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Website: http://it-toolkits.org/ Truc Phuong 1 Six Stages of IT Strategic Management The management literature is full of valuable strategic planning methodologies for information technology (IT). Nonetheless, a survey of eighty organizations found that IT planners were not satisfied with their methodologies, that planning required too many resources, that top management commitment was not easily obtained, and that only 24 percent of the projects recommended in a plan were ultimately executed. We have grappled with these issues many times as we have tried to help organizations apply the vast array of suggestions. Over the years, we have organized the different issues arising in IT strategic planning into a structured framework. In this paper, we will present and illustrate this framework, a comprehensive IT strategic planning methodology that incorporates many of the suggestions offered in the literature and the results of our own field experiences. Conditions for Effective IT Strategic Management Many authors have studied the conditions that need to be in place for an IT strategic planning process to be effective. Boynton and Zmud argue that twenty issues are critical for effective IT planning efforts. Nine of these issues must be addressed in the planning

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Page 1: Six Stages of IT Strategic Management

Website: http://it-toolkits.org/ Truc Phuong

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Six Stages of IT Strategic Management

The management literature is full of valuable strategic planning methodologies for

information technology (IT). Nonetheless, a survey of eighty organizations found that IT

planners were not satisfied with their methodologies, that planning required too many

resources, that top management commitment was not easily obtained, and that only 24

percent of the projects recommended in a plan were ultimately executed.

We have grappled with these issues many times as we have tried to help organizations

apply the vast array of suggestions. Over the years, we have organized the different issues

arising in IT strategic planning into a structured framework. In this paper, we will present

and illustrate this framework, a comprehensive IT strategic planning methodology that

incorporates many of the suggestions offered in the literature and the results of our own

field experiences.

Conditions for Effective IT Strategic Management

Many authors have studied the conditions that need to be in place for an IT strategic

planning process to be effective. Boynton and Zmud argue that twenty issues are critical

for effective IT planning efforts. Nine of these issues must be addressed in the planning

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agenda: internal politics, internal market, business strategy, business market, technology,

organizational learning, organizational culture, IT infrastructure, and IT risk taking.

Eleven issues relate to the planning process itself. It should be iterative and hierarchical,

that is, involving managers at all levels. It should consider multiple time horizons, focus

on action, commit participants and establish a planning team, elicit an organizational IT

mission, consider organizational and environmental events, identify strategic

opportunities and assumptions, and prioritize strategic options.

Boynton and Zmud conclude that the literature has not given enough attention to the

following:

Analyzing the internal culture;

Addressing politics and the distribution of power;

Determining the capabilities to accept, use, and institutionalize IT;

Evaluating IT risks;

Making sure that key members of the organization buy into the planning effort;

Identifying and communicating the organizational role of IT;

Identifying and responding to crucial organizational events; and

Identifying the planning participants’ assumptions.

At a more general level, Hax and Majluf state that planning that is isolated from other

managerial processes and top management concerns is misguided. This is a key issue: IT

must be framed as part of the corporation’s overall management process. IT strategic

planning is not a purely technical process, handled by IT specialists, but a managerial

procedure that involves the organization as a whole.

Given these assumptions, we believe that a comprehensive methodology for IT planning

must have three basic characteristics:

It should harmoniously combine all of the organization’s hierarchical levels,

integrating the IT strategy into the overall strategy in the corporate, business, and

functional arenas;

It should be part of a more general strategic management process that addresses

organizational, cultural, and behavioral issues (including “power games”); and

It should call for the participation of numerous parties in the firm, encouraging a

partnership between IT specialists and top managers.

The Methodology

The methodology derives from the frameworks presented by Hax and Majluf for the

functional strategy and the more general strategic management process. Illustrates the

methodology.

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The process may seem overwhelming at first. Certainly strategic planning requires

managers to have a lot of specialized and deep knowledge of both the firm’s different

businesses and the intricate aspects of the technology. A person starting from scratch

would face a complex effort. But seasoned managers are not starting from scratch. They

have a substantial amount of the required information already.

IT strategic planning can be done successfully just by tapping the collective knowledge

of key managers. There are many different procedures for doing this, but we have found

that a workshop with the top executives at the corporate, business, and functional levels

works well. The workshop helps managers to understand IT’s business importance,

especially in terms of its potential impact on the basis of competition; to become more

involved in IT decision making and delegate IT decisions less often; and to develop an

integrated set of IT requirements, creating a shared vision for IT.

