Managing the Information Technology Resource Jerry N. Luftman Chapter 1 Introduction Managing the Information Technology Resource Jerry N. Luftman

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

Importance of IT and the CIO IT is important and necessary for a successful organization Successful management of IT is necessary for competitive advantage

3 Strategies for Competitive Advantage Cost leadership Competing with lower costs Product differentiation Competing with value Product focus Competing by restricting one’s market

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

Additional Skills of IT Managers Financial Human Resource Relationship Management Legal Governance Marketing Negotiating Leadership

Critical Success Factors defined by 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.” “Areas of activity that should receive constant and careful attention from management.”

Expanding Role of IT 3 Primary Computing Eras Mainframe Computer Era PC Computing Era Pervasive Computing

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

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

Role of IT No longer just serves a business Integral in business strategy Impacts every area of business Complexity increases Supports relationships among various parts of an organization Responsible for the integration of information

Role of IT Today

A. IT as Enabler of E-Business All aspects of IT are more externally visible Serve as mediator among various functions Disintermediation Reintermediation Hypermediation Infomediation

Disintermediation Eliminates the middleman Electronic stock trading (E*trade) Forces focus on service differentiation Failures: (Levi Strauss & Co.) (e-toys)

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 Auction sites (eBay: 30M users, $5B, 2001)

Hypermediation Interactions found via Internet transactions Complete, seamless, invisible supply chain to customers Leverages external partners Click as transactions Web portal (Netscape) Search service (Google, Goto, etc.) Referral service Exchange service (credit cards) Delivery service (UPS, FedEx, USPS)

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

B. IT as Change Agent Dynamic Stability (mass customization) IT supports business in dynamic changes with no change to business processes Can enable/inhibit incremental and radical changes Innovation may depend on IT

C. IT as Enabler of Globalization Expands business presence beyond borders IT Infrastructure and Technologies enable company to manage & control global operations. (DHL)

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

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

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 Dell Computer Corp., Cisco Systems

Porter’s Generic Value Chain

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

Luftman’s 6 Components Communications Maturity Competency/ Value Measurement Maturity Governance Maturity Partnership Maturity Scope and Architecture Maturity Skills Maturity

Discussion Questions What would you consider some of the key changes in technology over the last 50 years that have had the most impact on organizations? How are companies organized in terms of the IT function? Who does the CIO report to? What are some examples of business models that have changed as a result of IT?

Discussion Questions What would you consider the most important factor in improving the ability to play a larger role in an organization? What are some issues IT faces in the global economy? In reviewing some of the other concerns within organizations (Fig. 1-3), what role does IT management play? What role does business management play?

Discussion Questions What contributes to the difficulties IT organizations have in demonstrating the value IT brings to the business goals and results? What is the role of the business function in these difficulties? How will the role of CIO continue to change in the future? What is the role of the CTO relative to the CIO?