Course

: 7233M Information System Strategic Planning

The evolving role of information

systems and technology in
organizations :
a strategic perspective
Session 1

AGENDA
1.
2.
3.
4.
5.
6.
7.

Information system and information technology;

Early views models of IT/IS in organizations;
Early views models and model up to 1980;
The DP and MIS Eras : the lesson learned;
Three era model;
The strategic information system era;
Strategic uses of IS/IT : classification; Factors for success and
management implications;
8. Success factors in strategic information systems;
9. The management implications;
10. What is IS/IT strategic?
11. The context for IS/IT Strategy;
12. Toward a fourth era : an organizational IS capability;

Introduction
Today, most organizations in all sectors of
industry, commerce and government are
fundamentally dependent on their information
systems.
In order to manage information systems and
information technology (IS/IT) strategically, it is
helpful to understand how the role of technologybased information systems has evolved in
organizations.

 While organizations today want to develop a more

strategic approach to managing IS/IT, many have
probably arrived at their current situation as a result of
various short-term tactical decisions regarding IS/IT.
Learning from experiencethe successes and failures of
the pastis one of the most important aspects of strategic
management. Earl has noted that much learning about the
capability of IT is experiential, and that organizations tend
to learn to manage IS/IT by doing, not appreciating the
challenges until they have faced them.

A number of important forces affect the pace and effectiveness of

progress in using IS/IT and in delivering business benefits. The
relative weighting of each factor varies over time, and will also vary
from one organization to another. These factors include:
.
.
.
.

the capabilities of the technology;

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

Information system and information

technology;
IS ?
IT ?

IT refers specifically to technology, essentially hardware,

software and telecommunications networks. It is thus both
tangible (e.g. with servers, PCs, routers and network cables)
and intangible (e.g. with software of all types).
IT facilitates the acquisition, processing, storing, delivery and
sharing of information and other digital content.
In the European Union, the term Information and
Communication Technologies or ICT is generally used instead
of IT to recognize the convergence of traditional information
technology and telecommunications, which were once seen
as distinct areas.

 The UK Academy of Information Systems (UKAIS) defines

information systems as the means by which people and
organizations, utilizing technology, gather, process, store, use
and disseminate information.
It is thus concerned with the purposeful utilization of
information technology.
The domain of study of IS, as defined by the UKAIS, involves
the study of theories and practices related to the social and
technological phenomena, which determine the development,
use and effects of information systems in organizations and
society.

 Another term that is frequently used along with IS and IT is

application. Essentially, an application refers to the use of
IT to address a business activity or process. There are
essentially two types of application:
. general uses of IT hardware and software to carry out
particular tasks such as word processing, electronic mail or
preparing presentation materials;
. uses of technology to perform specific business activities
or processes such as general accounting, production
scheduling or order processing.

e-business and e-commerce

E-business, on the other hand, has come to refer to
the automation of an organizations internal business
processes using Internet and browser technologies.
Unfortunately, the potential benefits and impact of
those aspects of IS/ IT that have been labelled ebusiness, e-commerce and latterly
mcommerce and t-commerce have been exaggerated,
resulting in tremendous hype surrounding these
concepts, much of it fuelled by technology vendors
and the media.

 Right up until the Nasdaq crash in March 2000, we could

not fail to pick up a newspaper or magazine without
reading a story about the Internet and its impact.
Attention grabbing headlines such as The net changes
everything, Log on or log out or The death of the job
and articles spotlighting the 21st century economy with
promises of change in the lives of everyone ensured that
the Internet became a popular topic of conversation.
Acronyms such as B2B (business-tobusiness), B2C
(business-to-consumer), B2E (business-to-employee) and
P2P (peer-to-peer) entered the business vocabulary.

 In a similar vein, Hamel, in his book Leading the

Revolution, 21 is quite forthright in stating that
[t]he real story of Silicon Valley is not e, but
i, not electronic commerce but innovation and
imagination. . . . It is the power of i, rather than
e, that separates the winners from the losers in
the twenty-first century economy.

