1. CHAPTER 8 Strategic Management of IS/IT: Organizing and Resourcing
Strategic Planning
for Information
Systems
John Ward and Joe Peppard
Third Edition
CHAPTER 8 Strategic Management of IS/IT: Organizing and Resourcing

2. Outlines Organizing strategies for IS/IT management
Models and framework for guiding management action

3. Objectives of the IS/IT Management Strategy
To ensure IS/IT strategies, policies and plans reflect business objectives and strategies.
To ensure potential business advantages from IS/IT are identified and exploited.
To ensure strategies, etc. are viable in terms of business risks.
To establish appropriate resource levels and reconcile contention/set priorities.
To create a ‘culture’ for the management of IS/IT that reflects the corporate culture.
To monitor the progress of business-critical IS/IT activities.
To achieve the best balance b/w centralization and development of IS/IT decision making.

4. Traditional IT Organization
Source: Luftman

5. Centralization
Source: Luftman

6. Decentralization
Source: Luftman

7. Federal or Hybrid

8. Benefits of Federal Model

9. Factors for Selecting Organizational Structure
The organization’s depend on IT
Its stage of maturity in terms of its application portfolio
The geography of the enterprise, especially for organizations with a global presence
Its business diversity and rate of change of the types of business and competitive pressures in each business
The potential benefits of synergy b/w business in both trading goods and services and information exchange
The economics of resourcing, obtaining and deploying skills

10. La Belle and Nyce
While the business units should be responsible for applications- architecture, development and operation- certain areas should be centralized
These included: telecommunications, hardware, software architecture, information architecture, risk management and security, shared services and utilities, and human resources.
The activities of the units had to be coordinated with the central architecture development via ‘steering group or committee’

11. Division of Responsibility: IT Architecture Management
Function: Develop and maintain information architecture
Central IT group:
Monitor process; provide assistance if requested
Business unit operations
Complete business architectures defining business by location
Complete translation of strategy into technology requirements
Define information architecture

12. Cont.. Function: Develop and maintain application architecture
Central IT group
Set standards, monitor process
Review architectures and report on adequacy to Technology Committee
Ensure appropriate commonality
Business unit operations
Define requirements and develop architecture
Coordinate b/w units for common business

13. Cont.. Function: Develop and maintain data architectures
Central IT group
Coordinate development/establishment of common database management process
Create/maintain corporate databases
Business unit operations
Define requirements
Develop in accordance with standards

14. Cont…
Function: develop and maintain hardware/operating system architecture
Central IT group
Monitor development/implementation within sectors
Develop and maintain architecture for corporate users-support operations
Business unit operations
Develop in accordance with corporate standards and business requirements
Request variances as appropriate; make change recommendations

15. Cont… Function: Develop and maintain telecommunications architectures
Central IT group
Develop in accordance with standards and business requirements
Business unit operations
Define requirements
Report performance/responsiveness problems

16. Balancing IS Demand and IT Supply
Business units receive a responsive service from decentralized IS functions
While at the same time a corporate IS function provides group wide IT services and exerts some degree of central leadership and control of IT activities

17. Summary of Structural Arrangements for IS Function in Multiple BUs

18. Cont..

19. Imperative for the Management of IS/IT: Rockart et al.
Achieve two-way alignment b/w the business and IS/IT strategy
Develop effective relationships with line management
Deliver and implement new systems
Build and manage IT infrastructure
Reskill the IS function with new competencies and knowledge
Manage vendor partnerships
Redesign and manage the federal IS organization

20. Imperative for the Management of IS/IT: Venkatraman
He argued the need for a different approach to managing IT resources that consider the sources of value to be derived from IT resources.
He proposed that resources should be managed as a value centre.
The value centre is an organizing concept that recognizes four interdependent sources of value from IT resources: cost centre, service centre, investment and profit centre.

21. Cont…
The cost centre has an operational focus that minimizes risks with an emphasis on operational efficiency. Cost-centre activities are good candidates for outsourcing.
The service centre, although still minimizing risk, aims to create an IT-enabled business capability to support current strategies.

