Module 1: Strategic importance of IS

Overview
All organizations want to grow and prosper. To obtain that growth and prosperity, organizations set long-
term goals and use numerous tools such as metrics and analytics to measure the effectiveness of their
goals. If the performance measures (metrics, for example, revenue per employee or percentage of orders
shipped on time) and the analysis tools (analytics) applied against the outcomes are appropriate, they
will help the organization to determine the best course of action to achieve its goals. The role of all
managers is to help develop organizational strategies that encourage and achieve those goals.
Information systems (IS) is the top-level term that refers to computer systems used within organizations
that help them collect, store, retrieve, and analyze data for the purpose of supporting and extending the
business side of an organization; information technology (IT) is the term that refers to the technology
side of IS, responsible for the hardware, software, and networks of computer systems. At one time it was
commonplace to link strategy with IS. Statements about information systems were taken as true and at
face value, simply because they sounded so right. What an IS department wanted, it usually got, because
what was wanted often seemed strategically important to the organization. The bursting of the tech
bubble in 2001 changed the way that companies regarded their investment in information systems.
The effective management and use of information systems is essential to the future growth and
prosperity of any organization. Or is it? In his 2004 book, Does IT Matter? Information Technology and
the Corrosion of Competitive Advantage, Nicholas Carr asked if, since the tools that once gave IT
competitive advantage are now widely available to all organizations, we can truly say that IT matters as
strategically as it once did. Today, IT has entered a new phase of outsourcing: the hosting of hardware
and software is cloud-based either externally with private cloud vendors like Amazon, SalesForce,
Google, or IBM, or internally with an organizations existing infrastructure. Not only is software delivered
on demand as a service (SaaS), but we also can outsource infrastructure as a service (IaaS), where
storage, hardware and servers are paid for on an as-used basis. What does this mean to the future of IS
within our organizations?
Its still true that IS and IT provide organizations with the ability to collect vast amounts of data.
Consider, for example, trying to run a financial institution without computer-based information systems.
How would you carry out the millions of transactions that take place each day? How would you record
and report on those transactions? How would you know what customers or products were most
profitable? Global corporations have advanced far beyond the ability of manual systems. Even small
businesses use computers to manage their business.
In todays organizations, the vast majority of the data to support organizational activities and decisions
comes from IS, which incorporates IT, data and information, and business procedures and processes.
Data is an important resource; it is derived from internal sources like enterprise systems and external
sources like the Internet. Big data, the term coined to describe the use of large data sets (like those
found on Google, Wikipedia, and Facebook) is used to assist in the analysis and predictive aspect of
consumer demand. The ability to integrate data from internal and external systems to design structures
that can capture the vast amounts of information for analysis, visualization, query or consumption is
where IS development was trending in 2013. How do these trends affect the standard business practices
in IS?
Organizations with poorly designed information systems face numerous problems including scalability
(how easily the systems can increase or decrease in size) and flexibility (the ability of a system to adapt
to changes). Consider the case of the New Jerseybased Knight Capital, which in 2012, following the
installation of new software, lost $457 million, nearly destroying the company.
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Organizations that design
and manage their information systems well can gain tremendous benefits. The issue facing IS today is
how to manage what were once centralized resources in an ever-expanding decentralized environment.
Cloud computing offers solutions to businesses that need infrastructure (storage, managing, processing)
but opt to use on-demand services rather than invest in the infrastructure internally. This is a strategic
decision, and organizations must be fully aware of the pros and cons and have a sound decision-making
process already in place. A study by Jeanne Ross and Peter Weill
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found that organizations that
effectively manage their IT decision making through a combination of strategy and governance
experience financial performance levels about 20% higher than those with less effective IT management.
IS should not be used as a cure-all for organizational problems. Even today, with the knowledge of best
practices, project management, and information systems, failures in the implementation of such critical
systems like Enterprise Resource Planning (ERP) still occur. In many cases, we cannot blame these
failures on technology. The key to developing a good strategy to achieve an organizations goals is to
buy, rent or build, but, at any rate, have well-designed and well-managed systems available.
At the end of this module, you should be able to evaluate and advise on the impact of new technologies
on business processes. You should also be able to advise on organizational structure and the
development of IT strategy. You will improve your competence to develop, implement, and update the
organizations operational plan to be in alignment with the strategic plan.
1
http://www.bloomberg.com/news/2012-10-17/knight-capital-reports-net-loss-as-software-error-takes-
toll-1-.html. Accessed on July 23, 2013.
2
Weill, P. & Ross, J. (2004). IT governance: How top performers manage IT decision rights for superior
performance. Boston, MA: Harvard Business School Press.
1.1 IS as an integral part of strategic planning
1.2 IS for competitive advantage
1.3 IS to achieve business transformation
1.4 IS and globalization
1.5 Managing IS human resources
1.6 IS's rapid pace of change
1.7 The ethics of information provision for CGAs
Module summary
Print this module
1.1 IS as an integral part of strategic planning
Learning objective
Evaluate the role of an IS strategy as part of an organization's overall strategic plan. (Level 1)
Required reading
Chapter 1, Information Systems in Global Business Today
Chapter 2, Section 2.2, How Information Systems Serve Management
Module Scenario: Strategy and budget dollars
Each Wednesday at 7:00 a.m. your organizations management team meets to discuss open projects,
strategy, and key performance indicators (KPIs) for their areas. The meeting is one hour long. Around
the table are the General Manager, Assistant General Manager, Production Manager, Sales Manager,
Human Resources Manager, Financial Manager, Logistics Manager, Purchasing Manager, Engineering
Manager, and Information Systems Manager. These meetings are usually friendly, but on occasion more
forceful discussions can erupt. On this particular day, the team is testing the value of certain assumptions
because a budget-planning session is two weeks away. There is only so much capital money to spend
(down 8% from last year), and all managers are using this meeting to test the project strength of the
other team members.
As the Information Systems Manager, you find yourself in a particularly hot seat today. Many key projects
in other areas need your help. Also, you have your own strategies that require capital expenditure to
complete. Statements are being made about information systems (IS), and just how strategic the
department really is to the organization. You have to explain your position in six key areas:
Discuss what IS strategy is and how to ensure its value.
Answer competitive questions in Porters five forces model and explain the contributions of IS in
relation to the value change analysis.
Reiterate the contribution of IS to past business process reengineering (BPR) undertakings.