Managers who use this methodology should not try to cover all the subjects addressed in

full detail; this may be impossible or impractical. There is one basic objective in this

effort: to be aware of the implications that an IT strategy has for the firm and to give

some deep thought to the external and internal factors that are related to the strategy.

Periodic workshops, typically one a year, should be enough to achieve this goal.

Whenever managers need more detailed data, they can request special studies on subjects

like market conditions or IT developments.

We have successfully applied this methodology in six different firms in both the financial

and industrial sectors, suggesting that it may be effective in a variety of settings. To

illustrate the methodology, we will use the case of the Latin Bank, an organization

structured around three strategic business units (SBUs) — commercial banking, retail

banking, and international operations — and three functional units — finance, operations,

and IT. The company name and some facts have been changed to preserve

confidentiality.

Stage I: Firm Strategy

At this stage, participants in the process determine the demands imposed on the IT

strategy by the corporate, business, and functional levels of the organization. This

approach recognizes that the firm’s IT specialists have to support the needs arising

throughout the firm. These specialists are a resource that allow the firm to confront

complex technical problems in order to sustain a business in a competitive environment.

Therefore, several steps are taken at this stage to identify, understand, and classify IT

requirements at all organizational levels.

Step 1: Determine Corporate Strategy Requirements

The strategic posture, defined at the corporate level, identifies the firm’s strategic thrusts,

planning challenges, and performance objectives. Strategic thrusts are the primary issues

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the firm has to address during the next three to five years to establish a healthy

competitive position in its key markets. Planning challenges are the specific

responsibilities assigned and prioritized at the corporate, business, and functional

levels. Corporate performance objectives are the quantitative indicators chosen to

measure the firm’s overall performance. This overall strategy provides unified and

coherent guidance to the business and functional units and determines certain IT

requirements. For example, Latin Bank has defined three strategic thrusts: emphasize

customer orientation, increase productivity, and launch new products .These goals

impose different challenges on the SBUs and functions. At this stage, the IT function

must generally understand how it needs to respond to those thrusts and how it should

prioritize them.

Step 2: Determine SBU Strategy Requirements

Business managers now formulate and implement strategic action programs in

accordance with the general corporate directions. Different methodologies for deriving

strategic action programs have been described in Hax and Majluf. Illustrates Latin Bank’s

strategic action programs for its retail banking business unit.

At this point, managers should generally understand how each SBU’s strategic action

programs affect IT needs.

Step 3: Determine Function Strategy Requirements

Each functional manager must formulate and implement strategic action programs

congruent with the general and specific strategic action programs of the businesses. The

IT function must interpret the IT requirements imposed by these programs.

Step 4: Identify Strategic IT Units

Now participants can further focus the process by identifying strategic IT units (SITUs).

These units consist of IT skills or disciplines applied to a particular product or service

addressing a specific market need. For example, the Latin Bank has defined seven SITUs:

Front office systems

Product support systems (back office)

General management systems

Executive support systems

Integrative managerial systems

Branch communication systems

Interorganizational systems

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These are the bank’s seven major systems that will supply the different services. The

advantage of defining SITUs is that it allows managers to explicitly identify the domains

where the firm is going to be engaged in competitive actions.

Stage II: External Analysis

In the second stage, participants explore the business opportunities and threats arising

from the development of new technologies. Managers take a fresh look at their businesses

to find opportunities for innovative uses of IT and to uncover possible threats posed by

industry trends or competitors’ actions.

Step 5: Identify IT Products

An important part of the external analysis is to gather information on all of the available

and relevant IT products. Specialized literature, industry product shows and literature,

and IT vendors are the best sources of this information. Kovacevic, Cortázar, Majluf, and

Schroeder present a detailed analysis of the opportunities for IT applications in the

banking industry. Summarizes the intelligence search performed by Latin Bank.

Step 6: Determine Effect of Technologies on Industry Structure

Several methodologies have been proposed for performing this step.

Competitive Analysis Framework. Porter’s framework is widely used to study an

industry’s competitive structure. Managers should carefully examine the five forces that

shape an industry’s competition to see if IT can help to change the magnitude of some of

those forces.

Strategic Grid. McFarlan analyzes some of the factors that will actually determine the

characteristics of the competitive forces, such as the capacity for generating barriers to

entry, for building switching costs, for changing the basis of competition, for changing

the power in supplier relationships, and for generating new products. In addition, he uses

the strategic grid concept to determine the strategic impact of IT in the firm, depending

on the importance of current and future applications. The strategic grid focuses on the

insights to be gained by differentiating the strategic impact of current and future

applications.

