IT Strategy, Sourcing, and Strategic Technology Trends

Module 12: Critical Thinking Assignment

Aligning IT Strategies to Business Strategies

Delta Corporation has been very impressed with the progress it has made with its new product line and the new marketing approach that you recommended and instigated. As a result, it is now considering expanding this approach for its other product lines, providing them with the ability to market and sell all of its products online. However, it has not considered the implications for its IT department in developing this type of plan. As a Social Media Marketing Consultant, you are familiar with integrating business and IT strategic planning. They have called upon you to provide advice. You need to:

Explain what the company needs to consider if it is going to move to a more online approach for its sales and marketing activities. In particular, describe the consequences for its IT department and why they need to be involved in the planning phase.

Given the likely increase in costs associated with this move, you need to outline the potential benefits and possible pitfalls of outsourcing the IT maintenance and development.

Outline some strategic technology trends that the company may wish to monitor and consider for the future.

Finally, research a company in Saudi Arabia and discuss whether they were able to align their overall strategy and their IT strategy. If they were successful discuss how they managed this alignment and what benefits they gained from doing so. If they were not so successful, explain how and why you felt that occurred.

IT for Management: On-Demand Strategies for
Performance, Growth, and Sustainability
Twelfth Edition
Turban, Pollard, Wood
Chapter 12
IT Strategy, Sourcing, and Strategic
Technology Trends
Learning Objectives (1 of 4)
IT Strategy and
Competitive
Advantage
IT Strategic
Planning,
Process, and
Tools
Strategic
Technology
Trends
IT Sourcing
Strategies and
IT Service
Management
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IT Strategy
• IT Strategy
o
A plan of action to create an organization’s IT capabilities for
maximum and sustainable value in the organization, goals,
and objectives and specifies the necessary financial
requirements, budgets, and resources.
• Business strategy
sets the overall direction of a company
o defines how a business will achieve its mission, vision, and
organizational goals
o
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Aligning IT Strategy and Business Strategy
• Business–IT alignment refers to applying IT in an appropriate and
timely way that is consistent with business strategies, goals, and
needs.
• The first step in achieving business–IT alignment is to
understand business objectives and how IT capabilities can best
support business requirements.
• Business–IT alignment can be improved by focusing on the
following five activities:
1.
2.
3.
4.
5.
Commitment to IT planning by senior management
CIO is a member of senior management
Understanding IT and corporate planning
Shared culture and effective communication
Multilevel links
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The Open
Group
Architecture
Framework
(TOGAF)
• A useful IT strategy tool that is used
to align IT goals with overall business
goals to improve business efficiency.
• Used by more than 60% of Fortune
500 companies
• TOGAF provides a systematic
approach to designing, planning,
implementing, and governing the
enterprise IT architecture.
• TOGAF also helps organizations to
plan their cross-departmental IT
efforts.
• TOGAF is free for organizations to use
internally.
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Resistance to Business–IT alignment
• 87% of business leaders believe that IT is critical to
their companies’ strategic success, but not all of them
work with IT to achieve that success.
• Less than 50% of business leaders reported that the IT
function was very involved in the strategic planning
process.
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Competitive
advantage
• An edge that enables a company
to outperform its average
competitor in ways that matter to
its customers.
• To create a competitive
advantage, an organization must
evaluate four major factors with
the company and the environment
in which it operates:
• Benefit
• Target market
• Globalization
• Competition
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Competitive
Advantage
Tools
Porter’s
Competitive Forces
Model
Porter’s Value
Chain Model
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Porter’s Value Chain Model
Identifies where the greatest value exists in an
organization and how that value can be increased.
Organizational activities: Primary and Support
Primary activities
1. Inbound logistics
2. Operations
3. Outbound logistics
4. Sales and marketing
5. Servicing
Support activities
1. Accounting, legal and
finance
2. HR
3. Product and technology
development
4. Procurement
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IT Agility, Responsiveness, and Flexibility
Agility means being able to respond quickly.
Responsiveness means that IT capacity can be
easily scaled up or down as needed, which
essentially requires cloud computing.
Flexibility means having the ability to quickly
integrate new business functions or to easily
reconfigure software or apps.
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Competing
Globally
Globalization is the free trade of goods
and services across national borders and
cultures as the interdependence of
nation’s economies grows driven by
people, technology, information, and
cash flow.
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When Countries Compete
