04/21/23 MS Ch. 1 1

Ibe250 IT Strategy

Strategy work – macro perspective System specification – micro

perspective Strategy:

What kind of problems do we have? How IT can solve these problems? Realistic plan for IT IT to support the organization

04/21/23 MS Ch. 1 2

Strategic IT-management

Goal: Employ IT to improve the competitiveness of the

company

Computer equipment (PC, servers...) is not enough!

Neither is software (Office, accounting…) These are only tools that we can use to get

where we want to be The major questions are therefore:

Where are we going? How can IT support us in getting there?

04/21/23 MS Ch. 1 3

Central themes

Globalization E-enablement Knowledge sharing and Knowledge

Management Automate (not in textbook)

04/21/23 MS Ch. 1 4

Globalization

Through IT, enterprises can work efficiently, over boundaries

In this respect, IT supports globalization

With IT one central office can support an unlimited number of branches (Rema, ARK, McDonald, Avis, SAS…)

04/21/23 MS Ch. 1 5

E-enablement

The Internet provides the infrastructure for doing e-business: Network Software Standards

04/21/23 MS Ch. 1 6

Knowledge Sharing & Mangement

Between people (sharing) From people to systems:

Processes Software Databases

The organizations knowledge must be maintained

04/21/23 MS Ch. 1 7

Automate functions

Reduce expensive manual work Improve efficiency Perform tasks that cannot be

performed manually Reduce lead times

04/21/23 MS Ch. 1 8

Atoms to bits

Percent employed

04/21/23 MS Ch. 1 9

Employment in the future Safe:

Health care Education Service

Not so safe: Industrial jobs Service functions that can be

automated (bank, travel agency, toll both collectors…)

Interesting question

Until now technology have resulted in layoffs in one sector while creating new jobs in others

Is this the case today, or are we looking at permanent unemployment?

04/21/23 MS Ch. 1 11

Remove (some) intermediates

Case: Working a cash register in a grocery Can be automated But require a higher level of formalization Need experienced customers (and honest)

Require: Either prepackaging of everything, or letting

the customer identify items not packaged (e.g., fruit)

Can be effective for large supermarkets Difficult to remove all persons

04/21/23 MS Ch. 1 12

OECD (some years ago) OECD: Norway will get a lower

development rate than other countries OECD: Because we are not good

enough to employ IT But, we have PC’s everywhere, some of

the best telecom systems in the world…

Or….

04/21/23 MS Ch. 1 13

Our experience Many companies do not have a clear idea of

where they are They have no clear idea of where they are

going They use IT for simple functions Only off-the-shelf products Use IT to make their business more effective,

but uses a lot of money on IT Complex processes are often manual – with

little or no IT support Do not have the knowledge of how they can

use IT strategically

04/21/23 MS Ch. 1 14

Course contents

Management Organizations Social relationships Business ideas Information Technology

04/21/23 MS Ch. 1 15

IT center

The change in tasks for the IT center be used to illustrate the development of IT over the last 50 years

04/21/23 MS Ch. 1 16

The development of the IT center Phases (hardware):

Centralized: Operating a mainframe Then decentralized: Mini computers, private

networks, equipment in the user environments

The users get their own computer - PC development.

More and more happens locally Connection: client-server, local area

networks (LAN), and then the Internet More automation, more centralization…?

Cloud computing Organizations may put the IT center in

the cloud Buying computer resources from others Inexpensive, resources when needed Needs “terminals” and network Risks: confidentiality, what if the cloud

center terminates Regulations: Privacy, tax authorities and

others may demand to know where data is stored

04/21/23 MS Ch. 1 18

Software Phases:

All software from mainframe manufacturer (operating system, file system, development systems, applications). Proprietary development.

Software from many vendors. Proprietary development still important, but more systems available in the market. Decentralization.

Abundance of ”Off-the-shelf” products (Office package o.l.).

Parameterization of large systems (SAP, Baan). Less proprietary development. Software architecture.

Centralization. Software in the cloud Is proprietary development passé?

04/21/23 MS Ch. 1 19

The organization’s external environment Quality, from the removal of exceptions

to custom orientation The customer gets IT Deregulation Crossing of industrial barriers Globalization Shorter development and life

expectancy for products

04/21/23 MS Ch. 1 20

The organization’s internal environment Team Work everywhere, at any time Outsourcing, strategic alliances Flatter organizations, reduced

hierarchy People as a resource, learning, building

competence, focus on knowledge This is theory, practice may be

different!

04/21/23 MS Ch. 1 21

”Mission” for Information systems From: automating stand-alone functions

(accounting, stock keeping, salary, invoice handling…)

Through: Correct information at the correct time

To: Use IT to improve the competitiveness of the organization

Textbook definition: ”To improve the performance of people in

organizations through the use of information technology”

04/21/23 MS Ch. 1 22

Different models of Technology use

04/21/23 MS Ch. 1 23

Model for IS (Inf. Systems):

Technologies Users A model for delivery (for

development, delivery and installation of IS)

Management of IS/IT

04/21/23 MS Ch. 1 24

Technologies Powerful PCs Cheap memory components and

processors Powerful server Internet Physical networks (fiber, wireless) Multimedia Integration (electrical products, IT) Cloud computing

04/21/23 MS Ch. 1 25

Users

More experienced Interactive systems,

”empowerment of users” Procedure oriented tasks Goal based tasks

04/21/23 MS Ch. 1 26

System development and delivery

Hardware at the bottom level On the top, the goal of the organization

and user requirements The task of the software is to map from

the one to the other We shall distinguish between systems

for procedure oriented activities and systems for goal based information work.

