ACCA Strategic Business Planning

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ACCAStrategic Business Planning Development

• Lecture 14
• Information Technology (IT)

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Learning Outcomes

• At the end of this lecture you will
• Appreciate the importance of IT to an
  organisation
• Know how to use McFarlans grid
• Understand the different levels of information
• Know the advantages and disadvantages of
  outsourcing IT

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The Importance of IT

• IT links computers with communications
• IT is of strategic importance due to its cost
• IT has a critical role in the success of some
  organisations
• IT has the potential to be a strategic weapon
• IT affects all management levels

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The Costs of IT

• The total amount spent on IT
• Ratio of IT spend to other expenditure
• How well the money is spent
• The time-lag between expenditure and benefits
  received
• The difficulty of quantifying the benefits
• The relative proportions of fixed and variable
  costs

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McFarlans Grid

• IT is critical to the success of some
  organisations
• Strategic importance recognised and analysed
• Impact has relevance to firm depending on
  industry and competition
• Aim to achieve best fit with organisation

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McFarlans Grid
Strategic impact of application for future systems
High
Low
Strategic impact for existing systems
Low
Turnaround
Support
Factory
Strategic
High
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McFarlans Grid - The Four Types

• Strategic business dependent on information
  system (IS) for competitive advantage
• Turnaround business expects that IS will become
  strategically important in future
• Support business sees no strategic value in IS
• Factory business sees current value of IS, but
  thinks this will not be sustained

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Use of IT as a Strategic Weapon

• Can improve productivity and performance
• Can alter management and communication structure
  of business
• Can lead to the development of new businesses
• Can be used at each stage of the value chain

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The Management of ICT

• Senior managers get a more precise view of
  operations
• Operational managers empowered by IT
• Delayering
• Intellective skills
• Better co-ordination of activities
• Compatibility
• Security

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Failure in Implementing IT

• Used to tackle the wrong problem, e.g. automating
  existing process rather than trying to improve it
• Senior management not interested
• Users ignored in design and development
• No attention given to behavioural factors

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The Information Resource

• Types of information
• Foundation
• Productivity
• Competence
• Resource-allocation
• Levels of information
• Strategic
• Tactical
• Operational

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Strategic, Tactical and Operational Information

• Strategic
• Profitability of main business segments
• Prospects for present and potential markets
• Investment appraisal studies
• Cash requirements
• Availability and prospects for raising long term
  funds

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• Tactical
• Sales analysis
• Stock levels
• Productivity measures
• Current purchasing requirements
• Budgetary controls and variance reports
• Labour turnover statistics
• Operational
• Listings of debtors and creditors
• Payroll details
• Raw materials requirements and usage
• Listings of customer complaints
• Machine output statistics
• Delivery schedules

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Types of Information System

• Transaction processing systems
• Management information systems
• Decision support systems
• Expert systems
• Executive information systems

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Management Information System (MIS)

• Definition a system to convert data from
  internal and external sources into information
  and to communicate that information, in an
  appropriate form, to managers at all levels in
  all functions to enable them to make timely and
  effective decisions for planning, directing and
  controlling the activities for which they are
  responsible

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Strategies for Information Systems

• An organisations IT strategy should support its
  overall strategy, therefore part of strategic
  planning process
• Process
• Define business objectives
• Identify the CSFs
• Develop the information systems to support the
  CSFs

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Plans for Information Systems
Technical quality
Low
High
Low
Divest system
Reassess system
Business value
Renew/upgrade the system
Maintain and enhance system
High
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Information Systems - Management

• IT Director - key tasks
• Integrating purchase and use of IT equipment
• Setting and controlling standards of
  software/hardware systems for organisation
• Providing network and systems design
• Liaising between IT professionals and rest of
  organisation
• Environmental scanning

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Responsibilities

• Administration
• Strategic control and planning
• Information systems development
• User support
• Service management, computer operations and data
  centres
• Network management

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Question for Discussion

• IT staff are sometimes seen as having too much
  power in an organisation and being able to get
  away with activities that other members of staff
  would not.
• Why do you think this perception has arisen?
• Why is it likely to change in the future?

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Advantages of Facilities Management (Outsourcing)

• Gains expertise and staff for small companies
• Cost control through contracts
• Gives economies of scale
• Staff with specialist expertise can be used

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Disadvantages of Facilities Management

• Giving control of key information to outside
  company
• Technologies with strategic objectives cannot be
  given over to outsiders
• Difficult to reverse outsourcing role once handed
  over
• Loss of IT awareness in organisation

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End-User computing

• The direct , hands-on use of computers by users
  of PCs
• Made possible by
• The introduction of PCs and networking to user
  departments
• User friendly software packages
• Greater awareness of power and use of computers
• The applications backlog

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Advantages of User-Developed Systems

• Overcomes shortage of systems development
  personnel
• Allows users to determine their IT requirements
• Implementation and process of IT transferred to
  users

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Disadvantages of User-Developed Systems

• Function of user and analyst are carried out by
  same person
• User ability limitations in requirements for
  application
• Lack of user knowledge
• Unstable user systems
• Private information systems
• Possibility of undesirable information behaviour

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Centralisation vs. Decentralisation

• Relates to both technical and managerial issues
• Data management - loss of control/comparison
• Hardware/software compatibility problems
• Security issues with diverse PCs
• Costs are difficult to control
• Corporate vs. functional
• Organisation structure

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E-Commerce and the Internet

• Special features of the Internet
• It challenges traditional business models
• Small companies can move into global market place
• It offers new economics of information
• It supplies high level of speed
• It has created new and cheaper networks of
  communication

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• It brings about the appearance of new
  intermediaries
• It has led to new business partnerships
• Work is becoming independent of its location
• It has changed the nature of work
• It promotes transparent pricing
• It facilitates personalised attention
• It provides sophisticated market segmentation
  opportunities
• It can be a separate or complementary channel
• It can lead to dynamic pricing

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Disadvantage of E-commerce

• It involves an unusual mix of people needs
  careful supervision
• A fuzzy an undefined market
• Needs to link with existing business systems
• Complex legal issues
• Actual or apparent?

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Impact of the Internet

• New distribution channels
• Shift of power
• Growing competition
• Growing pace of business
• Transformation of companies
• Re-evaluation of added value
• Recognition of the importance of knowledge