• Comparative advantage is a country’s ability to produce
goods or services more efficiently and inexpensively
than another.
• Opportunity cost is the benefit that is missed or given
up when an individual, business, or country chooses
one alternative over another.
• Goods-based comparative advantage A situation in
which a country can produce goods for a lower
opportunity cost than other countries.
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IT-Enabled Service-Based Comparative
Advantage
• Information technology has made the concept of global
competition more relevant than ever for governments.
• Service-based comparative advantage A country’s
capacity to produce and sell services at a lower
opportunity cost than its trading partners.
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IT Strategy and Competitive Advantage:
Questions
1.
What is business–IT alignment?
2.
Why would an IT department want to achieve business–IT alignment?
3.
What is the difference between the goals of a business strategy and an IT
strategy?
4.
Name the five activities that organizations need engage in to improve
business–IT alignment.
5.
How does business–IT alignment help companies gain a competitive
advantage in the marketplace?
6.
What are the seven skills that a CIO needs to help improve business–IT
alignment?
7.
Name the five competitive forces in Porter’s five forces model.
8.
In what ways can ICT help a country achieve a comparative advantage?
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Learning Objectives (2 of 4)
IT Strategy and
Competitive
Advantage
IT Strategic
Planning,
Process, and
Tools
Strategic
Technology
Trends
IT Sourcing
Strategies and
IT Service
Management
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• IT strategic planning is the process of
defining an organization’s strategy or
direction in adopting, implementing, using,
and disposing of its IT assets.
IT
Strategic
Planning,
Process,
and Tools
• When an organization is developing an IT
strategy, it should ask questions such as the
following:
• What is the long-term direction of the
business?
• What is the overall plan for deploying
resources?
• What trade-offs are necessary? What
resources will need to be shared?
• What is the company’s position
compared to that of its competitors?
• How does a company achieve
competitive advantage over rivals in
order to achieve maximize profitability?
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The Five Components of an IT Strategy
• Applications strategy
• Plan the direction and principles concerning the development,
operation, and maintenance of IT applications throughout the
enterprise.
• Integration strategy
• Consider how to connect all IT applications in a seamless way.
• Infrastructure strategy
• Develop and maintain the IT infrastructure including its safety and security.
• Services strategy
• Plan for, provide, and manage IT services when, where, and at what
level the business and its different functional areas require.
• Sourcing strategy
• Plan how to acquire IT infrastructure, software, and services either
internally or with one or more external suppliers.
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Identifying Value Drivers
Value driver enhances the value of a product or service to
consumers, creating value for the company. Advanced IT,
reliability, and brand reputation are examples.
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Developing an IT Strategic Plan
• IT strategic plan is a formal document that details how
the IT department will provide, support, and ensure
ongoing business operations.
• The four objectives of the IT strategic plan are to:
1. Improve management’s understanding of IT
opportunities and limitations
2. Assess current performance
3. Identify capacity and human resource requirements
4. Clarify the level of investment required
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IT strategic plan components
• Long-range IT plan: (the strategic IT plan)—aligns with
strategic-level business planning.
• Medium-term IT plan: aligns with managerial or
administrative level business planning.
• IT tactical plan: aligns with operational-level business
planning.
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Strategic Planning Tools
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The Balanced Scorecard
• Balanced scorecard is a strategic management
methodology for evaluating performance based on
both financial and nonfinancial metrics.
• The BSC is used to translate strategic plans and mission
statements into a set of business objectives and
performance metrics that can be quantified and
measured to evaluate how well objectives are being
achieved.
• Business objectives are the goals of an organization and
the building blocks of a strategy
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Steps in the BSC Methodology
1.
Establish the organization’s vision for the future.
2.
Identify BSC performance metrics that link vision and strategy to results.
3.
Select meaningful strategic objectives.
4.
Measure each objective.
5.
Set target(s) for each objective.
6.
Determine the action(s) and initiative(s) needed to achieve each target.
7.
Implement necessary tracking, analytics, communication, and reporting
systems, including sensors, data visualization, mashups, and dashboards via
social and mobile channels.
8.
Collect, analyze, and compare performance data with targets.
9.
Revise actions to improve performance gaps and take advantage of new
opportunities.
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Process Deliverables
The deliverables from the IT strategic planning process
should include the following:
1. An evaluation of the strategic goals and directions of
