CISB444
Strategic Information
Systems Planning
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
1
Chapter 1
A Strategic Perspective of the
Evolving Role of Information Systems
and Technology in Organisations
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
2
Chapter 1: Overview
• Chapter 1 sets the strategic context for IS/IT.
• It traces the historical development of IS/IT in
organisations, bringing it up to date both in terms of eCommerce and e-Business development and the latest
thinking on the strategic role of IS/IT in organisations
• It provides an appraisal of the general evolution of IS/IT in
major organisations, against which any organisation can
chart its progress and from which lessons can be learned
for its future management.
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the Evolving Role of IS and IT in Organisations
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Chapter 1: Main Topics
• Information Systems (IS) and Information
Technology (IT)
• Early Views and Models of IS/IT in Organisations
• Success Factors in Strategic Information Systems
• What is an IS/IT Strategy?
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the Evolving Role of IS and IT in Organisations
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e-Business and e-Commerce
• e-Commerce refers to the conduct of commerce or business
electronically
– Commercial transactions over the Internet only – buying and selling via the
Internet.
– All electronically mediated information exchanges between an organisation
and its external stakeholders
•
•
In the 1980s electronic commerce was already a reality, in this instance
referring to inter-company trading, specifically the exchange of business
documents, using electronic data interchange (EDI).
With the opening up of the Internet for commercial activity in 1991, a vast
new medium was emerging for the conduct of business transactions.
–
–
–
–
‘Networks of networks’
Open standards
WAP (wireless/mobile technology)
M-Commerce, T-Commerce (mobile/tablet)
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e-Business and e-Commerce
• e-Business refers to the automation of an
organisation’s internal business processes using
Internet and browser technologies.
– All electronically mediated information exchanges, both within an
organisation and with external stakeholders supporting the range
of business processes
– A holistic business culture, structure and mindset, which is not just
about buying and selling on the Internet or implementing new
technology but integrates core business processes electronically
using network technologies to create added value such as
enhanced customer services and increased efficiency
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e-Business and e-Commerce
• e-Business refers to the automation of an
organisation’s internal business processes using
Internet and browser technologies.
– ‘pure play’ dot-coms
• Totally web- or Internet-enabled, often reaching out directly to
customers
– ‘bricks and clicks’
• Integrate Internet with their mainstream operations
• ‘web-enabled’ selected business processes using Internet
technologies
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e-Business, e-Commerce and IS/IT
•
•
•
•
What we are essentially looking at is another technology, in this instance,
the Internet, including wireless technologies, to add to the range of
technologies that already exist.
The fundamental challenge for any organisation is still to identify
opportunities to deploy this new technology, as with any other.
Organisations need to realise that Internet is an enabling technology, a
powerful set of tools that can be used, wisely or unwisely, in almost any
industry and as part of almost any strategy.
It should also be noted that IT is not the business strategy
– Regardless of the industry that a firm operates in, it can achieve and
sustain profitable growth to the extent that it grasps and delivers on 2
strategy fundamentals: product advantage and production advantage.
– “it is the power of “i” (information, innovation, imagination) rather than “e”
(electronic) that separates the winners from the losers in the 21st century
economy
Chapter 1: A Strategic Perspective of
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E-commerce Examples
Your favorite e-commerce website
in Malaysia or worldwide?
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the Evolving Role of IS and IT in Organisations
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Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
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Distinctive Features of the Internet
• 3 aspects that make the Internet distinct from other technologies:
– Pervasive
• Internet has spread widely throughout an area or a group of people.
• For example, it directly reaches end consumers, facilitating the
conduct of business directly with consumers in new ways.
– Interactive
• This interactive element is of crucial importance since much business
activity consists of interactions (human and technical communication,
data gathering, collaborative problem solving, negotiation).
– Virtual nature
• A new medium that has different characteristics from the physical
world – marketspace – information-defined transaction space.
• All this implies that IS/IT strategy has to be even more tightly aligned
to other strategies.