Strategic Thrust Matrix. Wiseman and MacMillan suggest a strategic thrust matrix that

emphasizes the search for strategic opportunities that will emerge from the firm’s

relationships with its suppliers, customers, and competitors.

Customer Resource Life Cycle. Learmonth and Ives study the process a buyer follows in

choosing a product in order to find opportunities for using technologies. They decompose

the process into thirteen stages and consider how IT can be used to change the

characteristics of any of these stages. For example, technologies that would provide

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additional information about attributes would increase the chances of selling the product.

A firm that is focused on the buying process would use this methodology.

Interorganizational Systems. Cash and Konsynski suggest the implementation of

interorganizational systems (IOS) as a source for strategic applications of IT. IOS,

heavily based on IT, allow integration with different companies, such as suppliers,

buyers, and competitors. A company that emphasizes linkages with other organizations

would choose this methodology.

Managers at Latin Bank chose Porter’s framework because it allowed them to conduct an

overall view of the industry structure and because they were well versed in the

methodology. One of their conclusions was that in order for Latin Bank to differentiate

itself and to emphasize customer orientation, new public access video kiosks should be

installed to provide additional financial services.

Step 7: Discover Uses of IT by Main Competitors

IT is no longer considered a way to gain competitive advantage; it is a key to staying in

business. That is why it is crucial to look closely at what competitors are doing.

Managers can compare their firm with other companies by comparing SITUs or activities

of the value chain. For example, the Latin Bank could compare its own front office

automation with that of other companies, looking for those organizations that were

leading in that area and considering the solutions they had found. Or it could compare

activities in the value chain, such as loan approval systems, human resource management,

and marketing of new services. Both comparisons may be useful.

Stage III: Internal Scrutiny

At this stage, participants diagnose the firm’s competitive standing in its key markets and

judge the firm’s strengths and weaknesses relative to its most relevant competitors.

Managers are required to look for alternative ways to build a sustainable competitive

advantage using ITs, the most important ways being the reinforcement of a powerful IT

platform and a substantial overhaul of activities through process and product

reengineering in order to protect the firm from imitative competitors.

Step 8: Evaluate the IT Platform

A firm’s IT platform consists of its hardware, software, databases, and

telecommunications technologies. Participants in the planning process need to evaluate

the firm’s IT platform in terms of (1) resources (financial, human, and technological), (2)

its ability to meet user needs, and (3) how it compares with the platforms of competing

firms. An interesting way to assess the quality of the IT application platform is to perform

the analysis by SITU. For example, lists the applications in use at Latin Bank. By

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comparing it to , we can immediately see that Latin Bank is underusing IT. A number of

applications are available that the bank could adopt.

Steps 9 and 10: Determine Opportunities for Process and Product Reengineering

through IT

Now participants need to identify opportunities for improving processes or activities

through use of IT. This is called business reengineering. Porter describes how managers

can systematically review the activities of the value chain to identify those business

processes that are strategically critical to the firm and where IT has a role. At Latin Bank,

managers chose the outbound logistics activity as one of the critical business processes

and considered implementing fully automated branches to improve the delivery of

banking services.

Managers also need to consider reengineering products. How can the firm innovate and

add value to products and services through IT or package more information into products

and services? Sometimes IT usage generates a total redesign of the product and even a

completely new business or industry. At Latin Bank, the analysis of the cost structures for

all products led to a major change in the management of checking and saving accounts

that substantially increased profit potential.

Stage IV: Formulation and Assessment of IT Strategy

IT strategic planning needs to be an action-oriented exercise. The final output of the

methodology is a set of well-defined, integrated, and concrete IT strategic action

programs. These will have the virtue of being a well-justified IT portfolio for the business

side, as they have been derived by top managers from the firm’s strategy.

It may be necessary, when developing the IT strategy, to make adjustments to the firm

strategy (especially when firm strategy is based on ITs) or to review some piece of

information from the external and internal analyses.

Step 11: Define and Evaluate Strategic Action Programs

The IT strategy should be expressed in terms of IT strategic action programs (ITSAPs),

from broad to specific. For each of the corporate, business, and functional requirements,

the appropriate managers must define a set of ITSAPs.