04/21/23 MS Ch. 1 27

Automation vs. support functions

04/21/23 MS Ch. 1 28

Framework for IS management(and for the textbook)

04/21/23 MS Ch. 1 29

Case: MeadWestvaco Corporation Produces paper (as Norske Skog),

chemicals, consumer and office products in United States and Canada

1960: Centralized IT function 1967: Decentralization of IT (the

divisions established their own IT centers)

Centralized organization in six groups.

04/21/23 MS Ch. 1 30

Mead: Pre 1980 organization

04/21/23 MS Ch. 1 31

Mead: Focus on end users (1980)

Decision Support Applications (DSA) organized user support for the whole organization (choice of system, installation, user support)

Information Services had the responsibility for traditional IT functions (network, database, development of a company wide system, etc.)

Information Resources Planning and Control had responsibility for planning future systems, the next technology, etc.

04/21/23 MS Ch. 1 32

Mead: Organization (1980)

04/21/23 MS Ch. 1 33

Mead: Leverage the IT infrastructure (1990)

Decentralization: Local experts Application system consultants: To control the

development of end user systems All user support in one group A network team (which also had as its task to

look at network connections to suppliers and customers)

04/21/23 MS Ch. 1 34

Mead: Corporate Information Resource Group (1990)

04/21/23 MS Ch. 1 35

Mead: Hindsight (1990)

Focus on technology Focus on internal systems Focus on traditional products and

processes i.e., this had been a technology

plan

04/21/23 MS Ch. 1 36

Mead: Strategic Opportunities Framework

External markets Internal operations

04/21/23 MS Ch. 1 37

Mead: Business process reengineering

Demand significant changes We will not find these in internal

functions only Business processes are important Think ahead Gave results at Mead (but not in all

companies)

04/21/23 MS Ch. 1 38

Customer orientation

Terminals at the customers already from 1980

EDI (Electronic Data Interchange) Now over the Internet eBusiness, motto: ”it is easy to do

business with us”

04/21/23 MS Ch. 1 39

Mead: Strategy ahead

New organizational structure Include customers and suppliers Support reengineering Internet as an important element in

the implementation of new strategies Web simplifies, link to Web instead of

inserting and maintaining data in own databases

04/21/23 MS Ch. 1 40

Mead: Vision

04/21/23 MS Ch. 1 41

Mead: ERP (Enterprise Resource Planning) system

SAP Considered several times, but was not found to

be appropriate for the forest industry The divisions wanted SAP One system for the whole company Implementation from 1999, division by division Controlled by management, consultants from

the outside (IBM) Learnt from others Lotus Notes in addition (just as STATOIL until

now)

04/21/23 MS Ch. 1 42

Mead: SAP Very big and complex Must follow framework and rules within

SAP Defines roles (tasks), workflow between

roles Divisions looses freedom and flexibility,

larger updates must now be synchronized with the whole company

Replaces proprietary systems

04/21/23 MS Ch. 1 43

Mead: eCommerce Largest effect internally The Intranet defines how Mead conducts its

business processes Web interface in existing systems B2B - ”old wine in new bottles” Full B2B cannot be realized before the

customers are ready, i.e., before they rebuild their systems

IT is a strategic tool

04/21/23 MS Ch. 1 44

Mead – New structure

04/21/23 MS Ch. 1 45

MeadWestvaco – today IT is 3% of their budget (0.75% in the

1970s) Important that IT support business ideas 4 main areas for IT investments:

Infrastructure Standard applications Business applications Experimental systems

Goes with SAP

04/21/23 MS Ch. 1 46

Norwegian SMB companies All use off-the-shelf products The question is, what to do with the functions

that cannot be handled by these. Different approaches are in use:

Manual handling Manual handling with support from user-defined

systems in products as Excel Develop and use proprietary systems

The answer is often dependent of the type of company:

Standard Niche

04/21/23 MS Ch. 1 47

A “standard” company Similar to many other businesses, e.g.:

Grocer Plumber Power company

The competitiveness of the company is often based on its location

Can use software developed for this type of business

Advantage: Development costs are shared by many

This is not static, new functions may be needed

04/21/23 MS Ch. 1 48

An example A grocer performs a fairly standard job He can use the software provided by the

chain (cash register, accounting, etc.) Similar to the software used by other chains However, “out-of-date” products is a huge

cost. Can this be handled better than today? This may be something that the chain may

address, but is clearly outside the scope of the grocer

04/21/23 MS Ch. 1 49

Niche company Its competitiveness is based on its

idiosyncrasy, there are few competitors The company tries to be best within its

niche With standard software it will, at the best,

just be as good as the others, i.e., IT is not a competitive factor

With proprietary software it has the possibility to be better than its competitors, i.e., IT as a competitive factor

04/21/23 MS Ch. 1 50

Standard and niche There may be companies that perform a

fairly standard job, but may have some niche functions

Example: Høgskolen i Molde Use standard systems for accounting,

student administration, course handling Similar to many other institutions But could develop their own system for

making prognosis, for seeing into the future

04/21/23 MS Ch. 1 51

Proprietary development Necessary in the seventies and

eighties Considered too expensive and time

consuming in the nineties (due to many project that were not kept within budget and time limits, or were not finished at all)

Still a possibility today, especially for SMEs.

04/21/23 MS Ch. 1 52

Small and medium sized enterprises

can reduce development costs by: Using application tools (such as MS

Access) Employ the Office package to its limits

(e.g., link between applications) Important: IT-development must be an

integrated part of BPR (Business Process Reengineering)

Then proprietary development is a possibility