliefs support its use.

Building and changing global business processes - Chapter 5

5.1 The silo perspective versus the business process perspective

Silo or functional perspective

Many think of business by imagining a hierarchical structure organized around a set of functions. In a hierarchy, each department determines its core competency and then concentrates on what it does best. (e.g. operations, marketing, finance, etc.)

These silos: self-contained functional units, are useful for several reasons:

1. They allow an organization to optimize expertise

2. They allow the organization to avoid redundancy in expertise by hiring one person who can be assigned to projects across functions on an as-needed basis instead of hiring an expert in each function.

3. With a functional organization, it’s easier to benchmark with outside organizations, utilize bodies of knowledge created for each function, and easily understand the role of each silo.

Disadvantages silos:

1. Individual departments often recreate information maintained by other departments.

2. Communication gaps between departments are often wide.

3. As time passes, structure and culture of a functionally organized business can become ingrained, creating a complex and frustrating bureaucracy.

4. Handoffs between silos are often a source of problems, such as finger-pointing and lost information in business processes.

5. Silos tend to lose sight of the objective of the overall organization goal and operate in a way that maximizes their local goals.

Business process perspective

A manager can avoid the bureaucracy that characterizes the silo-perspective by managing from a process perspective.

Process perspective = Keeps the big picture in view and allows the manager to concentrate on the work that must be done to ensure the optimal creation of value.

Process = An interrelated, sequential set of activities and tasks that turns inputs into outputs, and includes the following:

• A beginning and an end

• Inputs and outputs

• A set of tasks that transform the inputs into outputs

• A set of metrics for measuring effectiveness

When managers take the process perspective, they begin to manage processes by:

• Identifying the customers of processes

• Identifying these customer’s requirements

• Clarifying the value that each process adds to the overall goals of the organization

• Sharing their perspective with other organizational members until the organization itself becomes more process focused.

Unlike a silo perspective, a process perspective recognizes that business operate as a set of processes that flow across functional departments.

See Figure 5.2 on page 140 for a comparison of silo perspective and business process perspective.

5.2 Agile and dynamic business processes

To stay competitive and consistently meet changing customer demands, organizations build dynamic business processes or agile business processes.

• Agile business processes = Are designed with the intention of simplifying redesign and reconfiguration. They are designed to be flexible and easily adaptable to changes in the can easily be changedbusiness environment.

• Dynamic business processes = Reconfigure themselves as they learn and are utilized in the business.

5.3 Changing business processes

Two techniques are used to transform a business:

1. Radical process, business process re-engineering (BPR)

2. Incremental, continuous process improvement, total quality management (TQM)

Incremental change

Managers use incremental change approaches to improve business processes through small, incremental changes. This improvement process generally involves the following activities:

• Choosing a business process to improve

• Choosing a metric by which to measure the business process

• Enabling personnel involved with the process to find ways to improve it based on the metric

Personnel often react favourably to incremental change because it gives them control and ownership of improvements and, therefore, renders change less threatening.

Total Quality Management = A very popular approach to change, as it incorporates methods of continuous improvement. The business sets out points, which outline a set of activities for increasing quality and improving productivity.

Another popular management approach to incremental change is called six sigma.

Six Sigma = A data-driven approach and methodology for eliminating defects from a process.
>> Six Sigma DMAIC = A process of Defining, Measuring, Analysing, Improving and Controlling. Six Sigma DMAIC helps the organization to outline a plan for eliminating defects on already existing products
>> Six Sigma DMADV = A process of Defining, Measuring, Analysing, Designing and Verifying a new process or product at Six Sigma quality levels

Radical change

Radical change enables the organization to attain aggressive improvement goals. The goal of radical change is to make a rapid, breakthrough impact on key metrics. Radical change typically faces greater internal resistance than does incremental change. Therefore, radical change processes should be carefully planned and only used when major change is needed in a short time.

Key aspects of radical change approaches include:

• The need for major change in a short amount of time

• Thinking from a cross-functional process perspective

• Challenging old assumptions

• Networked organizing

• Empowerment of individuals in the process

• Measurement of success via metrics tied directly to business goals

Radically changing a business is not an easy task. These are some of the common reasons why businesses fail:

• Lack of senior management support at the right times and the right places

• Lack of a coherent communications program

• Introducing unnecessary complexity into the new process design

• Underestimating the amount of effort needed to redesign and implement the new processes

• Combining re-engineering with downsizing

See Figure 5.5 on page 145 for a comparison of radical and incremental improvement

5.4 Workflow and mapping processes

Workflow = A series of connected tasks and activities done by people and computers that, together, form a business process.

Workflow diagram = A picture, or map, of the sequence and detail of each process step.

Business Process Management (BPM)

Business process management (BPM) = To have truly dynamic or agile business processes it requires a well-defined and optimized set of IT processes, tools, and skills called BPM. BPM helps managers to manage workflows in the business by tracking document-based processes where people executed the steps of the workflow.

Information technology is a critical component of most every business process today because information flow is at the core of most every process.

Figure 5.7 on page 148 shows an example of a BPM suite from a well known company.

5.5 Enterprise Systems (ES)

Enterprise System (ES) = A set of information systems tools that many organizations use to enable this information flow within and between processes. ES help to ensure integration and coordination across functions within the company, like accounting, production and customer management.

Enterprise Information Systems (EIS) = Comprehensive software packages that incorporate all modules needed to run the operations of a business. Good examples are Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Customer Relationship Management (CRM) and Product Lifecycle Management (PLM).

Figure 5.8 on page 151 shows examples of Enterprise Systems and the processes they automate.

Enterprise Resource Planning (ERP)

Enterprise Resource Planning = Help large companies to manage the fragmentation of information stored in hundreds of individual desktop, department, and business unit computers across the organization. Information is made immediately available to all departments in the company.
>> ERP II Systems = Makes company information available to external stakeholders like customers and suppliers or partners. ERP II Systems also incorporate social and collaboration features

Characteristics of ERP systems

• Integration; ERP Systems are designed to integrate information flows throughout the company

• Packages; ERP Systems usually are commercial packages that can be purchased from software vendors

• Best practices; ERP Systems reflect industry best practices for generic business processes

• Some assembly required; The ERP System software needs to be integrate within the organization’s hardware, operating systems, databases and network.

• Evolving;

Managing customer relationships

Customer Relationship Management (CRM) = A set of software programs that support management activities performed to obtain, enhance relationships with, and retain customers. They include sales, support and service processes.

Social IT are increasingly integrated into CRM systems, as customers are more and more active on Social Media and are easy to reach via Social Media.

Managing supply chains

Supply Chain Management (SCM) = Support processes and communication between different parts of the supply chain. The supply chain of a business begins with raw materials and ends with a product or service that is ready to be delivered. The activities that transform raw materials into a product or service are part of the supply chain, but transport activities as well.

Integrated supply chains = The approach of technically linking supply chains of vendors and customers to streamline the process and to increase efficiency and accuracy.

Several challenges for integrated supply chains:

• Information integration: Partners must agree on the type of information to share, the format, the technological standards and security. Trust must be established.

• Synchronized planning: Partners must agree on a joint design of planning, forecasting and replenishment.

• Workflow coordination: The coordination, integration and automation of critical business processes between partners.

Product Lifecycle Management (PLM)

Product Lifecycle Management systems automate the steps that take ideas for products and turn them into real products. PLM starts with the idea and then turns them into real products. It includes innovation activities, new product development and management, design, and product compliance.

Benefits and disadvantages of Enterprise Systems

Benefits ES:

• Major benefit ES: all modules of the information system easily communicate with each other, offering enormous efficiencies over stand-alone systems.

• Because of the focus on integration, ES are useful tools for an organization seeking to centralize operations and decision making. One of the benefits of centralization is the effective use of organizational databases.

• ES can reinforce the use of standard procedures across different locations.

Disadvantages ES:

• Implementing an ES represents an enormous amount of work.

