Chapter 12

McGraw-Hill/Irwin ©2008,The McGraw-Hill Companies, All Rights Reserved

Chapter 12

Enterprise and Global Management of Information Technology

12- 2

Learning Objectives

1. Identify each of the three components of information technology management, and use examples to illustrate how they might be implemented in a business.

2. Explain how failures in IT management can be reduced by the involvement of business managers in IT planning and management.

3. Identify several cultural, political, and geoeconomic challenges that confront managers in the management of global information technologies.

12- 3

Learning Objectives

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

5. Identify several considerations that affect the choice of IT applications, IT platforms, data access policies, and systems development methods by a global business enterprise.

6. Understand the fundamental concepts of outsourcing and offshoring as well as the primary reasons for selecting such an approach to IS/IT management.

12- 4

Case 1: Hewlett-Packard: Managing Radical Change in IT to Support New Business Goals

• It is important for CIOs to understand not only the technology and how it could be used to improve a business but also how to deliver those benefits.

• Companies like Hewlett-Packard face major challenges when implementing changes to make the IT function more efficient and vital contributor to their business success.

• Radical changes suggested by the CIO of HP, Randy Mott can lead to thousands of layoffs and changes in their culture.

• If these changes are not managed properly, it could lead to a disaster.

12- 5

Case Study Questions

1. Will the initiatives being undertaken by CIO Randy Mott to implement major changes to the IT function at HP make IT a more efficient and vital contributor to HP’s business success? Defend your position on each of the major initiatives he is implementing.

2. Do you approve of the change management job Mott is doing, including his meetings with HP employees throughout the world and having “coffee talks” with them? Why or why not?

12- 6


3. Assume you have been hired as a management consultant or coach to CIO Mott. What are several suggestions you might give him to help him successfully implement his ambitious plans for IT changes at HP? Defend your proposals.

12- 7

Real World Internet Activity

1. Use the Internet to discover the current financial performance of HP and determine if HP’s major changes and spending on IT are being viewed as a positive or negative contributor to its performance. Then investigate HP’s competitive performance in market share, units sold, and other areas compared with Dell, Leveno, Sun, IBM, and any other competitors you find, as well as the reasons given for HP’s current competitive stance.

12- 8

Real World Group Activity

2. Implementing major changes as CIO Mott is doing causes many employees to lose their jobs and much angst on the part of some of those who remain, whose jobs and work styles may also change.

– Discuss how you would handle a change management process at HP or any other company faced with implementing similar decisions.

12- 9

Components of IT Management

12- 10

Managing Information Technology

• Managing the joint development and implementation of business and IT strategies– Use IT to support the strategic business priorities– Align IT with strategic business goals

• Managing the development and implementation of new business/IT applications and technologies– Managing information systems development

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

resources

12- 11

Business/IT Planning Process

12- 12

Components of Business/IT Planning

• Strategy Development– Developing business strategies that support a

company’s business vision

• Resource Management – Developing strategic plans for managing or outsourcing

a company’s IT resources

• Technology Architecture – Making strategic IT choices that reflect an information

technology architecture designed to support a company’s business/IT initiatives

12- 13

Information Technology Architecture

• Technology Platform – Networks, computer systems, system software and

integrated enterprise application software

• Data Resources – Operational and specialized databases – Store and provide data and information for business

processes and decision support

12- 14

Information Technology Architecture

• Applications Architecture – Integrated architecture of enterprise systems that

support strategic business initiatives as well as cross-functional business processes

• IT Organization – Organizational structure of the IS function within a

company and the distribution of IS specialists

12- 15

Organizing IT

• Early years: centralization of computing with large mainframes

• Next: downsizing trend with a move back to decentralization

• Current: centralized control over the management of IT while serving strategic needs of business units– Hybrid of both centralized and decentralized

components

12- 16

Organizational Components of IT at Avnet Marshall

12- 17

Application Development Management

• Managing activities such as: – Systems analysis and design, prototyping, applications

programming, project management, quality assurance, and system maintenance for all major business/IT development projects

