McGraw-Hill/Irwin 12-1

Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

12
Enterprise and Global Management of Information Technology
Management of Information Technology Outsourcing and Offshoring Global Business/IT Strategy

McGraw-Hill/Irwin

Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
1.

2.

3.

Identify each of the three components of information technology management, and 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. Identify several cultural, political, and geoeconomic challenges that confront managers in the management of global information technologies.

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Learning Objectives
4.

5.

6.

Explain the effect on global business/IT strategy of the trend toward a transnational business strategy by international business organizations. 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.

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Case 1: Some People Just Never Learn

IT

failures

Show

up in earnings losses User companies often file lawsuits against vendors or consultants Notorious failures are usually big and complex projects
Companies

repeat the same mistakes

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Case Study Questions

1. 2. 3.

What are some of the reasons projects such as those discussed in the case end up as failures? What key management decisions might help to prevent IT failures? Why are companies often too embarrassed to report their IT failures?

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Real World Internet Activity

1.

The IT failures reported in the case occurred prior to 2000. Using the Internet,
See if you can find examples of more recent IT failures. What caused them to occur? Have we learned anything to help prevent such failures in the future?

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Real World Group Activity

As

we learned in Chapter 10, an IT project can fail as a result of mistakes that occur even during the late stages of implementation. In small groups,
Discuss

success. What are the key success factors that you would pay close attention to in your project.

how you would manage a project to ensure its

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Components of IT Management

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Managing Information Technology

Managing
Use

the joint development and implementation of business and IT strategies

IT to support the strategic business priorities Align IT with strategic business goals

Managing

the development and implementation of new business/IT applications and technologies

Managing

information systems development software, database, networks and other

Managing

the IT organization and IT infrastructure

Hardware,

resources

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Business/IT Planning Process

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Components of Business/IT Planning

Strategy

Development

Developing

business strategies that support a companys business vision

Resource

Management

Developing

strategic plans for managing or outsourcing a companys IT resources

Technology
Making

Architecture

strategic IT choices that reflect an information technology architecture designed to support a companys business/IT initiatives

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Information Technology Architecture

Technology
Networks,

Platform

computer systems, system software and integrated enterprise application software

Data

Resources

Operational

and specialized databases Store and provide data and information for business processes and decision support

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Information Technology Architecture

Applications

Architecture

Integrated architecture

of enterprise systems that support strategic business initiatives as well as crossfunctional business processes

IT

Organization
of the IS function within a company and the distribution of IS specialists

Organizational structure

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Organizing IT
Early

years: centralization of computing with large mainframes Next: downsizing trend with a move back to decentralization Current: centralized control over the management of IT while serving strategic needs of business units
Hybrid

of both centralized and decentralized components

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Organizational Components of IT at Avnet Marshall

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Application Development Management

Managing
Systems

activities such as:

analysis and design, prototyping, applications programming, project management, quality assurance, and system maintenance for all major business/IT development projects

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IS Operations Management
Use

of hardware, software, network, and personnel resources in the corporate or business unit data centers of an organization Includes computer systems operations, network management, production control and production support
Data

centers are the computer centers of an organization

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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, and Produce detailed statistics that are invaluable for effective planning and control of computing capacity

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Features of Systems Performance Monitors

Chargeback
Allocate

Systems

costs to users based on the information services rendered

Process

Control Capabilities

Systems

that not only monitor but automatically control computer operations at large data centers

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IT Staff Planning
Recruiting,

personnel Evaluate employee job performances and reward outstanding performances with salary increases and promotions Set salary and wage levels and design career paths so individuals can move to new jobs through promotion and transfer as they gain in seniority and expertise

training and retaining qualified IS

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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
In

Technology Officer (CTO)

charge of technology management: all information technology planning and deployment Managing the IT platform Second in command

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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

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Outsourcing
The

purchase of goods or services from third-party partners that were previously provided internally

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Outsourcings Top Ten

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Why outsource?
Save

money achieve greater ROI Focus on core competencies organization can focus on the business that they are in Achieve flexible staffing levels Gain access to global resources Decrease time to market

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Offshoring
Relocation

of an organizations business processes To a lower-cost location, usually overseas

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IT Management Failures
IT

not used effectively

Computerize

traditional business processes Instead of developing innovative e-business processes

IT

not used efficiently

Poor

response times and frequent downtimes Poorly managed application development projects

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Management Involvement and Governance

Managerial
Key

and end user involvement

ingredient to high-quality information systems performance

Involve

managers in the management of IT

structures such as steering committees

Governance

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Senior managements involvement in business/IT decisions

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Case 2: CIOs Need to Think Globally and Act Locally

Enterprises

globalize for different reasons

Examples:

global customers, seeking growth opportunities, cost efficiencies

CIOs

IT globalization decisions should

Determine the

balance of global integration versus local responsiveness Align ITs major processes with the enterprises governance orientation Assign staff, roles, and competencies appropriately

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Case Study Questions

1. 2. 3.