• Even though ES are flexible and customizable to a point, most also require business processes to be redesigned to achieve optimal performance of the integrated modules.

• ES and the organizational changes they induce tend to come with a hefty price tag.

• ES are risky

When the system drives the change

In several instances, it is appropriate to let the enterprise system drive business process redesign:

• When an organization is just starting out and processes do not yet exist.

• When an organization does not rely on its operational business processes as a source of competitive advantage.

• When the current systems are in crisis and there is not enough time, resources, or knowledge in the firm to fix them.

It is sometimes inappropriate to let a enterprise system drive business process change:

• When an organization derives a strategic advantage through its operational business processes. (If you share all the information with the public, your advantage is lost)

• When the features of available packages and the needs of the business do not fit.

• Lack of top management support, company growth, a desire for strategic flexibility, or decentralized decision making that render the enterprise system inappropriate.

Architecture and Infrastructure of an Information System - Chapter 6

6.1 From vision to implementation

Architecture translates strategy (something abstract) into infrastructure (something concrete); See Figure 6.1 on page 168. A comparison is made with building a house, which is a useful comparison and good example for explaining the transformation from strategy to infrastructure.

IT architecture = Provides a blueprint for translating business strategy into a plan for IS.

IT infrastructure = Everything that supports the flow and processing of information in an organization, including hardware, software, data, and network components.

The role of the manager

The manager must understand what to expect from IT architecture and infrastructure to be able to make full and realistic use of them. For without the involvement of the manager, IT architects could inadvertently make decisions that limit the manager’s business options in the future.

The manager must start out with a strategy, and then use the strategy to develop more specific goals. Then detailed business requirements are derived from each goal.

6.2 The leap from strategy to architecture to infrastructure

Figure 6.2 on page 171 illustrates how a strategy is transformed into an infrastructure.

From strategy to architecture

By outlining the overarching business strategy and then fleshing out the business requirements associated with each goal, the manager can provide the architect with a clear picture of what IS must accomplish and the governance arrangements needed to ensure their smooth development, implementation, and use.
>> Strategy – Goal

The manager must work with the architect to translate these business requirements into a more detailed view of the systems requirements, standards, and processes that shape an IT architecture. IT managers and general managers must work together closely.
>> Goal – Business Requirement – Architectural Requirement

From architecture to infrastructure

The next step, translating architecture into infrastructure. This task entails adding yet more detail to the architectural plan that emerged in the previous phase. Functional specifications are added, and from these functional specifications more specific specifications concerning hardware, software and interfaces are added. These components together eventually form the infrastructure
>> Architectural Plan – Functional Specifications – Hardware/Software/Interface/Etc. Specifications – Infrastructure.

Different levels of infrastructure:

• Global level: focus on the enterprise and refer to the infrastructure for the entire organization.

• Inter-organizational level: laying the foundation for communicating with customers, suppliers, or other stakeholders across organizational boundaries.

• Individual level: important to consider databases and program components.

Platform = Refers to the hardware and operating system on which applications run.

A framework for the translation

When developing a framework for transforming business strategy into architecture and then into infrastructure these basic components should be considered:

• Hardware; The physical components that handle computation storage, or transmission of data. Examples are computers, servers, hard drives and telephone lines

• Software; The programs that run on hardware to enable work to be performed. Examples are operating systems and databases

• Network; Components of software and hardware that create a path for communication and data sharing

• Data; The electronic representation of numbers and text

See Figure 6.3 on page 174 for an infrastructure and architecture analysis framework with sample questions.

There are three common configurations of IT architecture:

Centralized architecture = Everything is purchased, supported, and managed centrally, usually in a data centre, to eliminate the difficulties that come with managing a distributed infrastructure.

Decentralized architecture = The hardware, software, networking and data are arranged in a way that distributes the processing and functionality between multiple small computers, servers, and devices and they rely heavily on a network to connect them together.
>> A decentralized architecture uses numerous servers, often located in different physical locations, at the backbone of the infrastructure, called a server-based architecture

Service-oriented architecture (SOA) = An architecture in which larger software programs are broken down into services that are then connected to each other, in a process called orchestration, to form the applications for an entire business process. SOA is increasingly popular because the design enables large units of functionality to be built almost entirely from existing software service components. The type of software used in an SOA architecture is often referred to as software-as-a-server (SaaS).

See Figure 6.4 on page 175 for the common architectures.

There are also more and more systems that do not have to be designed exclusively for a specific firm:

Peer-to-peer = Allows networked computers to share resources without a central server playing a dominant role.

Wireless (mobile) infrastructures = Allow communication from remote locations using a variety of wireless technologies.

Web-based architectures = Are architectures in which significant hardware, software, and possibly even data elements reside on the Internet. Web-based architectures offer even more flexibility when used as a source for capacity-on-demand = The availability of additional processing capability for a fee.

Bring Your Own Device = Employees are able to connect their own devices to the corporate network. Issues like capacity, security and compatibility, however, do arise here. Corporate applications may not be designed for the small screens of tablets and mobile phones for example.

Consumerization of IT = The drive to port applications to personal devices and dealing with encumbrance issues in order to to make them work.

On pages 177-179 an example is given based on a fictive company named TennisUp. The example describes how TennisUp moved from strategy to architecture to infrastructure.

6.3 Architectural principles

Any good architecture is based on a set of principles, or fundamental beliefs about how the architecture should function. Architectural principles must be consistent with both the values of the enterprise as well as with the technology used in the infrastructure.

6.4 Enterprise Architecture (EA)

Enterprise architecture = A “blueprint” for all IS and their interrelationships in an enterprise. Enterprise architecture is the term used for the organizing logic for the entire organization, often specifying how information technologies will support business processes.

The components of an enterprise architecture typically include 4 key elements:

• Core business processes

• Shared data

• Linking and automation technologies

• Customer groups

Examples of enterprise architectures:

• TOGAF (The Open Group Architecture Framework) = A methodology and set of resources for developing an enterprise architecture. Based on the idea of an open architecture, which is an architecture whose specifications are public.

• Zachman Framework = Determines architectural requirements by providing a broad view that helps guide the analysis of the detailed view.

6.5 Virtualisation and cloud computing

Virtualisation = Physical corporate data centers that are rapidly being replaced by a virtual infrastructure. Five core components: servers, storage, backup, network and disaster recovery.

Cloud computing = An architecture based on services provided over the Internet. Based on the concept of a virtual infrastructure. Entire computing infrastructures are available in the cloud. Consumers of cloud computing very often purchase capacity on demand and are not generally concerned with the underlying technologies. Utility computing = Purchasing entire capabilities on an as-needed basis.

Advantages and disadvantages

Advantages of virtualisation and cloud computing are many:

• Businesses who embrace a virtual infrastructure can consolidate physical servers and possibly eliminate them, which greatly reduces the physical costs of a data centre

• Speed at which additional capacity can be done

Management should also be aware of potential risks. Cloud computing required dependence on a third-party supplier for example.

6.6 Other managerial considerations

Understanding the existing architecture

At the beginning of each project, the first step is to assess the current situation. Understanding existing IT architecture allows the manager to evaluate the IT requirements of an evolving business strategy against current IT capacity.

The architecture, rather than the infrastructure, is the basis for this evaluation because the specific technologies used to build the infrastructure are chosen based on the overall plan, or architecture.

By implementing the following steps, managers can derive the most value and suffer the least pain when working with legacy architectures and infrastructures:

1. Objectively analyse the existing architecture and infrastructure

2. Objectively analyse the strategy served by the existing architecture

3. Objectively analyse the ability of the existing architecture and infrastructure to further the current strategic goals.

The strategic timeframe

Understanding the life span of an IT infrastructure and architecture is critical. How far into the future does a strategy extend? How long can the architecture and infrastructure fulfil strategic goals?

Adaptability

When a company is facing hyper competition, any architecture must be designed with maximum flexibility and scalability to ensure it can handle the imminent business changes.

