CHAPTER 1

The Evolving Role of IS/IT in

Organizations :
A Strategic Perspective

Strategic Planning
for Information
Systems
Third Edition

John Ward and Joe Peppard

Perencanaan?

Strategi?
Sistem

Introduction
IT has become inextricably intertwined with
business (Rockart, 1988)

Depends on the effective

applications of IT

Most organization (all sectors)

dependent on their IS
With e-Commerce, use of technology is
accepted (indeed expected) way of
conducting business

Source for competitive

advantage

Learning from exp ience

the success and failures
of the past is one of the
most important as cts of
strategic manage nt.

IS & IT needs to be managed

strategically
Less strategic approach
legacy system

Support existing business

operations.

? Helpful to understand how the role of

technology-based IS has evolved in
organizations.

Effectiveness IT/IS & business

benefits
1.
2.
3.
4.
5.
6.

The capabilities of the technology;

The economics of deploying the technology;
The applications that are feasible;
The skills & abilities available in-house or
external sources to develop the applications;
The skills & abilities within the organization use
to the applications;
The pressures on the particular organization or its
industry to improve performance.

 IT/ICT refers specifically to technology,

essentially hardware, software and
telecommunications networks.
Tangible (e.g. servers, PCs,
Intangible (e.g. software)
IT/ICT facilitates the acquisition, processing,
storing, delivery and sharing of information &
other digital content.
IS the means by which people &
organizations, utilizing technology, gather,
process, store, use & disseminate
information (UK Academy of ISs)
Some IS are totally automated by IT.

IS Environment

Application

The use of IT to address a business activity or process.

Two types of applications:
1.

General uses of IT HW & SW to carry out particular tasks such as

word processing, electronic mail or preparing presentation
materials.
2. Use of technology to perform specific business activities
or
processes such as general accounting, production
Pre-packaged,
scheduling orpre-written SW programs or be developed inhouse
orprocessing.
outsourced. e.g. ERP packages
order

In order to create a system that effectively supports

users, it is first necessary to conceptualize that
which is to be supported (the IS), since the way it is
described will dictate what would be necessary to
serve or support it (the IT).

Why organizations fail to realize

benefits from investments in
IT?
Investments made only in technology;
Not understanding or analyzing the nature
of activities that the technology is to
support strategically or operationally in
the organization;

Stages of evolution
Computer (DP)
Management
Initiation
Contagion
Control

Information Systems
Management
Integration
Data management
Maturity

Transition from DP to
MIS
Change in how IS/IT
resources were
managed
Change in how the
role of IS/IT is
evaluated
Strategy for
management of
IS/IT

Stages of Growth Model

1.
2.
3.
4.
5.
6.

Initiation
Contagion
Control
Integration
Data
Manageme
nt
Maturity

Initiation
Computer-based IT had recently been introduced,
often in the accounting and finance areas
Initial applications were replacement of rule-based
labor-intensive computational activities such as
payroll, accounts and ledger
Analysis and design activities were not formalized
and were left to the initiative of a programming

unit

Project planning and scheduling were

undeveloped.

Contagion
Users became aware of possibilities,
and began agitating for applications,
which proliferated in an uncoordinated
manner
The data processing departments
profile increased, it maintained control
of the apparently arcane procedures
necessary for implementing software,
but its promise of new systems
exceeded its capacity to produce
them.

Control
Budget overruns,
Implementation failures, and senior
management disenchantment, led to
stronger financial control
Project planning, and a greater
attempt to meld management of IT
with understanding of business
processes

Integration
Technological progress produced database
driven solutions for business processes,
which could now be brought together from
their disparate and often uncoordinated
applications

Management information systems were

becoming more generic information systems,
and decentralized
End user computing began its development
and facilities such as information centers
were
formed for user support.

Data administration
Recognition of the information resource
becomes widespread
The orientation of systems becomes
of
one data use
Information management becomes a
means of assuring data quality through
information repositories, and user
responsibility and ownership of
information.

Maturity
The information resources are managed
with the strategic planning framework of
the enterprise
Representation on the senior
management group, perhaps under a
designated chief officer.

