The Big Picture: IT and Business

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The Big Picture IT and Business
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Managerial Questions

• When does an IS become strategic?
• How can I evaluate the strategic value of IS?
• Is creating strategic advantage easy?
• Why should I worry about business IT alignment?

• What are the economies of IT?
• Does IT matter?
• What kinds of IS are there?
• What are the key IT issues in the years ahead?

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The Issue

• For IT to be strategic and provide advantage, it
  must be tied to business processes and aligned
  with strategy.

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Examples of IS in Use

• The SABRE system
• ATMs by Citizens and Southern National banks

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Continual Improvement

• Improving IS is about more than just lessons
  learned it is about incorporating new aspects
  of the organization into the process.
• The case of FedEx

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Principles in the New IS

• Vision
• People Involved
• Catalysts and Barriers
• Implementation

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Risks in the New IS

• Being first
• Alteration of the basis for competition
• Lowering customer switching costs
• Legal intervention
• Lack of customer acceptance

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IT-Business Alignment

• Communications
• Competency/Value
• Governance
• Partnership
• Technology scope
• Skills

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Assessing Alignment

• The scale of alignment
• Level 1 no alignment
• Level 2 beginning processes
• Level 3 establishing processes
• Level 4 improved process
• Level 5 complete alignment

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Steps of Assessment

• Form a team
• Gather information
• Decide on scores / understanding where you stand
• Weighting of the categories

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Purpose of Assessment

• What does the score mean?
• Benchmark for improvement over time
• Comparison with other firms

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Considerations of Alignment

• - The better the alignment between IT and
  strategy the better the advantage provided.
• The paradox
• - The tighter the alignment, the greater the
  costs to update IT during a strategic shift in
  the organization

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Information Economics

• IS is expensive both in time and dollars
• Peripheral costs (such as staffing) of IS are
  similarly high
• There is always something newer and what you
  just bought is immediately made ancient by
  technological advances

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Searching for Productivity

• Measuring productivity
• - labor productivity (output per man-hour)
• - TFP total factor productivity
• how labor and capital are used together

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Increasing TFP by IT

• Increasing the amount of capital/worker
• Speeding up growth
• Speeding up growth in IT specific industry sectors

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Time-Lag Effects

• It takes some time for the investment in IT to
  contribute to productivity increases
• Growth in productivity / year
• 2001-2003 4
• 1996-2000 2.6
• pre-1995 1.5

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Why Invest? Does IT Matter?

• Carrs Argument
• That IT is a commodity
• Should be managed as cheaply as possible
• Too ubiquitous and imitable to provide any
  advantage
• Carr's Rules
• Spend Less
• Follow, don't lead
• Focus on the risks, not the opportunities.

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Countering Carr

• There are many
• Schrage you cannot divorce a company from the
  resources it needs and uses
• Strassman Practice and research shows that the
  effect of IT is not the same from one firm to the
  next (therefore not imitable)
• Brown IT is unique if the necessary human
  element is added, how IT is used provides
  advantage

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Types of IS

• Transaction Processing Systems
• Management Information Systems
• Decision Support Systems

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Inter-Organizational Computing

• The evolution
• 1960s stand alones
• 1970s integrated applications supporting
  multiple ends
• 1980s enterprise wide systems
• 1990s data is leveraged across firms

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The End of the Middle-Man

• Electronic markets
• Reduce the need for intermediation
• Increases communication speed
• Decreases error potential
• Introduces cost efficiencies