To infer the IT applications that could be developed to satisfy the firm’s strategic

requirements, special workshops or structured brainstorming sessions with corporate,

business, and functional executives and IT specialists are extraordinarily helpful. Lists

the eleven preliminary IT projects derived in this way at Latin Bank and the corporate

requirements to which they correspond. For example, to emphasize customer orientation,

managers identified two general strategic action programs: develop branch automation

and provide financial information services. These general programs were broken down

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into four projects: provide branches with adequate computer network support, integrate

information systems at the branch level, install additional automated teller machines

(ATMs), and install public access video kiosks.

At this step of the methodology, managers are in a good position to determine if any

information revealed by the internal and external analyses suggests an adjustment in the

firm’s business strategy. Thus the IT strategy not only reacts to the corporate and

business strategies but proactively suggests ways to define and conduct the firm’s

businesses. It is important to reconsider the corporate or business strategies at this stage

and make any changes necessary.

Managers can now perform the following checks on the process:

Strategic Consistency Test. Make sure that the IT projects are responding to specific

corporate, business, and functional requirements. Cross-references Latin Bank’s IT

projects with its business strategic action programs. Each mark indicates that the IT

project in that column directly supports a business strategic action program. Note that

“open new branches” is not expected to require IT support and “improve checking

accounts support” will not require new IT projects (it will be treated as routine

maintenance by the IT group). Although the financial manager very much needed new IT

support to “improve financial management support,” the program was seen as a major

undertaking that would have to be postponed for a later year.

Technical Coherence Test. Make sure that the IT projects are logically grouped into

technically feasible information systems.

Project Risk Test. Evaluate the risk of individual IT projects and the aggregate risk of the

IT strategic plan. Managers need to know the level of risk involved in order to make

informed decisions on whether and how to proceed with projects. Cash, McFarlan, and

McKenney describe a risk assessment questionnaire that can highlight risks, suggest ways

to lessen them, and outline alternatives.

Step 12: Consider Sourcing, Timing, and Horizontal and Vertical Strategy

There are several issues that are linked to the formulation of an IT strategy that have to be

addressed next.

Sourcing: Make versus Buy. Once the firm has decided to develop a new IT, it has to

select the best alternative from among the following: internal development, internal

development with external help, outsourcing, acquisition of software packages, joint

ventures, or acquisition of the firm that has the technology. To select from these

alternatives, the firm must evaluate its internal capacities, costs, risks, and degree of

dependency on external suppliers.

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Timing: Leader versus Follower. The leader does not always win. Bowmar created the

pocket calculator, but Hewlett-Packard and others have actually benefited from it. Special

attention should be given to timing the implementation of new technologies. Teece

suggests a methodology for making this decision based on the degree of value added by

the innovation to the company.

Horizontal Strategy: Balancing Centralization and Decentralization. Managers must

decide the best way to take advantage of synergies between businesses. Such linkages can

be a critical source of competitive advantage, particularly when the firm’s strategy stems

from a unique competency in the application of IT to one stage of the value chain and

when that application has allowed the firm to successfully enter a wide variety of

business enterprises. Texas Instruments, for instance, has used electronic technology to

support a large array of industrial and consumer products.

Linkages can arise from different sources: (1) common product technology, in which a

company’s products or services relate to each other through their common use of IT (e.g.,

at banks and other financial services companies); (2) common process technology, in

which the relevant knowledge comes from the dominance of processes with a high IT

content (e.g., at telecommunications companies); (3) common technologies in other value

activities, such as distribution and sales; and (4) a product incorporated into another, such

as electronic boards that are used in more than one product.

Another important issue that needs to be addressed is the centralization-decentralization

dilemma. Until recently, organizations had one large centralized IT group serving the

entire firm. This is no longer the case. Continuous improvements in technology have

provided cheaper and more powerful computers, generating a natural tendency toward

decentralization. A significant technical issue, therefore, is managing the network of

computers scattered inside and outside the organization. But the centralization-

decentralization issue has not gone away. There are numerous economic, technical, and

managerial decisions that need to be made regarding how resources and responsibilities

will be allocated. These decisions can have a profound effect on the firm’s power

structure and thus create resistance and anxieties in the organization.

Vertical Strategy: Compete versus Cooperate. Planners need to decide the best way to

manage relationships with constituencies outside the organization, primarily suppliers,

distributors, and customers. Should the firm move ahead with an IT project on its own or

join others? Latin Bank must decide whether to establish its own ATM network or share

one. Cooperation might be a cheaper solution, but it must be balanced against needs for

flexibility and differentiation.

