ch13.ed

Chapter 13IT Strategy and PlanningInformation Technology for ManagementImproving Performance in the Digital Economy7th editionJohn Wiley & Sons, Inc.Slides contributed by Dr. Sandra ReidChair, Graduate School of Business & Professor, TechnologyDallas Baptist University : 

Chapter 13IT Strategy and PlanningInformation Technology for ManagementImproving Performance in the Digital Economy7th editionJohn Wiley & Sons, Inc.Slides contributed by Dr. Sandra ReidChair, Graduate School of Business & Professor, TechnologyDallas Baptist University Turban and Volonino 13-1 Copyright 2010 John Wiley & Sons, Inc.

Chapter Outline : 

Chapter Outline 13.1 Alignment of Business and IT Strategies 13.2 IT Strategy Initiation 13.3 IT Strategic Planning 13.4 Outsourcing, Offshoring and IT as a Subsidiary 13.5 Managerial Issues 13-2 Copyright 2010 John Wiley & Sons, Inc.

Learning Objectives : 

Learning Objectives Explain the importance of aligning the business strategy and IT strategy and how this alignment is achieved. Recognize the challenges to IT-business alignment and how to address them. Recognize why IT plays a critical strategic role within organizations. Explain how IT is providing value to businesses. 13-3 Copyright 2010 John Wiley & Sons, Inc.

Learning Objectives – cont’d : 

Learning Objectives – cont’d 5. Describe IT strategic planning within organizations. Understand the major reasons for outsourcing. Understand how to manage outsourcing and offshoring opportunities. Copyright 2010 John Wiley & Sons, Inc. 13-4

Slide 5: 

Copyright 2010 John Wiley & Sons, Inc. 13-5 Figure IT7eU

Slide 6: 

Copyright 2010 John Wiley & Sons, Inc. 13-6 13.1 Alignment of Business and IT Strategies

Business & IT Strategies – Survey DataCommunication is key success factor, strategic necessity : 

Business & IT Strategies – Survey DataCommunication is key success factor, strategic necessity 87% surveyed believe IT is critical to their companies’ strategic success. Few work with IT to achieve strategic success. 33% of leaders reported that IT is very involved. 30% reported business executive responsible for strategy works closely with IT division. Alignment improves revenue. Copyright 2010 John Wiley & Sons, Inc. 13-7

Figure 13.1 : 

Figure 13.1 Copyright 2010 John Wiley & Sons, Inc. 13-8 The relationship among business, IS, and IT-strategies. (Source: Ward and Peppard, 2002.)

IT & Business Alignment : 

IT & Business Alignment IT must align function’s strategy, structure, technology & processes with those of the business units toward common goals. IT must align strategy with organizational strategy. IT strategic alignment goal to ensure that IT priorities, decisions & projects are consistent with overall business needs. Shared ownership & shared governance structure that crosses organizational lines & makes executives responsible for success of key IT initiatives. Copyright 2010 John Wiley & Sons, Inc. 13-9 Click link for an article with more: How to Develop a Shared Vision: The Key to IS Strategic Alignment

Table 13.1 : 

Table 13.1 Copyright 2010 John Wiley & Sons, Inc. 13-10

Activities Central to AlignmentIT personnel must be business-savvy. They must demonstrate their business expertise with their involvement. : 

Activities Central to AlignmentIT personnel must be business-savvy. They must demonstrate their business expertise with their involvement. Understanding IT & corporate planning. CIO is member of senior management. Shared culture & good communication. Deep commitment to IT planning by senior management. Shared plan goals. Deep end-user involvement. Joint architecture/portfolio selection. Identity of plan factors. Copyright 2010 John Wiley & Sons, Inc. 13-11

Challenges in Achieving IT-Business Alignment : 

Challenges in Achieving IT-Business Alignment Promoting collaboration between IT & organizational business units. Persuading senior management about importance of IT to business. Contributing to strategic planning & business growth initiatives. Identifying opportunities for business process automation & improvement. Improving internal & external user experience & satisfaction. Copyright 2010 John Wiley & Sons, Inc. 13-12 Top Business Issues Facing CIOs & IT Directors for what industry leaders forecast….