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
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Early Views and Models of IS/IT in Organisations
CAN YOU GUESS
What this is?
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
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Early Views and Models of IS/IT in Organisations
Its a hard disk in 1956....
The Volume and Size of 5MB memory storage in 1956.
In September 1956 IBM launched the 305 RAMAC,
the first computer with a hard disk drive (HDD). The
HDD weighed over a ton and stored 5MB of data.
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
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Data Trend – as at 2011
•
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•
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Mega
Giga
Tera
Peta
Exa
Zetta
Yotta
Bronto
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Name
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Nibble
Byte
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Terrabyte
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Yottabyte
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
Equal to:
1 bit
4 bits
8 bits
1,024 bytes
1,024 kilobytes
1,024 megabytes
1,024 gigabytes
1,024 terrabytes
1,024 petabytes
1,024 exabytes
1,024 zettabytes
Size in Bytes
1/8
1/2 (rare)
1
1,024
1,048,576
1,073,741,824
1,099,511,627,776
1,125,899,906,842,624
1,152,921,504,606,846,976
1,180,591,620,717,411,303,424
1,208,925,819,614,629,174,706,176
14
Early Views and Models of IS/IT in Organisations
• The use of computers in business began in the early
1950s but really became significant in the mid- to late
1960s with the development of multi-purpose mainframe
computers.
• During the 1970s, minicomputers of increasing power and
sophistication were used for a variety of business
applications that were either not feasible or economic in a
mainframe environment.
• However, the views developed of the role of information
systems and their expected evolution were based strongly
on a centralised, integrated concept derived from
mainframe origins.
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Early Views and Models of IS/IT in Organisations
• The most well known of these models, capturing the evolution of IS/IT
in an organisation, was developed by Gibson and Nolan during the
1970s.
• This model, in turn, used a hierarchical application portfolio model
described by Anthony (1965), who defined a structure for information
systems in an organisation, based on a stratification of management
activity into:
– Strategic planning
– Management control
– Operational control
• Different applications were built to support the different levels of
management activity, hence, it provided an early way of classifying
applications.
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Typical Planning, Control, And Operational Systems
Planning
systems
examples
Control
systems
examples
Operational
systems
examples
Sales forecasting operating plans capacity planning, profit/earnings forecasts,
business mix analysis, manpower planning, financial modelling
Sales analysis budgetary control, management accounting, inventory management,
quality analysis, expense reporting, market research/statistics, WIP control,
requirements planning, supplier analysis, etc.
Order entry, processing, tracking shipping documents, vehicle scheduling/loading,
Invoicing, sales and purchase ledgers, cost accounting, stock control, shop-floor scheduling,
bill of materials, purchase orders, receiving, employee records, payroll, word processing
Figure 1.1: Typical planning, control, and operational systems
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Stages Of Evolution Of IS/IT In Relation To Expenditure
Level of
IS/IT
Expense
Transition point
Computer (DP) management
Information (Systems) management
Initiation
Contagion
Control
Integration
Data
Management
Maturity
Stages of increasing sophistication and maturity
Box 1.1 Stages of evolution of IS/IT in relation to expenditure
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Nolan’s stages of growth model
Source: Galliers and Sutherland (1991)
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Characteristics of stages of growth model
1. Initiation. The first use of applications within an organisation. Characterised by
lack of senior management interest, operational or simple office systems and
transactional systems to reduce costs.
2. Contagion. Widespread use of applications as benefits are sought from
automation and information management. Characterised by rapid growth in use of
application with enthusiasm from departmental managers, overall control is
limited.
3 Control. This stage is a reaction against excessive and uncontrolled expenditures
of time and money on computer systems from the contagion stage. It is
characterised by introduction of plans, methodologies and expenditure controls,
often resulting in an applications backlog.
4 Integration. This is a reaction against the use of departmental applications and
data silos arising from earlier poor control. Traditionally characterised by use of
databases, today the use of middleware and enterprise resource planning
systems. Control continues to improve at this stage.