Discuss globalization and its challenges for IS.
Restate the roles and responsibilities of your key people.
Discuss the impact on your organization of the rapid pace of change through IS.
You understand this is just business. This is how managers in organizations stay focused and stay
relevant they challenge each other. You also understand this is a great opportunity for you to educate
your management team on the strategic importance of IS, so you take advantage of the time, and
answer the questions as they come.
LEVEL 1
The effective management and use of IS/IT is key to achieving the goals set out in an organization's
strategic plan. However, the alignment between the business plan and the IS strategy is often a source of
heated discussion and disagreement. No business strategy will succeed if it ignores the challenges and
rewards IS offers. Information systems are essential to any strategic plan. However, strategy and IS have
not always been partners. Boardroom discussions about the role of IS as a strategy or a service can lead
to conflict. IS, as an internal strategy, maintains centralized control of a companys information systems
with identifiable tactics and actions. IS, as an outsourced service, relies on internal IS to support an
externally distributed vision. Today, the role of IS is both internal and outsourced; the direction of
corporate goals dictates the amount of each. Part of the problem, however, is with the words themselves.
Service as a verb is clear enough; it is well understood when IT is in a service role of fixing, repairing,
documenting, or patching code for personal computers. Strategy, however, needs defining. It usually
begins as a directive from the top (increase global sales by 10%), which must then be filtered down,
analyzed, interpreted, divided into tasks, and acted upon to meet the directive.
What is strategy?
The Oxford American Dictionary defines strategy as a plan of action or policy designed to achieve a
major or overall aim. Key to this definition is its broadness. An organization can adopt many types of
strategies. For example, a market positioning or branding strategy can change how a company is
perceived or how well it is known. To be effective, strategy must become specific, and drive decisions
about:
what markets to serve
what products or services to include in the company's offerings to the markets
how to price and market those products to customers
how to make decisions about future products, services, and markets (the notion of a strategic
orientation)
Such decisions in turn shape the structure of the organization, the types of people it employs and the
way it rewards them, and the types of policies it sets to guide managerial action.
Strategy in an organization
The concept of strategy is paradoxical in todays environment. Typically, strategy implies a long-term
outlook in support of the companys vision. A tier-one automotive supplier of headlamps doesnt suddenly
decide to become the premier vendor of garden hoses. The idea of an organization changing its vision on
a daily basis is clearly problematic, given the wide scope of decisions and investments that strategy
shapes. Yet the pace of change in todays business market requires an ability to react quickly to
competitive pressures, which seems inconsistent with the notion of setting and following long-term plans.
Strategy is important as a way to focus an organizations goals, but flexibility in how those goals are
achieved is crucial for success.
It is best to think of a strategic plan not as a recipe book that defines precisely what to do and when, but
as a framework that articulates the objectives of an organizations vision.
IS in strategic planning
To understand the role that information systems play in todays business environment, it is essential that
you distinguish between information technology (IT) and information systems (IS). IT is the term used to
describe computer hardware, software, and network infrastructure tools in other words, the
technology itself. IS describes the broader perspective in which management uses IT to create and
support systems that allow the organization to pursue and achieve its strategic goals. When discussing
IS, it is important to consider all three of its dimensions: IT, management, and organization. As a
practical matter, you should note that the terms IT and IS are often used interchangeably, particularly by
those who are not directly involved in the IS or IT field, but technically this is not correct.
Information technology is pervasive throughout organizations and society as a whole. Businesses rely on
IT to achieve their day-to-day goals. In fact, the collection, storage, and retrieval of data and information
are both more sophisticated and more commonplace than they have ever been. The Internet has shown
that businesses can connect with customers in ever-expanding ways and that through those connections
new patterns and trends help tailor customer experiences individually. The web-based information a
company collects about its own and its competitors business practices is a valuable resource tool for
planning.
Consider the IT investments made by organizations. Worldwide spending on IT (hardware, software, and
services) totalled about $3.3 trillion in 2010, according to Gartner, a research and advisory company. This
shows a net increase of 3.3% over 2009, and a near return to 2008 spending levels before the economic
recession. Exhibit 1.1-1 shows the total worldwide IT spending from 2007 to 2010. Tables 2 to 5 show IT
spending by area, which includes hardware, enterprise (software), telecommunications, and services. By
comparison, enterprise (software) and services represent the largest combined increase in spending.
Exhibit 1.1-2 shows Gartners IT spending predictions from 20122014. Gartner predicts an increase in
2013 of 4.2% over 2012. Gartners own analysis of increased IT spending is summed up this way:
Uncertainties surrounding prospects for an upturn in global economic growth are the major retardants to
IT growth," said Richard Gordon, managing vice president at Gartner. "This uncertainty has caused the
pessimistic business and consumer sentiment throughout the world. However, much of this uncertainty is
nearing resolution, and as it does, we look for accelerated spending growth in 2013 compared to 2012.
IT is a crucial part of an organizations assets. It must be managed like any other asset, through
governance and planning. This means that the business impact of IT investments must be as
measureable and compelling as any other business case. Strategically, CIOs must justify IT spending and
show return the same as any other strategic investment. Competitive advantages because of information
technology are no longer sustainable advantages, therefore IT is granted no special dispensation when it
comes to budget, capital or other strategic investments.
Exhibit 1.1-1: Worldwide IT spending 2007-2010


Worldwide hardware spending remained down by 16.5% over 2008 spending levels.

Worldwide enterprise (software) spending was up by 4.8% over 2009, and was higher than 2008
spending.

Worldwide telecommunications spending was up by 3.2% over 2009.

Worldwide IT services spending was up by 4.5% over 2009.
Source: http://www.gartner.com/it/page.jsp?id=1284813 and
http://www.gartner.com/it/page.jsp?id=742913 (Please note: the original URLs for these two sources are
no longer active online. The source references do not exactly match the tables, but are meant as a
general reference.)
Exhibit 1.1-2: Worldwide IT spending 2012-2014

Source: http://www.gartner.com/it/page.jsp?id=2292815
Why this matters to accountants
IT spending is contentious at the best of times. However, since the introduction of the Sarbanes-Oxley
Act (SOX) in the United States in 2002 and Bill 198 in Canada, following the financial and accounting
scandals at Enron, Tyco International, and Worldcom, tighter controls have been enacted throughout U.S.
exchange-listed companies. Many of these controls directly affect accounting, but many also affect IT.