Stage V: Assessment of Financial Needs

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At this point, participants need to determine the resources necessary to provide adequate

funding for the strategic IT projects and assess the economic consequences of providing

that funding.

Step 13: Allocate Resources and Set Budgets

After formulating and assessing the final set of IT projects, IT managers face the difficult

decision of selecting the most promising ones and allocating resources for them. To do

this, they must evaluate the projects. This is often done by cost-benefit analysis or by

using profitability indicators such as return on equity (ROE) and net present value (NPV).

Unfortunately, it is seldom simple to evaluate the benefits of an IT investment. The

traditional techniques for evaluating projects and allocating resources are especially

inappropriate when the projects are highly tentative and when their value comes from the

strategic opportunities they can open if they are successful. In this respect, IT is like

research and development: it must be justified as a longer-term investment and not as an

overhead expense. This difficulty in showing IT’s real value often discourages

investments.

One way to formally incorporate the value of strategic opportunities is by using valuation

models that can handle uncertainty, such as models based on option theory. Simple

sensitivity studies that determine the investment’s impact under different scenarios can

also be adequate.

Similarly, to allocate resources in situations of great uncertainty, managers can use

techniques such as portfolio matrices. These matrices determine investment priorities by

considering each project’s market attractiveness and competitive technical strength.

Resource allocation can be completely centralized or partially decentralized. In the

former case, all IT projects are formally presented to a top committee that evaluates and

allocates resources to them. In the latter case, top management distributes the available

resources among the SBUs based on their attractiveness and profit potential for the firm,

and then each business evaluates each of its IT projects and allocates resources to them.

Stage VI: Internalization of the IT Strategy

The implementation of a strategy may require some political maneuvering, adjustment of

formal systems, changes in the organizational structure, and attempts to influence cultural

traditions. These are not easy tasks. Managers should recognize the limits imposed by

personalities, systems, organizational structure, and culture on any strategy.

The IT strategy cannot be a purely analytical effort. It should be understood and

internalized by the organization or it risks being just a useless exercise. Internalization

can be accomplished by the use of two very different but complementary managerial

approaches. One is based in the formal-analytical tradition, and the other is based in the

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management of cultural and behavioral issues. By using them together, managers should

be able to generate the organizational change and personal commitment required for a

successful implementation of the IT strategy.

Steps 14 and 15: Implement Management Procedures and Address Culture Issues

The first question at this step is how to run the IT group. It is beyond the scope of this

paper to develop this subject fully, but a key point is that the organizational structure and

the assignment of tasks and responsibilities of the IT group will have to be adjusted to be

responsive to the strategic imperatives. Typically, new multifunctional task forces will be

put together to address the most pressing IT projects, as was the case in Latin Bank with

the management control system, the sales system, and the personnel database. Also, the

internal management procedures of the IT group may be profoundly affected. The

adjustment of rewards, project control mechanisms, and capacity planning of the IT

resource are but a few of the issues that require special attention.

Second, to thoroughly internalize the IT strategy in the IT function and the broader

organization, it is not enough to pay attention to formal systems and procedures.

Managers must also consider cultural and behavioral issues and take care to be especially

sensitive to the changes in power stemming from implementation of the IT strategy.

The interplay of these two approaches can be discerned in the ways that have been

devised to ensure that the IT group gets out of its technical shell and addresses user

needs. One of these ways is the creation of the chief information officer, a top

management member who wears two hats: team player at the top of the firm and IT

specialist.

A more recent trend is to pair the head of each major IT developmental effort with a line

manager or senior executive. This approach is intended to give IT executives a broader

business perspective while bringing more technical expertise to high-level management

decisions. Certainly it is not easy to make such a coupling work. The participating

executives tend to have quite different backgrounds and to pay attention to quite different

problems. They must commit their best efforts to build and sustain such a partnership.

Henderson has identified conditions that make such a partnership successful: education; a

joint, ongoing, iterative planning process; agreed-on measures for monitoring activities;

the use of teams only under conditions known, from previous experience, to be favorable;

careful management of human resources; and the use of IT systems to integrate efforts.

Another organizational arrangement is the creation of special committees chaired by the

CEO to address IT issues formally and periodically. Similar committees are created at the

business level and chaired by the business manager.

Another initiative worth mentioning is the dispersion of IT specialists among the business

units. They do not report to the IT manager but directly to the business manager. Finally,

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some firms have experimented with a policy of rotating general managers through IT

assignments in order to sensitize them to the business potential and technical

characteristics of IT.

