Corporate

Information Strategy
and Management
Text and Cases

Eighth Edition

Lynda M. Applegate
Harvard Business School

Robert D. Austin
Copenhagen Business School
Harvard Business School

Deborah L. Soule
Harvard Business School

McGraw-Hill
Irwin
Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. Louis
Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

Contents
Preface . vii

Chapter 3
IT Impact on Organizations 81

Introduction: Corporate Information

Strategy and Management 1

The Need for New Capabilities

Case I-l: IBM's Decade, of Transformation:

Turnaround to Growth 5
Appendix 36

MODULE ONE
IT AND BUSINESS ADVANTAGE 39
Chapter 1
Understanding Business Models

41

Overview 42
Analyzing Strategy 44
Analyzing Capabilities 46
Analyzing Value Created for All
Stakeholders 48
Evolving Business Models 51
Summary 52
Appendix IA: Analyzing Business Models 54
Appendix IB: Analyzing Business Networks 60

Chapter 2
IT Impact on Business Models 63
Analyzing IT Impact 64
The Search for Opportunity

66

Can IT Change the Basis of Competition? 68

Can IT Change the Nature of Relationships and the
Balance of Power in Buyer-Seller Relationships? 70
Can IT Build Barriers to Entry? 72
Can IT Raise Switching Costs? 74
Can IT Add Value to Existing Products or Services or
Create New Ones? 75

The Management of Risk

Summary 79

78

82

Is History Repeating Itself? 85

Learning from Mistakes 85

IT Impact on Capabilities

88

Can IT Enable Agility and Control? 89

Can IT Enable Accountability and Collaboration?

92

Summary 94
Appendix 3A: Characteristics of the
Hierarchy, Entrepreneurial, and Networked
Organization 96

Chapter 4
Making the Case for IT

101

"Legacy" Mindset Limitations 103

The "IT Business Value" Mindset: Framing
Opportunities 106
Can IT Be Used to Drive Cost Savings? 106
Can IT Be Used to Drive Revenue Growth ? 109
Can IT Be Used to Drive Asset Efficiency? 112
Can IT Be Used to Create Sustainable Advantage? 115
Developing the Business Case for IT 116
Closing the Loop 117

Summary 118
Appendix 4A: Analyzing IT Impact on Business
Model Performance 120
Appendix 4B: Business Model Drivers and
Performance Metrics 124
Reading 1-1: The Five Competitive Forces That
Shape Strategy 128
Case 1-2: Amazon.com: The Brink of
Bankruptcy 146
Case 1-3: Canyon Ranch 156
Case 1-4: Boeing's e-Enabled Advantage 175
Case 1-5: Royal DSM N.V.: Information
Technology Enabling Business
Transformation 207
ix

Content

MODULE TWO
THE BUSINESS OF IT 233

Chapter 7
Managing IT Service Delivery 285

New Service Models 287

On Demand, Software as a Service, Utility, and Grid
Computing Models 290
Managing Risk through Incremental
The Drivers of Change: Better Chips, Bigger
Outsourcing 292
Pipes 236
An Incremental Outsourcing Example: Hosting 294
The Basic Components of Internetworking
Managing Relationships with Service Providers 296
Infrastructures
240
Selecting Service Partners 296
The Technological Elements of Networks 242
Relationship Management 299
The Technological Elements ofProcessing Systems 245
Managing Large-Scale Outsourcing
The Technological Elements of Facilities 248
Arrangements 302
Operational Characteristics of Internetworks 250
Why Companies Enter into Large-Scale Outsourcing
The Rise of Internetworking: Business
Relationships 303
Implications 252
Designing Large-Scale Outsourcing Alliances 304
The Emergence of Real-Time Infrastructures 252
Managing the Alliance 305
Broader Exposure to Operational Threats 254
Large-Scale Outsourcing: Here to Stay 306
New Models of Service Delivery 255
Managing Legacies 306
Managing Legacies 256
Managing IT Infrastructure Assets 309
The Future of Internetworking Infrastructure 256
Summary 310
Summary 257

