1. McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

2. McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. Enterprise and Global Management of Information Technology Chapter 14

3. 14-3 Identify each of the three components of information technology management Use examples to illustrate how they might be implemented in a business Explain how failures in IT management can be reduced by the involvement of business managers in IT planning and management Learning Objectives

4. 14-4 Learning Objectives Identify several cultural, political, and geo- economic challenges that confront managers in the management of global information technologies Explain the effect on global business/IT strategy of the trend toward a transnational business strategy by international business organizations

5. 14-5 Learning Objectives Identify several considerations that affect the choice of IT applications, IT platforms, data access policies, and systems development methods by a global business enterprise Understand the fundamental concepts of outsourcing and offshoring, as well as the primary reasons for selecting such an approach to IS/IT management

6. 14-6 Business and IT As the 21st century unfolds, many companies are transforming themselves into global powerhouses via major investments in Global e-business E-commerce Other IT initiatives There is a need for business managers and professionals to understand how to manage this vital organizational function

7. 14-7 Case 1: Alternative Governance Models The management of IT falls into five major governance decision areas IT principles IT architecture IT infrastructure Business application needs Prioritization and investment decisions How companies organize their business and IT management teams to make such decisions varies widely

8. 14-8 Case 1: Alternative Governance Models UPS’s IT Governance An IT steering committee: four top executives who have primary responsibility for principles and investment decisions An IT governance committee: senior IT executives responsible for key architecture A formal “charter” process: winnows down IT project proposals to those best aligned with strategic objectives An escalation process to handle exceptions to architecture standards

9. 14-9 Case 1: Alternative Governance Models Manheim Interactive Like most high-growth start-ups, the company did not tightly govern its IT architecture or infrastructure The focus on speed of IT delivery was unsustainable as the online business matured IT governance has now transitioned to a blend of centralized and decentralized arrangements

10. 14-10 Case 1: Alternative Governance Models JPMorgan Chase Encourages autonomy to generate innovation and recognize the very different requirements of its businesses The company encourages the use of standardized technologies where they can provide economies of scale

11. 14-11 Case 1: Alternative Governance Models ING Direct The company is organized into nine country- based businesses Each country operates autonomously, but the units share a common business model Business solutions, IT technical components, and the infrastructure as standardized A council comprised of CIOs and COOs makes enterprisewide principles, architecture, infrastructure, and investment decisions

12. 14-12 Case Study Questions Is there a need for different IT governance arrangements among companies? Why or why not? Use UPS, JPMorgan Chase, and ING Direct as examples to defend your answer

13. 14-13 Case Study Questions Should the IT governance of an e-commerce start-up like Manheim Online differ from that used by its parent company, as Manheim Auctions was in this case? Should the IT governance of an e-commerce venture change over time, as occurred with Manheim Online?

14. 14-14 Case Study Questions The five major governance decision areas outlined in the case tell us a lot about what is involved in the management of IT Which of the decision areas should primarily be the province of the business management of the company? Which should primarily be the responsibility of IT management? Should all decisions be made jointly by both management groups?

15. 14-15 Components of IT Management

16. 14-16 Managing Information Technology Managing the joint development and implementation of business and IT strategies Use IT to support strategic business priorities Align IT with strategic business goals Managing the development and implementation of new business/IT applications and technologies Information systems development Managing the IT organization and infrastructure Hardware, software, databases, networks, and other resources

17. 14-17 Comparing IT Management Approaches Insert Figure 14.3 here

18. 14-18 Managing the IT Function Three things happened in the past few years The Internet boom inspired businesses to connect their networks Companies on on their intranets essential applications without which their businesses could not function It became apparent that maintaining PCs on a network is very, very expensive These things created an urgent need for centralization

19. 14-19 Organizing IT Early Years Centralization of computing with large mainframes Next Downsizing and moving back to decentralization Current Centralized control over the management of IT while serving the strategic needs of business units Hybrid of centralized and decentralized components

20. 14-20 Avnet Marshall Organizational Components

21. 14-21 Managing Application Development Application development management involves Systems analysis and design Prototyping Applications programming Project management Quality assurance System maintenance

22. 14-22 Managing IS Operations IS operations management is concerned with the use of hardware, software, network, and personnel resources in data centers Operational activities that must be managed Computer system operations Network management Production control Production support

23. 14-23 System Performance Monitors Software packages that Monitor the processing of computer jobs Help develop a planned schedule of computer operations that can optimize computer system performance Product detailed statistics that are invaluable for effective planning and control of computing capacity