The following are guidelines for planning adaptable IT architecture and infrastructure:

1. Plan for applications and systems that are independent and loosely coupled rather than monolithic.

2. Set clear boundaries between infrastructure components.

3. When designing a network architecture, provide access to all users when it makes sense to do so.

Requirements concerning reliability may mitigate the need for technological adaptability under certain circumstances.

Scalability

A frequently used criterion for selecting an architecture or infrastructure is scalability.

To be scalable refers to how well an infrastructure component can adapt to increased, or in some cases decreased, demands.

Scalability is an important technical feature because it means that an investment can be made in an infrastructure or architecture with confidence that the firm will not outgrow it.

Standardization

Another important feature deals with commonly used standards. Hard- en software that uses common standard, as opposed to a proprietary approach, are easier to plug into an existing or future infrastructure or architecture because interfaces often accompany the standard.

Technical issues

Maintainability

How easy is the infrastructure to maintain? Are replacement parts available? Is service available?

Security

Security is a major concern for business managers and IT managers alike. Business feel vulnerable to attack. IT managers worry about protecting key data and process elements of the IT infrastructure. Security is a concern that extends outside the corporate boundaries.

Financial Issues

Payback from IT investments is often difficult to quantify. Some effort can and should be made to quantify the return on infrastructure investments.

This effort can be simplified if a manager works through the following steps with the IT staff:

1. Quantify costs

2. Determine the anticipated life cycles of system components

3. Quantify benefits

4. Quantify risks

5. Consider ongoing dollar costs and benefits

Figure 6.8 on page 191 shows the managerial considerations that were described above for TennisUp.

6.7 Conclusion and summary

So, 5 steps to go from strategy to architecture to infrastructure:

1. Define the strategic goals

2. Translate strategic goals to business requirements

3. Apply strategy-architecture-infrastructure framework

4. Translate architecture to infrastructure

5. Evaluate additional issues

Recovering the costs of an Information System - Chapter 7

7.1 The Business-IT Maturity model

Responding to the demands of business requires that the IT department organizes such that it is able to supply the services and products that are needed. IT managers must be partners with their business colleagues in every sense of the word in order to exactly know what they need from an Information System.

Business-IT Maturity model = A framework that is a useful tool for understanding the differences in capabilities. See Figure 7.1 on page 198. This model differentiates between the supply of IT (the capabilities) and the demands for IT (what the business wants).
The time dimension highlights that over time, there is a difference in supply and demand.

This model does not comment on the type of technology, but rather the way business organization approaches its use of IT.

The three levels of business transformation (vertical axis) over time:

• Level 1: support (business efficiency)

• Level 2: improve (business effectiveness)

• Level 3: innovate (business transformation)

7.2 Understanding the IT organization

Different firms need to do different things when it comes down to IT, because firms have different goals (thus need to act in a different way). Even though firms have same goals, size of firm, organization structure, or level of maturity might affect what the IT organization is expected to do.

Managers can expect some level of support in 14 core activities shown in Figure 7.2 on page 201 and 202. The IT organization can be expected to be responsible for most, if not all, of the activities listed in this figure. Instead of actually performing the activities, the IT organization increasingly identifies the activities and then works with vendors who provide them (outsource traditional activities to third-party vendors).

7.3 Managing IT activities globally

How does the management of IT differ when the scope of the organization is global? Large global IT organizations perform many of the same activities listed in Figure 7.2 on pages 201 and 202. Further, they typically face many of the same organizational issues as any other global department.

Managers must figure out how to manage when employees are in different time zones for example, or on different locations. See Figure 7.3 on page 204 for a summary of how a global IT perspective affect 6 information management issues.

The issues:

• Political stability

• Transparency

• Business continuity planning

• Cultural differences

• Sourcing

• Data flow across borders

Partnership between the general managers and IT professionals is important for a number of reasons. There are a couple of things the IT department does not do. It is not possible for the IT department to determine strategy for the organization, and it is not possible for the IT department to determine what the organization needs in the area of IS and IT. Therefore, general managers and IT managers must cooperate closely and communicate with each other.

7.4 The Chief Information Officer

Chief information officer (CIO) = The senior-most executive in the enterprise responsible for technology vision and leadership for designing, developing, implementing, and managing IT initiatives for the enterprise to operate effectively in a constantly changing and intensely competitive marketplace.

Also business technology strategist, who uses technology as the core tool in creating competitive advantage and aligning business and IT strategies.

A CIO must know the business vision and understand how the IT function contributes to making this vision happen. They must work effectively not only within the technical arena, but also in the overall business management arena.

Just as the chief financial officer (CFO) is somewhat involved in operation management of financial activities, the CIO is involved with operational issues related to IT.

See Figure 7.4 on page 207 for the CIO’s lieutenants

Community manager = The person in the position of helping build, grow, and manage a community. The community manager has a variety of roles; their role is more than just moderating a discussion, They are the advocate validating the individuals in the community for the community. Community managers represent the members of the community to the business, listening to what the community is saying, and taking an active role in participating in the community activities.

7.5 Building a business case

Business case = A structured document that lays out all the relevant information needed to make a go/no-go decision. It is also a way to establish priorities for investing in different in different projects, an opportunity to identify how IT and the business can deliver new benefits, gain commitment from business managers, and create a basis for monitoring the investment.

The components of a business case vary from corporation to corporation, but there are several primary elements of any business case. These are listed in Figure 7.5 on page 210:

• Executive summary, which describes the overall business case in one or two pages

• Overview and introduction; Brief background and the current situation

• Assumptions and rationale; Issues driving the proposal

• Program summary; Detailed description of the project

• Financial discussion and analysis; Costs, revenues, benefits, financial metrics, etc.

• Benefits and impacts; All non-financial outcomes

  • See Figure 7.6 on page 211 for a classification framework of benefits in a business case. This is suggested by Daniel and Peppard. Benefits can be either innovations, improvements or cessations, and can then be one of these four classifications:

    • Observable >> Only measured by opinion or judgement

    • Measurable >> Uses existing measures to ensure alignment with business strategy

    • Quantifiable >> Measure size or magnitude of the benefit

    • Financial >> There is a way to express the benefit in financial terms

• Schedule and milestones; The schedule for the project and details of expected metrics at each stage

• Risk and contingency analysis; Details on risks and how to manage those risks

• Conclusion and recommendation

• Appendices

Figure 7.7 on page 212 contains a sample of the cost-risk-benefit analysis for the business case.

7.6 IT portfolio management

IT portfolio management = Refers to evaluating new and existing applications collectively on an ongoing basis to determine which applications provide value to the business in order to support decisions to replace, retire, or further invest in applications across the enterprise.

Goal is for the company to fund and invest in the most valuable initiatives that, taken together as a whole, generate maximum benefits to the business.

4 asset classes of IT investments that typically make up the company’s IT portfolio:

• Transactional systems: systems that streamline or cut costs on the way business is done

• Infrastructure systems: the base foundation of shared IT services used for multiple applications.

• Informational systems: systems that provide information used to control, manage, communicate, analyse, or collaborate

• Strategic systems: used to gain competitive advantage in marketplace.

See Figure 7.8 on page 214 for an average company’s IT profile.

Figure 7.9 on page 215 summarizes the differences. A different balance between IT investments is needed for a cost-focused strategy compared to an agility-focused strategy for example.

7.7 Valuing IT investments

New IT investments are often justified by the business managers proposing them in terms of monetary costs and benefits. Monetary costs and benefits are important but not the only considerations in IT investments. Soft benefits, such as the ability to make future decisions, are often part of the business case for IT investments and make it difficult to measure the payback of the investment.

Several unique factors of the IT organization make it difficult to determine the value from IT investments:

1. The systems are complex, and calculating the costs is an art, not science

2. Because many IT investments are for infrastructure, calculating a payback period may be more complex than other types of capital investments.

3. Third, many times the payback cannot be calculated because the investment is a necessity rather than a choice, without any tangible payback.

