Mc GrawHillIrwin Copyright 2008 Copyright 2008 by The
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Chapter 14 Enterprise and Global Management of Information Technology Mc. Graw-Hill/Irwin Copyright © 2008, The Mc. Graw-Hill Companies, Inc. All rights reserved.
Learning Objectives • 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 3
Learning Objectives • Identify several cultural, political, and geoeconomic 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 4
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 5
Business and IT • As the 21 st 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 6
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 7
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 8
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 9
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 10
Case 1: Alternative Governance Models • ING Direct • The company is organized into nine countrybased 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 11
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 12
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? 13
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? 14
Components of IT Management 15
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 16
Comparing IT Management Approaches 17
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 18
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 19
Avnet Marshall Organizational Components 20
Managing Application Development • Application development management involves • • • Systems analysis and design Prototyping Applications programming Project management Quality assurance System maintenance 21
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 22
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 23
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 24
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 25
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 26
Other IT Positions • • E-commerce architect Technical team leader Practice manager Systems analyst 27
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 28
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 29
Outsourcing • The purchase of goods or services from third-party partners that were previously provided internally 30
Outsourcing’s Top Ten 31
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 32
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 33
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 34
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 35
Sr. Management’s Involvement in IT 36
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 37
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 38
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 39
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? 40
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? 41
Global IT Management Dimensions 42
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 43
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 44
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 45
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 46
Transnational Business/IT Strategies 47
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 48
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 49
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 50
International Data Communications Issues 51
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 52
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? 53
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? 54
Internet Users by World Region 55
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 56
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 57
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 58
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 59
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 60
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 61
Internet-Enabled IT Development 62
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 63
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 64
Case 3: Thinking & Acting Globally • Other issues to consider • The diversity of countries in which the company operates • The IT maturity in these countries 65
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? 66
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 67
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? 68
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? 69
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