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CHAPTER12.pptx

CHAPTER12.pptx

IT for Management: On-Demand Strategies for Performance, Growth, and Sustainability

Twelfth Edition

Turban, Pollard, Wood

Chapter 12

IT Strategy, Sourcing, and Strategic Technology Trends

Learning Objectives (1 of 4)

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Copyright ©2021 John Wiley & Sons, Inc.

IT Strategy and Competitive Advantage

IT Sourcing Strategies and IT Service Management

Strategic Technology Trends

IT Strategic Planning, Process, and Tools

IT Strategy

IT Strategy

A plan of action to create an organization’s IT capabilities for maximum and sustainable value in the organization, goals, and objectives and specifies the necessary financial requirements, budgets, and resources.

Business strategy

sets the overall direction of a company

defines how a business will achieve its mission, vision, and organizational goals

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Aligning IT Strategy and Business Strategy

Business–IT alignment refers to applying IT in an appropriate and timely way that is consistent with business strategies, goals, and needs.

The first step in achieving business–IT alignment is to understand business objectives and how IT capabilities can best support business requirements.

Business–IT alignment can be improved by focusing on the following five activities:

Commitment to IT planning by senior management

CIO is a member of senior management

Understanding IT and corporate planning

Shared culture and effective communication

Multilevel links

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The Open Group Architecture Framework (TOGAF)

A useful IT strategy tool that is used to align IT goals with overall business goals to improve business efficiency.

Used by more than 60% of Fortune 500 companies

TOGAF provides a systematic approach to designing, planning, implementing, and governing the enterprise IT architecture.

TOGAF also helps organizations to plan their cross-departmental IT efforts.

TOGAF is free for organizations to use internally.

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Resistance to Business–IT alignment

87% of business leaders believe that IT is critical to their companies’ strategic success, but not all of them work with IT to achieve that success.

Less than 50% of business leaders reported that the IT function was very involved in the strategic planning process.

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Competitive advantage

An edge that enables a company to outperform its average competitor in ways that matter to its customers.

To create a competitive advantage, an organization must evaluate four major factors with the company and the environment in which it operates:

Benefit

Target market

Globalization

Competition

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Competitive Advantage Tools

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Porter’s Competitive Forces Model

Porter’s Value Chain Model

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Porter’s Value Chain Model

Primary activities

Inbound logistics

Operations

Outbound logistics

Sales and marketing

Servicing

Support activities

Accounting, legal and finance

HR

Product and technology development

Procurement

Identifies where the greatest value exists in an organization and how that value can be increased.

Organizational activities: Primary and Support

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Copyright ©2021 John Wiley & Sons, Inc.

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IT Agility, Responsiveness, and Flexibility

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Agility means being able to respond quickly.

Responsiveness means that IT capacity can be easily scaled up or down as needed, which essentially requires cloud computing.

Flexibility means having the ability to quickly integrate new business functions or to easily reconfigure software or apps.

Competing Globally

Globalization is the free trade of goods and services across national borders and cultures as the interdependence of nation’s economies grows driven by people, technology, information, and cash flow.

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When Countries Compete

Comparative advantage is a country’s ability to produce goods or services more efficiently and inexpensively than another.

Opportunity cost is the benefit that is missed or given up when an individual, business, or country chooses one alternative over another.

Goods-based comparative advantage A situation in which a country can produce goods for a lower opportunity cost than other countries.

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IT-Enabled Service-Based Comparative Advantage

Information technology has made the concept of global competition more relevant than ever for governments.

Service-based comparative advantage A country’s capacity to produce and sell services at a lower opportunity cost than its trading partners.

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IT Strategy and Competitive Advantage: Questions

What is business–IT alignment?

Why would an IT department want to achieve business–IT alignment?

What is the difference between the goals of a business strategy and an IT strategy?

Name the five activities that organizations need engage in to improve business–IT alignment.

How does business–IT alignment help companies gain a competitive advantage in the marketplace?

What are the seven skills that a CIO needs to help improve business–IT alignment?

Name the five competitive forces in Porter’s five forces model.

In what ways can ICT help a country achieve a comparative advantage?

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Learning Objectives (2 of 4)

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IT Strategy and Competitive Advantage

IT Sourcing Strategies and IT Service Management

Strategic Technology Trends

IT Strategic Planning, Process, and Tools

IT Strategic Planning, Process, and Tools

IT strategic planning is the process of defining an organization’s strategy or direction in adopting, implementing, using, and disposing of its IT assets.

When an organization is developing an IT strategy, it should ask questions such as the following:

What is the long-term direction of the business?

What is the overall plan for deploying resources?

What trade-offs are necessary? What resources will need to be shared?

What is the company’s position compared to that of its competitors?

How does a company achieve competitive advantage over rivals in order to achieve maximize profitability?

Copyright ©2021 John Wiley & Sons, Inc.

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The Five Components of an IT Strategy

Applications strategy

Plan the direction and principles concerning the development, operation, and maintenance of IT applications throughout the enterprise.

Integration strategy

Consider how to connect all IT applications in a seamless way.