24. 14-24 Features of System Performance Monitors Chargeback Systems Allocates costs to users based on the information service rendered Process Control Capabilities Systems that not only monitor but automatically control computer operations at large data centers

25. 14-25 IT Staff Planning Recruiting, training and retaining qualified IS personnel Evaluating employee job performance and rewarding outstanding performance with salary increases and promotions Setting salary and wage levels Designing career paths

26. 14-26 IT Executives Chief Information Officer (CIO) Oversees all uses of information technology in many companies, and brings them into alignment with strategic business goals Chief Technology Officer (CTO) In charge of all information technology planning and deployment Manages the IT platform Second in command

27. 14-27 Other IT Positions E-commerce architect Technical team leader Practice manager Systems analyst

28. 14-28 Technology Management All information technologies must be managed as a technology platform for integrating business applications Both internally or externally focused The Internet, intranets, electronic commerce and collaboration technologies, CRM software, enterprise resource planning, and supply chain management Often the primary responsibility of a chief technology officer

29. 14-29 Managing User Services Business units that support and manage end user and workgroup computing Can be done with information centers staffed with user liaison specialists or with Web-enabled intranet help desks Key roles Troubleshooting problems Gathering and communicating information Coordinating educational efforts Helping with end user application development

30. 14-30 Outsourcing The purchase of goods or services from third-party partners that were previously provided internally

31. 14-31 Outsourcing’s Top Ten

32. 14-32 Why Outsource? Save money – achieve greater ROI Focus on core competencies – organizations can focus on the business that they are in Achieve flexible staffing levels Gain access to global resources Decrease time to market

33. 14-33 Offshoring Relocation of an organization’s business processes to a lower cost location This location is typically overseas Can be either production or service Growth of services offshoring is linked to Availability of large amounts of reliable and affordable communication infrastructure Digitization of many services

34. 14-34 Failures in IT Management IT not used effectively Computerizing traditional business processes instead of developing innovative e-business processes IT not used efficiently Poor response times Frequent downtimes Poorly managed application development

35. 14-35 Management Involvement & Governance Managerial and end user involvement Key ingredient to high-quality information system performance Involve business managers in IT management Governance structures, such as steering committees

36. 14-36 Sr. Management’s Involvement in IT

37. 14-37 The International Dimension Companies around the world are developing new models to operate competitively in a digital economy These models are structured, yet agile, global, yet local They concentrate on maximizing the risk adjusted return from both knowledge and technology assets

38. 14-38 Case 2: Offshoring & Giving Away Technology Only services can provide growth on the scale that IBM needs to make shareholders happy To combat cheaper offshore companies, IBM is giving away technology In theory, giving away software, patents, and ideas will Help the entire industry grow faster Open new frontiers Create opportunities for IBM to sell high-value products and services

39. 14-39 Case 2: Offshoring & Giving Away Technology To cut costs, IBM is also offshoring India accounts for the largest number of IBMers outside the United States By the end of next year, IBM Services head count in India will top 52,000 More than one-fourth of all services personnel About one-sixth of IBMers worldwide

40. 14-40 Case Study Questions Do you agree with IBM’s employment response to competition from software development contractors in India like Wipro that are expanding into IT consulting services? Will IBM’s plan to give away some of its IT assets and intellectual property and increase support of opensource software products be a successful growth strategy in the “brutally competitive marketplace” in which it operates?

41. 14-41 Case Study Questions Do you agree with IBM researchers’ assumption that IT will remain “hard to use, expensive, and labor-intensive, with customers continuing to need help solving business problems” for along time to come? Should IBM bet its business on that assumption?

42. 14-42 Global IT Management Dimensions

43. 14-43 Global IT Management Challenges Political challenges Many countries regulate or prohibit the transfer of data across their national boundaries Others severely restrict, tax, or prohibit imports of hardware and software Some have local content laws that specify the portion of the value of a product that must be added in that country if it is to be sold there Others require a business to spend part of the revenue they earn in a country in that nation’s economy

44. 14-44 Global IT Management Challenges Geoeconomic challenges Physical distances are still a major problem It may take too long to fly in specialists It is difficult to communicate in real time across 24 time zones Many countries do not have good telephone and telecommunications services It may be hard to find skilled local workers There can be great differences in the cost of living and labor costs between countries

45. 14-45 Global IT Management Challenges Cultural challenges Languages Cultural interests Religions Customs Political philosophies Global IT managers need cultural training before they are sent on assignment Different work styles and business relationships

46. 14-46 Transnational Strategies Companies are moving toward a transnational strategy Business depends heavily on information systems and Internet technologies to help integrate global business activities Requires an integrated and cooperative worldwide IT platform