5 Data administration. A change of emphasis to information management rather
than focus on technology and applications. Databases and document / content
management systems introduced to help achieve this.
6 Maturity. Information systems are put in place that reflect the real information
needs of the organisation. Characterised by planning and development of IS
closely linked to business strategy.
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Stages in adoption of different models
Source: Galliers and Sutherland (1991)
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Early Views and Models of IS/IT in Organisations
• The Nolan model is a useful starting point in
understanding the evolving role of IS/IT in organisations
but it only described events up to the 1980s and since
then much has changed.
• The 6 stages of the model divide into 2 large ‘eras’,
separated by a transition point between Stages 3 and 4
(Control and Integration)
– It can be summarised as a transition from computer (DP)
management to information (systems) management, during which
major changes occur in who managed what for whom, and how
– It was a fundamental change in how IS/IT resources were
managed, and how the role of IS/IT in the organisation should be
evaluated
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Early Views and Models of IS/IT in Organisations
• During the early stages of computerisation, the
preoccupation was with managing the activities –
operations, programming, data collection, etc.
• Later, a separate organisational unit was established that
could cope with a variety of types of application, over an
extended life cycle, during which the technology changed
significantly.
• The main driving force had been managing computer
resources and activities, focusing on the technical and
application difficulties, without much regard for the value
to the business of the applications.
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Early Views and Models of IS/IT in Organisations
• To achieve effective Information (Systems) Management,
a new top-down approach was required, a strategy for the
management of IS/IT, associated activities and resources
throughout the organisation.
• This should be based on a defined role for IS in the
enterprise, but that, in turn, depends on the role of IS in
relation to the outside world.
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Early Views and Models of IS/IT in Organisations
• The evolving issues associated with IS/IT management in
organisations can also be described in terms of a threestage model (Hirscheim et.al, 1988):
– Delivery:
• IS issues are mainly internal – improving the ability to deliver
and support the systems and technology.
• Achieving top-management credibility as a valuable function is
a prime objective.
• This means improving delivery performance, not necessarily
providing users with what they really need.
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the Evolving Role of IS and IT in Organisations
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Early Views and Models of IS/IT in Organisations
• The evolving issues associated with IS/IT management in
organisations can also be described in terms of a threestage model (Hirscheim et.al, 1988):
– Reorientation:
• Establishing good relationships with the main business
functions, supporting business demands through the provision
of a variety of services as computing capability spreads
through the business
• The issues focus is extended outside the ‘DP department’ and
a key objective is to provide a valued service to all business
function management.
• Different areas will benefit differently without regard to
business importance
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Early Views and Models of IS/IT in Organisations
• The evolving issues associated with IS/IT management in
organisations can also be described in terms of a threestage model (Hirscheim et.al, 1988):
– Reorganisation:
• The high level of awareness created both ‘locally’ in the
business area and ‘centrally’ in senior management creates
the need for a reorganisation of responsibilities designed to
achieve integration of the IS investment with business strategy
and across business functions.
• A key objective becomes the best way of satisfying each of the
differing business needs through a coalition of responsibilities
for managing information and systems.
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Early Views and Models of IS/IT in Organisations
•
It can be concluded that, from the 1960s to the
early 1980s, IS/IT and its deployment in
organisations passed through a major transition,
which linked 2 eras:
1. Data processing from 1960s on wards – the DP era;
2. Management information systems (MIS) from the
1970s onwards – the MIS era
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Summary of Lessons from DP and MIS Eras
• Some of DP lessons:
– Need to understand the process of developing
complete information systems, not just the programs to
process data
– More thorough requirements and data analysis to
improve systems linkages and a more engineered
approach to designing system components
– More appropriate justification of investments by
accessing the economics of efficiency gains and
converting these to a return on investment
– (See Table 1.2 for more lessons)
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Summary of Lessons from DP and MIS Eras
• Some of MIS lessons:
– Justification of IS investments is not entirely a matter of
return on investment/financial analysis
– Databases require large restructuring projects and
heavy user involvement in data definition – data
integration had been weak based on the project by
project DP approach
– The IS resource needs to move from a production to a
service orientation to enable users to obtain their own
information from the data resource – the information
centre concept.