22. Cont…
The investment centre has a long-term focus and aims to create new IT-based business capabilities. It seeks to maximize business opportunity from IT resources.
The profit centre is designed to deliver IT services to the external marketplace for incremental revenue and for gaining valuable experience in becoming a world-class IS function.

23. Imperative for the Management of IS/IT: Gartner Group

24. Cont…
IT leadership, which includes IT envisioning, fusing IT strategy with business strategy, and managing IS resources.
Architecture development, which is concerned with developing a blue-print for the overall IT technical design.
Business enhancement, which includes business process analysis and design, project management and managing relationships with users.
Technology advancement, which is application design and development.
Vendor management, which includes managing and developing relationships with vendor and suppliers, negotiating and monitoring contracts and purchasing.

25. A Framework Guiding Action
What needs to be managed?
Where IS/IT resources should be outsourced?
Who should manage IS/IT?
Coordinating mechanisms for the strategic management of IS/IT
Define IS competency
Managing relationships

26. What Needs to be Managed?
The activities that are traditionally seen as necessary for ‘IT’, and consequently considered as taking place within the IS function, can be portrayed as delivering a range of services to the business.
Strategy and planning services
Application development services
Application and technical services
Technology delivery and maintenance services

27. Deciding on the organization of IS/IT Resources
2 key issues must be considered
Location of IS/IT decision rights
What decisions should be centralized and what aspects of IS/IT management should be devolved into the business and out of the IS function?
The organization needs to define authority, responsibilities, policies, coordinating mechanism and control procedures.
Sourcing of IS/IT resources
Internal or interorganizational resources
The interorganizational arrangement places new stresses, demanding additional coordination and vendor relationship management.

28. Trading-offs in the Organization and Resourcing of IS/IT

29. Cont…
Organizations engaging in outsourcing at some stage identify the need to realign, change and/or develop different parts of their IS/IT structures, competencies and skills to enable them to maintain the link b/w IS/IT and business prerequisites.
Increase the complexity in managing IS/IT

30. Aspects Required for Distributing IS/IT Decision Making
Content – the decision areas that are being managed (Table 8.4)
Authority – the individuals or groups that have the power actually to make decisions in the various areas
Responsibilities – the individuals or bodies responsible for day-to-day execution in decision areas. The definition of responsibility needs to be integral to each person’s job role and function
Coordination – the mechanism and processes for ensuring coherence across all decision areas (eg. Steering committees, management groups)

31. Cont…
Policies – statements of principles or actions defining acceptable behaviour. They provide a basis for consistent decision making and resource allocation.
Control – outlining the approached to policing decisions, ensuring conformance across the organization

32. IS/IT Policies
Restraining policies are seen as describing the rules of federation. They define the parameters within which decisions are made.
Enabling policies relate to the dissemination of best practice.

33. Enabling and Restraining Policies
Technical compatibility standards
Standards for buying equipment & services
Common systems mandate
Disaster recovery, security & quality policies
Group systems standards
Group job specifications
Any conformance to industry standards .
Enabling Policies
Making group-resourced services available to division
Negotiating volume discounts
Managing supplier relationships
Influencing behaviour through charge-out rules
Setting criteria for selecting common systems
Funding share assets .

34. Provisioning of IS/IT Resources
Insourcing – IS/IT resources are provided by a central IS function
Outsourcing – delegation, through a contractual arrangement, of all or part of the technical resources, the human resources and the management responsibilities associated with providing IT services, to an external vendor.

35. Outsourcing Rationales
Financial and economic reasons
Technical reasons
Business reasons

36. Classifying Sourcing Options
Purchasing style
Transaction style refers to one-time or short-term contracts with enough detail to be the original reference document
Relationship style refers to less detailed, often incentive-based contracts, centred around the expectation that the customer and vendor will do business for many years.
Purchasing focus
Resource option, organizations buy vendor resources such as HW, SW or expertise, but manage the use of the resources in-house.
Result option, vendors manage the delivery of the IT activities, using whatever resources are necessary, to provide the customer with specified results.