SOX has meant a closer tie between finance and IS, because IS has to account for the soundness of the
general and application controls of the business software, which provides finance with its numbers. There
are control frameworks such as COBIT and COSO, which can assist companies with their SOX compliance,
and as a result introduce IT governance as a part of continued compliance. But it is important to
understand that with SOX, both financial and legal responsibility sit with the CEO and CFO. A closer
business partnership between IS and finance is beneficial to both.
Example of IS in an aligned strategic plan: backup and recovery
Linking IS strategy to business strategy is not always a direct line. Strategically, a company may state it
requires a 10% increase in sales in the next year. For IS, every minute a system is dedicated to system
backups, or suffers reduced access speed, represents the potential for lost product, lost sales, or lost
opportunity, with significant financial impacts. Backup and recovery procedures within organizations have
often been time consuming, expensive, and prone to issues. Many organizations use expensive tape-
archival systems; some mirror contents to other hard drives, and others save the contents of their daily
transactions to DVD. Then there is the issue of off-site storage: some systems can be saved while users
are logged in and performing tasks, others need a user-free dedicated system. Backups in some
companies can take anywhere from minutes to an hour or more. And, in the event of a recovery, it takes
longer.
The importance of backups is never in question, but the expense in both labour and equipment/supplies
is. To link the IS strategy to the business strategy, consider the following:
What is the actual cost of backup/recovery to the organization?
What is the actual cost of downtime to the organization?
What new technologies could assist in reducing both these costs?
What security concerns are implicit in these new technologies?
IS will pull together data from current best practices and trends, with cost and increased uptime
projections so that the company has real data to assess whether the IS role is achieving the appropriate
company strategy. What the strategy should also do for IS is streamline a cumbersome process, reduce
unnecessary costs and steps, and provide a better service for their internal customers through system
uptime. An aligned strategy benefits both the company and IS.
Ensuring alignment of IS strategy and business strategy
Because of the pervasiveness and importance of IS in the business environment, it is imperative for
businesses to ensure that their IS strategies are aligned with and adequately reflect their overall business
strategy. If these strategies are misaligned, an organizations ability to meet its goals and objectives can
be severely jeopardized. For example, given the significant percentage of capital investment represented
by IT assets, it is critical that these assets, and the systems they support, fit with the objectives and
strategies of the business as a whole. The business/IS strategic alignment in the example (increase sales
by 10% aligned with a reduction in backup/archive/recovery costs resulting in increased system
availability) works because the goal of increased sales as a key business strategy is supported by backup
initiative of IS.
Module 2 focuses in more detail on the elements of an IS strategic plan and the process of IS strategic
planning. The remainder of this module explores how information systems can support or influence
strategy, and the challenges of the business and technological environment in which strategic decisions
must be made. Beyond the question of alignment, there are significant changes to IS in the areas of
technology, management, and organizations. New themes and new opportunities have emerged and are
clearly laid out in Table 1-1 of the text.
1.2 IS for competitive advantage
Learning objectives
Evaluate a company or industry using Porter's five forces and Barneys resource-based view of the
firm, and formulate several strategies that allow an organization to develop competitive
advantage. (Level 1)
Identify the types of strategies that produce a competitive advantage for an organization. (Level 1)
Recommend how to leverage and use IS to create and maintain a competitive advantage.
(Level 1)
Required reading
Chapter 3, Sections 3.3, Using Information Systems to Achieve Competitive Advantage, and 3.4,
Using Systems for Competitive Advantage: Management Issues
Module scenario: How does IS help with competition?
After explaining the role of IS in aligning strategy with business drivers (by using the 10% sales increase
aligned with improved backup processes), the boardroom discussion turns to competition.
Sure, says the Engineering Manager. IS provides the information we need to make decisions. We all
know that. But when it comes to improving our products so that we are better than our competition, I
dont see how IS helps.
The Marketing Manager then adds this to the discussion: We always consider our products in relation to
the rest of the business not just our immediate competition and we look for ways to lock in our
existing customers and to prevent new and existing competitors from taking our share of the market. Im
with Engineering on this. I dont see how IS helps us at all with this strategy. Not only that, but
maintaining competitive advantage is a constant strategy that we continue to evolve within all
departments; that is, all departments except IS. They keep our existing systems running and available,
but they are a cost centre, not a place where we go to increase profits.
Once again, as the IS Manager, you realize these statements highlight the difficulty of alignment between
IS and the rest of the business. Improvements in processing power, charts detailing the 99% uptime of
IT servers, and Balanced Scorecards for key IS projects mean little to other managers who want to know
how any of those things help a companys strategy to sustain competitive advantage. To answer their
concerns, you begin by examining Porters five forces model as it relates to information systems. Then,
after defining the forces, you use Barneys resource-based view of the firm to help you identify IT
opportunities for your colleagues.
LEVEL 1
Porters five forces
Michael Porter is the Bishop William Lawrence University Professor at Harvard Business School in Boston,
Massachusetts. Born in Ann Arbour, Michigan in 1947, he is the author of over 18 books and 125 articles
on strategy and competitiveness. Widely respected and honoured for his work, Porters theories are
taught in business schools worldwide.
To achieve its long-term strategic goals, an organization must establish and then maintain a competitive
advantage over its competitors. In his 1980 book Competitive Strategy: Techniques for Analyzing
Industries and Competitors, Michael Porter
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devised a model that shows how five forces can influence the
success of a business within a given industry by determining the intensity of competition within a given
market. As a manager, you can use this model to gain insight into your organizations competitive forces
and develop successful strategies that help maintain your competitive advantage. As an IS manager, you
use these forces to gauge strategy alignment. If your IS strategy does not assist your company in any of
Porters forces, chances are it is either misaligned or the wrong strategy altogether.
Porters five forces are
Threat of new entrants
Bargaining power of customers
Bargaining power of suppliers
Threat of substitute products or services
Rivalry among existing competitors
The textbook describes each of Porters competitive forces. The issue here is one of perspective, and the
question is, what does IS bring to manage the effects of these forces? The Internet has intensified rivalry
between both retaining suppliers and retaining customers. Table 3-4 on page 79 in the textbook
describes four basic competitive strategies where IS plays an important role.
