Chap14

Chapter 14 Enterprise and
Global Management of
Information Technology
James A. O'Brien, and George Marakas.
Management Information Systems with MISource
2007, 8th ed. Boston, MA: McGraw-Hill, Inc.,
2007. ISBN: 13 9780073323091
Learning Objectives
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Identify each of the three components of
information technology management
 Use examples to illustrate how they might be
implemented in a business
Explain how failures in IT management can be
reduced by the involvement of business
managers in IT planning and management
Identify several cultural, political, and geoeconomic challenges that confront managers in
the management of global IT
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Learning Objectives
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Explain the effect on global business/IT strategy
of the trend toward a transnational business
strategy by international business organizations
Identify several considerations that affect the
choice of IT applications, IT platforms, data
access policies, and systems development
methods by a global business enterprise
Understand the fundamental concepts of
outsourcing and offshoring, as well as the
primary reasons for selecting such an approach
to IS/IT management
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Business and IT
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As the 21st century unfolds, many companies
are transforming themselves into global
powerhouses via major investments in
 Global e-business
 E-commerce
 Other IT initiatives
There is a need for business managers and
professionals to understand how to manage this
vital organizational function
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Case 1 Alternative Governance
Models
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The management of IT falls into five major governance
decision areas: IT principles, IT architecture, IT
infrastructure, business application needs, and prioritization
and investment decisions
How companies organize their business and IT management
teams to make such decisions varies widely
UPS’s IT Governance
 An IT steering committee
 An IT governance committee
 A formal “charter” process: winnows down IT project
proposals to those best aligned with strategic objectives
 An escalation process to handle exceptions to
architecture standards
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Case 1 Alternative Governance
Models
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Manheim Interactive
 Like most high-growth start-ups, the company did not
tightly govern its IT architecture or infrastructure
 The focus on speed of IT delivery was unsustainable as
the online business matured
 IT governance has now transitioned to a blend of
centralized and decentralized arrangements
JPMorgan Chase
 Encourages autonomy to generate innovation and
recognize the very different requirements of its
businesses
 The company encourages the use of standardized
technologies where they can provide economies of scale
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Case 1 Alternative Governance
Models
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ING Direct
 The company is organized into nine country-based
businesses
 Each country operates autonomously, but the units
share a common business model
 Business solutions, IT technical components, and the
infrastructure as standardized
 A council comprised of CIOs and COOs
makes enterprisewide principles, architecture,
infrastructure, and investment decisions
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Case Study Questions
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Is there a need for different IT governance arrangements among
companies?
 Why or why not?
 Use UPS, JPMorgan Chase, and ING Direct as examples to
defend your answer
Should the IT governance of an e-commerce start-up like Manheim
Online differ from that used by its parent company, as Manheim
Auctions was in this case?
 Should the IT governance of an e-commerce venture change
over time, as occurred with Manheim Online?
The five major governance decision areas outlined in the case tell
us a lot about what is involved in the management of IT
 Which of the decision areas should primarily be the province of
the business management of the company?
 Which should primarily be the responsibility of IT management?
 Should all decisions be made jointly by both management
groups?
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Components of IT Management
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Managing Information Technology
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Managing the joint development and
implementation of business and IT strategies
 Use IT to support strategic business priorities
 Align IT with strategic business goals
Managing the development and implementation of
new business/IT applications and technologies
 IS development
Managing the IT organization and infrastructure
 Hardware, software, databases, networks, and
other resources
Comparing IT Management Approaches - See
Figure 14.3
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Managing the IT Function
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Three things happened in the past few years
 The Internet boom inspired businesses
to connect their networks
 Companies on on their intranets essential
applications without which their businesses
could not function
 It became apparent that maintaining PCs
on a network is very, very expensive
These things created an urgent need for
centralization
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Organizing IT
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Early Years
 Centralization of computing with large
mainframes
Next
 Downsizing and moving back to decentralization
Current
 Centralized control over the management of IT
while serving the strategic needs of business
units
 Hybrid of centralized and decentralized
components
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Avnet Marshall Organizational
Components
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Managing Application
Development
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Application development management involves
 Systems analysis and design
 Prototyping
 Applications programming
 Project management
 Quality assurance
 System maintenance
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Managing IS Operations
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IS operations management is concerned with
the use of hardware, software, network, and