37. Classifying Sourcing Options

38. 4 Outsource Strategies
Contract out strategy - the vendor is responsible for delivering the results of IT activity.
Buy-in strategy – the organization buy in resources from the external market, often to meet a temporary requirement. Contracts often specify the skills required and cost, with the resources then managed in-house.
Preferred contract strategy – organizations contract long term with a vendor to reduce risk, with the vendor responsible for the management and delivery of an IT activity or service.
Preferred supplier strategy – this strategy takes buy-in approach further, with an organization seeking to develop a long-term close relationship with a vendor in order to access its resources for ongoing IT activities. The organization takes responsibility for managing these resources.

39. Vital Competencies for Maintaining In-House
The ability to track, assess and interpret changing IS/IT capability and relate them to organization need.
The ability to work with business management to define the IT requirements over time.
The ability to identify appropriate ways to use the market, specify and manage IS/IT sourcing.
The ability to monitor and manage contractual relations.

40. When to Outsource Position on the strategic grid Development portfolio
Organizational learning
A firm’s position in the market
Current IT organiztion

41. Position on the Strategic Grid

42. Development Portfolio
Maintenance or high-structured projects=> candidate for outsourcing
High-technology, highly structured work => strong candidate for outsourcing
Large, low-structured projects => difficult coordination problems for outsourcing

43. Organizational Learning
A firm’s organizational learning ability influences whether it can manage an outsourcing arrangement effectively.
Many firms’ development portfolios include a large number of projects aimed at process reengineering and organizational transformation.
The success of both types of projects depends on having the internal staff radically change the way it works.

44. A Firm’s Position in the Market
Firms that are far behind their peers often do not have the IT leadership, staff skills, or architecture to upgrade quickly to state-of-the-art technology.
Must go forward with contemporary practice and technology.
A firm whose IT capabilities have become obsolete, it is not worth dwelling on how the firm got where it is but vital to determine how it can extricate itself

45. Current IT Organization
The more IT activities are already segregated in organizational and accounting terms, the easier it is to negotiate an enduring outsourcing contract.
A stand-alone IT unit has already developed the fundamental integrating and control mechanisms necessary for an outsourcing contract

46. Who should Manage IS/IT and Where should IT Report
Pluses
Minuses
IT directors
Technical expertise
Accurate Systems
Sound technology
Systems integration
IT not aligned
Education omitted
Information overload
Technical solutions
Finance directors
Tight cost control
Department coordination
Training costs integrated
Strict authorization
Not always best value for money
Insufficient time to devote to IT
Opportunities missed
Short-term approach

47. Cont… Pluses Minuses Business-unit head
IT investments linked to the business direction
Locally-focused systems
Continuous development
Shorter reporting structure
Systems not coordinated
Incompatibility across BUs
Duplication of data
Unnecessary costs incurred
Board of directors
Strategic direction
Appreciation of broader impact of decisions
Major problems tackled
Funding allocated
Logistical details omitted
IS/IT underexploited
Infrastructure weak
Slow to exploit technology

48. Changing Role of the CIO
Application portfolio
Mainframe era
Transaction processing-automation for efficiency
Distributed era
Knowledge-worker support, interorganizational systems, ERP systems
Web-based and Internet era
Electronic commerce, knowledge management, virtual organizations, supply chain re-engineering

49. Cont… Senior business executive attitudes to IS/IT Mainframe era
IT for cost displacement and automation
Distributed era
Increased involvement in IT issues and governance
Polarization of attitudes: IT as strategic asset or cost to be minimized
Web-based and Internet era
IT, particularly the Internet, viewed as transformational
IT investments now more attractive in terms of costs and timescales
IS/IT now part of ongoing business conversation

50. Cont… Input to business Mainframe era Distributed era
Advisor on ‘How to do’, not ‘What to do’
Distributed era
Access to senior executives
Invited ‘seat at table’
Web-based and Internet era
Member of executive team having a ‘seat at the table’
Helps define ‘what to do’

51. Cont… Major tasks Mainframe era Distributed era
On-time delivery
Reliable IT operations
Distributed era
Manage IS function
Provide infrastructure
Manage vendors
Web-based and Internet era
Jointly develop business/IT model
Introduce management processes that leverage technologies, particularly the Internet