Low-cost leadership: Where IS can assist in the reduction of costs through tighter
information/process alignment. Walmart created its own supply chain replenishment system that
has helped to
o Lock in suppliers by integrating with suppliers information systems (that is, since Walmarts
system is difficult to remove or alter, it reduces suppliers bargaining power)
o Maintain customers (through lower pricing because of cost efficiencies in the system)
o Limit the success of new entrants and existing rivalries in the industry (the cost of
developing an equivalent system, and the cost to convince suppliers to switch is a
deterrent)
Product differentiation: E-commerce has shown that a great website needs a great strategy to be
successful. The site design alone is not enough to entice the customer to buy or to return.
Marketing to customers on the web provides new targeting opportunities, such as using Google
Adwords, adopting social media applications like Facebook, Twitter and Google+ to create closer
links to customers, and providing multiple ways to purchase and pay for products. Community is
the buzzword for online differentiation. Since the tools to create effective websites are available to
all companies, the key is creating one that highlights your product and company in a way that
turns website browsers into buyers and loyal customers.
Focus on market niche: The more information you can collect about your customers, the better you
will be able to sell to them. Through software development, CRM applications, and web usage
tools like Google Analytics or Webtrends, organizations can better focus their existing customer
website visits. Making customer experiences individual is seen as a way to increase revenues and
extend consumer branding.
Customer and supplier intimacy: The Strength of Weak Ties is a 1973 paper written by Stanford
University sociologist Mark Granovetter.
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Social networks reference many of his theories, including
that information is transmitted more through weak ties or links between individuals (customers)
than through strong social ties. IS, again through the strategy of creating community on a
website, can help foster these weak tie relationships.
Exhibit 1.2-1 : Porters Five Forces
Read a summary of Porters five forces.
Strategies to compete
In his 1980 book, Porter also identified three generic strategies to counteract the five forces that
influence an organizations ability to compete: cost leadership, differentiation, and focus (market
segmentation).
In addition to these three generic strategies, Porter introduced four other strategies that allow an
organization to establish a competitive advantage over its competitors, bringing the total to seven:
Reduce costs
Differentiate products or services
Focus
Lock in suppliers or customers
Create alliances
Raise barriers to entry in the market
Create new products or services
Reduce costs
If an organization reduces the cost of its products or services, it can either lower the price to gain market
share or increase the profit margin. For example, a company can use technology to reduce the costs of
manufacturing through automation. Just-in-time inventory, which significantly reduces the costs of
carrying inventory, can only be achieved through information systems that allow for enhanced
communication and cooperation between the company and its suppliers. Walmart is an example of a
company that uses a customized supply chain to reduce inventory costs and lower its prices.
Differentiate products or services
Organizations can use IS to differentiate or enhance products or services. Products can have added
technology, such as GPS in cars, or technology can be used to enhance the product after it is delivered,
such as websites that allow you to download different ringtones for your cell phone. Chris Anderson, a
well-known author and editor-in-chief at Wired until 2012, has stressed (in his 2007 book titled Free:
How Today's Smartest Businesses Profit by Giving Something for Nothing) that differentiation today in an
e-commerce world means offering something for free. This could be information, a song, a book,
anything that can increase your share of repeat customer visits to help drive profits by reducing
advertising costs.
Focus
Companies that focus on specific market niches operate by accommodating their product or service
offerings to the needs of a unique group of clients. For example, clothing designers that cater to a small
number of demanding and wealthy clients, rather than trying to design for the mass market, can be said
to pursue a focus strategy. IS aids in focus strategy by providing in-depth customer information,
supporting customer relationship management (CRM) strategies, and responding to customer service
requests through wikis, Twitter accounts, and Facebook pages.
Lock in suppliers or customers
Locking in is the idea of making it more difficult for customers or suppliers to switch to a different
company. For example, Walmart has a sophisticated infrastructure that supports its point of sale (POS)
systems and inventory control systems. Often, wholesalers and manufacturers must change their own
systems in order to communicate with Walmarts system. Once they have done this, it is more difficult for
wholesalers or manufacturers to sell through a Walmart competitor (such as Canadian Tire or Target)
because these retailers have their own POS systems that they expect suppliers to use.
Create alliances
Organizations can create alliances with other organizations to increase market share. They may choose to
sell products or services at a lower price either in combination with other products or services, or as a
reward for using a companys products. Air Miles and credit card rewards programs are examples of this
type of alliance. IT may also support an alliance between two competitors that need to combine to create
a new product offer.
Raise barriers to entry in the market
Barriers to entry through increased IT investment are generally term-based. Organizations that once
raised barriers to new entrants through software investments differentiated themselves by the amount of
capital required for software. Few new entrants could afford the cost of the software and the sunk costs
of the implementation. However, as customizable off-the-shelf technologies (such as SAP, Oracle,
Microsoft Dynamics, and other enterprise systems) became more available and easier to acquire (or
lease) for small firms, the barriers to entry were lowered.
Software-as-a-service (SaaS) providers make applications available in the cloud, such as SAPs integrated
management information system, for a monthly fee. This hosted SaaS model of integrated systems lets
companies advertise SAP access for as low as $99 per user per month. As companies substituted
information technology (in the form of websites) for retail storefronts, they traded off a relatively
expensive capital requirement for an inexpensive one, thus lowering barriers to entry and creating low-
cost competition for customers.
Create new products or services
Finally, IS can be used to create new products or services that may be added to the product mix of an
organization. For example, tablet computers such as the Apple iPad, the Google Nexus 7, or the Amazon
Kindle Fire, are IT-based products that did not exist 15 years ago (even less time in the services vein with
such social network companies as Facebook (2004), Twitter (2006), and YouTube (2005).
Sustaining competitive advantage
Jay Barney is a Professor of Management at The Ohio State University. He is best known for his work on
the resource-based view that states that competitive advantage is best achieved through multiple
resources. He is an associate editor for the Journal of Management and senior editor for Organization
Science, has written textbooks, and has published over 100 articles in leading publications.
Using one or all of the strategies covered here to gain a competitive advantage or protect an existing
advantage requires the successful application of information technologies and systems. As a manager,
you need to choose techniques that support and complement your organization's strategy and goals.
Many will argue that information technology alone is not a source of sustainable competitive advantage.
Nicholas Carr began his career as executive editor of the Harvard Business Review and a principal at
Mercer Management Consulting. Carr writes on the social, economic, and business implications of
technology. He has published three books to date, as well as numerous articles. He holds a B.A. from
Dartmouth College and an M.A., in English and American literature and language, from Harvard
University.