Infrastructure strategy

Develop and maintain the IT infrastructure including its safety and security.

Services strategy

Plan for, provide, and manage IT services when, where, and at what level the business and its different functional areas require.

Sourcing strategy

Plan how to acquire IT infrastructure, software, and services either internally or with one or more external suppliers.

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Identifying Value Drivers

Value driver enhances the value of a product or service to consumers, creating value for the company. Advanced IT, reliability, and brand reputation are examples.

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Developing an IT Strategic Plan

IT strategic plan is a formal document that details how the IT department will provide, support, and ensure ongoing business operations.

The four objectives of the IT strategic plan are to:

Improve management’s understanding of IT opportunities and limitations

Assess current performance

Identify capacity and human resource requirements

Clarify the level of investment required

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IT strategic plan components

Long-range IT plan: (the strategic IT plan)—aligns with strategic-level business planning.

Medium-term IT plan: aligns with managerial or administrative level business planning.

IT tactical plan: aligns with operational-level business planning.

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Strategic Planning Tools

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The Balanced Scorecard

Balanced scorecard is a strategic management methodology for evaluating performance based on both financial and nonfinancial metrics.

The BSC is used to translate strategic plans and mission statements into a set of business objectives and performance metrics that can be quantified and measured to evaluate how well objectives are being achieved.

Business objectives are the goals of an organization and the building blocks of a strategy

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Steps in the BSC Methodology

Establish the organization’s vision for the future.

Identify BSC performance metrics that link vision and strategy to results.

Select meaningful strategic objectives.

Measure each objective.

Set target(s) for each objective.

Determine the action(s) and initiative(s) needed to achieve each target.

Implement necessary tracking, analytics, communication, and reporting systems, including sensors, data visualization, mashups, and dashboards via social and mobile channels.

Collect, analyze, and compare performance data with targets.

Revise actions to improve performance gaps and take advantage of new opportunities.

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Process Deliverables

The deliverables from the IT strategic planning process should include the following:

An evaluation of the strategic goals and directions of the organization and how IT is aligned

A new or revised IT vision and assessment of the state of the IT department

A statement of the strategies, objectives, and policies for the IT department

The overall direction, requirements, and sourcing of resources

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IT Strategic Planning, Process, and Tools: Questions

What are the three levels of an IT strategic plan?

What is the purpose of the IT strategic planning process?

Why would an organization conduct a SWOT analysis?

What is the purpose of using the BSC in the IT strategic planning process?

How does the BSC approach differ from previous measurement approaches?

What are the four BSC perspectives?

What are the four deliverables of the IT strategic planning process?

What is the purpose of an IT steering committee?

What five tasks do the steering committee perform?

What are the three general types of business value drivers?

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Learning Objectives (3 of 4)

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IT Strategy and Competitive Advantage

IT Sourcing Strategies and IT Service Management

Strategic Technology Trends

IT Strategic Planning, Process, and Tools

IT sourcing

The strategy used to acquire and maintain IT systems and IT services.

Two broad categories:

In-house systems development

Outsourcing:

Offshoring Systems development and/or support are provided by a supplier in a country that is different from the country of the sourcing organization.

Onshoring

Cloud services

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IT Onshoring

The practice of acquiring and maintaining IT systems and services from external third-party providers located in the same country as the company sourcing the systems and services.

The types of work that are ideal for onshoring include the following:

Work that has not been routinized

Work that if offshored would result in the client company losing too much control over critical operations

Situations in which offshoring would place the client company at too great a risk to its data security, data privacy, or intellectual property and proprietary information

Business activities that rely on an uncommon combination of specific application domain knowledge and IT knowledge in order to do the work properly

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Cloud Services

Cloud services—also referred to as edge services—IT services, from infrastructure to apps (Xaas), are delivered by a third-party vendor over the cloud.

Cloud Strategy: A complex strategy to source scale and deliver IT capabilities on demand without physical location, labor, or capital restrictions in addition to on-premise systems.

Tactical adoption approach: Deploying cloud services incrementally results in apps and services that are patched together to create end-to-end business processes—this is short-sighted.

Cloud adoption needs to occur according to a coordinated strategy.

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Cloud Strategy Challenges

The top challenges about migrating to the cloud revolved around cybersecurity, privacy, data availability, and the accessibility of the service.

The newer challenges relate to cloud strategy, including integration of cloud with on-premises resources, extensibility, and reliability of the cloud service.

Extensibility is the ability to get data into and out of the cloud service.

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Outsourcing lessons

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Manage change

Assess organizational readiness

Anticipate risks and formulate a plan for mitigating them

Build project management infrastructure

Create a governance mechanism

Properly define how success will be measured, both qualitatively and quantitatively.

IT Service Management

IT services is the application of business and technical expertise to enable organizations in creating, managing, optimizing, and accessing information and business processes.

IT service management (ITSM) is a strategy by which IT systems are offered under contract to customers and performance is managed as a service to achieve greater business–IT alignment and smooth business processes and operations.

