Chapter 9 IT Planning and Business Process Redesign

Chapter 9 IT Planning and Business Process Redesign Information Technology For Management 4 th Edition Turban, Mc. Lean, Wetherbe Lecture Slides by A. Lekacos, Stony Brook University John Wiley & Sons, Inc. Chapter 9 1

Chapter Objectives ¡ ¡ ¡ ¡ ¡ Discuss the importance, evaluation, and approaches to IT planning. Explain the four-stage model of information systems planning, and discuss the importance of aligning information systems plans with business plans. Describe several different methodologies for conducting strategic information systems planning. Describe information requirement analysis, project payoff and portfolios, resource allocation, and project planning. Identify the different types of information technology architectures and outline the processes necessary to establish an information architecture. Discuss the major issues addressed by information systems planning. Distinguish the major Web-related IT planning issues and understand application portfolio selection. Describe organizational transformation and change management related to business processes redesign. Explain the IT support for processes redesign and BPR, and describe redesign efforts, successes, and failures. Describe the need for business process redesign and the methodologies for doing it. Chapter 9 2

IT Planning — A Critical Issue for Organizations IT planning is the organized planning of the IT infrastructure and applications portfolios for all levels of the organization. Corporate IT planning determines the IT infrastructure which in turn determines what applications end users can deploy. Aligning the goals of the organization and the ability of IT to contribute to those goals can deliver great gains in productivity to the organization. ¡ IT PLANNING APPROACHES l l l Business-led approach: The IT investment plan is defined on the basis of the current business strategy. Method-driven approach: The IS needs are identified with the use of techniques and tools. Technological approach: Analytical modeling and other tools are used to execute the IT plans. Administrative approach: The IT plan is established by a steering committee. Organizational approach: The IT investment plan is derived from a business-consensus view of all stakeholders in the organization Chapter 9 3

IT Planning — A Critical Issue for Organizations Continued A four-stage model of IT planning that consists of four major activities. ¡ Strategic IT planning: Establishes the relationship between the overall organizational plan and the IT plan. ¡ Information requirements analysis: Identifies broad, organizational information requirements to establish a strategic information architecture that can be used to direct specific application development. ¡ Resource allocation: Allocates both IT application development resources and operational resources. ¡ Project planning: Develops a plan that outlines schedules and resource requirements for specific IS projects. The four-stage planning model is the foundation for the development of a portfolio of applications that is highly aligned with the corporate goals and has the ability to create an advantage over competitors. Chapter 9 4

IT Planning — A Critical Issue for Organizations Continued An applications portfolio is the mix of computer applications that the information system department has installed or is the process of developing on behalf of the company. The applications portfolio categorizes existing, planned, and potential information systems based on their business contributions. Chapter 9 5

Strategic Information Technology Planning - Stage 1 The first stage of the IT planning model identifies the applications portfolio through which an organization will conduct its business. This stage can also be expanded to include the process of searching for strategic information systems (SIS) that enable a firm to develop a competitive advantage. This involves assessing the current business environment and the future objectives and strategies. ¡ ¡ ¡ IT Alignment with Organizational Plans: The primary task of IT planning is to identify information systems applications that fit the objectives and priorities established by the organization. Analyze the external environment (industry, supply chain, competition) and the internal environment (competencies, value chain, organizational structure) then relate them to technology (alignment). Alignment is a complex management activity whose complexity increases in accordance with the complexity of organization. Chapter 9 6

Strategic Information Technology Planning – Methodologies Several methodologies exist to facilitate IT planning. ¡ The business systems planning (BSP) model, developed by IBM deals with two main building blocks which become the basis of an information architecture. l Business processes l Data classes ¡ Stages Of It Growth Model, indicates that organizations go through six stages of IT growth l Initiation. When computers are initially introduced. l Expansion (Contagion). Centralized growth takes place as users demand more applications. l Control. In response to management concern about cost versus benefits, l Integration. Expenditures on integrating (via telecommunications and l Data administration. Information requirements rather than processing l Maturity. The planning and development of IT are closely coordinated with systems projects are expected to show a return. databases) existing systems drive the applications portfolio. business development Chapter 9 7

Strategic Information Technology Planning – Methodologies Continued Chapter 9 8

Strategic Information Technology Planning – Methodologies Continued ¡ Critical success factors (CSFs) are those few things that must go right in order to ensure the organization's survival and success. Critical success factors vary by industry categories—manufacturing, service, or government—and by specific industries within these categories. Sample questions asked in the CSF approach are: l l l ¡ What objectives are central to your organization? What are the critical factors that are essential to meeting these objectives? What decisions or actions are key to these critical factors? What variables underlie these decisions, and how are they measured? What information systems can supply these measures? Scenario planning is a methodology in which planners first create several scenarios, then a team compiles as many as possible future events that may influence the outcome of each scenario. Chapter 9 9

