Chapter 12

Enterprise and Global Management of Information Technology

McGraw-Hill/Irwin

2008,The McGraw-Hill Companies, All Rights Reserved

Learning Objectives
1. Identify each of the three components of information technology management, and use examples to illustrate how they might be implemented in a business. 2. Explain how failures in IT management can be reduced by the involvement of business managers in IT planning and management. 3. Identify several cultural, political, and geoeconomic challenges that confront managers in the management of global information technologies. 12- 2

Learning Objectives
4. Explain the effect on global business/IT strategy of the trend toward a transnational business strategy by international business organizations. 5. Identify several considerations that affect the choice of IT applications, IT platforms, data access policies, and systems development methods by a global business enterprise. 6. 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: Hewlett-Packard: Managing Radical Change in IT to Support New Business Goals

It is important for CIOs to understand not only the technology and how it could be used to improve a business but also how to deliver those benefits. Companies like Hewlett-Packard face major challenges when implementing changes to make the IT function more efficient and vital contributor to their business success. Radical changes suggested by the CIO of HP, Randy Mott can lead to thousands of layoffs and changes in their culture. If these changes are not managed properly, it could lead to a disaster.
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Case Study Questions

1. Will the initiatives being undertaken by CIO Randy Mott to implement major changes to the IT function at HP make IT a more efficient and vital contributor to HPs business success? Defend your position on each of the major initiatives he is implementing. 2. Do you approve of the change management job Mott is doing, including his meetings with HP employees throughout the world and having coffee talks with them? Why or why not?
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Case Study Questions

3. Assume you have been hired as a management consultant or coach to CIO Mott. What are several suggestions you might give him to help him successfully implement his ambitious plans for IT changes at HP? Defend your proposals.

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Real World Internet Activity

1. Use the Internet to discover the current financial performance of HP and determine if HPs major changes and spending on IT are being viewed as a positive or negative contributor to its performance. Then investigate HPs competitive performance in market share, units sold, and other areas compared with Dell, Leveno, Sun, IBM, and any other competitors you find, as well as the reasons given for HPs current competitive stance.

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Real World Group Activity

2. Implementing major changes as CIO Mott is doing causes many employees to lose their jobs and much angst on the part of some of those who remain, whose jobs and work styles may also change.
Discuss how you would handle a change management process at HP or any other company faced with implementing similar decisions.

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Components of IT Management

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Managing Information Technology

Managing the joint development and implementation of business and IT strategies
Use 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

Managing the IT organization and IT infrastructure

Hardware, software, database, networks and other 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 Architecture
Making 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 Platform
Networks, 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
Organizational structure of the IS function within a company and the distribution of IS specialists

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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 activities such as:
Systems 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 Systems
Allocate 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, training and retaining qualified IS 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
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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 Technology Officer (CTO)

In 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 thirdparty 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 and end user involvement
Key ingredient to high-quality information systems performance

Involve managers in the management of IT

Governance structures such as steering committees

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Senior managements involvement in business/IT decisions

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Case 2: IBM Corporation: Competing Globally by Offshoring IT Workers and Giving Away Technology
IBM is expanding their development centers in India to compete with companies like Wipro, Infosys, and TCS. IBM is also giving away technology and its intellectual property to expand its business. According to Fortune magazine, IBM gives away at least $150 million worth of technology every year. The idea that giving things away makes the pie bigger for everybody is being embraced by IBM. When IBM gives away free tools, it often sells additional software and consulting services. As long as IT remains hard to use, expensive, and labor intensive, with customers continuing to need help solving business problems, IBM will have the opportunity to thrive.
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Case Study Questions

1. Do you agree with IBMs employment response to competition from software development contractors in India, like Wipro, that are expanding into IT consulting services? Why or why not? 2. Will IBMs plan to give away some of its IT assets and intellectual property and increase its support of opensource software products like Linux be a successful growth strategy in the brutally competitive marketplace in which it operates? Why or why not?

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Case Study Questions

3. Do you agree with IBM researchers assumption that IT will remain hard to use, expensive, and labor-intensive, with customers continuing to need help solving business problems for a long time to come? Should IBM bet its business on that assumption? Defend your answers to both questions.

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Real World Internet Activity

1. Use the Internet to research news on the latest developments in the competition to provide IT consulting services to businesses and governments. Check out IBMs performance, as well as major players like HP and Accenture, new entrants like Dell, and international competitors like Wipro. Who appears to be winning or losing in this arena? What reasons can you uncover for the results you find?

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Real World Group Activity

2. IBM eliminated 14,500 jobs, mostly in Europe, and then reportedly hired thousands of additional IT workers in India. Such cutting of high-cost jobs and offshoring jobs to a subsidiary in a lower-cost country is a controversial business strategy being used by other global companies.
Discuss the implications of this issue for your current or future career choices and the kinds of companies or organizations you would want to work for.
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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

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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

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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 Data Flows
Business 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 12- 56

Internet-enabled Collaboration in IT Development

Source: Adapted from Jon Udell, Leveraging a Global Advantage, Infoworld, April 21, 2003, p. 35. 12- 57

Case 3: Northwestern Mutual Life, GE, and Boeing: The Business Challenges of Outsourcing
Outsourcing of IT services provides cost savings. Financial-services companies like Northwestern Mutual Life can cut the cost of IT work by 39 percent by outsourcing it to vendors in low-cost countries. Companies that are outsourcing their IT services have to manage many challenges. Key challenges are: privacy, security, and effective management of the outsourcing relationship. Key issues to successful outsourcing are often unique to the company and its needs.
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Case Study Questions

1. The law does not require companies to disclose to their customers 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? 2. What is meant by the term best-of-breed model? Why has this approach worked for Boeing? 3. 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 a company may choose to outsource. Using the Internet and Figure 12.6 as your guide, see if you can find examples of companies that 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

2. Outsourcing and offshoring are controversial issues particularly when it comes to jobs. Discuss 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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