the organization and how IT is aligned
2. A new or revised IT vision and assessment of the state
of the IT department
3. A statement of the strategies, objectives, and policies
for the IT department
4. The overall direction, requirements, and sourcing of
resources
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IT Strategic Planning, Process, and Tools:
Questions
1.
What are the three levels of an IT strategic plan?
2.
What is the purpose of the IT strategic planning process?
3.
Why would an organization conduct a SWOT analysis?
4.
What is the purpose of using the BSC in the IT strategic planning process?
5.
How does the BSC approach differ from previous measurement
approaches?
6.
What are the four BSC perspectives?
7.
What are the four deliverables of the IT strategic planning process?
8.
What is the purpose of an IT steering committee?
9.
What five tasks do the steering committee perform?
10. What are the three general types of business value drivers?
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Learning Objectives (3 of 4)
IT Strategy and
Competitive
Advantage
IT Strategic
Planning,
Process, and
Tools
Strategic
Technology
Trends
IT Sourcing
Strategies and
IT Service
Management
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IT sourcing
• The strategy used to acquire and maintain IT systems
and IT services.
• Two broad categories:
1. In-house systems development
2. Outsourcing:
a) Offshoring Systems development and/or
support are provided by a supplier in a
country that is different from the country of
the sourcing organization.
b) Onshoring
c) Cloud services
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IT Onshoring
• The practice of acquiring and maintaining IT systems and
services from external third-party providers located in the
same country as the company sourcing the systems and
services.
• The types of work that are ideal for onshoring include the
following:
• Work that has not been routinized
• Work that if offshored would result in the client company losing too
much control over critical operations
• Situations in which offshoring would place the client company at too
great a risk to its data security, data privacy, or intellectual property
and proprietary information
• Business activities that rely on an uncommon combination of
specific application domain knowledge and IT knowledge in order to
do the work properly
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Cloud Services
• Cloud services—also referred to as edge services—IT services,
from infrastructure to apps (Xaas), are delivered by a thirdparty vendor over the cloud.
• Cloud Strategy: A complex strategy to source scale and
deliver IT capabilities on demand without physical location,
labor, or capital restrictions in addition to on-premise
systems.
• Tactical adoption approach: Deploying cloud services
incrementally results in apps and services that are patched
together to create end-to-end business processes—this is
short-sighted.
• Cloud adoption needs to occur according to a coordinated
strategy.
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Cloud
Strategy
Challenges
• The top challenges about
migrating to the cloud revolved
around cybersecurity, privacy,
data availability, and the
accessibility of the service.
• The newer challenges relate to
cloud strategy, including
integration of cloud with onpremises resources, extensibility,
and reliability of the cloud service.
• Extensibility is the ability to get
data into and out of the cloud
service.
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Outsourcing
lessons
• Manage change
• Assess organizational readiness
• Anticipate risks and formulate a
plan for mitigating them
• Build project management
infrastructure
• Create a governance mechanism
• Properly define how success will
be measured, both qualitatively
and quantitatively.
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IT Service Management
• IT services is the application of business and technical
expertise to enable organizations in creating, managing,
optimizing, and accessing information and business
processes.
• IT service management (ITSM) is a strategy by which IT
systems are offered under contract to customers and
performance is managed as a service to achieve greater
business–IT alignment and smooth business processes and
operations.
• Service relationship is the degree of cooperation between
a service provider and service customers,
vendors/suppliers, and regulatory agencies including
service provision, service consumption, and service
relationship management.
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Levels and Types of IT Services
• IT services can be sourced in three different ways:
• Internal service provider delivers IT services to a
single business unit in its own organization.
• Shared service provider provides IT services to
different business units in its own organization.
• External service provider delivers IT services to
customers outside the organization.
• ITIL®4: IT Infrastructure Library (ITIL) serves as a
roadmap for process improvement to help IT
professionals build a foundation for ongoing service
excellence while meeting budget and regulatory
requirements.
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ITIL®4
• Organizations and people: Organizational culture,
systems of authority, roles, skills and competencies
needed to plan, manage, and deliver IT services.
• Information and technology: Information and
technology needed to deliver IT services as well as that
needed to manage the services.
• Partners and suppliers: They contribute in various
ways to the services that are delivered.
• Value streams and processes: All the activities,