Strategic Information Technology Planning – Methodologies Continued Critical success factors (CSFs) Chapter 9 10

Strategic Information Technology Planning - Stage 2 Information Requirements Analysis The second stage of the model is the information requirements analysis, which is an analysis of the information needs of users and how that information relates to their work. The goal of this second stage is to ensure that the various information systems, databases, and networks can be integrated to support the requirements identified in stage 1. ¡ ¡ ¡ Information requirements analysis in stage 2 is a more comprehensive level of analysis. It encompasses infrastructures such as the data needs (e. g. , in a data warehouse or a data center), requirements for the intranet, extranet, and corporate partners are established. Identifies high payoffs IT projects which will produce the highest organizational payoff. Provides an architecture that leads to a cohesive, integrated systems that offers the most benefit Chapter 9 11

Strategic Information Technology Planning - Stage 3 Resource Allocation Resource allocation, the third stage of the IT planning model, consists of developing the hardware, software, data networks and communications, facilities, personnel, and financial plans needed to execute the master development plan as defined in the requirements analysis phase. Allocation is a difficult and in many cases a political process. ¡ Difficult since opportunities and requests for spending far exceed the available funds. ¡ Difficult since some projects and infrastructures are necessary in order for the organization to stay in business. ¡ Another major factor in resource allocation is employing outsourcing strategy. Chapter 9 12

Strategic Information Technology Planning - Stage 4 Project Planning The fourth and final stage of the model for IT planning is project planning. It provides an overall framework within which specific applications can be planned, scheduled, and controlled. Additional emphasis is placed on vendor management and control it the organization will outsources some of the requirements. We have to understand what we are going to do We need to know the start and end dates We need to know the resources We need to know the tasks Various tools exist for planning and control: ¡ PERT & CPM ¡ Gantt Charts Chapter 9 13

IT Planning — Information Technology Architectures Information technology architecture refers to the overall structure of all information systems in an organization. ¡ This structure consists of applications for various management levels l l l ¡ Applications oriented to various functional-operational activities l l ¡ operational control management planning and control strategic planning Marketing R&D Production Distribution It also includes infrastructure l l l Databases Supporting software Networks Chapter 9 14

IT Planning — Information Technology Architectures Continued Different organizations have different IT infrastructure requirements. Two general factors that influence infrastructure levels are information intensity (the extent to which products or processes incorporate information) and strategic focus (the level of emphasis on strategy and planning). Firms with higher levels of these two factors use more IT infrastructure services, ¡ ¡ Industry. Manufacturing firms use fewer IT infrastructure services than retail or financial firms. Market volatility. Firms that need to change products quickly use more IT infrastructure services. Business unit synergy. Firms that emphasize synergies (e. g. , cross-selling) use more IT infrastructure services. Strategy and planning. Firms that integrate IT and organizational planning, and track or monitor the achievement of strategic goals, use more IT infrastructure services. Chapter 9 15

IT Planning — Information Technology Architectures Continued Each organization has its own particular needs and preferences for information. Therefore, today’s IT architecture is designed around business processes rather than traditional departmental hierarchy. ¡ Architectural choices are: l l l ¡ Centralized computing: puts all processing and control authority within one computer to which all other computing devices respond. Distributed computing: gives users direct control over their own computing by providing a decentralized environment Blended computing: a blend of the two models End-user configurations (workstations): l l l Centralized computing with the PC functioning as “dumb terminals” or “not smart” thin PCs. A single-user PC that is not connected to any other device. A single-user PC that is connected to other PCs or systems, using a telecommunications connections. Workgroup PCs connected to each other in a small P 2 P network. Distributed computing with many PCs fully connected by LANs via wireline or Wi-FI. Chapter 9 16

IT Planning — Planning Challenges Information technology planning gets more complicated when several organizations are involved, as well as when we deal with multinational corporations. ¡ ¡ ¡ Planning for Interorganizational Systems (IOS) involving several organizations may be complex. Those involved with hundreds or even thousands of business partners is extremely difficult. IT planners in those cases should focus on groups of customers, suppliers, and partners IT Planning for Multinational Corporations face a complex legal, political, and social environment, which complicates corporate IT planning. Therefore, many multinational companies prefer to decentralize their IT planning and operations. Thus evolving into local systems. Other Problems for IT Planning l Cost, ROI justification l Time-consuming process l Obsolete methodologies l Lack of qualified personnel l Poor communication flow l Minimal top management support Chapter 9 17