Managers do not want to be placed in the position of having to upgrade because of necessity. Instead, managers may resist IT spending on the grounds that the investment does not add incremental value.

Despite the difficulty, the task of evaluating IT investments is necessary. Knowing which approaches to use and when to use them are important first steps. A number of approaches are summarized in Figure 7.10 on page 217

Pitfalls when analysing return on investment:

• Not every situation needs an in-depth analysis

• Not every evaluation method works in every case

• Circumstances may alter the way a particular valuation method is best used

• Managers can fall into ‘’analysis paralysis’’. Reaching a precise valuation may take longer than is reasonable to make an investment decision

• Even when the numbers say a project is not worthwhile, the investment may be necessary to remain competitive.

7.8 Monitoring IT investments

Management’s role is to ensure that the money spent on IT results in benefits for therefore, common set of metrics must bethe organization created, monitored and communicated to the senior management and customers of the IT department.

The Balanced Scorecard

The balance scorecard = Focuses attention on the organization’s value drivers. Companies use it to assess the full impact of their corporate strategies on their customers and workforce, as well as their financial performance.

4 perspectives:

• Customer perspective: how do customers see us?

• International business perspective: at what must we excel?

• Innovation and learning perspective: can we continue to improve and create value?

• Financial perspective: how do we look to shareholders?

Applying those categories of the balanced scorecard to IT might mean interpreting them more broadly then originally conceived.

See Figure 7.11 on page 219 for the balance scorecard perspectives.

For an example of a balance scorecard applied to IT departments, see Figure 7.12 on page 220.

IT Dashboards

IT dashboards = A snapshot of metrics at any given point in time. It summarizes the key metrics for senior managers in a manner that provides quick identification of the status of the organization. They provide frequently updated information on areas of interest within the IT department.

Types of IT dashboards:

1. Portfolio dashboards = Help senior IT leaders manage the IT projects. They show the status, problems, milestones, progress, expenses, and other metrics related to specific projects.

2. Business-IT dashboards = They show relevant business metrics and link them to the IT systems that support them.

3. Service dashboard = Is geared towards the internal IS department, showing important metrics about the IS such as up-time, through-put, service tickets, progress on bug fixes, help desk information etc.

4. Improvement dashboard = Monitors the 3 to 5 key improvement goals for the IT group.

Dashboards are built on the information contained in the other application databases, and analytical systems of the organization.

See Figure 7.13 on page 223 for an example of an architecture of a dashboard.

7.9 Funding IT resources

Who pays for IT? There are different funding methods:

Chargeback method

Chargeback funding method = IT costs are recovered by charging individuals, departments, or business units based on actual usage and cost.

The IT organization collects usage data on each system it runs. Rates for usage are calculated based on the actual cost to the IT group to run the system and billed out on regular basis.

Chargeback systems are popular because they are viewed as the most equitable way to recover IT cost. Cost are distributed based on usage or consumption of resources, ensuring that the largest portion of the costs is paid by the group of individual who consumes the most.

Allocation funding method

Allocation funding method = Recover cost based on something other than usage, such as revenues, login account, or number of employees. With this allocation system, it does not matter whether these employees use the IT; the department is still charged the same amount.

The allocation mechanism is simpler to implement and apply each month compared to the chargeback method.

Advantages of allocation:

• The level of detail required to calculate the allocation is much less.

• The charges from the IT organization are predictable.

Disadvantages:

• The free-rider problem. A large user of IT services pays the same amount as a small user when the charges are not based on usage.

• Deciding the basis for allocating the costs is an issue. Choosing the number of employees over the number of desktops or other basis is a management decision, and whichever basis is chosen, someone will pay more than their actual usage would imply.

Corporate budget method

Corporate budget = Paying for IT costs by considering them all to be corporate overhead and pay for them directly out of the corporate budget. With this funding method, the costs fall to the corporate bottom line, rather than levying charges on specific users or business units.

It is a relatively simple method for funding IT costs. It requires no calculation of prices of the IT systems. And because bills are not generated on a regular cycle to the business, concerns are raised less often by business managers.

his method also encourages the use of new technologies, because learners are not charged for exploration and inefficient system use.

Drawbacks:

• All IT expenditures are subjected to the same process as all other corporate expenditures.

• If the business units are not footing the bill, the IT group may feel less accountable to them, which may result in an IT organization that is less end-user or customer-oriented.

See Figure 7.14 on page 226 for a summary of the advantages and disadvantages of the funding methods.

7.10 How much does it cost?

Activity-Based Costing

Activity-based costing (ABC) = Calculates cost by counting the actual activities that go into making a specific product or delivering a service.

Activities = Processes, functions or tasks that occur over time and produce recognized results.

ABC calculates the amount of time that system was spent supporting a particular activity and allocates only that costs to that activity.

When a system is proposed and a business case is created to justify the investment, summing up the initial outlay and the maintenance cost does not provide an entirely accurate total system cost.

In fact, only the initial and maintenance cost are considered, the decision is often made on incomplete information.

Total Cost of Ownership

Other costs are involved, and a time value of money affects the total costs. A technique used to calculate a more accurate cost that includes all associated costs is TCO

Total cost of ownership (TCO) = Looks beyond initial capital investments to include costs associated with technical support, administration, training and system retirement.

A major IT investment is for infrastructure. See Figure 7.15 on page 229 for a TCO component evaluation. The manager needs to evaluate all these components for each infrastructure option. This table allows the manager to asses softer costs like administration and support.

TCO component breakdown

TCO component breakdown = To clarify how the TCO framework is used, this section examines the hardware category in greater detail.

Hardware: computing platforms and peripherals.

Soft cost are easier to estimate than they may first appear.

See Figure 7.16 on 230: In this figure these calculations of soft costs are broken down

Managers want to analyse the costs of informal support for 2 reasons:

1. The costs – both in salary and in opportunity – of a non-support employee providing informal support may prove significantly higher than analogous costs for a formal support employee. (See bottom p.230 for an example)

2. The quantity of informal support activity in an organization provides an indirect measure of the efficiency of its IT support organization. The formal support organization should respond with sufficient promptness and thoroughness to discourage all but the briefest informal transactions.

Drawbacks of TCO:

1. Although putting dollar values on informal support may be a challenge, managers want to gauge the relative potential of each component option to affect the need for informal support.

2. Further, even if managers cannot get a completely accurate figure of costs, they can be more aware of areas where costs can be cut.

Governance of Information Systems - Ch 8

8.1 IT governance

As already discussed, the Chief Information Officer (CIO) = An executive who manages IT resources to implement enterprise strategy.

What managers should and should not expect from the IS organization are at the heart of IT governance. Governance in the context of business enterprises is all about making “decisions that define expectation, grant power, or verify performance”.

Centralized versus Decentralized structures

Organizational structures for IS evolved in a cyclic manner. At one end of the spectrum, centralized IS organizations bring together all staff, hardware, software, data, and processing into a single location. Decentralized IS organizations, on the other hand, scatter these components in different location to address local business needs.

See Figure 8.2 on page 239 for advantages and disadvantages of organizational approaches.

Companies’ organizational strategies exist along a continuum from centralization to decentralization, with a combination of the two, called federalism, found in the middle. Figure 8.3 on page 241 shows what Federal IT looks like.
Federalism = A structuring approach that distributes power, hardware, software, data and personnel between a central IS group and IS in business units.

Sometimes the centralized/decentralized/federal approaches to governance are not fine-tuned enough to help managers deal with the many contingencies facing today’s organizations.

Another perspective on IT governance

Peter Weill and his colleagues define IT governance as “specifying the decision rights and accountability framework to encourage desirable behaviour in using IT.”