12- 18

IS Operations Management

• Use of hardware, software, network, and personnel resources in the corporate or business unit data centers of an organization

• Includes computer systems operations, network management, production control and production support

• Data centers are the computer centers of an organization

12- 19

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, and

– Produce detailed statistics that are invaluable for effective planning and control of computing capacity

12- 20

Features of Systems Performance Monitors

• Chargeback Systems – Allocate costs to users based on the information

services rendered

• Process Control Capabilities– Systems that not only monitor but automatically control

computer operations at large data centers

12- 21

IT Staff Planning

• Recruiting, training and retaining qualified IS personnel

• Evaluate employee job performances and reward outstanding performances with salary increases and promotions

• Set salary and wage levels and design career paths so individuals can move to new jobs through promotion and transfer as they gain in seniority and expertise

12- 22

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 technology management: all information

technology planning and deployment– Managing the IT platform– Second in command

12- 23

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

12- 24

Outsourcing

• The purchase of goods or services from third-party partners that were previously provided internally

12- 25

Outsourcing’s Top Ten

12- 26

Why outsource?

• Save money – achieve greater ROI• Focus on core competencies – organization can

focus on the business that they are in• Achieve flexible staffing levels• Gain access to global resources• Decrease time to market

12- 27

Offshoring

• Relocation of an organization’s business processes

• To a lower-cost location, usually overseas

12- 28

IT Management Failures

• IT not used effectively– Computerize traditional business processes– Instead of developing innovative e-business processes

• IT not used efficiently– Poor response times and frequent downtimes– Poorly managed application development projects

12- 29

Management Involvement and Governance

• Managerial and end user involvement– Key ingredient to high-quality information systems

performance

• Involve managers in the management of IT– Governance structures such as steering committees

12- 30

Senior management’s involvement in business/IT decisions

12- 31

Case 2: IBM Corporation: Competing Globally by Offshoring IT Workers and Giving Away Technology

• IBM is expanding their development centers in India to compete with companies like Wipro, Infosys, and TCS.

• IBM is also giving away technology and its intellectual property to expand its business.

• According to Fortune magazine, IBM gives away at least $150 million worth of technology every year.

• The idea that giving things away makes the pie bigger for everybody is being embraced by IBM.

• When IBM gives away free tools, it often sells additional software and consulting services.

• As long as IT remains hard to use, expensive, and labor intensive, with customers continuing to need help solving business problems, IBM will have the opportunity to thrive.

12- 32


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? Why or why not?

2. Will IBM’s plan to give away some of its IT assets and intellectual property and increase its support of opensource software products like Linux be a successful growth strategy in the “brutally competitive marketplace” in which it operates? Why or why not?

12- 33


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 a long time to come? Should IBM bet its business on that assumption? Defend your answers to both questions.

12- 34


1. Use the Internet to research news on the latest developments in the competition to provide IT consulting services to businesses and governments. Check out IBM’s performance, as well as major players like HP and Accenture, new entrants like Dell, and international competitors like Wipro. Who appears to be winning or losing in this arena? What reasons can you uncover for the results you find?

12- 35


2. IBM eliminated 14,500 jobs, mostly in Europe, and then reportedly hired thousands of additional IT workers in India. Such cutting of high-cost jobs and offshoring jobs to a subsidiary in a lower-cost country is a controversial business strategy being used by other global companies.

– Discuss the implications of this issue for your current or future career choices and the kinds of companies or organizations you would want to work for.