– (See Table 1.2 for more lessons)
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Case Study 1 :
Group Discussion
(presentation – next class)
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the Evolving Role of IS and IT in Organisations
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Questions?
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Strategic Information Systems Era
• During the late 1970s, a number of organisation had begun to
use IS/IT in ways that fundamentally changed how their
business was conducted, changing the balance of power in
their industry with respect to competitors, customers, and/or
suppliers.
• The use of IS/IT was thus directly influencing their competitive
position and had become a new weapon to improve their
competitiveness, implying a new relationship between IS/IT
investment and strategic development.
• During the mid-1980s, a lot of examples were quoted in many
journals and books on SIS under the generic title of ‘how IS/IT
provides competitive advantages’.
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Strategic Uses of IT/IS: Classification, Factors for
Success, and Management Implications
•
The following classification can be shown to be helpful in
considering the implications of strategic IS/IT use. The 4
main types of strategic system appear to be:
1.
2.
3.
4.
Those that share information via technology-based systems with
customers/consumers and/or suppliers and change the nature of the
relationship – Linking to Customers and Suppliers
Those that produce more effective integration of the use of information
in the organisation’s value-adding processes – Improved Integration of
Internal Processes
Those that enable the organisation to develop, produce, market and
deliver new or enhanced products or services based on information –
Information-based Products and Services
Those that provide executive management with information to support
the development and implementation of strategy – Executive
Information Systems
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Success Factors in Strategic Information Systems
• External, not internal focus
• Adding value, not cost reduction
• Sharing benefits within the organisation, with suppliers,
customers, consumers and even competitors
• Understanding customers and what they do with the
product or service: how they obtain value from it.
• Business-driven innovation, not technology-driven
• Incremental development, not the total application vision
turned into reality
• Using the information gained from the systems to develop
the business
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The Management Implications
Business
Strategic
Management
Impact
analysis
IS/IT
Strategic
Management
Information
analysis
Executive
management
Information
Systems
Management
Systems
design
User
management
Project and
Computer
Management
User
Operations
Figure 1.5 The relationship between the business, SIS, MIS, and DP
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The Management Implications
IS/IT
Industry, business and
organisational impact
potential
BUSINESS STRATEGY
Business decisions
Objectives and direction
Change
Support
business
Where is the business
going and why
Direction for
business
IS STRATEGY
Business based
Demand oriented
Application focused
Infrastructure
and services
What is required
Needs and
priorities
IT STRATEGY
Activity based
Supply oriented
Technology focused
How it can be delivered
Figure 1.6 The relationship between business, IS, and IT strategies
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An Applications Portfolio for the ‘Combined Era’
• The applications in the overall DP, MIS, and SIS portfolio
need to be planned and managed according to their
existing and future contribution to the business.
• Traditional portfolio models considered the relationship of
systems to each other and the tasks being performed,
rather than the relationship with business success.
• A portfolio model for the combined era can be derived
from a matrix concept developed by McFarlan and
McKenney which considered the contribution of IS/IT to
the business now and in the future, based on its industry
impact.
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The McFarlan and McKenney Strategic IT/IS Grid
•
•
The McFarlan and McKinney Model (1992) is a
much quoted and typical example of a 2X2 business
analysis matrix.
The grid separates businesses and their applications
by virtue of the different degree to which the firm is
dependent upon IS today and the degree to which IS
are strategically important in the sector.