IT governance is not about what decisions are actually made but rather about who is making the decisions and how the decision makers are held accountable for them. Figure 8.4 on page 242 shows different combinations of decision rights and accountability:

• Technocentric gap = A manager has a lot of decision rights, but low accountability. This is an example of a mismatch. There is a danger of overspending on IT, because the manager can decide a lot, but is not accountable for his decisions. This overspending can lead to frustrations between business groups and the IT department

• Strategic norm = Here, a manager has a lot of decision rights and at the same time he is highly accountable for the decisions he makes. A situation of balance

• Support norm = The manager has few decision rights, but is not responsible for the decisions he makes. A situation of balance

• Business gap = A manager has very few decision rights, but is highly accountable for the decisions he makes. This is an example of a mismatch. Cost considerations, here, dominate the IT decision. The manager is afraid to spend too much or to make mistakes. Again, this leads to frustrations

Archetype = A pattern from decision rights allocation. Figure 8.6 on page 244 shows different archetypes

8.2 IT governance and security

5 Critical decisions about information security that are frequently discussed in the security literature:

• Information security strategy; Has to do with protecting the confidentiality of customer- and employee information. It should reflect the company’s mission and the overall business environment

• Information security policies; Security policies encourage standardization and integration. They broadly define the scope of and overall expectations for the company’s information security program

• Information security infrastructure; The security infrastructure provides protection by aligning security mechanisms to the IS architecture specifications

• Information security education/training/awareness; It is very important to make business users aware of security policies and practices. Training and awareness build a security-conscious culture

• Information security investments; The FUD-factor (Fear, Uncertainty and Doubt) used to be all that was needed to get top management to invest in information security. As complex Information Systems are becoming more usual and financial resources are scarce, it’s becoming increasingly difficult to get management to invest in information security.

See Figure 8.7 on page 245 for matching information security decisions and archetypes

8.3 Decision-making mechanisms

Many different types of mechanisms can be created to ensure good IT governance.

Policies are useful for defining the process of making a decision under certain situations. However, often the environment is so complex that policies are too rigid.

Review board = A committee that is formally designated to approve, monitor, and review a specific topic. This can be a very effective governance mechanism.

Steering committees = An advisory committee of key stakeholders or experts that provides guidance on important IT issues. Work especially well with the federal archetypes, which calls for joint participation of IT and business leaders in the decision-making process.

Steering committees can be geared toward different levels of decision making:

• IT Governance Council (steering committee at highest level) reports to the board of the directors or the CEO.

• Lower-level steering committees provide a forum for business leaders to present their IT needs and to offer input and direction about the support they receive from IT operations.

8.4 Governance frameworks for control decisions

Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act (SoX) = Enacted in 2002 to increase regulatory visibility and accountability of public companies and their financial health.

SoX was not originally aimed at IT departments, but it soon became clear that IT played a major role in ensuring the accuracy of financial data. Five IT control weaknesses that are repeatedly uncovered by auditors;

1. Failure to segregate duties within applications, and failure to set up new accounts or terminate old ones in a timely manner

2. Lack of proper oversight for making application changes, including appointing a person to make a change and another to perform quality assurance on it

3. Inadequate review of audit logs to ensure that not only were systems running smoothly, but also that there was an audit log of the audit log

4. Failure to identify abnormal transactions in time

5. Lack of understanding of key system configurations

Frameworks for implementing SoX

COSO

The COSO is the Committee of Sponsoring Organisations of the Treadway Commission. Developed three control objectives for management and auditors, together with some other organizations:

• Operations

• Compliance

• Financial reporting

COBIT

COBIT = Control Objectives for Information and Related Technology, is an IT governance framework that is consistent with COSO controls.

Sourcing information systems across the world - Chapter 9

Sourcing Decision Cycle Framework

The following framework shows that sourcing involves many decisions.

• The first choice is make- or-buy. Buy means outsourcing.

• Secondly: where? Domestic (inshoring) or foreign outsourcing (offshoring)

• If the decision is offshoring, the third choice is nearby or far away?

• Captive center (overseas subsidiaries)

• Far shoring

• Near shoring

If the inhouse quality of work is unsatisfactory, or production speed can be improved by relocating parts of the process outsoucing can be an option. Similarly this decision can also mean backsourcing, if the quality or production speed of the outscourced work does not meet expectations. Evalutaion needs to be continuous, and the decision cycle will restart every time an evaluation is made.

Reasons for outsourcing

1. Cost

2. Enlargement of global market presence.

3. Focus on core competencies

4. Access to means and specialised knowledge (greater access to IT talent pools)

5. Reducing complex systems of IT and telecommunication systems

Drivers insourcing

1. Good for inhouse development of core competencies

2. More security when dealing with confidential or sensitive IT systems

3. Insourcing is preferred when enough time is available for inhouse development of sofware

4. Insourcing provides the opportunity to train inhouse employees or benefit from highly trained, specialised and experienced IT professionals

Challenges insourcing

1. Is there enough support from the top-level management to utilise the required means to finish a development project?

2. Finding a reliable and capable outsourcing partner with specialised knowledge and skills that wants based inhouse.

Drivers outsourcing

1. Cost – reduction

2. Desire to focus on core-business components in the headquarters

3. Consolidation of data-centres leads to greater focus.

4. Potentially faster transitioning to new technologies

5. Cash infusion through the sale of equipment to the outsourcing partner

Challenges outsourcing

1. Maintaining an adequate level of oversight and control of a project

2. Maintaining the opportunity to react to new tecnical innovations in the market

3. Managing strategic advantage and possible losses stemming from such

4. Avoiding overreliance on the outsourcing provider (contracts may lead to too much dependency on the provider)

5. Effective cooperation with suppliers

Succesful Outsourcing procedures and decisions:

Contracting: It is often wise to break up the developmtent life-cycle up into several stages. Each stage requires a separate contract. This way the investment in development is managable and felxibility to react to technological or market developments is maintained.

Outsourcing offshore

When deciding to go offshore companies face a myriad of issues to decide upon before settling on a certain location. Consideration must be taken into account when it comes to the host country of the outsourcing provider:

• English proficiency (for communication)

• Geopolitical stability of the country

• Crime rates

• Good relationships with the home country

• regulatory restrictions

• Data security and legal protection

• Intellectual Property guarantees

• Adequacy of technical infrastucture

• Trade issues and local competition

• Cultural issues

Outsourcing pitfalls

A list of practicalities to take into account when outsourcing:

1. Do not negotiate solely on price

2. Careful Transition planning

3. Thoroughl evaluation of potential outsourcing providers

4. Cultural fit (and ability to communicate cross-culturaly)

5. Proper and thorough evaluation of one's own company

6. Maintain flexibility in contracts

7. Choose strategic providers, potentially to create partnerships

Outsourcing in the most extreme case can lead to creating one's own competition. If a company outscources too much of its core-competencies to its provider the transfer of knowledge can give the provider too much weight and create an unbalanced relationship. When the provider has enough knowledge it can become a competitor as such. The danger here is that the central company reduces itself to a hub that ships production components from one provider to another, having no more core-competencies of itself.

The following is a list of mistakes often encountered in outsourcing procedures:

7 Common Outsourcing Mistakes

1. Outsourcing activities when there is no neccesity to do so.

2. Selection of the wrong provider.

3. Bad Contracts (open to legal complaints)

4. Overlooking problems in staff and recruiting

5. Losing control of outsourced activities

6. Overlooking hidden or unexpected costs

7. Not having an adequate exit-strategy

Glossary:

Full-outsourcing: complete transfer of IT-functions to providers. Management can thus focus on other company proceses.

Selective outsourcing: Transfer of some functions and applications, while maintaining some (core) applications inhouse. This is sometimes also referred to as Strategic Outsourcing, as the company can choose what activities to retain and what to grant to an outside provider.

Best-of-breed: Suppliers, potential providers are selected based on their expertice in specific technology areas such as Mobile applications, Social IT services, business application development or webiste hosting (amongst others compentencies).

Application service provider (ASP), or Software as a Service (SaaS): Providing cloud-based access to company software. The client does not have to purchase the software, but gains access to functionalities and support through online means.