47. 14-47 Transnational Business/IT Strategies

48. 14-48 Global Business Drivers Business requirements caused by the nature of the industry and its competitive or environmental forces Examples of global drivers: Customers Products Operations Resources Collaboration

49. 14-49 Global IT Platforms Hardware Difficulties High prices High tariffs Import restrictions Long lead times for government approvals Lack of local service or spare parts Lack of documentation tailored to local conditions

50. 14-50 Global IT Platforms Software Difficulties Packages developed in Europe may be incompatible with American or Asian versions The software publisher may refuse to supply markets that disregard software licensing and copyright agreements

51. 14-51 International Data Communications Issues

52. 14-52 The Internet as a Global IT Platform The Internet An interconnected matrix that reaches tens of millions of users in over 100 countries Business environment is free of traditional boundaries and limits Without incurring massive cost outlays for telecommunications, companies can Expand markets Reduce communications and distribution costs Improve profit margins

53. 14-53 Key Questions for Global Websites Will you have to develop a new navigational logic to accommodate cultural preferences? What content will you translate, and what content will you create from scratch to address regional competitors or products that differ from those in the U.S.? Should your multilingual effort be an adjunct to your main site, or will you make it a separate site, perhaps with a country-specific domain?

54. 14-54 Key Questions for Global Websites What kinds of traditional and new media advertising will you have to do in each country to draw traffic to your site? Will your site get so many hits that you’ll need to set up a server in a local country? What are the legal ramifications of having your website targeted at a particular country, such as laws on competitive behavior, treatment of children, or privacy?

55. 14-55 Internet Users by World Region

56. 14-56 Global Data Access Issues Transborder Data Flows may be viewed as violating A nation’s sovereignty because it avoids customs duties and regulations Laws protecting the local IT industry from competition Laws protecting local jobs Privacy legislation

57. 14-57 U.S.-E.U. Data Privacy Requirements Key data privacy provisions Notice of purpose and use of data collected Ability to opt out of third-party distribution of data Access for consumers to their information Adequate security, data integrity, and enforcement provisions

58. 14-58 Internet Access in Restrictive Countries The struggle between Internet censorship and openness at the national level revolves around Controlling the conduits Filtering the flows Punishing the purveyors Most of the world has decided that restricting Internet access is not a viable policy Restricting access also hurts a country’s opportunities for economic growth and prosperity

59. 14-59 Global Government Internet Restrictions High Government Access Fees Kazakhstan, Kyrgyzstan Government Monitored Access China, Iran, Saudi Arabia, Azerbaijan, Ubekistan Government Filtered Access Belarus, Cuba, Iraq, Tunisia, Sierra Leone, Tajikistan, Turkmenistan, Vietnam No Public Access Allowed Burma, Libya, North Korea

60. 14-60 Global Systems Development Key development issues Conflicts over local versus global system requirements Trying to agree on common system features Disturbances caused by systems implementation and maintenance activities Global standardization of data definitions

61. 14-61 Systems Development Strategies Key strategies for global systems development Transform an application used by the home office or a subsidiary into a global application Set up a multinational development team Parallel development Centers of excellence Offshore development

62. 14-62 Internet-Enabled IT Development

63. 14-63 Case 3: Thinking & Acting Globally Globalization means different things to different people There’s no single method for how it operates Too often, strategic motivations for globalization aren’t matched by operational approaches to meet enterprise needs Operating globally means striking a balance between central and local control of operations

64. 14-64 Case 3: Thinking & Acting Globally To ensure that IT-globalization decisions match the enterprises core needs and approaches Determine the balance of global integration versus local responsiveness Align IT’s major processes with the enterprise’s governance orientation Assign staff, roles, and competencies appropriately

65. 14-65 Case 3: Thinking & Acting Globally Other issues to consider The diversity of countries in which the company operates The IT maturity in these countries

66. 14-66 Case Study Questions What are some of the forces driving IT organizations to globalize? What are some of the local forces and challenges facing modern IT organizations? How does a CEO manage the requirement to both globalize and localize the IT function?

67. 14-67 Case 4: The Hard Road to Outsourcing Outsourcing IT work abroad can cut the cost of IT by 39 percent It carries privacy risks It threatens U.S. jobs

68. 14-68 Case Study Questions The law does not provide for companies to disclose to their customers that they have outsourced or offshored access to their data Is this a potential problem for either the company or the customer? What is meant by the term “best-of-breed model?” Why has this approach worked for Boeing?

69. 14-69 Case Study Questions GE wants to outsource its entire ERP system based, in part, on its successes with other outsourcing projects Is it possible to outsource too much?