Three Era Model

Data Processing (DP) Era
To improve operational efficiency by automating
information-based processes

Management Information Systems (MIS) Era

To increase management effectiveness by
satisfying their information requirements for
decision making

Strategic Information Systems (SIS) Era

To improve competitiveness by changing the

nature or conduct of business IS/IT as a source
of competitive advantage

Historic Perspective

Data Processing (I)

Need to understand the process of developing

complete information systems, not just the
programs to process data.
More requirements and data analysis to
improve systems linkages and a more
engineered approach to designing systems
components

More appropriate justification of investments

by assessing the economics of efficiency
gains and converting these to return on
investment

Data Processing (II)

Less creative, more structured approaches to

programming, testing and documentation to reduce the
problems of future amendments, more discipline was
introduced with change control procedures and sign
off on specifications and tests

Extended project management which recognized the

need for coordination of both user and DP functions
and the particular need to establish user
management in
a decisive role in the systems development the user
had to live with the consequences
The need for planning the interrelated set of systems
required by the organizations, better planning produced
overall improvements in systems relevance and
productivity

Management Information Systems

Justification of IS investments is not entirely a matter of

return on investment / financial analysis
Databases require large restructuring projects and
heavy user involvement in data definition data
integration had been weak based on the project by
project DP approach
The IS resource needs to move from a production to a
service orientation to enable users to obtain their own
information from the data resource the information

centre concept
Need for organizational policies, not just DP
methodologies

Personal computers and office systems enable better

MIS to be developed, provided that users and IS people
both focus on the information needs rather than the

Factors Shifting Emphasis From

Internal to External
1990s Business Forces
Globalization
Worldwide competition
Productivity requirements
Volatile environment
Increased Connectivity
Inter-organizational business relationships
Intra organizational coordination for increased efficiency and
effectiveness

Adaptable organization structures

1990s Information Technology Opportunities

Continued dramatic cost performance and capacity advances
New IT architectures encompassing:
- Extensive communications networks
- Accessible distributed databases
- Enhanced human interface workstations
Source: Scott Morton Fig 2.2

Role of IS
Commodity Service Provider

IT is for efficiency
Budgets are driven by external benchmarks
IT is separable from the business
IT is seen as an expense to control
IT managers are technical experts

Role of IS
Strategic Partner

IT is for business growth

Budgets are driven by business strategy
IT is inseparable form the business
IT is seen as an investment to manage
IT managers are business problem solvers

IS Application Portfolio
Assessment of Corporate Contribution

Relationship between business, IS and

IT strategies

Why have an IS/IT Strategy?

Systems investments are made that do not
support business objectives

Loss of control of IS/IT

Systems are not integrated
No means for prioritising investments
No mechanisms for deciding
optimum resource usage

Why have an IS/IT Strategy?

Poor management information
Misunderstandings between users and IT
specialists
Technology strategy is incoherent and constraints
options
Inadequate infrastructure investments made

Problems caused by IS/IT investments can

become a source of conflict

Localized justification of investments can produce

benefits that are counterproductive in the overall
business context

Levels of Integration
Type 1: Separate planning with
administrative integration.
Weak relationship between business
strategy and IS strategy.
Little effort to use IT to support business
plans

Levels of Integration
Type 2: one-way linked planning with
sequential integration.
Business strategy provides the direction for
IS strategy.
IS strategy focuses on supporting the
business strategy

Levels of Integration
Type 3: Two-way linked planning with
reciprocal integration
Business strategy and IS strategy are
interdependent.
IS strategy supports and influences
business strategy.

Levels of Integration
Type 4: Integrated planning with full
integration
Little distinction between business strategy
and IS strategy
Business and IS strategy are developed
concurrently in the same integrated
planning process

Levels of Integration
The type of integrative approach a
company takes may depend on the attitude
to information systems
We need to take a strategic view.
IS as value adders rather than costs
sinks..
integration between IS and the business
The integration of business strategy, IS
and IT needs to be much closer.

cess Factor In Strategic Information Sys

1. External, Not Internal, Focus
2. Adding Value, not cost
reduction
3. Sharing the benefits
4. Understanding Customers
5. Business-driven Innovation,
not technology-driven
6. Incremental Development
7. Using the information gained

The Central Theme of this Lecture

The . . obvious conclusion about the

evolution of the management of
is
IS/IT
that it has creep precisely away from the
computer room, through the IS
department and is now clearly a process
that depe nds users and senior
management
involvement for success
on
/0

Adapted from : Strategic Planning for Information Systems W-ard et al pg 44

Case Study
1.American Hospital Supply
-AHS owned terminal
2.American Airlines
- First US carrier to offer an online
reservation system to travel
agent
- Displaing its own flight first
3.Otis Elevator
- A prompt lift repair service
4.Amazon.com
- The profiling technology

Conclusion

Information Systems Planning is strategic.

It will influence what the organization does
and may affect its profitability - short and
long term.
How you gather, manage, and use
information will determine whether you win
or lose
- Bill Gates

Quick Quiz

1. What is differences between

IS and IT ?
2. Why do we need IS/IT
strategy ?
3. Why IS/IT strategy is closely
related with IS/IT planning ?