12- 36

Global IT Management

• Develop appropriate business and IT strategies for the global marketplace

• Develop the portfolio of business applications needed to support business/IT strategies

• Determine the technology platform needed• Determine the systems development projects

that will produce the required global information systems

12- 37

Global IT Management Dimensions

12- 38

Global IT Management Challenges

• Political• Geoeconomic – effects of geography on the

economic realities of international business activities

• Cultural

12- 39

Political Challenges

• Rules regulating or prohibiting transfer of data across national boundaries

• Severely restricted, taxed, or prohibited imports of hardware and software

• 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

• Reciprocal trade agreements that require a business to spend part of the revenue they earn in a country in that nation’s economy

12- 40

Geoeconomic Challenges

• Sheer physical distances• Difficult to get good-quality telephone and

telecommunications services• Differences in the cost of living and labor costs

12- 41

Cultural Differences

• Languages• Cultural Interests• Religions• Customs• Social Attitudes• Political Philosophies

12- 42

Transnational Strategies

• Business depends heavily on its information systems and Internet technologies to help integrate global business activities

• Develop an integrated and cooperative worldwide IT platform

12- 43

Transnational Business/IT strategies

12- 44

Global Business Drivers

• Business requirements caused by the nature of the industry and its competitive or environmental forces

• Examples of drivers:– Global Customers– Global Products– Global Operations– Global Resources– Global Collaboration

12- 45

Global IT Platform

• Managing the hardware, software, data resources, telecommunications networks, and computing facilities that support global business operations

• Technically complex with major political and cultural implications

12- 46

International Data Communications Top 10 Issues

12- 47

Internet as a Global IT Platform

• Technology platform free of many traditional international boundaries and limits

• Expand markets, reduce communications and distribution costs, and improve profit margins without massive cost outlays for telecommunications

12- 48

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?

12- 49

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?

12- 50

Internet Users by World Region

12- 51

Global Data Access Issues

• Transborder Data Flows– Business data flow across international borders over

the telecommunications networks of global information systems

– May be viewed as violating a nation’s sovereignty because avoids custom duties

– Or violating their laws to protect local IT industry from competition or their labor regulations for protecting local jobs

12- 52

U.S.-E.U Data Privacy Requirements

• 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

12- 53

Internet Access Issues in Most Restrictive Countries

• High Government Access Fees• Government Monitored Access• Government Filtered Access• No Public Access Allowed

12- 54

Global Systems Development

• Conflicts over local versus global system requirements

• Difficulties in agreeing on common system features

• Disturbances caused by systems implementation and maintenance activities

• Global standardization of data definitions

12- 55

Systems Development Strategies

• Transform an application used by the home office into a global application

• System used by a subsidiary that has the best version of an application will be chosen for global use

• Set up a multinational development team with key people from several subsidiaries to ensure that the system design meets the needs of local sites as well as corporate headquarters

12- 56

Systems Development Strategies

• Parallel Development – parts of the system are assigned to different subsidiaries and the home office to develop at the same times based on the expertise and experience at each site

• Centers of Excellence – an entire system may be assigned for development to a particular subsidiary based on their expertise in the business or technical dimensions needed for successful development

• Offshore Development – outsource the development work to a global development company

12- 57

Internet-enabled Collaboration in IT Development

Source: Adapted from Jon Udell, “Leveraging a Global Advantage,” Infoworld, April 21, 2003, p. 35.

12- 58

Case 3: Northwestern Mutual Life, GE, and Boeing: The Business Challenges of Outsourcing

• Outsourcing of IT services provides cost savings.• Financial-services companies like Northwestern Mutual

Life can cut the cost of IT work by 39 percent by outsourcing it to vendors in low-cost countries.

• Companies that are outsourcing their IT services have to manage many challenges.

• Key challenges are: privacy, security, and effective management of the outsourcing relationship.

• Key issues to successful outsourcing are often unique to the company and its needs.

12- 59


1. The law does not require 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? Why or why not?

2. What is meant by the term “best-of-breed model”? Why has this approach worked for Boeing?

3. 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?

12- 60


1. Each of the companies in the case shares a common goal but from a different perspective. As we learned in the chapter, there are a variety of reasons a company may choose to outsource. Using the Internet and Figure 12.6 as your guide, see if you can find examples of companies that have chosen to outsource for reasons different from the three outlined in the case. What were their reasons?

12- 61


2. Outsourcing and offshoring are controversial issues— particularly when it comes to jobs.

– Discuss the pros and cons of this issue. – Should we curtail outsourcing and offshoring to

protect jobs? – Are new jobs being created to replace the ones

lost?

Documents

Chapter 12