Cloud Sourcing: Outsourcing through the cloud. Psysical relocation of the development team or acquiring a captive centre is not necessary.

Crowd sourcing:Outsourcing development to a non-select group through open (often online) dialogue. Often participants contribute voluntarily, combining their collective intellegence or creativity. This is a form productivity enhancing methods often used by companies to gain scale-advantage.

Project management - Chapter 10

In the current business environment, the quality that differentiates firms in the marketplace – and predetermines them for success or failure- is often the ability to adapt existing business processes and systems to new, innovative ideas faster than the competition.

Typical adaptation projects include the following elements:

• Right-sizing the organization

• Re-engineering business processes

• Adopting more comprehensive, integrative processes

• Incorporating new information technologies

Successful business strategy requires executive management to decide which objectives can be met through normal daily operations and which require specialized project management.

10.1 What defines a project?

Organizations combine two types of work to transform resources into profits:

1. Projects; when the project is finished, the work ends.

2. Repetitive operations

See figure Figure 10.1 on page 291 for characteristics of operational and project work.

Formal definition project:

A project = A temporary endeavour undertaken to create a unique product or service. Temporary means that every project has a definite beginning and a definite end. Unique means that the product or service is different is some distinguishing way from all similar products or services.

Project stakeholders = The individuals and organizations that are either involved in the project, or whose interests may be affected as a result of project. See Figure 102 on page 291 for relationships among project stakeholders.

10.2 What is project management?

Project management = The application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectation from the project.

Project management always involves continual trade-offs.

Trade-offs can be subsumed in the project triangle, which highlights the importance of balancing (1) scope, (2) time and (3) cost. (see Figure 10.3 on page 292). In most projects only two of these elements can be optimized.

Business projects are often initiated because of a successful business case. A successful project begins with a well-written business case that spells out the components of the project. The process used to develop the business case sets the foundation for the project itself. Therefore detailed planning, along with contingency planning, is an important part of project management. A strong business plan gives all the project team a reference document to help guide decisions and activities.

Project management office (PMO) = A department responsible for boosting efficiency, gathering expertise, and improving project delivery.

PMOs can be expected to function in the following 7 areas:

1. Project support

2. Project management process and methodology

3. Training

4. Project manager home base

5. Internal consulting and mentoring

6. Project management software tools and support

7. Portfolio management

10.3 Project elements

Project manager = Makes sure that the entire project is executed appropriately and coordinated properly.

There are 4 project elements:

1. Project management

2. Teamwork

3. A project cycle plan

4. A common project vocabulary

Project Management

There are nine elements of project management. Each element addresses a specific factor that affects a project’s chances of success. The elements are:

1. Identification of requirements

2. Organizational integration

3. Team management

4. Risk and opportunity management

5. Project control

6. Project visibility

7. Project status

8. Corrective action

9. Project leadership

See Figure 10.4 on page 296 for a project leadership vs. Project management (PM) process.

Project managers are influenced by organizational culture and socioeconomic influences, which are government and industry standards, globalization and national culture for example.

Project Team

Business teams often fail because members don’t understand the nature of the work required to make their team effective. Teamwork begins by clearly defining the team’s objectives and each member’s role in achieving these objectives. Teamwork ensures that all parts of the project come together correctly and efficiently.

Project cycle plan

The project cycle plan represents the methodology and schedule to be used by the team to execute the project. It identifies critical beginning and end dates and breaks the work spanning these dates into phases. The project manager uses the phases to control the progress of work. The project cycle plan can be developed using various approaches and software tools. The three most common approaches are:

1. Project evaluation and review technique (PERT), for an example of a PERT chart, see Figure 10.5 on page 208

2. Critical Path Method (CPM)

3. Gantt chart, See Figure 10.6 on page 300 for an example of a Gantt chart

A common project vocabulary

The typical project teams include a variety of members from different backgrounds and different parts of the organization. A common project vocabulary allows all those involved with the project to understand the project and communicate effectively.

10.4 IT projects

IT projects are a specific type of business project. Sometimes, managing the IT component of a project is referred to separately as an IT project, not only for simplicity, but also because the business world perceives that managing and IT project is somehow different from managing any other type of project. The more complex the IT aspect of the project, the higher is the risk of failure of the project.

10.5 IT project development methodologies

Systems Development Life Cycle (SDLC)

Traditionally IT professionals use four main methodologies to manage the technology projects. Of these methods, systems development life cycle (SDLC) is a popular method for developing information systems.

Systems development is the set of activities used to create an IS.
SDLC = Typically refers to the process of designing and delivering the entire system. SDLC refers to a process in which the phases of the project are well documented, milestones are clearly identified, and all individuals involved in the project fully understand what exactly the project consists of and when deliverables are to be made.

See Figure 10.8 on page 305 for the SDLC phases.

Direct cutover = Old system stops running as soon as the new system is installed

Parallel conversion = Old system runs alongside the new system.

Problems SDLC:

• Many systems projects fail to meet objectives, even with the structure of SDLC.

• Even though objectives that were specified for the system were met, those objectives may reflect a scope that is too broad or too narrow.

• Organizations need to respond quickly because of the dynamic nature of the business environment.

Because of these problems, 4 other methodologies:

1. Agile development

2. Prototyping

3. RAD

4. JAD

Agile development

Agile development = One of the dangers developers face is expecting a predictable development process when in reality, it is not predicable at all. In response to this challenge, agile development methodologies are being championed.

Agile development methodologies tend to be people rather than process oriented. They adapt to changing requirements by iteratively developing systems in small stages and then testing the new code extensively.

Prototyping

Prototyping = A type of evolutionary development, the method of building systems where developers get the general idea of what is needed by the users, and then build a fast, high-level version of the system as the beginning of the project.

The idea of prototyping is to quickly get a version of the software in the hands of the user and to jointly evolve the system through a series of iterative cycles of design.

Drawbacks prototyping:

• Documentation may be more difficult to write

• Because users see the prototype develop, they often do not understand that a final prototype may not be scalable to an operation version of the system without additional costs and organizational commitments.

• This approach is not suitable for all systems.

See Figure 10.10 on page 308 for a comparison of IT development methodologies.

Other development methodologies and approaches

Rapid Applications Development and Joint Applications Development

Rapid applications development (RAD) = Similar to prototyping in that it is an interactive process, in which tools are used to drastically speed up the development process. RAD systems typically have tools for developing the user interface, reusable code, code generation, and programming language testing and debugging. The system includes a set of tools to create, test, and debug the programs written in the pure programming language. RAD is commonly used for developing user interfaces and rewriting legacy applications.

Drawbacks RAD:

• Sometimes basic principles of software development are overlooked in the race to finish the project.

• The process may be so speedy that requirements are frozen too early.

Joint applications development (JAD) = A version of RAD or prototyping in which users are more integrally involved, as a group, with the entire development process up to and, in some cases, including coding. JAD uses a group approach to elicit requirements in a complete manner.

Drawbacks JAD:

• Expensive

• Low use of technology

Object-Oriented Development

Object-oriented development = Becoming increasingly popular as a way to avoid the pitfalls of procedural methodologies. Object-oriented development, unlike more traditional development using the SDLC, builds on the concept of objects.

An object = Encapsulates both the data stored about an entity and the operations that manipulate the data.

Open-Sourcing Approach

Open sourcing approach = The process of building and improving free software by an internet community. Software is open source software (OSS) if it is released under a license approved by the Open Source Initiative.

Open source is a movement that offers a speedy way to develop software. Further because it is made available to a whole community, testing is widespread. Finally, its price is always right – it is free.

However, a number of managerial issues are associated with its use in a business organization:

• Preservation of intellectual property

• Updating and maintaining open source code

• Competitive advantage

• Tech support

• Standards

10.6 Managing project risk

Complexity

Complexity of a project refers to the extent of difficulty and interdependent components of the project. There are a couple of factors that contribute to complexity, with the pace of technological change being one of the greatest. Technological change changes the future view of a business constantly, and employees have to be trained to use new technologies.