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 CIO manage the requirements to both globalize and localize the IT function?

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Real World Internet Activity

1.

One of the issues facing the CIO is the assessment of IT maturity in the countries they operate in. Using the Internet,
See if you can find examples of countries where the IT maturity is still low and, thus presents a greater challenge. What are the characteristics of a low IT maturity country?

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Real World Group Activity

One

of the prescriptions offered in the case was to align ITs major processes with the enterprises governance orientation. In small groups,
Discuss

the meaning of this prescription. What is meant by governance orientation? How can IT become better aligned with the organization in this regard? Is there one right way to govern IT?

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Global IT Management
Develop

appropriate business and IT strategies for the global marketplace Develop the portfolio of business applications needed to support business/IT strategies Determine the technology platform needed Determine the systems development projects that will produce the required global information systems

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Global IT Management Dimensions

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Global IT Management Challenges

Political

Geoeconomic

effects of geography on the economic realities of international business activities Cultural

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Political Challenges
Rules

regulating or prohibiting transfer of data across national boundaries Severely restricted, taxed, or prohibited imports of hardware and software 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 Reciprocal trade agreements that require a business to spend part of the revenue they earn in a country in that nations economy
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Geoeconomic Challenges
Sheer

physical distances Difficult to get good-quality telephone and telecommunications services Differences in the cost of living and labor costs

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Cultural Differences
Languages

Cultural

Interests Religions Customs Social Attitudes Political Philosophies

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Transnational Strategies
Business

depends heavily on its information systems and Internet technologies to help integrate global business activities Develop an integrated and cooperative worldwide IT platform

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Transnational Business/IT strategies

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Global Business Drivers

Business

requirements caused by the nature of the industry and its competitive or environmental forces Examples of drivers:
Global

Customers Global Products Global Operations Global Resources Global Collaboration

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Global IT Platform
Managing

the hardware, software, data resources, telecommunications networks, and computing facilities that support global business operations Technically complex with major political and cultural implications

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International Data Communications Top 10 Issues

12-45

Internet as a Global IT Platform

Technology

platform free of many traditional international boundaries and limits Expand markets, reduce communications and distribution costs, and improve profit margins without massive cost outlays for telecommunications

12-46

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?

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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 youll 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?

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Internet Users by World Region

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Global Data Access Issues

Transborder
Business

Data Flows

data flow across international borders over the telecommunications networks of global information systems May be viewed as violating a nations sovereignty because avoids custom duties Or violating their laws to protect local IT industry from competition or their labor regulations for protecting local jobs

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U.S.-E.U Data Privacy Requirements

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

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Internet Access Issues in Most Restrictive Countries

High

Government Access Fees Government Monitored Access Government Filtered Access No Public Access Allowed

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Global Systems Development

Conflicts

over local versus global system requirements Difficulties in agreeing on common system features Disturbances caused by systems implementation and maintenance activities Global standardization of data definitions

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Systems Development Strategies

Transform

an application used by the home office into a global application System used by a subsidiary that has the best version of an application will be chosen for global use Set up a multinational development team with key people from several subsidiaries to ensure that the system design meets the needs of local sites as well as corporate headquarters

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Systems Development Strategies

Parallel

Development parts of the system are assigned to different subsidiaries and the home office to develop at the same times based on the expertise and experience at each site Centers of Excellence an entire system may be assigned for development to a particular subsidiary based on their expertise in the business or technical dimensions needed for successful development Offshore Development outsource the development work to a global development company
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Internet-enabled Collaboration in IT Development

Source: Adapted from Jon Udell, Leveraging a Global Advantage, Infoworld, April 21, 2003, p. 35.

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Case 3: The Hard Road to Outsourcing

Can

cut the cost of IT work by 39 percent by outsourcing it abroad But it carries privacy risks And threatens US jobs

12-57

Case Study Questions

1.

2. 3.

The law does not provide for companies to disclose to their customers the fact that they have outsourced or offshored access to their data. Is this a potential problem for either the company or the customer? Why or why not? What is meant by the term best-of-breed model? Why has this approach worked for Boeing? 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?

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Real World Internet Activity

1.

Each of the companies in the case shares a common goal, but from a different perspective. As we learned in the chapter, there are a variety of reasons why a company may choose to outsource. Using the Internet and Figure 12.8 as your guide,
See if you can find examples of companies who have chosen to outsource for reasons different from the three outlined in the case. What were their reasons?

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Real World Group Activity

Outsourcing
Discuss

and offshoring are controversial issues particularly when it comes to jobs. In small groups,
the pros and cons of this issue. Should we curtail outsourcing and offshoring to protect jobs? Are new jobs being created to replace the ones lost?

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