Managing the Information Technology Resource Jerry N. Luftman Chapter 1 Introduction Managing the Information Technology Resource Jerry N. Luftman © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 1

Chapter Outline Evolution of role of IT Role of IT management versus other business functions View of IT by IT executives How to better manage IT resources Key issues in the management of IT Importance of successfully managing IT © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 2

Primary Purpose IT is important and necessary for a successful organization Successful management of IT is necessary for competitive advantage © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 3

3 Strategies for Competitive Advantage Cost leadership Competing with lower costs Product differentiation Competing with value Product focus Competing by restricting one’s market © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 4

IT Management Categories Strategic Pertinent to long-term attainment of goals and business as a whole Tactical Needed to achieve strategic plans and goals to produce changes for success Operational Process and actions that must be performed on a day-to-day basis to maintain performance level © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 5

Additional Skills of IT Managers Financial Human Resource Relationship Management Legal Governance Marketing Negotiating Leadership © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 6

John Rockart “The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization’s efforts for the period will be less than desired.” © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 7

3 Primary Computing Eras Mainframe Computer Era PC Computing Era Pervasive Computing Pervasive means universial Pervasive computing is an emerging trend associated with embedding microprocessors in day-to-day objects, allowing them to communicate information. It is also known as ubiquitous computing. The terms ubiquitous and pervasive signify "existing everywhere." © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 8

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Historical View of IT Initially for government/military use Businesses used for financial automation Data Processing was key function Computers were costly and large in size Not widely used © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 11

Historical View Cost decreased Size decreased Use of personal computers increased Business staff and IT staff began to interact Technology issues increased Networks, E-mail, and Internet became necessity © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 12

Role of IT No longer just serves a business Integral in business strategy Impacts every area of business Complexity increases How does IT function vs. the entire organization Responsible for the integration of information © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 13

Role of IT Today © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 14

Enabler of E-Business All aspects of IT are more externally visible Serve as mediator among various functions Disintermediation Reintermediation Hypermediation Infomediation Mediator : go in between © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 15

Disintermediation Eliminates the middleman Electronic stock trading Forces focus on service differentiation © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 16

Reintermediation Use of Internet to reassemble buyers and sellers in new ways Allows negotiation of prices, warranties, quality, shipping Example includes merging of banking, insurance, and other financial services © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 17

Hypermediation Interactions found via Internet transactions Complete, seamless, invisible supply chain to customers Leverages external partners © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 18

Infomediation Allows technology users to manage large amounts of information Search engines and portals provide for narrowing searches Data mining technology is critical IT helps business sift through information for insight and clarity © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 19

Change Agent Dynamic Stability IT supports business in dynamic changes with no change to business processes Can enable/inhibit incremental and radical changes Innovation may depend on IT © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 20

Enabler of Globalization Expands business presence beyond borders IT maintenance of Infrastructure and Technologies © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 21

IT/Business Gap IT/Business alignment critical Alignment Enabler Application of IT in an appropriate and timely manner, in harmony with business goals, strategies, and needs Enabler Inhibitor © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 22

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CSC Survey Top Rankings Information Systems alignment with Corporate Goals ranked 1st or 2nd 9 of 11 years! Organizing & utilizing data Connecting to customers, suppliers, and/or partners electronically Optimizing organizational effectiveness © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 24

IT vs. Other Functions Encompasses entire enterprise Affects all business functions Extends beyond business boundaries Affects every level of management Impact affects entire value chain, including suppliers and customers Creates synergy between departments © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 25

Porter’s Generic Value Chain © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 26

Value of IT IT usage has increased three-fold since 1978 Substantial capital expenditures Cost of doing business Productivity measurement Alignment with strategic business goals © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 27

Luftman’s 6 Components Communications Maturity Competency/ Value Measure-ment Maturity Governance Maturity Partnership Maturity Scope and Architecture Maturity Skills Maturity © 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 28