Clarity

Clarity has to do with the ability to define the requirements of the system. Projects with high clarity are projects that are easy to define; risk, thus, is low if there is high clarity. The opposite holds for projects with low clarity.

Size

Bigger projects are riskier than smaller projects. A very big project can be recognized quite easily:

• Large budget

• Large number of team members that work on the project

• Large number of organizational units involved, so there is not a project within the marketing department, but a project that involves marketing, accounting and manufacturing for example

• Large number of programs and components

• Large number of function points

Managing project risk

Managing complexity

Complexity can be managed in three ways:

1. Leveraging the technical skills of the team; When a project is complex, managers and team members with high technical expertise in similar situations are very useful.

2. Relying on consultants and vendors; Only few organizations develop in-house capabilities for managing complex IT projects and rely more and more on consultants, whose job is to manage projects.

3. Integrating within the organization; Complex projects require proper and extensive communication and a strong team. Holding frequent meetings and documenting are very critical in complex projects

Managing clarity

If a project is low in clarity, managers must make sure that it becomes more clear such that there is no confusion about what to do. In case of low clarity, managers must manage the project stakeholders and sustain commitment to the project. The manager has the difficult task to balance the goals of various project stakeholders to achieve the desired outcomes. Defining the stakeholders is rather difficult, and their goals may not be very clear as well.

Gauging success

4 dimensions of success of a project:

1. Resource constraints (does the project meet the established time and budget criteria?)

2. Impact on customers (how much benefit does the customer receive from this project?)

3. Business success ( how high are the profits and how long do they last? Did the project meet its return on investment goals?)

4. Prepare the future (Has the project altered the infrastructure of the organization so that in the future business success and customer impact are more likely?)

Business analytics and knowledge management - Chapter 11

This chapter provides an overview of some of the ways businesses make decisions. Enterprises have long sought a way to harness the value locked inside the extensive data they collect and store about customers, markets, competitors, products, people, and processes.

11.1 Knowledge management, business intelligence, and business analytics

Knowledge management = Includes the processes necessary to generate, capture, codify, and transfer knowledge across the organization to achieve competitive advantage.

Ultimate source of organizational knowledge are individuals.

Business intelligence (BI) = The term used to describe the set of technologies and processes that use data to understand and analyse business performance. It is the management strategy used to create a more structured approach to decision making based on facts that are discovered by analysing information collected in company databases.

Business analytics = The term used to refer to the use of quantitative and predictive models and fact-based management to drive decisions. (It is a subset of BI)

The most profound aspect of knowledge management and BI: an organization’s only sustainable competitive advantage lies in what its employees know and how they apply that knowledge to business problems.

Intellectual property

Intellectual capital = Knowledge that has been identified, captured, and leveraged to produce higher-value goods or services or some other competitive advantage for the firm.

Intellectual property = Allows individuals to own their creativity and innovation in the same way that they can own physical property.

It differs from physical property in 2 ways:

1. Information-based property is nonexclusive to the extent that when one person uses it, it can be used again by another person.

2. Unlike the cost structure of physical property, the marginal cost of producing additional copies of information-based property is negligible compared with the cost of original production.

The concept of intellectual property makes it possible for owners to be rewarded for the use of their ideas and it allows them to have a say in how their ideas are used.

4 main types of intellectual property:

1. Patents for inventions

2. Trademarks for brand identity

3. Design for product appearance

4. Copyrights for literary and artistic material

11.2 Data, information and knowledge

For the relationship between data, information and knowledge see Figure 11.1 on page 331

Data = Specific, objective facts or observations. Standing alone, such facts have no intrinsic meaning, but can be easily captured, transmitted, and stored electronically.

Information = Data endowed with relevance and purpose. People turn data into information by organizing them into some unit of analysis (dollar, dates, customers etc.)

Knowledge = A mix of contextual information, experiences, rules, and values. It is richer and deeper than information and added his or her own unique experience, judgement, and wisdom.

• Knowing what often is based on assembling information and eventually applying it.

• The process of applying knowledge helps generate knowing how to do something. This kind of knowing requires an understanding of an appropriate sequence of events or the ability to perform a particular set of actions.

• Together they result in knowing why: the causal knowledge of why something occurs.

See Figure 11.2 on page 332 for taxonomy of knowledge, link between 3 kinds of knowledge.

Values and beliefs are also a component of knowledge: they determine the interpretation and the organization of knowledge.

Tacit versus Explicit Knowledge

See Figure 11.3 on page 333 for the value of managing knowledge. Managing knowledge becomes far more complex these days.

Tacit knowledge = Personal, context-specific, and hard to formalize and communicate. Example: Explain verbally how to swim or ride a bicycle is almost not possible.

Explicit knowledge: knowledge that can be easily collected, organized, and transferred through digital means.

See Figure 11.4 on page 334 for examples of explicit and tacit knowledge.

4 different modes of knowledge conversion (see Figure 11.5 on page 334):

1. From tacit to tacit knowledge, which is called socialization, and is about transferring tacit knowledge via training and mentorship

2. From tacit to explicit knowledge: externalization, which is about articulating tacit knowledge through metaphors, analogies and models

3. From explicit to explicit knowledge, which is called combination, and is about combining existing knowledge

4. From explicit to tacit knowledge: internalization, which is about converting explicit knowledge into tacit knowledge by learning by doing.

11.3 Knowledge management processes

Knowledge management involves 4 main processes.

(1) Knowledge generation = Includes all activities that discover new knowledge, whether such knowledge is new to the individual, firm or entire discipline.

(2) Knowledge capture = Involves continuous processes of scanning, organizing, and packaging knowledge after it has been generated.

(3) Knowledge codification = The representation of knowledge in a manner that can be easily accessed and transferred.

(4) Knowledge transfer = Involves transmitting knowledge from one person or group to another, and the absorption of knowledge.

Tagging = Where users themselves list key words that codify the information or document at hand, creates an ad-hoc codification system, sometimes referred to as a folksonomy.

11.4 Business intelligence (BI)

Traditional BI has been associated with providing dashboards and reports to assist managers in monitoring key performance metrics. Common elements of BI systems include reporting, querying, dashboards, and scorecards.

Crowdsourcing allows the data structures and report designs to be created by the community, rather than a single designer.

11.5 Competing with Business Analytics:

One reason for the rise in companies competing on analytics is that many companies in many industries offer similar products and use comparable technologies. Therefore, business processes are among the last remaining points of differentiation, and analytic competitors are wringing every last drop of value from those processes.

Companies that compete successfully using their business analytics have these 5 capabilities:

• Hard to duplicate: Copying the capability is difficult, if not impossible. A competitor may have the same tools, but success comes from how they are used.

• Uniqueness: a specific business will choose a path based on their business, strategy, market, competitors and industry.

• Adaptability: successful companies use analytics across boundaries and in creative ways. There is created a culture of analytics.

• Better than the competition

• Renewability: Agility is an important characteristic of sustainable competitive advantage. Companies who use analytics for competitive advantage are exceptionally adaptable, continuously reinvest, and constantly renew their capabilities.

11.6 Components of Business analytics

See Figure 11.6 on page 338 for 4 components of business analytics.

(1) Data repositories = Data used in the analytical processes must be gathered, cleaned up, integrated, and stored for easy access.

Data warehouses = Collections of data designed to support management decision making.

• Data warehouses must be scalable, to allow capture and storage of all the data.

• Data warehouses must be agile, to accommodate changing requirements, mixed types of work, and quick turnaround of queries and reports

• Must be compatible with the enterprise infrastructure to integrate with business applications and provide appropriate accessibility, backup and security.

(2) Software tools = Applications and processes for statistical analysis, forecasting, predictive modelling, and optimization. Data mining = The process of analysing data warehouses for gems that can be used in management decision making.

(3) Analytics environment = Organizational environment that creates and sustains the use of analytics tools. Reward system that encourages the use of the analytics tools; willingness to test or experiment.