Service relationship is the degree of cooperation between a service provider and service customers, vendors/suppliers, and regulatory agencies including service provision, service consumption, and service relationship management.

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Levels and Types of IT Services

IT services can be sourced in three different ways:

Internal service provider delivers IT services to a single business unit in its own organization.

Shared service provider provides IT services to different business units in its own organization.

External service provider delivers IT services to customers outside the organization.

ITIL®4: IT Infrastructure Library (ITIL) serves as a roadmap for process improvement to help IT professionals build a foundation for ongoing service excellence while meeting budget and regulatory requirements.

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Copyright ©2021 John Wiley & Sons, Inc.

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ITIL®4

Organizations and people: Organizational culture, systems of authority, roles, skills and competencies needed to plan, manage, and deliver IT services.

Information and technology: Information and technology needed to deliver IT services as well as that needed to manage the services.

Partners and suppliers: They contribute in various ways to the services that are delivered.

Value streams and processes: All the activities, workflows, controls, and procedures necessary to provide high-quality on-time services to create value for customers and users.

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Service Value Chain Key Activities

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Plan Ensure a shared understanding of what the organization wants and how it will be done by creating plans, portfolios, architectures, policies, etc.

Improve Create improvements initiatives to ensure continuous improvement of all products, services, and practices across all four ITSM dimensions.

Engage Interact with stakeholders and understand their needs.

Design and transition Create new and changes services and ensure stakeholders expectations around quality, cost, and time to market are met.

Obtain/build Create service components, ensure they are available when and where needed, and ensure they meet agreed-upon specifications.

Deliver and support Ensure services meet stakeholder delivery and support expectations.

Benefits of Using a Structured ITSM Strategy

Lower IT operation costs

Higher returns on IT investments

Minimal service outages

Ability to establish, well-defined, repeatable, and manageable IT processes

Efficient analysis of IT problems to reduce repeat incidents

Improved efficiency of IT help desk teams

Clear expectations of service levels and service availability

Risk-free implementation of IT changes

Better transparency into IT processes and services

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The Outsourcing Life Cycle

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Phase 1: Assess opportunities and develop your overarching strategy and process- or geography-specific business cases for outsourcing.

Phase 2: Prepare and issue the request for proposal (RFP), evaluate the proposals that are submitted, and select a service provider.

Phase 3: Develop and negotiate the outsourcing contract that will serve as a framework for your relationship with your new business partner.

Phase 4: Plan and execute the service transition.

Phase 5: Ongoing management of the SLAs and managing the service provider relationship.

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Request for Proposal (RFP)

The requirements defined in the RFP document should include:

Service scope

Technical architecture, vision, and strategic objectives

Service delivery model, service management processes

SLA

Governance model and forums

Commercial objectives

Cost treatment and allocation

Pricing model

How assets will be treated

Legal terms

Employee transfer

Risk and compliance

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Ask for “Proof of Concept” or a Trial Run

Proof of concept (POC) is a vendor demonstration of a product to see how or how well it works.

Trial run is when a vendor product or service is tested in a pilot study or limited area of the business to confirm its usefulness to the company.

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Finding, Selecting and Managing Vendors

Two criteria to assess first are:

Experience with very similar systems of similar size, scope, and requirements.

Financial and qualified personnel stability.

The most important factor in managing a vendor is communication.

Vendor management organization (VMO) is a business unit with an organization that is responsible for evaluating suppliers of goods and services and overseeing regular interaction and long-term relationships with vendors.

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Outsourcing Benefits

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Outsourcing Risks and Hidden Costs

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Shirking

Poaching

Opportunistic repricing

Breach of contract by vendor

Inability of vendor to deliver as promised

Vendor lock-in

Loss of control over data

Lower employee morale

Relationship setup costs

IT Sourcing Strategies and IT Service Management: Questions

What contributes to the complexity of a cloud strategy?

How does tactical adoption of cloud services differ from a coordinated cloud strategy?

What is onshore sourcing?

What are the major benefits and risks of outsourcing?

What needs to be done before signing a contract with an IT vendor?

What is the purpose of an RFP?

What is ITSM?

What are the four dimensions of ITIL®4?

What is the difference between an outsourcing contract and an SLA?

What is the purpose of a VMO?

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Learning Objectives (4 of 4)

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IT Strategy and Competitive Advantage

IT Sourcing Strategies and IT Service Management

Strategic Technology Trends

IT Strategic Planning, Process, and Tools

Strategic Technology Trends

Strategic technology has the potential to make significant impacts on an organization’s long-term plans, programs, and initiatives.

The first step to considering and adopting new technologies is to find them.

Approaches to finding trending strategic technologies include exploring the research and development activities of major research centers and IT consulting firms and attending technology industry conferences, such as COMDEX, IBM Inter-Connect, Google Next, Adobe Summit, and HIMSS.

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Strategic Technology Trends: Questions

What are three ways that a company can identify and keep up with emerging strategic technologies?

Why would a company want to invest in strategic technologies?

What does an organization need to put in place to identify suitable strategic technologies?

What are the five steps in the technology scanning process?

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Copyright

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