Nicholas Carr, in the 2003 Harvard Business Review article IT Doesnt Matter, followed in 2004 by the
book Does IT Matter: Information Technology and the Corrosion of Competitive Advantage, argued that
IT by itself cannot provide a source of sustainable competitive advantage, nor will the commoditized
portion of IT matter since it represents technology available to everyone.
Sustainable competitive advantage occurs when an organization uses organization-specific resources to
accomplish something its rivals cannot. The Resource-Based View of the Firm (Barney, 1991
3
) reflects on
four critical elements that make some sources of advantage more sustainable than others. This theory
suggests that resources lead to sustainable competitive advantage only to the extent that they are:
Valuable they can improve the firms efficiency or effectiveness in a material way.
Rare competitors cannot easily access the same resources.
Inimitable they cannot easily be imitated.
Non-substitutable there are no easily accessible substitutes that serve the same purpose.
So how does IT fare in terms of these four elements? Information technology can be valuable: the cost
and time spent to effectively introduce IT in firms represents a significant investment, and historical cases
have shown that such systems can indeed produce significant cost savings or revenue.
On the other hand, as Carr suggests, information technology is not particularly rare; the watchword for
technology today is ubiquity in many cases, even commodity rather than rarity. As more and more
sophisticated software is available for purchase and customization, and as models of software as a
service proliferate where organizations effectively rent their information systems and pay on an as-
used basis as though consuming a utility the same technologies that are available to large global
companies are equally available to smaller organizations. Even cloud computing, behind its promise of
managed and hosted hardware/software services for a fraction of traditional IS department costs,
conceals the commoditization of much business software. When all software is universally available as a
service, regardless of physical location or size, then software truly is a commodity, or an infrastructure
necessity that offers little in the way of a long-term competitive advantage.
Moreover, information technology is easily imitated, and substitutes are common. An organization can
examine its competitors technologies and adopt the same or similar technologies, often more cheaply
than the competitor was able to, because prices decrease so rapidly in accordance with Moores Law.
What is not so easy to imitate (or find a substitute for) is the configuration of the technology, the people,
and the particular processes that operate to meet the specific goals of the organization. This is the notion
of organizational specificity in Barneys resource-based view. The information technology itself (the
hardware and the software) is neither rare nor inimitable. But when the system as a whole is designed to
support specific competencies of the organization and when managerial talent for IS is brought into the
picture (managerial talent for IS is both rare and difficult to imitate), then a more sustainable advantage
is possible.
Why this matters to accountants
The ability to analyze IT projects as strategic or tactical will help determine whether the results of the
project affect the bottom line or are part of secondary value chain activities. (See Topic 1.3.) In other
words, paying close attention to IT spending on tactical projects will help determine if IT is overspending
without significant return. It could now cost more to produce the same report without any noticeable
change in the results. Upgrading technology for the sake of upgrading alone means that the cost of
producing the same information increases without a revenue increase to warrant it. Still, it is important to
recognize that not all upgrades are user visible. A report may still look the same; however, the upgrade
could have contained elements of improved security invisible to the report reader, but beneficial to the
overall business. Accountants must be attuned to the spending of IT and able to assist IT in determining
the organizational value of its strategies. This is one of the roles of IT governance, which is discussed in
more detail in Module 2.
4


1
The model of the five competitive forces was developed by Michael E. Porter in his book Competitive
Strategy: Techniques for Analyzing Industries and Competitors in 1980.
2
Granovetter, M., (1973), The Strength of Weak Ties, American Journal of Sociology; 78, (6), pp.
1,360-1,380. An online version of the document is available.
3
Barney, J.B., (1991), Firm Resources and Sustained Competitive Advantage, Journal of Management;
17, (1), pp.99-120. Watch Jay Barney briefly discussing his resource-based view of the firm.
4
A primer for IT Governance can be found online here, posted by Harvard Business School Working
Knowledge Archive as Ten Principles of IT Governance (2004) by Peter Weill and Jeanne W. Ross.
You may also watch a Harvard Business Publishing video that discusses the Porter five forces model
directly with Michael Porter.
1.3 IS to achieve business transformation
Learning objective
Recommend applications and processes through which IS can contribute to organizational and
business transformation. (Level 1)
Required reading
Chapter 2, Section 2.3, Systems That Span the Enterprise
Chapter 9, Section 9.1, Systems as Planned Organizational Change
Module Scenario: Information flows with process flows
The boardroom is quiet. Managers are considering your ideas about IS and competition, and are
beginning to see how information technology may not ensure competitive advantage alone, but that it is
one of many strategies.
Fine, your CEO blurts out. I get it that systems cant keep us ahead of our competition by themselves.
Maybe thats not how we should use our information technology anyway. What if, she says, we align IT
closer with process improvement projects? Maybe put them on Six Sigma projects, training even, where
they can work alongside our black belts to help us make sure we get the added benefit of information
technology along with our process improvements. Now that would really be an advantage.
And with those words you clear off the whiteboard, turn to face the management team, and say: All
right, let me explain how IS can work with you to help transform our business process flows...
LEVEL 1
IS provides benefits to organizations when it transforms the way work is traditionally done, in particular,
by helping businesses achieve cost-effective and efficient solutions through streamlining or automating
processes. Aligning data collection with process improvement is a key to successful business
transformations. The ability to eliminate waste (time, space, labour) from a process through the
combination of workflow changes and integrated systems can reduce both process and product cost.
For example, consider the operations of a pharmaceutical supplier in the 1970s. Foremost McKesson
supplied products to pharmacies throughout the United States. Dealing with inventory restocking in a
large number of distributed stores was extremely challenging and labour intensive.
Orders were received from pharmacies on paper (usually by mail or telephone) and keyed into the
information systems by order entry personnel (about 700 workers at the time). Then the orders were
filled from stock on hand or through orders to McKessons suppliers. The process of manually entering
the data from the orders received was costly and fraught with errors.
McKesson introduced a system where customers would enter their orders electronically (based on
proprietary technology developed for the company). This eliminated the need to re-key orders and
resulted in a significant competitive advantage for McKesson. The company was able to decrease the
number of order entry staff from 700 to 15, at a time when the volume of orders was increasing. These
positive results were only possible through a transformation of the way business was done. What was a
unique and novel approach to the problem of data entry in the 1970s is now a general principle of
reengineering: Collect data at the start of the process and collect it only once.