Strong CIO Characteristics : 

Strong CIO Characteristics Political savvy. Influence leadership & power. Relationship management. Resourceful. Strategic planner. Does what it takes. Leads employees effectively. Copyright 2010 John Wiley & Sons, Inc. 13-13

Table 13.2 : 

Table 13.2 Copyright 2010 John Wiley & Sons, Inc. 13-14

Slide 15: 

Copyright 2010 John Wiley & Sons, Inc. 13-15 13.2 IT Strategy Initiation

Critical Strategic Role of IT : 

Critical Strategic Role of IT Global economy is defined by innovate use of IT. Companies must determine use, value & impact of IT to identify opportunities & create value which supports overall strategic vision. CIO is key mover in upper management. Copyright 2010 John Wiley & Sons, Inc. 13-16

Value Add by IT : 

Value Add by IT Direct – by reducing cost through efficiencies. Indirect – increased revenue through improved productivity and/or reduction in employees. Enabling temporary or sustained competitive advantage. Copyright 2010 John Wiley & Sons, Inc. 13-17

Competitive Advantage Thru IT : 

Competitive Advantage Thru IT Gained by providing real or perceived value to customers. Resources must be considered valuable by customers. Resources must be considered as rare. Resources must be appropriable. Copyright 2010 John Wiley & Sons, Inc. 13-18

Table 13.3 : 

Table 13.3 Copyright 2010 John Wiley & Sons, Inc. 13-19

Sustained Competitive Advantage : 

Sustained Competitive Advantage Imitability – can another firm copy the resource? Mobility – easily acquired resource? Substitutability – is an acceptable alternative available? Is there ever a real “sustained” competitive advantage? No, it’s always just a matter of time before advantage is eroded, or lost. Copyright 2010 John Wiley & Sons, Inc. 13-20

Table 13.4 : 

Table 13.4 Copyright 2010 John Wiley & Sons, Inc. 13-21

Table 13.5 : 

Table 13.5 Copyright 2010 John Wiley & Sons, Inc. 13-22

Figure 13.2 - How CIOs spend their time. (Source: Luftman, 2007.) : 

Figure 13.2 - How CIOs spend their time. (Source: Luftman, 2007.) Copyright 2010 John Wiley & Sons, Inc. 13-23 It is NO surprise that 36% of the CIO time is spent on relationships/ 24% on operations & strategy.

Slide 24: 

Copyright 2010 John Wiley & Sons, Inc. 13-24 13.3 IT Strategic Planning

Good IT Planning Processes : 

Good IT Planning Processes Yearly, quarterly, monthly. Planning is continual, not one-time. May result in formal IT strategy, or annual reevaluation. Organizational planning of IT resources done throughout the organization. End-users must understand. Adopt best practices such as listen from both up & below the CIO level Copyright 2010 John Wiley & Sons, Inc. 13-25 Mistakes: Strategic Planning Don'ts (and Dos)

Steering Committees : 

Steering Committees Direction setting Rationing Structuring Staffing Communicating Evaluating Governing Copyright 2010 John Wiley & Sons, Inc. 13-26

Figure 13.3 - Effective strategy is no accident. It must be planned, implemented, evaluated, adjusted, etc. : 

Figure 13.3 - Effective strategy is no accident. It must be planned, implemented, evaluated, adjusted, etc. Copyright 2010 John Wiley & Sons, Inc. 13-27 IT strategic planning process. (Source: Drawn by J. Sipior.)

Business Service Management : 

Business Service Management Approach for linking KPIs of IT to business goals to determine impact on business. KPIs measure actual performance of critical aspects of IT such as projects, servers, networks against predefined goals such as growing revenue, lowering costs, reducing risk. KPIs measure real-time performance or predict future results. Proactive vs. reactive. KPIs measures results of past activity. Copyright 2010 John Wiley & Sons, Inc. 13-28

Figure 13.4 : 

Figure 13.4 Copyright 2010 John Wiley & Sons, Inc. 13-29 Business service management (from FireScope). (Source: firescope.com/solutions/businessservicemanagement/FireScope delivers a single view into the business impact of IT operations by aggregating all IT technology and business metrics into realtime dashboards, customizable for the needs of each member of IT. Used with permission.)

Figure 13.5 - from the architecture, planners can define organizational databases & identify applications that support business strategies. : 

Figure 13.5 - from the architecture, planners can define organizational databases & identify applications that support business strategies. Copyright 2010 John Wiley & Sons, Inc. 13-30 Business systems planning (BSP) approach.