personnel resources in data centers
Operational activities that must be managed
 Computer system operations
 Network management
 Production control
 Production support
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System Performance Monitors
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Software packages that
 Monitor the processing of computer jobs
 Help develop a planned schedule of computer
operations that can optimize computer system
performance
 Product detailed statistics that are invaluable
for effective planning and control of computing
capacity
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Features of System
Performance Monitors
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Chargeback Systems
 Allocates costs to users based on the
information service rendered
Process Control Capabilities
 Systems that not only monitor but
automatically control computer operations
at large data centers
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IT Staff Planning
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Recruiting, training and retaining qualified
IS personnel
Evaluating employee job performance and
rewarding outstanding performance with
salary increases and promotions
Setting salary and wage levels
Designing career paths
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IT Executives
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Chief Information Officer (CIO)
 Oversees all uses of information technology
in many companies, and brings them into
alignment with strategic business goals
Chief Technology Officer (CTO)
 In charge of all information technology
planning and deployment
 Manages the IT platform
 Second in command
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Other IT Positions
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E-commerce architect
Technical team leader
Practice manager
Systems analyst
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Technology Management
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All information technologies must be managed
as a technology platform for integrating business
applications
 Both internally or externally focused
 The Internet, intranets, electronic commerce
and collaboration technologies, CRM
software, enterprise resource planning, and
supply chain management
Often the primary responsibility of a chief
technology officer
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Managing User Services
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Business units that support and manage end
user and workgroup computing
 Can be done with information centers
staffed with user liaison specialists or with
Web-enabled intranet help desks
Key roles
 Troubleshooting problems
 Gathering and communicating information
 Coordinating educational efforts
 Helping with end user application
development
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Outsourcing
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The purchase of goods or services from
third-party partners that were previously
provided internally
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Outsourcing’s Top Ten
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Why Outsource?
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Save money – achieve greater ROI
Focus on core competencies – organizations
can focus on the business that they are in
Achieve flexible staffing levels
Gain access to global resources
Decrease time to market
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Offshoring
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Relocation of an organization’s business
processes to a lower cost location
 This location is typically overseas
 Can be either production or service
Growth of services offshoring is linked to
 Availability of large amounts of reliable
and affordable communication infrastructure
 Digitization of many services
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Failures in IT Management
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IT not used effectively
 Computerizing traditional business processes
instead of developing innovative e-business
processes
IT not used efficiently
 Poor response times
 Frequent downtimes
 Poorly managed application development
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Management Involvement &
Governance
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Managerial and end user involvement
 Key ingredient to high-quality information
system performance
Involve business managers in IT management
 Governance structures, such as steering
committees
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Sr. Management’s Involvement in IT
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The International Dimension
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Companies around the world are developing
new models to operate competitively in a digital
economy
 These models are structured, yet agile,
global, yet local
 They concentrate on maximizing the risk
adjusted return from both knowledge and
technology assets
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Case 2 Offshoring & Giving
Away Technology
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Only services can provide growth on the scale that IBM needs to make
shareholders happy
 To combat cheaper offshore companies, IBM is giving away
technology
In theory, giving away software, patents, and ideas will
 Help the entire industry grow faster
 Open new frontiers
 Create opportunities for IBM to sell high-value products and
services
To cut costs, IBM is also offshoring
 India accounts for the largest number of IBMers outside the United
States
By the end of next year, IBM Services head count in India will top
52,000
 More than one-fourth of all services personnel
 About one-sixth of IBMers worldwide
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Case Study Questions
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Do you agree with IBM’s employment response to
competition from software development contractors in
India like Wipro that are expanding into IT consulting
services?
Will IBM’s plan to give away some of its IT assets and
intellectual property and increase support of opensource
software products be a successful growth strategy in the
“brutally competitive marketplace” in which it operates?
Do you agree with IBM researchers’ assumption that IT
will remain “hard to use, expensive, and labor-intensive,
with customers continuing to need help solving business
problems” for along time to come?
 Should IBM bet its business on that assumption?