Early views models of IT/IS in

organizations;

The use of computers in business began in the

early 1950s but really only became significant in
the mid- to late 1960s with the development of
multi-purpose mainframe computers.
During the 1970s, minicomputers of increasing
power and sophistication were used for a variety
of business applications that were either not
feasible or economic in a mainframe environment

 The most well known of these models, capturing the

evolution of IS/IT in an organization, was developed by
Gibson and Nolan [26] during the 1970s. [27] This
model, in turn, used a hierarchical application portfolio
model described by Anthony, [28] who defined a
structure for information systems in an organization,
based on a stratification of management activity into:
strategic planning;
management control;
operational control;

Transition between computer and information management:

relationships and emphases (source: partly derived from EDP
AnalyserHow the management job is changing, June 1984, Vol.
22, No. 6)

Research by Hirschheim and colleagues [38] supported the

rationale of this transition, based on studying the evolving issues
associated with IS/IT management in organizations. They
described it in terms of a three stage model. The stages are
described as:
1. Delivery: IS issues are mainly internalimproving the ability to
deliver and support the systems and technology. Achieving top
management credibility as a valuable function is a prime
objective. This means improving delivery performance, not
necessarily providing users with what they really need.
2. Reorientation: establishing good relationships with the main
business functions, supporting business demands through the
provision of a variety of services as computing capability spreads
through the business. The issues focus is extended outside the
DP department and a key objective is to provide a valued
service to all business function management. Different areas will
benefit differently without regard to business importance.

3. Reorganization: the high level of awareness created both locally in

the business area and centrally in senior management creates the Early
Views and Models of IS/IT in Organizations 13 need for a reorganization
of responsibilities designed to achieve integration of the IS investment
with business strategy and across business functions. A key objective
becomes the best way of satisfying each of the differing business needs
through a coalition of responsibilities for managing information and
systems.
The last stage equates to the top-down, strategic view, while the first two
describe the climb to the position of considering the role [of IS/IT] in the
enterprise.

Early views models and model up to

1980;

The DP and MIS Eras : the lesson

learned;

There have been essentially three parallel threads of evolution that

have enabled more extensive and better information systems to be
developed:
. Hardwarereducing cost and size, improving reliability and
connectivity, enabling the system to be installed closer to the
business problem.
. Softwaremore comprehensive and flexible operating software and
improved languages, enabling business applications to be developed
more quickly, with greater accuracy and by staff with less experience.
In addition, there was an increased availability of application packages
available off the shelf .
. Methodologyways of organizing and carrying out the multiplicity of
tasks, in a more coordinated, synchronized and efficient way to enable
ever more complex systems to be implemented and projects to be
managed successfully.

Three era model;

The prime objective of using IS/IT in the eras differs:
. data processing to improve operational efficiency by
automating information-based processes;
. management information systems to increase
management effectiveness by satisfying their
information requirements for decision making;
. strategic information systems to improve
competitiveness by changing the nature or conduct of
business (i.e. IS/IT investments can be a source of
competitive advantage).

The strategic information system era;

The use of IS/IT was thus directly influencing their
competitive position and had become a new
weapon to improve their competitiveness,
implying a new relationship between IS/IT
investment and strategic development.

Strategic uses of IS/IT : classification;

Factors for success and management
implications;

The four main types of strategic system appear to be:

1. those that share information via technology-based
systems with customers/consumers and/or suppliers and
change the nature of therelationship;
2. those that produce more effective integration of the use of
information in the organizations value-adding processes;
3. those that enable the organization to develop, produce,
market and deliver new or enhanced products or services
based on information;
4. those that provide executive management with
information to support the development and
implementation of strategy (in particular, where relevant
external and internal information are integrated in
analysis).

Notowidigdo [54] divided strategic

informationsystems into:
. internal systems that have direct benefit for the
company;
. external systems that have direct benefits for
the companys customers.

 A similar approach was adopted by Venkatraman [55] in assessing

how the strategic benefits from IT resulted from increasing degrees of
business change (and risk!).
He considered the early evolutionary stages of IT use in much the
same way as described earlier in this chapter for DP and MIS.
However, he described three types of revolutionary uses of IT, which
require considerable transformation in terms of what the organization
does or how it does it:
1. business process redesignusing IS/IT to realign business activities
and their relationships to achieve performance breakthroughs;
2. business network redesignchanging the way information is used by
the organization and its trading partners, thereby changing how the
industry overall carries out the value-adding processes;
3. business scope redefinitionextending the market or industry.