While the McKesson example is old, it demonstrates the advantage of moving from largely informal and
disconnected systems to more structured electronic systems. Few large organizations today would
experience quite the transition that is described for McKesson. But most new organizations begin their
operations with these sorts of informal, disconnected systems. Today, many small and medium-sized
enterprises (SMEs) tend to begin with information systems, but typically these are nothing more
sophisticated than word processing templates and spreadsheets. Eventually, as firms grow, they face the
challenge of moving to more structured systems supported by more sophisticated technology, so that
decisions can be based on real-time information, collected at the point of process. And in this transition,
the experience of McKesson still represents an important lesson.
Contributions of IS
IS contributes to organizational goals when people use data, information, and information technology
through a set of procedures, as illustrated in Exhibit 1.3-1. This is a simple model of alignment, which
should be the basis for all information systems.
Exhibit 1.3-1: A Typical Information System

A set of procedures reflects the processes for conducting work in the organization. It includes, for
example, rules outlining who makes decisions about extending credit to customers, the prices they will
charge, the procedures for reordering inventory, and nearly every other aspect of how the business
operates. However, the framework required to support this example does appear deceptively simple.
Accessibility of information
In the past, with management information systems (MIS), information only appeared in one place at a
time and usually in one form. Today, with shared databases, cloud storage, communications, device
mobility, and distributed systems, information can be accessed from anywhere, at any time,
simultaneously, and in multiple formats. This changes how decisions are made, where they are made,
and who can make them.
In the retail industry, for example, managers used to gather sales reports from across the country in
order to decide on inventory restocking orders. Now, a point of sale (POS) system automatically gathers
and sorts the data and applies rules to decide when an item should be reordered. Then, with an
integrated supply chain management system (SCM), the system connects with the suppliers system to
automatically process an order.
Business tasks that once required highly trained, experienced, and expensive expert employees to
complete can now be accomplished with novices using expert systems. These systems are capable of
capturing the collective expertise of employees, and transferring it to the organization in the form of
probable recommendations. Consider online help desk systems that, through a series of questions and
answers with a user, help diagnose a computer problem and offer the user a course of action to solve it.
In many cases these expert systems can save an organization thousands of dollars in support personnel
wages and overhead.
This increased accessibility of information (anywhere, anytime, anyone) is often a necessary factor to
enable successful business transformations. Where Microsoft once dominated the desktop computer
market with application suites like Microsoft Office, businesses today have options through mobility, such
as Google Docs, Zoho, and ThinkFree. Even Microsoft itself has felt the pressure and introduced Microsoft
Office365, a cloud-based, pay-as-you-go user offering. Devices such as tablets and smartphones offer
connections that are mobile and go with the user, but may still require application software installed on
the device. Cloud computing offers the promise of geographic mobility to users because the browser is
the primary application for data access. When the centralized model for applications is no longer the
device but the web, our perception of how we access information changes. Mobile apps, downloaded like
utilities from Googles Android Market, Apples App Store, and Blackberry App World, are changing how
we extend the functionality of our mobile devices. Competition may no longer be for your hard drive, but
for your browser. Move this observation to Enterprise Software, and suddenly cloud computing presents a
new model of centralized business, outside the realm of traditional IT management, always on and
always available.
The value chain model
However, in order to transform business processes, you must first have a framework to examine and
evaluate those processes, to determine where the greatest opportunities for enhancement lie. One way
to analyze how an organization does business is to use the value chain model. First described by Michael
Porter in his 1985 book Competitive Advantage: Creating and Sustaining Superior Performance, the value
chain model separates the activity of a company into either primary or support activities by which firms
can create competitive advantage.
Primary activities The primary activities include inventory management, manufacturing operations,
logistics, sales and marketing, and service. Primary activities are discrete steps in the production
and delivery of goods and services. Through each step, value is added to the product or service.
IS can increase the value added either through lowering the cost of the process often through
reduced labour costs or increasing the value through better quality or features.
Support activities In the value chain model, all other activities and processes in an organization are
support activities, often referred to as overhead. Support activities can include employee hiring
and training (HR), purchasing, maintenance, tech development like process automation,
administration and finance. These do not add directly to the value of a companys products or
services, but are a necessary part of doing business. Support activities increase the cost of
products and services, so any reduction in the cost of support activities indirectly adds to the value
of the product by reducing its final cost, for example, creating a cost advantage through
proprietary and innovative information systems.
Consider, for example, how an evaluation of the value chain can be used to help transform a distribution
company. Primary activities such as order picking and packaging can be made more efficient through the
use of bar codes, radio frequency identification (RFID) tags, and automated parts picking. This can
reduce the time needed to ship finished goods to customers and, when used with web ordering, can
reduce the number of people needed to deliver finished products. Not only does this increase the value of
products, it means a significant change in the support activities of a company. The roles and
responsibilities of management change from direct supervision of warehouse employees to more
customer relations and supervision of technical personnel.
Limitation of the value chain model
One limitation of the value chain model is that it works best when used to describe organizations that
offer tangible products; it tends to break down when describing organizations that only offer services,
such as consulting companies. Nonetheless, it is still possible to think about service companies in terms of
activities that add value directly (billable hours) and activities that support the primary value producing
activities (invoicing a customer for those hours). The same methodology can then be used to evaluate
other activities and look for opportunities for improvement.
Business process reengineering
While any application of IT or IS used to support a new way of doing things can be thought of as
reengineering or transforming work, the notion of business process reengineering (BPR) which
emerged onto the business scene in the early 1990s encompasses something much broader. The idea
of reengineering refers to the radical reshaping of the processes an organization uses to achieve its
goals.
The concept of BPR derives largely from the work of Michael Hammer and his 1993 book (co-authored
with James Champy), Reengineering the Corporation. Recognizing that organizational practice exists, not
for current necessity but for traditions sake, Hammer argued that organizations need to take a radical
look at what they are doing and fundamentally break down and reshape themselves, as if they are
starting anew. Reengineering became one of the hottest management fads following the release of
Hammer & Champys book. As with most fads, it then fell somewhat into disfavour. The original concept
of radically reengineering the corporation, instead of a focus on areas for continuous improvement,
caused difficulties as corporations tried to sustain the changes. Flexibility and speed in reacting to market
conditions became more important as corporations entered into the e-business era in the late 1990s.
Today, however, reengineering is recognized as one element in a managerial toolkit, and the concepts of
reengineering have become embedded in many organizational processes and routines, even if on a
smaller scale than originally proposed.