52. Cont… Role Mainframe era Distributed era Web-based and Internet era
Functional head
Operational manager
Deliver on promises
Distributed era
Strategic partner
Relationship builder
Technology advisor
Align IS/IT with business
Web-based and Internet era
Visionary
Technology opportunist
Drive and shape strategy

53. 5 Roles for the Success CIO
Leadership
Visionary
Relationship builder
Politician
Deliverer

54. Leadership: Characteristics
Broad business and organizational knowledge
Broad set of relationships in the firm and the industry
Excellent reputation and a strong track record in a broad set of activities
Keen mind and strong interpersonal skills
High integrity and personal values
High level of motivation

55. Leaders VS Managers

56. Profile of the CIO Behavior Motivation Competencies Experience
Is loyal to the organization
Is open in management style
Is perceived to have integrity
Motivation
Is goal oriented
Comfortable as a change agent
Creative and encourages ideas
Competencies
Is a consultant/facilitator
Good communicator
Has IT knowledge
Able to achieve results through others
Experience
Sound experience in an IS development role (especially in system analysis)

57. Coordinating Mechanisms for the Strategic Management of IS/IT
Steering group or committee
Reasons
Ensuring top management involvement in IS planning
Ensuring the fit b/w IS and business strategy
Improving communication with top and middle management
Changing user attitudes to IT

58. Causes of the Problems with Steering Committee
The wrong people involved
The activities of the steering committee and the decisions taken have to be integrated with the overall strategy processed in the business.
The committee has no infrastructure to support it and carry out its actions which become the strategy.

59. Steering Organization for IS/IT Strategic Management

60. Responsibilities: Executive Steering Group
Interpreting business strategy and agreeing overall IS/IT policies
Establishing priorities, agreeing resource and expense levels, authorizing major investments
Ensuring that strategic applications achieve their objectives
Establishing the appropriate organizational responsibilities and relationships

61. Responsibilities: Business IS Strategy Groups
Identifying business needs, interpreting CSFs, assessing opportunities and threats and IS implications in that business area
Prioritizing, planning and coordinating IS activities and expenditure in the area and ensuring planned benefits are delivered
Ensuring appropriate user resources are allocated to projects and appoint application managers

62. Responsibilities: IT Strategy Group
Interpreting IT trends and developments in the context of the organization’s business
Ensuring resources are deployed to meet business priorities
Developing IT resources and services in line with business IS plans and monitoring the performance of those resources
Managing the supply of technology and specialist bought-in services
Ensuring technical risks are minimized

63. Responsibilities: Application Management Groups
Identifying and specifying the needs, benefits, business resources and costs of applications to enable management to evaluate investments and set priorities
Managing developments and ongoing use of systems to ensure benefits are maximized
Ensuring business changes necessary to get the benefits carried out
Ensuring that user resources are made available as needed and used effectively on projects

64. Responsibilities: Service Management Groups
Translating business needs into technical requirements and resource implications
Selecting the optimum means of meeting the business needs
Monitoring performance against budgets/service levels agreed with the business
Ensuring technical solutions are tested and quality assured to avoid application failure
Planning the development of services and resources to meet evolving demands

65. Responsibilities: Technology Management Groups
Understanding technology development, formulating options and communicating the implications
Assessing the capabilities of the technologies against known and potential needs
Planning and managing infrastructure developments and migrations to minimize the risk to business applications
Resolving technical issues/problems with suppliers and ensuring service groups are effectively supported

66. Managing the IS Function
3 enduring challenges in the exploitation of IT
The challenge of business and IS/IT vision is to address the need for two-way alignment b/w business and technology
The challenge of delivery of IS services at low cost and high quality is being transformed by the evolving, vibrant service market
The challenge of IT design architecture – the choice of technical platform on which to mount IS services

67. Core IS Competencies IS/IT leadership
Integrating IS/IT effort with business purpose and activity
Business system thinking
Envisioning the business process that technology makes possible
Relationship building
Getting the business constructively engaged in IS/IT issues
Architecture planning
Creating a coherent blueprint for a technical platform that responds to current and future business
Making technology work
Rapidly achieving technical progress by one means or another

