Managing & Using Information Systems: A Strategic Approach Discussion Please find the attached chapter 8 and follow the below instructions. In Chapter

Managing & Using Information Systems: A Strategic Approach Discussion Please find the attached chapter 8 and follow the below instructions.

In Chapter 8 of the text – Managing & Using Information Systems: A Strategic Approach, the chapter the Business of IT. This week we discuss the way business should have a strategic partnership with IT.

Using the lessons learned in Chapter 8 of the text about the way Information Technology should be a partnership with business, evaluate the organization you work for or an organization you are familiar with. Describe the IT reporting relationship in your organization. You can include an organization chart. Is the IT department a Business Partner? If not, how would you recommend the organization change to develop this type of relationship?

You must have 1 scholarly journal articles along with your text to support your analysis. Try to find articles that are less than 5 years old.

Initial posts must be 300 words but no more than 500 words. Responses to classmates 200 words each (2 required).

Please make sure you cite and support your posts. Please include a reference for each citation. Your post should use APA formatting. The Business of
Information Technology
This chapter explores the business of information technology (IT) and the customers it
serves. Beginning with the introduction of a maturity model to understand the balancing
act between the supply and business demand for information systems (IS), the chapter
describes key IT organization activities and relates them to one of three maturity levels. The
chapter continues with a discussion about the work done by the IT organization and how
the leadership within the IT organization ensures that activities are conducted efficiently and
effectively, both domestically and globally. We then examine business processes within the
IT department, including building a business case, managing the IT portfolio, and valuing
and monitoring IT investments. The remainder of the chapter focuses on funding models
and total cost of ownership.
After several months in the job of chief information officer (CIO) of Alcoa’s Industrial Chemicals
Business, Kevin Homer received a wake-up call from the president of the business: 1
We chose you because you were the best of the IT group, and you are doing a great job completing IT projects and managing the IT organization. But I am afraid that you don’t know the business of
your business. You haven’t thoroughly answered my repeated questions about how much IT costs the
business! Furthermore, you can’t communicate with the people running the business in words they
understand!
As a high-achieving math major in college with minors in computer science and business, Homer
was quite savvy about his craft and did not expect to hear these remarks. When he protested that
the structure of the financial information in European and Asian subsidiaries made it really difficult
to find the answer, his boss’s response surprised him: “If it wasn’t a hard problem, I wouldn’t need
you here!”
Interpreting this unpleasant meeting as his being “under review” for possible ouster, Horner
saw this as a wake-up call to the true meaning of being a C-level executive. He had found some
answers about cost issues, but many of the financial numbers were “buried”-inextricably intertwined in general categories of financial statements in Europe and Asia. He had some early results,
but managing the IT group took most of his time and effort.
Further, his early presentations were heavy with technical details and were often met with glazed
eyes and yawns. Homer reported that he began to realize that this audience did not want to hear
about the technology. “They certainly wanted me to handle technology issues, but they wanted me
to communicate with them in words they understood … people, time, money and the possibilities
technology created for them in their businesses. Most importantly they wanted me to help them to
use IT to grow the business at either the top line (sales) or bottom line (net income).”
6.,.
1
This story and all the quotes are based on a personal interview with Kevin Horner and one of our authors. March 23, 2015.
cha11ter
11m
The Business of Information Technology
Horner embarked on a re-energized mission to answer all of the president’s concerns in a more complete way,
and that mission ultimately paid handsome dividends both to him and Alcoa. If success can be measured by promotions, he went far beyond redeeming himself. After five years as CIO of Alcoa Chemical, he had many promotions
until he ultimately became CIO of Alcoa Global. In 2011, he took an opportunity to become chief executive officer
(CEO) of Mastech, a $100 million publicly traded IT staffing firm where he remains.
How did he achieve such resounding success? The first thing he did was to partner with the CFO to understand
the financials of the business. The CFO was able to determine how to peel back the layers of accounting numbers
and truly wrestle the IT costs from the general accounting categorizations where they comfortably hid. Within
60 days, the president and his management team had their answers.
