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1

IT

Ron Williams

Business Innovation Through Information Technology

IT Portfolio

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2

IT

Ron Williams

You Must Develop an Holistic View of IT Strategy Organization

Bus.

ORG IT

ProcessesJobs Beliefs

Incentives

Processes

Task

Relationship

Architecture

Business Needs

Policies

Technology

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

IT Investment Portfolio

Technology

HardwareSoftware

InformationNetwork

“Emerging”

IS Management

OwnSourceManage

IS Development

SDLC

Project Mgn’t

Business

Technology

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3

IT

Ron Williams

Information Systems Classifications• Organizational level supported

– Personal– Departmental– Enterprise– Inter-organizational

• Functional area– Finance– Marketing – Operations …..

• Support provided– Transaction processing– Management information– Office automation– Groupware– Decision support

• Activity supported – Operational– Tactical– Strategic

• Mode of processing– Batch– Real-time

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4

IT

Ron Williams

So What’s Important

• Support provided – High level– Transaction processing– Information Management– Infrastructure

• Functional vs. cross functional systems

• Organization supported - Enterprise & inter-organizational

• Knowing why the system is being implemented

• Returning business value

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5

IT

Ron Williams

Traditional IT Investment Portfolio

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

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6

IT

Ron Williams

Traditional IT Investment Portfolio

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

CommunicationsData Base

Office AutomationGroupware

MISDecision SupportKnowledge Mgn’t

Processing Business Activities

OrdersSales

Shipment

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7

IT

Ron Williams

The Evolution

Operations

Marketing Finance

Distribution

HROther

Operational

Tactical

Strategic

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8

IT

Ron Williams

The Stovepipes and Levels Must Go

Order Cash

Single Enterprise View for Customers

Manage & Optimize all Resources

Strategic View

Empowered Employees & Flatter Organizations

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9

IT

Ron Williams

The Result

Order Cash

Single Enterprise View for Customers

Manage & Optimize all Resources

Strategic View

Order Cash

Single Enterprise View for Customers

Manage & Optimize all Resources

Strategic View

Enterprise Resource Planning Systems ( ERP)Customer Relationship Management (CRM)E-mail & GroupwareKnowledge Management

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IT

Ron Williams

Enterprise Resource Planning (ERP)

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IT

Ron Williams

ERP Implementations – Benefits & Problems

• Who has done it

– 60% of multi-national firms had implemented ERP by 19992

– General survey - 38% had implemented, 26% were implementing according to CIO survey of 10/07/01

• Implementations cost & time– Average cost $15 million (can run as high as 2-3% of revenue)13

• Highest - $300 million• Lowest - $400,000• Total cost of ownership for heads-down user - $53,000

– Takes on average 21 months to install with benefits starting to accrue after 31 months3

– Why so long and cost so much?• Simultaneous process redesign of multiple functional areas within the firm• Need to adapt processes to the capabilities of the software

• Median annual savings - $1.6 million13

• Many reported problems– Hershey Foods, Nike, Whirlpool– Agilent Technologies, August 19, 2002 Reports that ERP installation problems cost them

• $105 million in revenue for the quarter• $70 million in operating profit

3. Hitt, Wu, Xiaoge13. Meta Survey of 63 companies in 1998 reported by Hitt, Wu, Xiaoge and CIO Magazine

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IT

Ron Williams

Customer Relationship Management

• What does it do?– Common view of the customer– Call center management– Sales force automation– Marketing analytics– Marketing campaign management

• Who has or is implementing 1

– 40% of high tech, aerospace, retailing, & utilities (US & Europe)– 66% of US telecom– >50% of US financial services, pharmaceutical, & transportations

• Highly complex installations can cost $100 million and take 3 years

• Results– 35% of respondents said met expectations 2

– 20% of US retail banks have raised profitability as a result 3

1. AMR Research 2001

2. IDC Study 2001

3. Mc Kinsey Productivity Study 2001

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13

IT

Ron Williams

Traditional Information Technology Portfolio

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

Leveraging the New Infrastructure, Peter Weil and Marianne Braodbent

Cut CostsIncrease Throughput25 to 40% ROA

Increase ControlBetter Information & IntegrationImprove QualityIncrease Innovation

Increase SalesCompetitive Advantage/NecessityMarket PositioningInnovative Services50% Fail2-3 Year Lead Time

Business IntegrationBusiness FlexibilityReduce Marginal Cost of Business Unit ITReduce IT CostsStandardization

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IT

Ron Williams

Expenditure of Average Firm (Around 1998)

InformationalInformational

StrategicStrategic

TransactionalTransactional

InfrastructureInfrastructure

Leveraging the New Infrastructure, Peter Weil and Marianne Braodbent

16% 14%

12%

58%

4.1% of Revenue7.7% of Expenses