68. Cont..
Informed buying
Managing the IS/IT sourcing strategy that meets the interests of the business
Contract facilitation
Ensuring the success of existing contracts for IS/IT services
Contract monitoring
Protecting the business’s contractual position, current and future
Vendor development
Identifying the potential added value of IS/IT service suppliers

69. Other Framework for IS Competencies

70. Cont…
Strategy: the ability to identify and evaluate the implications of IT- based opportunities as an integral part of business strategy formulation and define the role of IS/IT in the organization.
Define the IS contribution: the ability to translate the business strategy into processes, information and system investments and change plans that match the business priority- IS strategy
Define the IT capability: the ability to translate the business strategy into long-term information architecture, technology infrastructure and resourcing plans that enable the implementation of the strategy- IT strategy

71. Cont…
Exploitation: the ability to maximize the benefits realized from the implementation of IS/IT investments through effective use of information, applications and IT services.
Deliver solutions: the ability to deploy resources to develop, implement and operate IS/IT business solutions that exploit the capabilities of the technology.
Supply: the ability to create and maintain an appropriate and adaptable information, technology and application supply chain and resource capacity.

72. Cont… Strategy Business strategy Technology innovation
Investment criteria
Information governance
Define the IS contribution
Prioritization
IS strategy alignment
Business process design
Business performance improvement
Systems and process innovation
Define the IT capability
Infrastructure development
Technology analysis
Sourcing strategy
Exploitation
Benefit planning
Benefit delivery
Managing change
Deliver solutions
Applications development
Service management
Information asset management
Implementation management
Apply technology
Business continuity and security
Supply
Supplier relationships
Technology standards
Technology acquisition
Asset and cost management
IS/IT staff development

73. Mapping Location of Resources against IS Components

74. IS Competencies

75. Hygiene Factors for Keeping Key Staff
Training new recruits from school or university, which is expensive
Recruiting experienced staff from other organizations, which can be risky
Training existing non-IS people, especially in application skill in user areas, which may require the development of new job roles
Using external resources, either on a short-term basis to overcome peak loads, or long-term to provide the organization with particular skills

76. Use of Resources

77. Keen’s 4 Major Role Categories
Business services – requiring strong business, organizational and planning skills
Business support – business and organizational as well as some technical skills
Development support – strong technical and good business skills
Technical services - strong technical skills

78. Managing Relationships: 3 Key Relationships (Venkatraman & Loh)
With outside IT suppliers, who will inevitably do increasingly more of the work through outsourcing arrangement.
With the business managers and system users, to enable the business to identify and realize the benefits from the applications investments and to obtain maximum value from the services provided.
With IT specialists in other companies, especially trading partners

79. Internal Organizational Relationships
Organizations contain subcultures often associated with functional specialism or geographical location.
These subculture can be dyfunctional.
IT as a functional specialism has introduced new subculture and one that is often difficult to reconcile with the dominant culture in the organization.=> culture gap
This implies that the viability of the IS strategy will depend on the extent to which it is derived from the ‘shared values’ of those who have to implement the strategy.

80. 6 Staged Model Regarding Shared Value
Stage 1 Adhocracy
Very few shared values since the focus of IT is internal and they are unable or unwilling to seek a coherent relationship with the business. They relate more closely to IT supplier
Stage 2 ‘Starting the foundations’
The ‘priesthood’ of IT begins to develop and IT staff perhaps cultivate a unique culture based on technology worship – often seriously at odds with the business
Stage 3 ‘Centralized dictatorship’
When IT management often reacts to business managers’ concern over ‘excessive spending’ on IT and views of poor delivery performance by becoming defensive and exerting control over what it does to redress the balance

81. Cont… Stage 4 ‘Democratic dialectic and cooperation’
IT specialists recognize the need to work in cooperation with business managers toward achieving business goals, but still expect the business to cooperate with IT’s set of values
Stage 5 ‘Entrepreneurial opportunity’
Recognition in the business that IT can deliver new, potentially strategic, benefits through innovative use often leaves the IT department looking after the legacy and struggling to provide any value to the newly ‘liberated’ users
Stage 6 ‘Integrated harmonious relationship’
Rarely achieved, due to the difficulties in reconciling differing values, overcoming historical precedents and prejudice, and requiring a new openness in all aspects of IT activity