Leaders must move the company’s culture toward an evidence-based management approach = In which evidence and facts are analysed as the first step in decision making. Those in this type of culture are encouraged to challenge others by asking for the data, and where no data is available, to experiment and learn to generate facts.

(4) Skilled workforce = Workforce that has the training, experience, and capability to use the analytics tools.

For levels of analytic capabilities see Figure 11.7 on page 341.

11.7 Big data

Big data = The term used to describe techniques and technologies that make it economical to deal with very large datasets at the extreme end of the scale.

Big data is increasingly common in part because of the rich, unstructured data streams that are created by social IT.

Managers saw a rise in interest in using social IT as long as there was some way to measure the value gained from the invested time and resources.

11.8 Social analytics

A class of tools called: social analytics or social media analytics, were created to address this issue, and as expected, many vendor began offering packages that provided these tools.

Platforms with social analytics tools enable:

• Listening to the community: identify and monitor all conversations in the social web on a particular topic or brand

• Learning who is in the community: learn customer demographics

• Engaging people in the community: communicate directly with customers on social platforms

• Tracking what is being said: measure and track demographics, conversations etc.

11.9 Caveats for managing knowledge and business intelligence

Some warnings for managers in knowledge management and business intelligence;

• Knowledge management and business intelligence continue to be emerging, it is very important to remain flexible and open-minded

• The objective of knowledge management is not per se to make knowledge more visible or available, it can also be an objective to keep the knowledge tacit

• Knowledge can create a shared context for thinking about the future

• It is the people that are at the core of knowledge management and business intelligence. Establishing and nurturing a culture that values learning and sharing knowledge is very important

Ethical considerations in the use of information - Chapter 12

12.1 Responsible computing

The technological landscape is changing daily. Daily companies encounter ethical dilemmas as they try to use their IS to create and exploit competitive advantages.

These ethical dilemmas arise whenever a decision or an action reflects competing moral values that may impair or enhance the well-being of an individual or group of people.

Managers in the information age need to translate their current ethical norms into meaningful for the new electronic corporation.

They need to consider information ethics = The ethical issues associated with the development and application of IT.

3 theories of ethical behaviour in the corporate environment that managers can develop and apply to the particular challenges they face. These normative theories of business ethics are widely applied in traditional business situations.

They are “normative” in that they attempt to derive what might be called “intermediate-level” ethical principles: principles expressed in language accessible to the ordinary businessperson, which can be applied to the concrete moral quandaries of the business domain.

Stockholder Theory

Stockholder Theory = According to the stockholder theory, stockholders advance capital to corporate managers, who act as agents in furthering their ends. The nature of this contract binds managers to act in the interest of the shareholders.

Stockholder theory qualifies the manager’s duty in two salient ways:

1. Managers are bound to employ legal, non-fraudulent means

2. Managers must take the long-term view of shareholder interest.

Managers should bear in mind that stockholder theory itself provides a limited framework for moral argument because it assumes the ability of the free market to fully promote the interests of society at large.

Proponent = As agents of stockholders, managers must not use stockholders’ money to accomplish goals that do not directly serve the interests of those same stockholders.

Opponent = Such spending would be just if the money went to further the public interest.

Stakeholder Theory

Stakeholder Theory = Stakeholder theory holds that managers, although bound by their relation to stockholders, are entrusted also with a responsibility, fiduciary or otherwise, to all those who hold a stake in or a claim on the firm.

he term “stakeholder” is currently taken to mean any group that vitally affects the survival and success of the corporation or whose interests the corporation vitally affects.

Stakeholder theory diverges most consequentially from stockholder theory in affirming that the interests of parties other than the stockholders also play a legitimate role in the governance and management of the firm.

Social Contract Theory

Social Contract Theory = Social contract theory derives the social responsibilities of corporate managers by considering the needs of a society with no corporations or other complex business arrangements.

Social contract theorists ask what conditions would have to be met for the members of such a society to agree to allow a corporation to be formed.

Thus, society bestows legal recognition on a corporation to allow it to employ social resources toward given ends. This contract generally is taken to mean that, in allowing a corporation to exist, society demands at a minimum that it creates more value to the society than it consumes.

The social contract comprises two distinct components:

1. Social welfare term

2. Justice term

The social welfare term arises from the belief that corporation must provide greater benefits than their associated costs, or society would not allow their creation.

The justice term holds that corporations must pursue profits legally, without fraud or deception, and avoid activities that injure society.

See Figure 12.1 on page 356 for the 3 normative theories of business ethics.

12.2 Corporate social responsibility (CSR)

There are 2 types

(1) Green computing

Green computing = Concerned with using computing resources efficiently. The need for green computing is becoming more and more obvious.

Companies are working in a number of ways to adopt more socially responsible approaches to energy consumption (replacing older inefficient systems for example).

Green computing can be considered from the social contract theory perspective: managers benefit society by conserving global resources when the make green energy-related decisions about their computer operations.

Companies become more environmentally friendly and reduce their energy costs at the same time.

(2) Ethical tensions with governments:

Organizations are also facing a dilemma reconciling their corporate policies with regulations in countries where they want to operate. Managers need to adopt much different approaches across nationalities to counter the effects of what they perceive as unethical behaviours.

In an economy that is rapidly becoming dominated by knowledge workers, the value of information is tantamount. Those who possess the “best” information and know how to use it, win.

12.3 PAPA: Privacy, accuracy, property and accessibility

Privacy

Privacy = Has long been considered “the right to be left alone”. In today’s information-oriented world, it has been defined as: “the ability of the individual to personally control information about one’s self”.

Employers can monitor their employees’ e-mail and computer utilization while they are at work, even though they have not historically monitored telephone calls.

Every time someone logs onto one of the main search engines, a “cookie” is placed in their hard drive so that these companies can track their surfing habits.

Cookie = A message given to a Web browser by a Web server. The browser stores the message with user identification codes in a text file that is sent back to the server each time the browser requests a page from the server.

Accuracy

Accuracy = Or the correctness, of information assumes real importance for society as computers come to dominate in corporate record-keeping activities. Over time it becomes increasingly difficult to maintain the accuracy of some types of information.

Although a person’s birth date does not typically change, addresses and phone numbers often change as people relocate, and even their names may change with marriage, divorce, and adoption.

Property

Property = The question is who owns the data. Do organizations have the right to share data with others to create a more accurate profile of an individual?

Accessibility

Accessibility = The ability to obtain the data, becomes increasingly important.

Manager’s role in ethical control

Today’s managers must ensure that information about their employees and customers is accessible only to those who have a right to see and use it. Accessibility is becoming increasingly important with the surge in identity theft, or “the taking of the victim’s identity to obtain credit, credit cards from banks and retailers, steal money from the victim’s existing accounts, apply for loans, establish accounts with utility companies, rent an apartment, file bankruptcy or obtain a job using the victim’s name”.

Identity theft is categorized in two ways:

1. True name

2. Account takeover

True name = Identity theft means that the thief uses personal information to open new accounts.

Account takeover = Identity theft means the imposter uses personal information to gain access to the person’s existing accounts.

Managers must work to implement controls over information highlighted by the PAPA principles. Not only should they deter identity theft by limiting inappropriate access to customer information, but they should also respect their customers’ privacy.

Issues related to the ethical governance of information systems are emerging in terms of the outward transactions of business that may impinge on the privacy of customers and electronic surveillance and other internally oriented personnel issues.

Security looms as a major threat to Internet growth. Businesses are bolstering security with hardware, software, and communication devices.

See Figure 12.2 on page 360 for examples of critical questions for the different areas of PAPA.

Manager’s role in ethical information control:

Managers must work to implement controls over information highlighted by the PAPA principles.

3 best practices can be adopted to help improve an organization’s information control by incorporating moral responsibility (page 268):

• Create a culture of responsibility

• Implement governance processes for information control

• Avoid decoupling

See Figure 12.3 on page 270 for security and control tools