But Horner did not stop at a good, solid set of internal cost numbers, a remarkable achievement in and of itself.
Rather than only gaze inside the firm, he found it most helpful to use the Hackett Group, an external benchmarking
consulting firm, to compare his costs against those of similar firms. This analysis was most helpful for the leadership of the business because after finding that the company was high on some key IT costs, the leaders all saw
the writing on the wall for the next mission: Find ways to reduce costs but continue to provide improved services.
Two key examples of how Homer addressed those needs will help explain his early success. He accompanied salespeople on actual sales calls to see exactly how the overall supply chain process worked. Then with that
information as a base, he was able to have the business provide reliable product information to customers, accelerating delivery of the products customers needed without creating excessive inventory buffers.
Homer also worked with procurement officials to renegotiate contracts for the highest-cost elements within the
company’s IT spending. For example, two very costly areas included telecommunications costs (including cell
phones) and PCs. He found two important cost-savings opportunities: eliminate unnecessary services and negotiate many small separate contracts as a larger unit, raising the business’s bargaining power. As contracts would
come up for renewal, a joint team from IT and procurement spearheaded an intense process to streamline costs,
focusing on the highest cost elements first. These contract negotiations led to another benefit: standardization,
which enabled further savings by simplifying items such as interconnectivity between segments of the business,
and PC and mobile phone support.
The lessons learned in Homer’s initial CIO role in the chemicals business transferred naturally into his next role
as CIO of Alcoa Europe, which was a collection of historical Alcoa businesses and locations along with several
newly acquired companies representing what Homer called “kind of a $3B ‘start-up’ company.” He knew immediately that he had to get a clear picture of the IT business in Europe from several perspectives-technology, applications, people, vendors, cost, and “quick wins,” which solved problems for his business leadership colleagues. This
time Homer didn’t need the questions from the business president to guide him: He had to quickly assess talent
in his team, determine total IT cost in the business, assist the management team to move to Europe from a structure focusing on legal entity driven reporting and reporting finances in a new structure that aligned with corporate
Alcoa and unified pan-European business units. As a result of his business-focused thrusts, within 24 months, the
entire unified structure was created and implemented; legal entity fiscal reporting was maintained; a shared service
function for finance, accounting, HR, and procurement plus the technology to operate it was implemented; Y2K
remediation was completed; and European IT costs were reduced by 25%.
What does this experience demonstrate? It shows that there are common denominators that every business leader
understands: people, time, and money. When a business leader wants to invest capital to produce more product or
a new product, that investment is scrutinized for cost and benefit. Horner says that a CIO should make sure IT is
not the exception to that rule. “Don’t talk about ERP or mobile apps, talk about what is going to happen to the
business … [and] to people, time, and money when you have the ERP or the mobile app,” he says. “Getting the
cost side of the IT organization in order represents table stakes for the CIO,” implying that you would wear out
your welcome by focusing inward. Rather than focusing only on managing the technologies and IT people and
describing new investments and initiatives by using “techy” jargon, a CIO should take a business viewpoint. If you
follow that advice, you will not only be welcome at the table but also will thrive. This demonstrates the Business of
Information Technology, the title of this chapter.
In this chapter, issues related to the business side of IT are explored. We begin by looking at key activities
managers can expect of their IT organization and, probably just as importantly, what the IT organization does not
Organizing to Respond to Business: A Maturity Model
Im
provide. The chapter continues with a discussion of key business processes within the IT organization, such as
building a business case, managing an IT portfolio, and valuing and monitoring IT investments. This is followed
by a discussion of ways of funding the IT department and an exploration of several ways to calculate the cost of
IT investments, including total cost of ownership and activity-based costing. These topics are critical for the IT
manager to understand, but a general manager must also understand how the business of IT works to successfully
propose, plan, manage, and use information systems.
Organizing to Respond to Business: A Maturity Model
The Alcoa situation just discussed reveals that IT leaders must make sure they have the right resources and organization to respond to business needs. It is not enough to focus inward on managing personnel, software, and equipment, which can seem like a full-time responsibility. IT managers must go beyond internal matters and partner
with their business colleagues. Responding to business demands adds substantially to IT managers’ responsibilities
because it requires them not only to manage the complexity within the IT function, but also to go well beyond what
seem to be the boundaries of IT and understand intricacies of their business partners.