82. Bridging the Gap

83. Models for Improving the Relationship b/w IS Function & the Business
Earl and Sampler
Recognize disequilibrium
Emphasize supply management
Emphasizing demand management
Maintain equilibrium
Peppard
Get the basics right
Enlist key influencers
Build credibility
Seek involvement early in project
Place responsibility for IS with business
Cultivate and maintain partnership

84. Earl and Sampler: Recognize Disequilibrium
The organization articulates, explores and analyses the crisis or loss of confidence in IT in general and IS function in particular.
Symptoms and prescription
Business needs not satisfied
Technological problems
Management assessment
Start of new regime

85. Earl and Sampler: Emphasize Supply Management
The organization seeks radical performance improvement of the supply side by setting delivery goals and beginning to rebuild the technology platform.
Prescriptions
Setting ambitious performance targets
Beginning to rebuild technical platform
Seeking early, visible results
Setting application priorities

86. Earl and Sampler: Emphasizing Demand Management
Emphasizes demand management, shifting the focus from supply to demand.
The concern is with building IT capabilities and creating future value.
Prescriptions
Work out the vision
Define demand management processes
Define value propositions
Plan the infrastructure

87. Earl and Sampler: Maintain Equilibrium
The organization completes the transformation process by implementing final radical changes in both demand and supply sides.
If business or technological discontinuities occur and the company does not deal with them, it can initiate a new transformation process by returning to Stage 1.
Prescriptions
Recognizing that it is a continuous journey
Rethinking governance
Reskilling IT personnel
Creating a partnership with business and vendor

88. Peppard’s Model Get the basics right Enlist key influencers
IT leadership
Get business focused
Focus on internal quality of IT organization
Examine internal structures and processes
Define value-added aspect of IS/IT
Get buy-in and commitment from all IS staff
Enlist key influencers
Get key influencers on board
Agree role of the IT organization
Listen to the business
Define key priority areas
Establish relationship roles within IT organization
Establish service level agreements
Open communication channels

89. Cont… Build credibility Seek involvement early in project
Build a dialogue with business
Address values and beliefs of business management
Demonstrate business value
Initiate education program to address ‘mindset’ blockages
Initiate internal marketing programme
Seek involvement early in project
Focus on benefits delivery
Ensure IT involvement early in business projects and visa-versa

90. Cont… Place responsibility for IS with business
Move responsibility for IS demand out into the business
Reframe IS/IT governance structure
Create IT/business processes
Define informational roles
Cultivate and maintain partnership
Emphasis continual communication
Revisit previous stages

91. Managing Relationships with Vendors
4 critical areas that require close attention
The CIO function
Performance measurement
Mix and coordination of tasks
Customer-vendor interface

92. The CIO Function Partnership/contract management Architecture planning
An informed CIO who monitors performance against the contract and plans for and deals with issues that arise helps an outsourcing alliance adapt to change.
Architecture planning
A CIO’s staff must visualize and coordinate a long-term approach to networks, HW and SW standards and database architectures
Emerging technologies
A company must develop a clear grasp of emerging technologies and their potential applications
Assessing technology alternatives cannot be delegated to a third party
Continuous learn
A firm should create an internal IT learning environment to bring users up to speed so that they are comfortable in a climate of continuous change

93. Performance Measurement
Companies must develop performance standards, measure results.
Most important measures of success are intangible and play out a long period of time

94. Mix and Coordination of Tasks
If not carefully managed, both the contracts and the different geographic locations of the outsourcing vendor’s development staff may inhibit discussion and lead to additional cost

95. Customer- Vendor Interface
The interfaces b/w customer and the vendor are very complex and usually must occur at multiple levels.
The senior levels, there must be links to deal with major issues of policy and relationship restructuring
The lower levels, there must be mechanisms for identifying and handling more operational and tactical issues.
CEO level- policy discussion
Both side need regular full-time relationship managers and coordinating groups lower in the organization to deal with operational issues and potential difficulties