Chapter 5
Understanding IT Infrastructure 235

Chapter 6
Assuring Reliable and Secure IT
Services 259
Availability Math 260
The Availability of Components in Series 261
The Effect of Redundancy on Availability 262
High-Availability Facilities 263
Uninterruptible Electric Power Delivery 264
Physical Security 264
Climate Control and Fire Suppression 265
Network Connectivity 265
Help Desk and Incident Response Procedures 265
N+ 1 and N + N Redundancy 265
Securing Infrastructure against Malicious Threats 267
Classification of Threats 268
Defensive Measures 273
A Security Management Framework 277
Risk Management of Availability and Security 278
Incident Management and Disaster Recovery 280
Managing Incidents before They Occur 281
Managing during an Incident 281
Managing after an Incident 282
Summary 282

Chapter 8
Managing IT Project Delivery 311
Managing Sources of Implementation Risk 312
Managing the "Dip " during Project Implementation 313
Portfolio Risk 314
Managing Proj ect Execution 315
Development Methodologies 316
Adaptive Methodologies 318
Adaptive Methods and Change Management 319
Process Consistency and Agility in Project
Management 320
Summary 321
Case 2-1: CareGroup 322
Case 2-2: The IPremier Company (A): Denial of
Service Attack 339
Case 2-3: Ford Motor Company: Supply Chain
Strategy 348
Reading 2-4: The Power of Virtual Integration: An
Interview with Dell Computer's Michael Dell 356
Case 2-5: Strategic Outsourcing at Bharti Airtel
Limited 368
Case 2-6: Cisco Systems, Inc.: Implementing
ERP 385

Content xi

MODULE THREE
IT LEADERSHIP 401
Chapter 9
Governance of the IT Function 403
The Essentials of Enterprise
Governance 404
The Benefits of Good Enterprise
Governance 405
Introducing IT Governance 405
The Impetus for Better IT Governance 406
The Business Value of IT 407
Recognition of IT Impact 407
IT as an Enabler of Corporate Governance and
Compliance 409
Benefits of Effective IT Governance 409
The Scope and Practice of IT
Governance 413
IT-Business Alignment 413
Investment Value 415
Project Delivery 415
Service Delivery 416
Resource Management 416
Measurement of IT Performance 416
Risk Management 417
Designing IT Governance: Critical Success,Factors
and Good Practices 417
Intentional but Minimalist Design 418 <'
Board-Level Leadership 418
Broad-Based Executive Involvement 419
Clear Ownership but Broad
Participation 419
Enforce Execution but Accommodate
Exception 420
Define Benefits and Target Expectations 421
Aim for Evolution Not Revolution in
Implementation 421Summary 422

Chapter 10

Leadership of the IT Function 423

Understanding the Role of IT in the Firm 423
Support 424
Factory 424
Turnaround 424
Strategic 425
Recognizing Transitions in the Role of IT 425
Turnaround Transitions 426
Factory Transitions 426
Strategic Transitions 427
Managing Tensions in the Changing Role of IT 428
Managing the Execution-Innovation Tension 428
Managing the IT-Business Relationship 429
Leadership Approaches to the Role of IT 430
Support: Organizing for Low-Cost Stability and
Incremental Improvement 430
Factory: Organizing for Factory-like Efficiency and
Reliability 431
Turnaround: Organizing for Experimentation and
Rapid Exploitation 432
Strategic: Organizing for Operational Discipline and
Business Agility 433
Summary 435
Appendix 10A: Leadership Implications of the
Role of IT 436
Reading 3-1: Information Technology and the
Board of Directors 438
Case 3-2: Volkswagen of America: Managing IT
Priorities 449
Case 3-3: The AtekPC Project Management
Office 462

Concluding Thoughts 475

Case C-l: The ITC eChoupal Initiative 477
Annotated Bibliography
Index 499

495