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Global IT Management
Dimensions
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Global IT Management Challenges
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Political challenges
 Many countries regulate or prohibit the
transfer of data across their national boundaries
 Others severely restrict, tax, or prohibit
imports of hardware and software
 Some have local content laws that specify the
portion of the value of a product that must be
added in that country if it is to be sold there
 Others require a business to spend part of the
revenue they earn in a country in that nation’s
economy
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Global IT Management Challenges
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Geoeconomic challenges
 Physical distances are still a major problem
 It may take too long to fly in specialists
 It is difficult to communicate in real time
across 24 time zones
 Many countries do not have good telephone
and telecommunications services
 It may be hard to find skilled local workers
 There can be great differences in the cost of
living and labor costs between countries
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Global IT Management Challenges
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Cultural challenges
 Languages
 Cultural interests
 Religions
 Customs
 Political philosophies
 Global IT managers need cultural training
before they are sent on assignment
 Different work styles and business
relationships
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Transnational Strategies
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Companies are moving toward a transnational
strategy
 Business depends heavily on information
systems and Internet technologies to help
integrate global business activities
 Requires an integrated and cooperative
worldwide IT platform
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Transnational Business/IT
Strategies
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Global Business Drivers
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Business requirements caused by the nature of
the industry and its competitive or environmental
forces
Examples of global drivers:
 Customers
 Products
 Operations
 Resources
 Collaboration
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Global IT Platforms
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Hardware Difficulties
 High prices
 High tariffs
 Import restrictions
 Long lead times for government approvals
 Lack of local service or spare parts
 Lack of documentation tailored to local conditions
Software Difficulties
 Packages developed in Europe may be incompatible
with American or Asian versions
 The software publisher may refuse to supply markets
that disregard software licensing and copyright
agreements
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International Data
Communications Issues
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The Internet as a Global IT Platform
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The Internet
 An interconnected matrix that reaches tens
of millions of users in over 100 countries
 Business environment is free of traditional
boundaries and limits
Without incurring massive cost outlays
for telecommunications, companies can
 Expand markets
 Reduce communications and distribution
costs
 Improve profit margins
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Key Questions for Global Websites
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Will you have to develop a new navigational logic to
accommodate cultural preferences?
What content will you translate, and what content will you
create from scratch to address regional competitors or
products that differ from those in the U.S.?
Should your multilingual effort be an adjunct to your main site,
or will you make it a separate site, perhaps with a countryspecific domain?
What kinds of traditional and new media advertising will you
have to do in each country to draw traffic to your site?
Will your site get so many hits that you’ll need to set up a
server in a local country?
What are the legal ramifications of having your website
targeted at a particular country, such as laws on competitive
behavior, treatment of children, or privacy?
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Internet Users by World Region
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Global Data Access Issues
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Transborder Data Flows may be viewed as
violating
 A nation’s sovereignty because it avoids
customs duties and regulations
 Laws protecting the local IT industry
from competition
 Laws protecting local jobs
 Privacy legislation
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U.S.-E.U. Data Privacy
Requirements
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Key data privacy provisions
 Notice of purpose and use of data collected
 Ability to opt out of third-party distribution
of data
 Access for consumers to their information
 Adequate security, data integrity, and
enforcement provisions
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Internet Access in Restrictive
Countries
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The struggle between Internet censorship and
openness at the national level revolves around
 Controlling the conduits
 Filtering the flows
 Punishing the purveyors
Most of the world has decided that restricting
Internet access is not a viable policy
 Restricting access also hurts a country’s
opportunities for economic growth and
prosperity
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Global Government Internet
Restrictions
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High Government Access Fees
 Kazakhstan, Kyrgyzstan
Government Monitored Access
 China, Iran, Saudi Arabia, Azerbaijan,
Ubekistan
Government Filtered Access
 Belarus, Cuba, Iraq, Tunisia, Sierra Leone,
Tajikistan, Turkmenistan, Vietnam
No Public Access Allowed
 Burma, Libya, North Korea
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Global Systems Development
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Key development issues
 Conflicts over local versus global system
requirements
 Trying to agree on common system features
 Disturbances caused by systems
implementation and maintenance activities
 Global standardization of data definitions
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Systems Development Strategies
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Key strategies for global systems development
 Transform an application used by the home
office or a subsidiary into a global application
 Set up a multinational development team
 Parallel development
 Centers of excellence
 Offshore development
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Case 3 Thinking & Acting Globally
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Globalization means different things to different people
 There’s no single method for how it operates
 Too often, strategic motivations for globalization aren’t matched
by operational approaches to meet enterprise needs
 Operating globally means striking a balance between central and
local control of operations
To ensure that IT-globalization decisions match the enterprises core
needs and approaches
 Determine the balance of global integration versus local
responsiveness
 Align IT’s major processes with the enterprise’s governance
orientation
 Assign staff, roles, and competencies appropriately
Other issues to consider
 The diversity of countries in which the company operates
 The IT maturity in these countries
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Case Study Questions
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What are some of the forces driving IT
organizations to globalize?
What are some of the local forces and
challenges facing modern IT organizations?
How does a CEO manage the requirement to
both globalize and localize the IT function?
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Case 4 The Hard Road to
Outsourcing
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Outsourcing IT work abroad can cut the cost of
IT by 39 percent
 It carries privacy risks
 It threatens U.S. jobs
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Case Study Questions
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The law does not provide for companies to
disclose to their customers that they have
outsourced or offshored access to their data
 Is this a potential problem for either the
company or the customer?
What is meant by the term “best-of-breed model?”
 Why has this approach worked for Boeing?
GE wants to outsource its entire ERP system
based, in part, on its successes with other
outsourcing projects
 Is it possible to outsource too much?
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