Merlyn’s business-IT maturity model in Figure 8.1 provides characteristics of how engaged the IT function
can be with the rest of the organization at three unique levels of maturity. At Level 1, representing an immature IT
organization, IT managers maintain an inward focus. They merely react to specific needs that are brought to their
attention, often in an environment that emphasizes cost reduction. As the IT organization matures to Level 2, the
focus shifts to business processes, and IT personnel search for solutions to business problems. Level 3 represents
IT managers as business partners who search for ideas that provide value to the organization and value relationships
both inside and outside not only the IT organization but also the firm. They seek ideas that provide not only new
revenue but also help identify new opportunities that redefine the business.
This model illustrates that for IT to provide the most value to the business, IT managers and business managers
must recognize their mutual dependency and ensure that business capability has the technology support needed
for success. This model does not comment on the type of technology used but on the way the business organization approaches its use of IT. For example, in Level 3, business leaders see IT’s role as a business partner that
they can include in high-level meetings that explore new lines of business. Compare this approach with lower
levels of maturity. At Level 2, the focus would instead be on creating an effective business process, which has a
much more limited scope and impact. At Level 1, where the business demand for IT is primarily all about cost
Maturity Level
I Level3
Nature of the Level
IT as business partner
I
II Level 2 · · —
‘
I
— —
I Engagement Characteristics
•
•
•
•
•
Proactive
Outside-in
Relationship centric
Focused on business growth
Framed on a context of business
IT as solutions provider
• Process centric
• Focused on solutions
• Framed in a context of projects
—-+———-+————-;
Level 1
IT as order taker
• Reactive
l
• Inside-out
j
1
• Technology centric
• Framed in a context of cost
FIGURE 8.1
—-·-·———··-··-··—·-·-·—-··~ i
Business-IT maturity model.
Source: Adapted from Vaughan Merlyn, http://vaughanmerlyn.com/2014/04/01/the-disciplines-of-business-it-engagement/
(accessed April 22, 2015}.
Im
The Business of Information Technology
savings and foundation systems, the IT function might be seen more as a necessary evil that needs to be pushed
into a corner rather than expanded to flex organizational muscles. When the maturity of the IT organization rises
to Level 3, it is able not only to keep up with business demands but also to enhance the business in ways that were
not envisioned before.
This chapter describes the complex, multifaceted tasks for which an IT organization takes responsibility and
how IT is organized. The chapter describes both the internal and external issues that must be handled by IT leaders
and the personnel responsible for them. The description is presented in a context of how the IT organization must
make it a priority to partner with business leaders. Because running the business of IT requires funding, we also
explore how to fund IT projects to support business and how to cover the operational costs.
Understanding the IT Organization
Consider the analogy of a ship to help explain the purpose of an IT organization and how it functions. A ship transports people and cargo to a particular destination in much the same way that an IT organization directs itself toward
the strategic goals set by the larger enterprise. All ships navigate waters, but different ships have different structures,
giving them unique capabilities such as transporting people versus cargo. Even among similar categories, ships
have different features, such as those configured to transport a cargo of finished products versus one configured to
transport a cargo of oil. All IT organizations provide services to their businesses, but based on the skills and capabilities of their people, the organizational focus of their management, and their state of maturity, they, too, differ
in what they can do and how they work with the businesses. Sometimes the IT organization must navigate perilous waters or storms to reach port. For both the IT organization and the ship, the key is to perform more capably
than any competitors. It means doing the right things at the right time and in the right way to propel the enterprise
through the rough waters of business.
Different firms need to do different things when it comes to IT. Because firms have different goals, they need to ..,,;
act in different ways and as a result, there are differences in the IT activities that are provided. But even if two firms
have similar goals, the firms’ size, organization structure, and level of maturity might affect what the IT organization in each firm is expected to do.