workflows, controls, and procedures necessary to
provide high-quality on-time services to create value
for customers and users.
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Service Value Chain Key
Activities
Plan Ensure a shared understanding of what the organization wants and how it will
be done by creating plans, portfolios, architectures, policies, etc.
Improve Create improvements initiatives to ensure continuous improvement of all
products, services, and practices across all four ITSM dimensions.
Engage Interact with stakeholders and understand their needs.
Design and transition Create new and changes services and ensure stakeholders
expectations around quality, cost, and time to market are met.
Obtain/build Create service components, ensure they are available when and where
needed, and ensure they meet agreed-upon specifications.
Deliver and support Ensure services meet stakeholder delivery and support
expectations.
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Benefits of Using a Structured ITSM Strategy
• Lower IT operation costs
• Higher returns on IT investments
• Minimal service outages
• Ability to establish, well-defined, repeatable, and
manageable IT processes
• Efficient analysis of IT problems to reduce repeat incidents
• Improved efficiency of IT help desk teams
• Clear expectations of service levels and service availability
• Risk-free implementation of IT changes
• Better transparency into IT processes and services
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The Outsourcing Life Cycle
1. Phase 1: Assess opportunities and develop your
overarching strategy and process- or geographyspecific business cases for outsourcing.
2. Phase 2: Prepare and issue the request for proposal
(RFP), evaluate the proposals that are submitted, and
select a service provider.
3. Phase 3: Develop and negotiate the outsourcing
contract that will serve as a framework for your
relationship with your new business partner.
4. Phase 4: Plan and execute the service transition.
5. Phase 5: Ongoing management of the SLAs and
managing the service provider relationship.
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• The requirements defined in the RFP
document should include:
Request
for
Proposal
(RFP)
• Service scope
• Technical architecture, vision, and
strategic objectives
• Service delivery model, service
management processes
• SLA
• Governance model and forums
• Commercial objectives
• Cost treatment and allocation
• Pricing model
• How assets will be treated
• Legal terms
• Employee transfer
• Risk and compliance
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Ask for
“Proof of
Concept”
or a Trial
Run
• Proof of concept (POC) is a
vendor demonstration of a
product to see how or how well
it works.
• Trial run is when a vendor
product or service is tested in a
pilot study or limited area of the
business to confirm its
usefulness to the company.
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Finding,
Selecting
and
Managing
Vendors
• Two criteria to assess first are:
• Experience with very similar
systems of similar size, scope, and
requirements.
• Financial and qualified personnel
stability.
• The most important factor in
managing a vendor is
communication.
• Vendor management organization
(VMO) is a business unit with an
organization that is responsible for
evaluating suppliers of goods and
services and overseeing regular
interaction and long-term
relationships with vendors.
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Outsourcing Benefits
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Outsourcing Risks and Hidden Costs
Shirking
Poaching
Opportunistic
repricing
Breach of
contract by
vendor
Inability of
vendor to deliver
as promised
Vendor lock-in
Loss of control
over data
Lower employee
morale
Relationship
setup costs
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IT Sourcing Strategies and IT Service
Management: Questions
1.
What contributes to the complexity of a cloud strategy?
2.
How does tactical adoption of cloud services differ from a
coordinated cloud strategy?
3.
What is onshore sourcing?
4.
What are the major benefits and risks of outsourcing?
5.
What needs to be done before signing a contract with an IT vendor?
6.
What is the purpose of an RFP?
7.
What is ITSM?
8.
What are the four dimensions of ITIL®4?
9.
What is the difference between an outsourcing contract and an SLA?
10. What is the purpose of a VMO?
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Learning Objectives (4 of 4)
IT Strategy and
Competitive
Advantage
IT Strategic
Planning,
Process, and
Tools
Strategic
Technology
Trends
IT Sourcing
Strategies and
IT Service
Management
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• Strategic technology has the potential to
make significant impacts on an
organization’s long-term plans,
programs, and initiatives.
Strategic
Technology
Trends
• The first step to considering and
adopting new technologies is to find
them.
• Approaches to finding trending strategic
technologies include exploring the
research and development activities of
major research centers and IT consulting
firms and attending technology industry
conferences, such as COMDEX, IBM
Inter-Connect, Google Next, Adobe
Summit, and HIMSS.
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Strategic Technology Trends: Questions
1. What are three ways that a company can identify and
keep up with emerging strategic technologies?
2. Why would a company want to invest in strategic
technologies?
3. What does an organization need to put in place to
identify suitable strategic technologies?
4. What are the five steps in the technology scanning
process?
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