The extent of reengineering required is one of the key challenges associated with implementing
enterprise systems. As you will see in Topic 1.4, coping with change is not easy for people or for
organizations. Reengineering is often resisted, even when its benefits are significant. Inherent to change
is both a loss and a gain, and its the loss that people resist. Managing the change effort is an essential
element of any successful reengineering project. You will learn more about this issue in Module 10.
Principles of reengineering
Seven principles
1
guide reengineering efforts:
Organize around outcomes, not tasks.
Have those who use the output of the process perform the process.
Subsume information processing work into the real work that produces the information.
Treat geographically dispersed resources as if they were centralized.
Link parallel activities rather than integrate them.
Put the decision point where the work is performed, and build control into the process.
Capture information once, at the source.
In looking at these principles, it should be clear that successful implementation of reengineering will
typically depend on the use of computer-based information systems. Capturing information in one place
and then using it multiple times in another place depends on distributed systems. Treating geographically
dispersed resources as centralized requires IT for communication and coordination as well as data
sharing and data management.
Benefits of reengineering through software
Reengineering is one of the fundamental benefits that organizations have derived from the
implementation of enterprise-wide information systems such as SAP and Oracles PeopleSoft. Because of
their level of integration and sophistication, adopting one of these systems typically requires
organizations to make significant changes in the way they do business. Industry best practices that BPR
results promised could be equally adopted by implementing integrated ERP or enterprise systems.
Through these large-scale changes, organizations have achieved improvements in performance and
returns on their investments of 100% or more. But have these improvements been sustainable internally
and across the industry? Nicholas Carr would say no. In his article for Harvard Business Review IT
Doesnt Matter, Carr explains that technology, and specifically information technology, can begin as a
proprietary advantage, but quickly becomes an infrastructural marker. Any advantages, competitive or
otherwise, are lost as other organizations have access to the same software, thus the same best
practices. From Carrs perspective, competitive sustainability through IT is not possible since competitors
quickly adopt new technology. For example, what separates a smartphone is not the technology of the
device, but its apps and programmable features of it, in other words, the software.

1
Summary of Reengineering Work: Dont Automate, Obliterate by Michael Hammer, Harvard Business
Review, July-August 1990, pages 104-112.
1.4 IS and globalization
Learning objective
Evaluate the benefits and limitations of IS in relation to the globalization of business. (Level 1)
Required reading
Chapter 11, Sections 11.1, The Growth of International Information Systems, and 11.2, Organizing
International Information Systems
Module scenario: The world is flat and across the street
I understand your point, you say to the Marketing Manager, who has just countered the effectiveness
of your point on the disruptive nature of cloud computing by saying that it turns everything you do into a
commodity, therefore, reducing costs and making the technology available to all.
Whats the use of IT strategy, the Marketing Manager says, if everyone can do everything equally
well?
Well, you say, the West still considers itself technologically superior to so-called developing countries
like China and India.
But, he says, Thomas Friedman of the New York Times discovered that, while we were sleeping, the
global infrastructure that we thought was ours alone is also connected to them. Distance is no longer a
barrier to competition
And, you say, the push will be for corporations to become more fluid, more ephemeral, like the cloud
computing platform they will inhabit brought together to realize a particular strategy, then dissolved
after the goal.
The room goes noticeably silent. You say: Let me explain a few things about IS and globalization
LEVEL 1
Thomas L. Friedman is an author, reporter, and columnist for the New York Times. He is the recipient of
three Pulitzer Prizes, and the author of five books. Born in Minnesota in 1953, Friedman grew up in the
middle-class Minneapolis suburb of St. Louis Park. He has also coproduced, reported, and narrated six
documentaries. Globalization and its effect on populations is a common theme of his work.
Over the past few decades, political, social, and economic forces have been important influences in the
globalization of industry (see Table 11-1 of your textbook); however, the application of IS to
organizational processes has been equally important. The growth of inexpensive telecommunications
technologies has aided communication between far-flung offices and made it easier to accomplish the
business globalization promoted by the political, social, and economic environment. In fact, Thomas
Friedman, in his 2005 book The World is Flat, argues that IS/IT is a critical element driving the flattening
of the world (the breaking down of barriers between world economies and the rise of a truly global
playing field). Where telecommunications was once the domain of large corporations, the Internet has
provided all businesses with an inexpensive standardized backbone for global communications.
Growth of telecommunications
In the 1970s, telecommunications meant expensive and proprietary equipment, with service provided at
great cost. The amount of bandwidth available was quite low. Today, with Internet availability and a
surplus of bandwidth available among telecommunications companies, telecommunications has become
cheap and readily available.
Frances Cairncross, a noted writer for The Economist, wrote in 1999 that the availability of inexpensive
communications heralded the death of distance. She argued that organizations could structure
themselves and operate as single entities, irrespective of the distances that separate their physical
elements (offices, employees, factories, and so on). This virtualization of organizations has its origins in
the early 1980s
1
, and its characteristics have continued to evolve since. Amazon.com is an example of an
early adopter of a virtual organization its business model was for the online sale of books where
orders, sourcing, packaging, and shipping occurred through different alliances, yet appeared as a single
entity to the consumer.
Challenges for global technology
The growth of global firms has created challenges for the management of IS. To achieve economies of
scale made available by IS, and use best practices for the management of the firm, global organizations
often try to implement common global systems. This makes intuitive sense. However, employees are
often resistant to these global systems for various reasons.
Local practice differences
Often systems designed for one part of a company or one part of the world do not work well in another
because of differences in local practice. This was the case when General Motors tried to implement a
common global system for timekeeping. The company encountered tremendous resistance in Canada
where timekeeping practices had been adapted to meet local union requirements throughout the country.
Thus, the way the system was designed to work in the United States was not consistent with Canadian
practice.
Design differences
Even seemingly small design issues can be problematic as they take on a symbolic importance that goes
beyond their actual influence. Consider the case of an international organization that decided to roll out a
financial information system worldwide. The system had been designed so that it could handle the
different currencies in use by the global subsidiaries. Calculations done in one currency were converted to
other currencies as needed to create integrated financial statements.