What a Manager Can Expect from the IT Organization
We look at the IT organization from the perspective of the customer of the IT organization, the general manager, or
“user,” of the systems. What can a manager expect from the IT organization? Just as IT leaders benefit from understanding their business partners, a general manager benefits from understanding what the IT organization does.
Managers must learn what to expect from the IT organization so they can plan and implement business strategy
accordingly. Although the nature of the activities may vary in each IT organization depending upon its overall goal, a
manager typically can expect some level of support in 14 core activities: (I) developing and maintaining information
systems, (2) managing supplier relationships, (3) managing data, information, and knowledge, (4) managing Internet
and network services, (5) managing human resources, (6) operating the data center, (7) providing general support,
(8) planning for business discontinuities, (9) innovating current processes, ( 10) establishing architecture platforms
and standards, (11) promoting enterprise security, (12) anticipating new technologies, (13) participating in setting
and implementing strategic goals, and (14) integrating social IT. 2 These activities are briefly described in Figure 8.2.
Although the activities could be found at any maturity level, we indicate in Figure 8.2 the level where they are
especially important. Recall that Level 1 focuses on cost savings and efficiency of business operations; Level 2
takes a process view, provides services of an integrated nature across the organization, and supports decision making to maximize business effectiveness; and Level 3 focuses on innovation and support of business strategy. This
progression implies that the scope of activities in the IT organization expands with increased IT maturity.
‘ Eight activities are described by John F. Rockart, Michael J. Earl, and Jeanne W. Ross. “Eight Imperatives for the New IT Organization,” Sloan
Management Review (Fall 1996), 52-53. Six activities have been added to their eight imperatives.
..,,,,J
What a Manager Can Expect from the IT Organization
Im
! Maturity Level
Description
————–··——-. ———————————+————1
Activity
i1
Developing and
maintaining systems
• Together with business users, analyze needs, design, write, and test the
software
• Identify, acquire, and install outside software packages to fill business
needs
• Correct system errors or enhance the system to respond to changing
business and legal environments
Managing supplier
relationships
• Maximize the benefit of supplier relationships to the enterprise and
pre-empt problems that
occur
Managing data,
information, and
knowledge
• Collect and store data created and captured by the enterprise (Level 1)
• Manage enterprise information and knowledge (Level 2)
1, 2
Managing Internet and
network systems
• Develop and maintain Internet access and capabilities
• Manage private networks, telephone systems, and wireless
technologies
• Design, build, and maintain the network architecture and infrastructure
1, 2 (depending
on nature of
network)
Managing human
resources
• Hire, train, and maintain good staff performers; fire poor performers
• Work with enterprise HR personnel to learn up-to-date regulations
practices
– -·-
–·—·—– —–···
. . ···-··-·····–·-···- —- ·-··-·-·-····-····· -···-· ··-
– ·–·–·–····–
…. ·-·······-···—·—-·- —·-·-··-··-······-·—–·–·· – – –
Operate and maintain large mainframe computers, rows of servers, or
other hardware on which the company’s systems are built
Provide connections between the firm’s systems and cloud services
Operating the data
center
Providing general
support
•
•
•
•
•
Manage diverse help desk activities
Collect and record support information
Assign appropriate personnel to support cases
Follow up with vendors as needed
Follow up with business contacts with updates or solutions
Planning for business
discontinuities
• Develop and implement business continuity plan
• Make preparations to counter physical or electronic attacks, hacking
attempts, weather disasters, and other events that could cripple the
enterprise
Innovating current
processes
• Work with managers to innovate processes that can benefit from
technological solutions
• Explore modifications that can reduce costs, improve service, or
connect with customers
• Design systems that facilitate new ways of doing business
architecture
platforms and standards
• Develop, maintain, and communicate standards
• Maintain consistency and integrity of the firm’s data
!1
!
i
r1·!
I
i1
‘
2
Promoting enterprise
security
• Maintain the integrity of the enterprise infrastructure
• Develop and implement enterprise information security policies,
strategy, and controls
• Identify, prioritize, and guard against threats to the enterprise’s
information assets
1
Work with business units to enhance security of operational practices
• Train employees to raise awareness, importance, and under…
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