Chapter 10 Structuring and Managing the IT Function

Manager’s Perspective Management strategy for IT function –Why? Hard to organize and manage? –Senior management - clear lack of understanding of IT –Withdraw instead of learn about it –Netcentric firms –Designing and managing IT function - challenge for organizations and senior management –Cross functional - involve members - different parts of organization

Opportunities for Greatness and Disaster The IT group deals with both creative and routine operations at the same time, and each of its activities has a risk of failure - challenging Diverse set of activities Develop applications - literally transform organization - highly desirable, difficult to attain –Corporate strategy –New source of revenue –Reduce costs Operates and maintains infrastructure Serve - variety of stakeholders

Opportunities for Greatness and Disaster Structure of the IT group –Centralized: results in lowest cost to the organization Managers see as unresponsive, poor service Spend more time and effort –Decentralized: associated with greater flexibility and better service Loss of standardization and control More familiar - unique needs Decisions made more quickly Information Politics

Information Politics Technocratic UtopianismReliance on technology; model the firm’s IT structure and rely on new technologies AnarchyNo overall information management policy FeudalismManagement of IT by individual business units; limited reporting to the organization MonarchyStrong control by senior management; information may not be shared with lower levels of the firm FederalismManagement through consensus and negotiation about key IT decisions and structures

Political model Anarchy - technology is not managed - no planning, no standards - tremendous problems Feudal - powerful executives control technology Monarchy - CIO - establishes and enforces standards Federal model - reach a consensus - most frequent, most effective Infrastructure - designed and operated centrally - makes most sense Central IT group - provides coordination, local - most of the responsibility, decisions

What Has to be Managed? Relationships –Variety of stakeholders - other managers, staff, customers, suppliers Strategy –Support current, enable new Infrastructure –Hardware, networks - enable - operate current systems and undertake new initiatives - key - success Human Capital –IT - knowledge business Innovation –Advance the organization

What Has to be Managed? Solutions Delivery –Locally know the functional requirements - select best packaged problem solution Provisioning of Service –Help desks –Responsible for providing, maintaining, upgrading hardware and software Financial Performance –Financial analysis - difficult

Three Models for the IT Organization PartnerPlatformScalable Strategic position IT is an active business partner for innovation IT provides infrastructure for the entire business IT remains flexible and able to undertake new initiatives quickly CharacteristicsIT managers in divisions, corporate IT for leadership, matrix reporting in IT Corporate IT supervises overall infrastructure, businesses “own” IT innovations, IT account manager in each business Centralize IT to encourage commonality and reduce duplication, IT in business units Most applicableSenior executives lack in-depth knowledge of IT, firm needs to promote IT innovation, solid IT leadership Global companies with diverse lines of business; company managers knowledgeable about IT Cyclical businesses, global businesses with similar subsidiaries, e.g., oil retailer

New Organizational Models for IT The Partner Model –‘proactive partner in the innovative process –Senior management stimulates thought - strategic uses of IT –Similar to federal IT organization - focus on innovation rather than decentralization Individual divisions - responsible for own IT Central unit - infrastructure and costs –Appropriate - promote innovation with technology, executives lack deep understanding of IT –Encourages collaboration, learn from each other

New Organizational Models for IT The Platform Model –Concentrates on infrastructure and tools - enable innovation –Infrastructure - buying an option to undertake innovations –Account manager - position created - liaison - IT function and business units –Most fitting for global, multidivisional firms - several lines of business The Scalable Model –Organization - needs maximum flexibility –Acquire resources - opportunity presents itself –Fast moving –Firm outsources large portion of IT - take advantage of resources of service providers

Coordination IT - integrated with multiple units and divisions within the organization, partner organizations - outsourced service providers –Integrated with multiple units and divisions Coordination can be traditional or electronic –Traditional: systems that embody rules and procedures; task forces and committees –Electronic: E.g., Internet based order cycles Within the IT unit development efforts must be coordinated with consultants, package providers, management, and end users –Task forces and committees are used for coordination –Teleconferencing, video conferencing, web meetings and groupware can supplement face-to-face meetings

The Chief Information Officer (CIO) The CIO is in charge of IT, influential senior member of management –CIOs participate in planning, influencing and building relationships with other managers, and campaigning for the effective use of technology and appropriate levels of investment in IT –CIOs provide leadership and control over information processing, voice and data communications, and office technology –CIOs build confidence in technology within the firm and help provide it a competitive edge with the strategic use of IT - must find a way to add value from use of IT

The Chief Information Officer (CIO) Most successful approach - business strategy subsumes IT strategy Determine - not how to use IT, rather - where it should be used to most benefit organization Political role - campaigning for effective use of IT, appropriate levels of investment Add value - finding new business opportunities, using technology to conduct buiness in new ways Last few years - intense pressure to reduce costs

The Chief Information Officer (CIO) Vision - what IT can accomplish - what organization is trying to become, vision should be sufficiently compelling to create enthusiasm for plan to achieve it –Vision and strategy - provide goals for IT plan to describe how to achieve Plan - guideline for management decisions - IT –Key role - identify most important new applications of technology and prioritize them –Focus on applications that contribute to achieving vision and strategy –Makes managing IT requests easier - evaluate against plan –Fundamental management tool - IT makes maximum contribution CIO - resource, consultant, tutor –IT - not separate plan, integrated

Contents of an IS Plan Executive summary Goals – general and specific Assumption Scenario – vision of the firm Applications areas – status, cost, schedule, priorities Operations Maintenance and enhancements Organizational structure – pattern of computing Effects of plan on the organization – financial impact Implementation – risks, obstacles

How CIOs Can Add Value To the Firm Obsessive and continuous focus on business imperatives Interpretation of external IT success stories as potential models for the firm Establishment and maintenance of IS executive relationships Establishment and communication of IS performance record Concentration of the IS development effort Achievement of a shared and challenging vision of the role of IT

The CEO Some CEOs see IT as a strategic resource while others see IT as a cost. Their common concerns include: –Are we getting value for money invested in IT? –How important is IT? –How do we plan for IT? –Is the IS function doing a good job? –What is the IT strategy? –What is my vision for the role of IT? –What do we expect of the CIO?

What the CEO Should Do Understand enough about technology so that IT becomes a part of corporate strategy Look for e-business opportunities Insist that the firm and its management develop a vision and plan for IT Be aware of the possibilities for adopting new organizational structures enabled by IT Help set priorities for IT and the priority of IT given other activities Meet regularly with the CIO

What the CEO Should Do Spend time understanding IT applications in the firm Make a major systems effort a company goal for the year Ask for regular reports on the progress on major IT initiatives, and take action when problems develop Evaluate the impact of technology on the firm Challenge managers at all level of the firm to think about what technology can do for the firm and to look for e-business opportunities