Enterprise and Global Management of Information

Technology

Chapter

14

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

• 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

Learning Objectives

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Learning Objectives

• Identify several cultural, political, and geo-economic challenges that confront managers in the management of global information technologies

• Explain the effect on global business/IT strategy of the trend toward a transnational business strategy by international business organizations

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Learning Objectives

• 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

• 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: Toyota, Procter & Gamble, Hess Corporation, and Others

• Today, the role of a CIO has become very strategic. Tomorrow’s CIOs will be even more involved in strategic thinking and influential in an organization.

• The skills needed to be a CIO has changed as their role has shifted from being a technologist to business strategist.

• Developing and mentoring their successors is one of the key responsibilities of IT leaders in an environment that includes the changing role of the CIO and a shortage of qualified managers.

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Case Study Questions

1. Several comments in the case note that CIOs are in a unique position for companywide leadership, extending beyond their primary technological concerns. Why do you think this is the case? How are CIOs different in this regard from other chief officers, for example, in finance, HR, or marketing?

2. After reading the case, what do you think are the most important competencies for the successful CIO of tomorrow? How do you rate yourself in those? Had you considered the importance of these skills and abilities before?

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Case Study Questions

3. How can CIOs prepare their successors for an uncertain future that will most likely require skills different from those possessed by the successful CIOs of today? Which key competencies are enduring, and which ones are a function of the current technological environment? How can CIOs prepare for the latter?

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Components of IT Management

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Managing Information Technology

• 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– Information systems development

• Managing the IT organization and infrastructure– Hardware, software, databases, networks, and other

resources

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Managing the IT Function

• 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

• 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

• Application development management involves

– Systems analysis and design

– Prototyping

– Applications programming

– Project management

– Quality assurance

– System maintenance14-14

Managing IS Operations

• 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

• 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

• 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

• 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

• 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

• E-commerce architect• Technical team leader• Practice manager• Systems analyst

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Technology Management

• 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

• 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

• 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?

• 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

• 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

• 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

• 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

• 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: Reinsurance Group of America and Fronterrra

• Consistency across the different business functions, countries, languages and processes involved in worldwide implementations is one of the most important challenges faced by global organizations today.

• Reinsurance Group of America faced with a challenge in developing a single system that manages reinsurance business processes for numerous offices around the world—offices whose staffs speak different languages, are in different time zones, and just might be stuck in their ways as to how they manage their business.

• The result of developing this system resulted in a return on investment of 15% which was better than expected.

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Case Study Questions

1. What is the business value of these global system developments for the companies mentioned in the case? How did they achieve these benefits? What were the major obstacles they had to overcome?

2. What are the advantages and disadvantages of a fullblown versus a phased approach for system implementations in general, and global ones in particular? How do you make the decision on which road to take?

3. How important is that all units in global organization speak the same business language, and use the same functions and business processes? How do you balance the competing needs for flexibility and consistency across operations?

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Global IT Management Dimensions

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Global IT Management Challenges

• 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

• 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

• 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

• 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

• 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

• 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

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Global IT Platforms

• 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

• 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

• 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 country-specific domain?

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Key Questions for Global Websites

• 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

• 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

• 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

• 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

• 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

• 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

• 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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Internet-Enabled IT Development

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Case 3: General Motors: Factory IT Faces Its Biggest Test Yet

• Today companies need manufacturing capability that can respond quickly to changing tastes of the consumers.

• GM is looking at how it can make changes on the production lines at its plants more deftly to react to shifting consumer tastes.

• In 2006 and 2007, the number of vehicles on which production ceased because of IT related problems decreased about 50% over 2005. So far in 2008, the number of vehicles it has had to stop production on because of IT related issues is less than 5% of the vehicles.

• IT plays a big part in enabling GM’s responses to market demand.

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Case Study Questions

1. What are some of the major business benefits of the type of technology rollout implemented by GM, e.g. product routing and order management systems? What other benefits may accrue to the company, beyond those directly related to improved manufacturing efficiency? Provide several examples from both categories.

2. One of the hallmarks of GM’s rollout is the creation of four command centers distributed throughout the world. While local plants are the first line of defense, more important issues are handled at these command centers. What are some advantages and disadvantages of this structure? Provide several examples of each and your justification for inclusion in your list.

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Case Study Questions

3. While commonality and standardization help GM improve its efficiency and reduce costs, they may have the downside of hindering innovation in the different plants. Reread the statements by Kirk Gutmann to this effect. Do you believe he means innovation is not important? How could GM strike a balance between these two seemingly conflicting objectives? Provide a recommendation and rationale for your proposed course of action.

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Case 4: IBM Corporation

• 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

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Case 4: IBM Corporation

• 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

1. 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?

2. 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?

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Case Study Questions

3. 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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