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The McFarlan and McKenney Strategic IT/IS Grid
•
Businesses can be positioned with respect to the
importance of IS for the business under review
under the classifications of:
–
–
–
–
Support
Factory (Key Operational)
Turnaround (High Potential)
Strategic
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The McFarlan and McKenney Strategic IT/IS Grid
•
•
Although the grid is a simple model it can be a
powerful one since it enables us to reflect upon the
impact of information technology on business
operations both now and in the future.
The implication of the grid is that different
information management approaches will be
applicable to different quadrants.
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The McFarlan and McKenney Strategic IT/IS Grid
High
Turnaround
Strategic
Support
Factory
Strategic
importance
of planned IS
Low
Low
Chapter 1: A Strategic Perspective of
the Evolving Role of IS and IT in Organisations
Strategic
importance
of current IS
High
42
The McFarlan and McKenney Strategic IT/IS Grid
•
Support:
– Applications that are valuable but not critical to
success
– The impact of IS both in terms of existing operations
and in terms of planned/future application
development is low.
– IT/IS is used essentially for administrative systems to
improve internal efficiency and on islands of specialist
technology rather than on an integrated enterprisewide basis.
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The McFarlan and McKenney Strategic IT/IS Grid
•
Factory (Key Operational):
– Apllications on which the organisation currently
depends for success
– IT/IS is critical to current operations and management
but is not at the heart of the company’s strategic
development.
– Reliable information systems are required both for
administrative and process management, but future IT
applications are not the critical factor for future
business success.
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The McFarlan and McKenney Strategic IT/IS Grid
•
Turnaround (High Potential):
– Applications that may be important in achieving future
success
– IT is becoming more pervasive and is being
recognised as a tool for transformation.
– The systems being planned and developed may be
critical to the enterprise’s survival or growth.
– However, there is a degree of uncertainty as the
capabilities of the company in terms of delivery and
support are untested.
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The McFarlan and McKenney Strategic IT/IS Grid
•
Strategic:
– Applications that are critical to sustaining future
business strategy
– Some enterprises will be operating in conditions
where information technology is already central, and
where their future too will be dependent upon and
shaped by developments in information systems.
– Business operations are not possible without the use
of advanced information systems and new products
and services tend to be computer based.
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The McFarlan and McKenney Strategic IT/IS Grid
•
Enterprise can move between quadrants on the grid
over time
– The move is generally towards the top right
•
It is possible that a company with diverse activities
may have strategic business units operating in
different sectors of the grid.
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The McFarlan and McKenney Strategic IT/IS Grid
•
3 factors that drive the position of the firm on the
grid:
– The ability of management to match the potential of IT
with the firm’s operations and strategy.
– The strategic choices that management makes with
respect to IT, for example is it used to cut costs, to
improve quality or to develop new businesses.
– What is happening in the firm’s competitive
environment.
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What is an IS/IT Strategy?
• The IS strategy defines the organisation’s requirement or
‘demand’ for information and systems to support the
overall strategy of the business.
• It is firmly grounded in the business, taking into
consideration both the competitive impact and alignment
requirements of IS/IT
• Essentially it defines and prioritises the investments
required to achieve the ‘ideal’ applications portfolio, the
nature of the benefits expected, and the changes required
to deliver those benefits, within the constraints of
resources and systems interdependencies.
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What is an IS/IT Strategy?
• The IT strategy is concerned with outlining the vision of
how the organisation’s demand for information and
systems will be supported by technology, essentially, it is
concerned with ‘IT supply’
• It addresses the provision of IT capabilities and resources
(including hardware, software, and telecommunications)
and services such as IT operations, systems development
and user support.
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Earl’s Model
•
•
Earl’s model is important in that it articulates the
need for an enterprise-wide stance on information
management.