IT Planning — Web-based Systems Strategic planning for Web-based systems can be viewed as a subset of IT strategic planning. However, in many cases it is done independently of IT planning. E-planning mostly deals with the EC infrastructure uncovering business opportunities and deciding on an applications portfolio that will exploit those opportunities. ¡ E-planning is usually less formal ¡ E-planning must be more flexible ¡ In e-planning more attention is given to: l l ¡ applications portfolio risk analysis, the degree of risk in Web-based systems can be high strategic planning issues such as the use of metrics (industry standards) strategic planning must integrate, e-business and knowledge management The Web environment is very turbulent Chapter 9 18

IT Planning — Web-based Systems Continued Chapter 9 19

IT Planning — Business Process Redesign (BPR) More extensive response Environmental pressures from customers, competition and market changes may require more comprehensive responses then typical organizational responses. These extensive changes in operations, processes or structure are called business process redesign. ¡ Drivers of Process Redesign l l l l Fitting commercial software Streamlining the supply chain Participating in private or public e-marketplaces Improving customer service Conducting e-procurement Enabling direct online marketing Reducing cost and improving productivity Automating old processes A business process is a collection of activities that take one or more kinds of inputs and create an output. Chapter 9 20

IT Planning — Business Process Redesign (BPR) continued BPR Business process redesign was preceded by business process reengineering, a methodology in which an organization fundamentally and radically redesigned its business processes to achieve dramatic improvement. Today, BPR can focus on anything from the redesign of an individual process, to redesign of a group of processes, to redesign of the entire enterprise. BPM A new method for restructuring, Business process management (BPM), combines workflow systems and redesign methods. This emerging methodology covers three process categories: people-topeople, systems-to-systems, and systems-to-people interactions. It is a blending of workflow, process management, and applications integration. Chapter 9 21

IT Planning — Business Process Redesign (BPR) IT’s Role The traditional process of looking at problems first and then seeking technology solutions for them may need to be reversed. A new approach is first to recognize powerful redesign solutions that restructuring and BPR make possible, and then to seek the processes that can be helped by such solutions. Thus the role of IT in redesigning business processes can be very critical. ¡ ¡ ¡ Integrating fragmented information systems Employing data warehouses Implementing an extended supply chain Utilizing B 2 B e-marketplaces Providing a single point of contact for customers Redesign of business processes often means a need to change some or all of the organizational information systems. This process is referred to as retooling Chapter 9 22

IT Planning — Business Process Redesign (BPR) Development Software A large variety of IT tools can be used to support redesign and BPR. Some are generic, while others are specifically designed for redesign and BPR. ¡ Special BPR and process redesign software enables the capture of the key elements of a business process in a visual representation made up of interconnected objects on a time line. The elements include: l l l ¡ ¡ Activities Sequencing Resources Times Rules BPR software also has “what-if” capabilities in that it enables process simulation and performance comparison of alternative process designs. BPR software may incorporate some aspects of project management in terms of allocating resources and costs to work activities and their time sequencing. Chapter 9 23

IT Planning — Business Process Redesign (BPR) Restructuring Processes Redesign, restructuring, and reengineering efforts involve many activities on the value and supply chains. ¡ Efficient PO, to AP to Receiving system the classical “ 3 Way” Match ¡ Cross-docking, movement of just received merchandise to out going loading platforms ¡ Mass Customization, maintaining Work-In-Process inventory ¡ Cycle Time reduction, the time it takes to complete a process from beginning to end ¡ Vendor managed inventory ¡ Mobile devices ¡ Many more … Chapter 9 24

IT Planning — Business Process Redesign (BPR) Restructuring the Organization The fundamental problem with the hierarchical organizational structure is that any time a decision needs to be made, it must climb up and down the hierarchy. Yet in thin structures there is a need for horizontal communications to minimize inefficiencies. ¡ Thick (many levels) hierarchical structure ¡ Thin (single level) structure ¡ Network structure ¡ Virtual Network structure or organization Why is an efficient Structure important? 1. 2. 3. 4. 5. Management suited to strategy Better response to Opportunities and Threats Higher morale Developing Culture Control Chapter 9 25

IT Planning — Business Process Redesign (BPR) The Virtual Organization The virtual corporation (VC) is an organization composed of several business partners sharing costs and resources for the purpose of producing a product or service. In a virtual organization the resources of the business partners remain in their original locations but are integrated. ¡ The major attributes of a virtual organizations are: l l l l Excellence Utilization Opportunism Lack of border Trust Adaptability to change Technology Chapter 9 26

IT Planning — Business Process Redesign (BPR) Change Management Major organizational changes such as transformation to e-business are referred to as organization transformation. This process usually requires change management. ¡ Organization transformation refers to an organization with a “new face, ” whose business processes, structure, strategy, and procedures are completely different from the old one. Such a radical transformation can be a lengthy, expensive, and complex process, which may involve organizational learning, changes in management and personnel, creation of a new structure, and employee retraining. ¡ Change Management refers to the implementation, control and guidelines to introduce change into organizations. Changing business processes, organizational structure and operating procedures are interrelated and depending upon the magnitude of the change can be met with employee resistance. Since change is a learning process its impact can be minimized if properly managed. Chapter 9 27