Success factors in strategic

information systems;
1.
2.
3.
4.
5.

External, not internal, focus:

Adding value, not cost reduction:
Sharing the benefits:
Understanding customers
Business-driven innovation, not technologydriven:
6. Incremental development,
7. Using the information gained

The management implications;

What is IS/IT strategic?

Essentially, an IS/IT strategy is composed of two
parts:
an IS component and an IT component.

 The IS strategy defines the organizations

requirement or demand for information and
systems to support the overall strategy of the
business.
The IT strategy is concerned with outlining the
vision of how the organizations demand for
information and systems will be supported by
technologyessentially, it is concerned with IT
supply.

 We will often use the term IS demand to refer

tothe IS strategy.
Similarly, when we use the term IT supply, we are
referring to the IT strategy.

The context for IS/IT Strategy;

Figure 1.9 Environments of IS/IT strategy

Toward a fourth era : an organizational

IS capability;
However, to date, no one has clearly defined IS capability beyond an
expression of its core objective of enabling an organization continuously
to derive and leverage value through IS/IT. This presents a serious
challenge for organizations who seek to understand and develop an
ongoing IS capability, as there is little guidance about how organizational
resources contribute toward both its development and deployment.
Remember that Dell, Cisco, Bankinter, Amazon.com and the many
other companies mentioned in this chapter have gained advantage by
using technologies that are non-proprietary and widely available to all.
In the final chapter, this concept of IS capability is further explored and
developed, and we suggest that it does represent the emergence of a
new era.

Summary
The evolution of information systems and technology
in a business and organizational context has been
erratic, but, without doubt, IS/IT has inexorably
increased its importance as the economics and
capability have enabled more to be achieved.
Increasingly, competitive business environments have
provided a motivation to invest in more efficient and
effective ways of carrying out business processes and
managing the business. Although the progress has
been fitful and unsynchronized, patterns can be
observed.

The two major eras of DP and MIS are well

established and much can be learnt from themin
particular, that the best ways of planning for
applications, given the contribution they can make to
the business, were only discovered well into the eras,
from painful experience in many cases. Often the
secret of better IS/IT planning was only discovered
after initial enthusiasm had turned to frustrationjust
before disillusion was about to occur; necessity
perhaps being the mother of invention of better
approaches!

We are now well into the third era, with bigger prizes and, reciprocally,
greater risks, when the business can become critically dependent on its
investment in systems not just for its success but for its very survival
planning for information systems has become strategic for many
companies.
That does not mean that previously-developed, good IS/IT
strategy formulation and planning practice is obsolete, merely inadequate
for the new era. Can companies afford to wait to find the appropriate
strategy approaches until the enthusiasm has faded into frustration? It
may then be too late. The SIS era implies winners and losers with IS/IT,
not just relative success and failure, which may not reflect directly in the
overall business performance.

In this new millennium, increasing business pressures and the improving

capabilities and price/performance of IT have led to the consideration
of more radical strategies than previously. These can require the
transformation
of business processes, organizational structures and relationships
to achieve major improvements in business performance. Clearly,
changes to the organizations information systems will be an integral
component of this industry re-engineeringin creating and implementing
the new processes and enabling new organization structures to
function. But, also, innovations in the use of information and new
technologies
are essential ingredients in creating the options for change.
Hence, strategies for IS will have to be more radical and more adaptable
in the future than they have been in the past.

The last obvious conclusion about the evolution of strategic planning

for IS/IT is that it is now clearly a process that depends on users and
senior management involvement for success. It has become difficult to
separate aspects of IS/IT strategy from business strategy. Hence, it is
important to use the tools and techniques of business strategic analysis
and planning to ensure that approaches to IS/IT strategy formulation
and planning are knitted into the pattern of business strategic
management.
Indeed, the emerging fourth era seeks to embed an IS capability in
the very fabric of the organization. Chapter 2 starts this integration
process by considering the processes and tools of business strategic
management.