Earl (2000) identifies 4 key complementary
information strategy components, which may exist
within an enterprise:
–
–
–
–
Information technology (IT) strategy
Information systems (IS) strategy
Information management (IM) strategy
Information resource (IR) strategy
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Earl’s Model: Characteristics of IT and IS Strategy
IS Strategy
Business unit and corporate
Demand oriented
Business focused
Business with IT
Infrastructure
Context
IT Strategy
Scope and architecture
Supply oriented
Technology focused
IT and business
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Earl’s Model: IT Strategy
•
IT strategy is concerned primarily with technological
issues such as
–
–
–
–
–
–
architecture,
standards,
physical security,
data integrity,
service availability and maintenance,
support and procurement.
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Earl’s Model: IT Strategy
•
•
•
It answers the “how” question:
– How will we deliver business requirements?
This covers desk-top platforms, peripherals, networks,
servers and other shared computer processing capability
and repositories of data, operating systems and software
tools.
The key goal of the strategy is to ensure that there is a
robust but flexible infrastructure which can support the
range of applications required to satisfy organisational
objectives.
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Earl’s Model: IT Strategy
•
•
In practice the IT manager will have to deal with:
– legacy issues,
– new technologies for which standards have not yet been
agreed,
– purchases which take place outside procurement
guidelines, and
– version drift.
All of these contribute to higher costs associated with the
management of IT (often referred to as total cost of
ownership) and greater complexity in the IT strategy.
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Earl’s Model: IS Strategy
•
•
Earl views IS strategy as being concerned with
ensuring that IS development is in tune with
organisational needs and hence with identifying and
prioritising applications for development.
This requires a focus on:
–
–
–
–
business and process models,
data definitions,
information architectures,
users needs.
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Earl’s Model: IS Strategy
•
•
It is therefore concerned with the “what” questions:
– What applications set is required to meet business objectives?
Business modelling tools have 2 key roles to play in facilitating the IS
strategy:
– They allow the development teams to visualise business
processes in a way that allow users, analysts and programmers
to interact with a common and accessible representation of what
an application is required to deliver
– They provide an opportunity to explore alternatives and identify
areas for streamlining processes, an essential element of
business process re-engineering
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Earl’s Model: IS Strategy
•
•
A corporate IS strategy will focus on enterprise-wide
application needs and on systems which help to glue the
various functions of the enterprise together.
This is particularly important for ensuring that data captured by
customer-facing applications (e.g. an order) can be instantly
supported by data on for instance, stock levels (from inventory
management systems), lead times (from manufacturing
systems) and delivery times (from distribution systems).
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Earl’s Model: IS Strategy
•
•
•
IS strategy will also be formulated at the level of
strategic business units or process owners and is
therefore demand-oriented.
An important decision that will have to be taken at
this stage will be to establish who is the business
owner of the application.
Consequently there may be several interdependent
IS strategies which are owned and shaped by the
relevant management teams.
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Why Have an IS/IT Strategy?
• Consequences of not having an IS/IT strategy are severe, which
include:
– Systems investments are made that do not support business objectives
– Loss of control of IS/IT, leading to individuals often striving to achieve
incompatible objectives through IS/IT
– Systems are not integrated. This can also lead to duplication of effort and
data leading to inaccuracy and no coherent information resource
– No means of setting priorities for IS projects/resources and constantly
changing plans leading to lower productivity, etc.
– No mechanisms for deciding optimum resource levels or the best means
of supplying systems
– Poor management information; it is either not available, inconsistent,
inaccurate or too slow
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Why Have an IS/IT Strategy?
• Consequences of not having an IS/IT strategy are severe, which
include:
– Misunderstanding between users and IT specialists leading to conflict and
dissatisfaction
– Technology strategy is incoherent and constraints options
– Inadequate infrastructure investments made
– All projects evaluated on financial basis only
– Problems caused by IS/IT investments can become a source of conflict
between parts of the organisation
– Localised justification of investments can produce benefits that are
actually counterproductive in the overall business context
– Systems, on average, have a shorter than expected business life and
require, overall, considerably greater IS/IT spending to redevelop more
frequently than should be necessary
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Chapter 1 Complete
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the Evolving Role of IS and IT in Organisations
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Case Study 1 – Presentation
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Questions?
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