IT Planning — (BPR) (FORD) Chapter 9 28

IT Planning — (BPR) (BANK) Chapter 9 29

MANAGERIAL ISSUES ¡ Getting IT ready for the future. Planning—is one of the most challenging and difficult tasks facing all of management, including IS management. Each of the four steps of the IT strategic planning process—strategic planning, information requirements analysis, resource allocation, and project planning—presents its own unique problems. Yet, without planning, or with poor planning, the organization may be doomed. ¡ Organizing for planning. Many issues are involved in planning: What should be the role of the ISD? How should IT be organized? Staffed? Funded? How should human resources issues, such as training, benefits, and career paths for IS personnel, be handled? What about the environment? The competition? The economy? Governmental regulations? Emerging technologies? What is the strategic direction of the host organization? What are its key objectives? Are they agreed upon and clearly stated? Finally, with these strategies and objectives and the larger environment, what strategies and objectives should IS pursue? What policies should it establish? What type of information architecture should the organization have: centralized or not centralized? How should investments in IT be justified? The answer to each of these questions must be tailored to the particular circumstances of the ISD and the larger organization of which it is a part. Chapter 9 30

MANAGERIAL ISSUES Continued ¡ Fitting the IT architecture to the organization. Management of an organization may become concerned that its IT architecture is not suited to the needs of the organization. In such a case, there has likely been a failure on the part of the IT technicians to determine properly the requirements of the organization. Perhaps there has also been a failure on the part of management to understand the type and manner of IT architecture that they have allowed to develop or that they need. ¡ IT architecture planning. IT specialists versed in the technology of IT must meet with business users and jointly determine the present and future needs for the IT architecture. In some cases, IT should lead (e. g. , when business users do not understand the technical implications of a new technology). In other cases, users should lead (e. g. , when technology is to be applied to a new business opportunity). Plans should be written and published as part of the organizational strategic plan and as part of the IT strategic plan. Plans should also deal with training, career implications, and other secondary infrastructure issues. ¡ IT policy. IT architectures should be based on corporate guidelines or principles laid out in policies. These policies should include the roles and responsibilities of IT personnel and users, security issues, cost-benefit analyses for evaluating IT, and IT architectural goals. Policies should be communicated to all personnel who are managing or directly affected by IT. Chapter 9 31

MANAGERIAL ISSUES Continued ¡ ¡ ¡ Ethical and legal issues. Conducting interviews for finding managers’ needs and requirements must be done with full cooperation. Measures to protect privacy must be taken. In designing systems one should consider the people in the system. Reengineering IT means that some employees will have to completely reengineer themselves. Conducting a supply chain or business process reorganization may result in the need to lay off, retrain, or transfer employees. Should management notify the employees in advance regarding such possibilities? And what about those older employees who are difficult to retrain? Other ethical issues may involve sharing of computing resources (in a client/server environment, for example) or of personal information, which may be part of the new organizational culture. Finally, individuals may have to share computer programs that they designed for their departmental use, and may resist doing so because they consider such programs their intellectual property. Appropriate planning must take these and other issues into consideration. When using business intelligence to find out what competitors are doing, companies may be engaged in unethical tactics such as pressuring competitors’ employees to reveal information, or using software that is the intellectual property of other companies (frequently without the knowledge of these other companies). Chapter 9 32

MANAGERIAL ISSUES Continued ¡ IT strategy. In planning IT it is necessary to examine three basic strategies: l l l ¡ Be a leader in technology. However, there is a high development cost of new technologies and high probability of failures. Be a follower. This is a risky strategy because you may be left behind. Be an experimenter, on a small scale. This way you minimize your research and development investment and the cost of failure. Integration: The role of IT in redesign and BPR. Almost all major supply chain management (SCM) and/or BPR projects use IT. However, it is important to remember that in most cases the technology plays a supportive role. The primary role is organizational and managerial in nature. On the other hand, without IT, most SCM and BPR efforts do not succeed. ¡ Failures. One of the lessons from the history of IT is that very big projects have a tendency to fail when expectations exceed real capabilities. One of the reasons for failure is a miscalculation of the required amount of IT. It simply may be too expensive to rebuild and retool the IT infrastructure and adjust applications that are necessary for BPR. The solution may be instead to defer the BPR and use incremental improvements, or to reengineer only the most critical processes. Chapter 9 33

Chapter 9 Copyright © 2004 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein. Chapter 9 34