Although organizational mechanisms are important, they are not enough to achieve the

required state of IT participation in firm or business unit activities. The mechanisms must

promote changes in social interactions and patterns of power. IT managers must become

integrated into the firm’s overall managerial effort or they risk being marginal

contributors in this endeavor.

The Methodology in Practice

As we have indicated, use of this methodology is not as simple as following a series of

steps. Changes in the allocation of IT resources and responsibilities have profound

implications for the firm’s power structure, culture, systems, and organization. The Latin

Bank provides an example of the complexity of the task (names have been changed to

protect the firm’s anonymity).

Patricio Naranjo had been CEO of Latin Bank for four years when he reached an impasse

with his chief information officer (CIO) Juan Cadenas. The information systems group

needed a $5 million investment, Cadenas said, to upgrade hardware and software. This

was a significant amount, given the bank’s size and total investment budget. Naranjo

could not see any relationship between the projects Cadenas wanted to fund and the

organization’s overall strategic thrusts that had been so painstakingly identified and

implemented during the previous three years. He wondered why the IT group had not

integrated the firm’s overall strategy into its own strategy.

Naranjo brought in a trusted consultant, Francesco Negroponte, to develop a new IT

budget with Cadenas. Negroponte noticed that many of the proposed IT projects were

based on hundreds of requests from users of information services throughout the bank.

There was no indication of the relative importance of the requests. He began a process of

negotiating with the IT group that lasted for a year. By the end of that year, a small set of

significant IT projects linked to the bank’s strategy had emerged.

Cadenas did not survive as CIO during this period. His replacement, Carlos Salvador,

worked with Negroponte and a team of IT specialists and line managers to follow the six-

stage methodology. They did not, however, follow the steps sequentially; they worked

simultaneously in most of the stages in order to encourage a continuous adjustment and

reinterpretation of the data.

For Stage I, much of the work had been done. Naranjo had led a three-year effort to

generate an explicit strategy before the IT work began. The firm strategy was well known

and shared by most executives. Salvador used the strategy guidelines to judge the

relevance and priority of IT projects requested by other units.

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As part of Stage II, members of the task force traveled extensively to gather information

on emerging IT products offered to banks. The comparison with competitors showed

Latin Bank to be falling behind in technology, and opinion polls indicated the bank’s

image as a technological laggard.

External consultants conducted independent studies of the bank’s IT platform during

Stage III. These studies showed how the existing information systems and databases

needed to be upgraded, but it also became clear that a thorough reengineering of

administrative processes would be necessary in order to take full advantage of IT’s

potential. Opportunities for reengineering were brought to the attention of the CEO for

the long term. Product reengineering suggestions were also evaluated.

At Stage IV, the task force conducted a fundamental consistency test, gearing IT projects

to key overall strategy concerns. The members made the decision to rely on outsourcing

more heavily to complete these projects quickly.

Stage V, internalization of the strategy, truly began when the crisis first broke. As

Cadenas left the bank and Naranjo’s lack of confidence in the IT group became apparent,

the remaining IT group members had to scramble to respond. Since then, their internal

organization had been redefined and the process for project control had been completely

overhauled. These changes affected the larger bank, and the whole organization was

learning to internalize the new processes.

After a year of intense work, the IT group made its final presentation to the CEO. For the

first time, Naranjo saw a portfolio of projects clearly linked to the strategy he had been

promoting. He felt the group was now part of the top management team. He approved the

proposals to invest heavily in the technology to become one of the leading banks in the

market. For four years since, he has continued to support the IT group’s proposals. Latin

Bank is no longer a technological laggard.

Conclusion

Our methodology is aimed at incorporating IT into the firm’s mainstream strategic

management decisions. The methodology involves six stages:

Providing the adequate framework for generating the IT strategy.

Exploring the major external forces that determine IT attractiveness.

Identifying the basic internal IT strengths and weaknesses.

Defining the IT action programs.

Preparing the budget and allocating resources.

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Defining the appropriate organization and management processes and dealing with

cultural issues.

IT projects tend to be extended efforts, spanning many years and demanding substantive

amounts of resources. Only a system clearly linked to the long-term drivers of a firm’s

strategy has the chance to become an important contributor to the business’s success. If

the system is not so linked, the firm may find its IT managers putting a lot of energy into

overbudget projects to produce irrelevant products. If the system is appropriately linked

to the firm’s overall strategy, IT can be a major opportunity to strengthen the firm’s

strategic positioning.

ST