Six IT decisions IT people should not take...

ISM-6155 Enterprise Information Systems Management.University of South Florida.

Presentation by:Tanaya BoseKaustav Chaudhury

How to understand IT?Top executives are unable to understand the business values of the high priced technology they have installed for their organization.Companies are paying lots for IT but they are unable to utilize it.

● Is my understanding well enough?● Where is the payback from the IT investment towards state of the

art technologies?● Whenever senior managers assign responsibility for critical

decisions to IT executives, disaster often ensues. Why?

Ok!... So what are those decisions?To help avoid IT disasters and generate values the authors suggested 6 decisions that the seniors managers should take instead of the IT executives.

● 3 strategic decisions● 3 executive decisions

1. How much should we spend on IT?● Managers should weigh strategic

role that IT will play in the organization and then establish company wide funding level to give green signal!

● “Happy surprises” often result in total return on IT investment greater than sum of the ROIs of individual projects

● UNDIRECTED PROJECTS/VERSATILE PROJECTS often lead to spend millions chasing elusive benefits.

United Parcel Service and FedEx :

● UPS: emphasis on -- -- standardized IT environment ,consistency and reliability, relatively low cost

● FedEx : emphasis on -- -- flexibility, localized innovation, varied customers’ needs

● Managers should play active role in ranking IT projects based on significance and benefit returned.

● choose between the projects that will have a significant impact on the company’s success and those that provide some benefits but aren’t essential.

● Hershey Foods’ : too many IT projects : missed deadline to deliver candies in 1999 halloween season

● Contrast to this “Delta Airlines” in house IT department initiated in 1997. $1 billion dollar project started to design “Delta Nervous System (DNS)”. They did not work on a simultaneous revenue building system given its business and resource limitations.

2. Which business processes should receive our IT dollars?

Lets Outsource our IT! But will it be wise?

● Main IT capabilities in-house, while selective outsourcing is the best approach.

● These decisions better left to the IT unit, based on their capabilities.

● Senior managers should decide which ones to merge and which are the ones that should remain separate.

● Depending on the company’s culture, either standardize everything to keep costs low or recognizing the importance of business unit autonomy.

● Johnson & Johnson: global consumer and health care company: For almost 100 years, J&J enjoyed success as a decentralized organization.

● Multiple salespersons, invoices, and shipments that resulted from doing business through 200 units.

● Hence Global Data Definitions were formulated by Senior managers.

● Like UPS they realized that shared infrastructures sometimes do not meet the needs of new, smaller businesses.

3. Which IT capabilities need to be companywide?

● Senior managers to decide how much they are willing to spend for various features and services.

● Business managers should then, in consultation with IT managers, determine the appropriate level of service at a price they can afford.

● Although Better is always best choice, providing Cadillac service when a Buick will do – is not right always.

● Gtech Corporation: Govt. sponsored lottery cannot compromise on response times since penalty as high as $10,000/min issued.

● Dow Corning On the other hand brief downtime in ERP systems does not stop entire production or lose customer orders. Hence negotiation in accepting the system can be done. So in 1999 they opted for a disaster recovery environment for such situations.

4. How good do our IT services really need to be?

● Security, like reliability and responsiveness, is a feature of IT systems.

● Increasing security involves not only higher costs but also greater inconvenience.

● It is up to senior managers to assess the balance between customer convenience and privacy.

● MITs non-standard firewall approach means that the institute cannot install most commercial software packages for applications such as course registration and student accounting.

● Yale University’s admission status can be checked using DOB+SSN. This allowed Princeton University official to check the status of same competing students. These trade offs need to be weighed accordingly by the senior managers.

5. What security and privacy risks will we accept?

● Failed initiatives lead to finger pointing.IT efforts fail to generate the intended business benefits

● New systems alone have no value; value derives from new or redesigned business processes.

● Regular meeting, arrange training sessions, establish clear metrics, PROVIDE REAL BUSINESS VALUE

● Sustained commitment: Longitudinal Medical Record system, 1998 at Partners HealthCare: practicing physicians in management roles- they must use the system, provide constant feedback, and encourage colleagues to sign on to the project (to make its use widespread.)

6. Whom do we blame if an IT initiative fails?

Final point

Best decisions are made with input from

both business unit and IT executives.

“Coming together is a beginning. Keeping together is progress. Working together is success."

- Henry Ford

Thanks!

Any questions?