Table 13.6 - If critical success factors are not met, it is necessary to build appropriate applications. The critical success factor approach encourages managers to identify what is important to their performance & then develop good indicators of performance in those areas. : 

Table 13.6 - If critical success factors are not met, it is necessary to build appropriate applications. The critical success factor approach encourages managers to identify what is important to their performance & then develop good indicators of performance in those areas. Copyright 2010 John Wiley & Sons, Inc. 13-31

Critical Success Factors : 

Critical Success Factors What objectives are central to organization? Critical factors to meeting objectives? What decisions or actions are key? What variables underlie decisions & how are they measured? What information systems can supply measures? Copyright 2010 John Wiley & Sons, Inc. 13-32

Figure 13.6 - Drilling down the balanced scorecard so that it is really a tool for improving performance : 

Figure 13.6 - Drilling down the balanced scorecard so that it is really a tool for improving performance Copyright 2010 John Wiley & Sons, Inc. 13-33 Critical success factors-basic processes.

Scenario Planning : 

Scenario Planning Ensure not focusing on catastrophe to exclusion of opportunity. Allocate resources more prudently. Preserve options. Ensure not still “fighting the last war.” Give opportunity to rehearse testing & training of people to go through process. Copyright 2010 John Wiley & Sons, Inc. 13-34

Table 13.7 - Scenario planning is critical to minimize risk of the unexpected. : 

Table 13.7 - Scenario planning is critical to minimize risk of the unexpected. Copyright 2010 John Wiley & Sons, Inc. 13-35

Resource Allocation : 

Resource Allocation Consists of developing plans for hardware, software, data communications & networks, facilities, personnel, financial resources need to execute master plan. May be contentious process due to limited resources. Copyright 2010 John Wiley & Sons, Inc. 13-36

Slide 37: 

Copyright 2010 John Wiley & Sons, Inc. 13-37 13.4 Outsourcing, Offshoring, and IT as a Subsidiary

Reasons To Outsource : 

Reasons To Outsource Desire to focus on core competency. Cost reduction. Improve quality. Increase speed to market. Faster innovation. Copyright 2010 John Wiley & Sons, Inc. 13-38

Table 13.8 : 

Table 13.8 Copyright 2010 John Wiley & Sons, Inc. 13-39 Discuss potential ethical dilemmas associated with outsourcing

Risks Associated with Outsourcing : 

Risks Associated with Outsourcing Shirking – vendor deliberately underperforms while claiming full payment. Poaching – vendor develops a strategic application for a client & then uses it for others. Opportunistic repricing – client enters into long-term contract & then vendor changes financial terms or overcharges for unanticipated enhancements & contract extensions. Copyright 2010 John Wiley & Sons, Inc. 13-40

Hidden Costs of Outsourcing : 

Hidden Costs of Outsourcing Benchmarking & analysis Investigating & contracting with a vendor Transmitting work & knowledge to outsourcer Ongoing staffing & management of outsourcing relationship Transitioning back to in-house Copyright 2010 John Wiley & Sons, Inc. 13-41 The text states that after all is considered, the benefits of outsourcing may be small. Do students think the trend will move back internal to the organization? What about on-shore sourcing rather than off-shore? How might some of these strategies be implemented? Strong employee involvement; trust is key.

Strategies for Risk Management in Outsourcing : 

Strategies for Risk Management in Outsourcing Understand project Divide & conquer Align incentives Write short-period contracts Control subcontracting Do selective outsourcing Copyright 2010 John Wiley & Sons, Inc. 13-42 Top 10 Risks of Offshore Outsourcing

Evaluating Outsourcing : 

Evaluating Outsourcing How well is business value delivered? Balanced scorecard is useful tool to measure value of outsourcing relationship. Multi-vendor approach should include measures for each. Copyright 2010 John Wiley & Sons, Inc. 13-43 The hidden risk in outsourcing overseas

Slide 44: 

Copyright 2010 John Wiley & Sons, Inc. 13-44 13.5 Managerial Issues

Leaders Must… : 

Leaders Must… Align IT strategy & business strategy Organize for effective planning Initiate IT strategy Undertake IT strategic planning process Deal with outsourcing & offshoring Copyright 2010 John Wiley & Sons, Inc. 13-45