The functionality of the system was correct. However, the user interface designers neglected to change
the currency symbol that was displayed in local reports. To do so would have required substantial
reprogramming that would not affect the actual calculation functionality of the system. As a result,
whenever a report was displayed, it showed the correct amount but with a dollar sign as the currency
symbol. In the United States and Canada, this created no specific problems. But in Japan, users were
incensed that North American designers ignored what was for them an essential element of design.
Political, legal, and human resources factors
Political and legal differences must be considered in operating global IS. Many aspects of IS are governed
by legal requirements and influenced by the tendency for telecommunications providers to be state-run in
much of the world. Differences in the availability of skilled talent to manage IS must also be considered.
Limitations to global technologies
There are limits to what technology can accomplish. Authors like Cairncross sometimes overstate the case
when they speak of communications technologies as the panacea for bridging the physical distances
between organizations, or between disparate parts of organizations.
For example, when video conferencing technology first became available, many were excited about the
prospect of using video conferencing to end the need for business travel, or at least substantially reduce
it. While there is no question that video conferencing can be used for some aspects of business
communication, it has not ended the need for travel, partly because of the somewhat limited nature of
the medium and the human and cultural desire for face-to-face contact.
Yet another, and truly insurmountable, issue that limits the use of video conferencing is physical distance
and the notion of time zones. Consider a situation where a senior executive in Vancouver is trying to
arrange a video conference with sales offices in Eastern Canada, Europe, and Asia. Taking time zones
into account, there is no overlapping time during normal working hours that will allow parties in these
four geographic regions to meet.
Still, as more consumers become accustomed to online ties through social media sites like Facebook, the
question of physical contact between buyer and seller blurs. The term showrooming, which describes
the practice of examining physical items at a bricks-and-mortar store, but making the purchase online,
often at a competing retailer, is another way consumers are distorting the seller issue.
2
Store and
salesperson expertise is used but not valued monetarily, because the consumer will still purchase from
the lowest seller, which in many cases is the online seller. Still, the weak ties between Facebook friends
are ideal for global information sharing, which can open consumers up to the possibility of friending not
only individuals, but corporations as well. A Fiserv.com survey conducted in August 2010
3
concluded that
11% of online users are currently connected with their bank or other financial institution through social
media. The ability of information technology to remove distance barriers between users and businesses
presents new opportunities for a community approach including media contact and sales.

1
Mowshowitz, Abbe, (2002), Virtual Organization: Toward a Theory of Societal Transformation
Stimulated by Information Technology, pp.25-30.
2
Brodie, Terri (2013-01-16). Retailers, note: Showrooming growing globally, study finds, Retrieved
2013-02-01, The Globe and Mail online. http://www.theglobeandmail.com/report-on-business/small-
business/sb-tools/small-business-briefing/retailers-note-showrooming-growing-globally-study-
finds/article7421199/
3
Consumers Want to Connect with Financial Institutions via Social Media, Says Fiserv Survey, Fiserv
Financial Services Technology Solutions website, accessed July 14, 2011,
http://investors.fiserv.com/releasedetail.cfm?ReleaseID=535471.
1.5 Managing IS human resources
Learning objectives
Explain the structure of the IS function and the kinds of people that work in a typical IS
department. (Level 2)
Explain the challenges in managing people who design and operate information systems and who
support the firm in using them. (Level 2)
Discuss the human resource challenges in IS management and how these affect IS planning.
(Level 2)
Discuss the role of the CIO and understand its strategic significance. (Level 2)
Required reading
Reading 1-1: CIO 2.0: The Changing Role of the Chief Information Officer
Chapter 10, Section 10.1, Information Resource Management
Module Scenario: Whos on first, second, and third
Until now the assistant general manager has been quiet. He has been listening to your ideas, nodding his
head for some, but not for others. You no longer need to wonder what hes thinking. He lets out a loud
sigh and says that the systems and the connections between the different business systems that you
have been describing will take extra people to design and operate, and that your department is not
equipped in number or in skill to lead the business in any of these directions. What you are giving us,
he says, is a lot of words with no substance. I dont even know who does what in your department.
They all either rush around or sit without talking all day, hammering away at their keyboards. All I know
is that I call Mary when I forget my password.
Everyone laughs. Everyone looks at you. You say, You already know that Mary handles customer
service, and behind her are Gary for more technical issues, and Suri for application problems. Let me
explain a little more about whos who in IS, because I think this will help you see that we actually can
take on some of the projects I have talked about, but we all need to decide which ones
LEVEL 2
This topic focuses on attracting, developing, and retaining IT staff. A non-IS manager, needs to rely on
the professional staff in IS to provide the specialist knowledge that you do not have. It is important to
understand the key roles played by IS specialists, the skills you should look for in hiring IS professionals,
their career motivations, and the issues involved in providing opportunities for continuous professional
development.
The IS department: Roles and responsibilities
The assigned reading provides an overview of the different roles played by members of a typical IS
department. It shows that IS personnel participate in a variety of activities, broadly grouped into the
categories of operations, development, and support. Ensure that you are familiar with these different
roles and their importance and that you know what is meant by IS human resources and information
resource management (IRM).
Chief information officer (CIO)
The head of the IS function is often, but not exclusively, the chief information officer (CIO) (there are
other heads of IT including the Manager, Director, VP, each reflecting certain maturity levels of the IT
organization or the industry segment in which the IT organization functions). The CIOs main
responsibilities include participating in organizational strategic planning, allocating budget resources,
managing personnel, and monitoring (from a strategic standpoint) technological advances. This is a
senior management responsibility and parallels the role of the chief financial officer. In some firms this
role is also called the chief technology officer (CTO), but CIO is the more common term. In some
organizations, the IS manager may perform a hybrid of both functions, similar to the blending of the
controller and the chief financial officer in finance. This, however, is difficult to do successfully. Running
the department and ensuring that operational tasks are performed is the role of the IS manager. The
manager helps fulfill the vision of the CIO. Combining roles into a single person assumes an overlap of
duties where there is none.
Successful CIOs must possess a broad range of skills and knowledge. They must understand the business
and its strategy. At the same time, they must understand the technology and its capabilities. But most
importantly, the CIO must be a communicator and negotiator, able to work with various constituents
inside and outside the organization to mobilize the disparate resources necessary to make an information
system work.
As the Deloitte article suggests, the role of the CIO is not an easy one. Organizations expect much from
their investments in IS and are frequently dissatisfied with the results often for good reason. The
responsibilities of the CIO have evolved since the publication of the Deloitte article: much of what were
once considered core IT components (hardware, software, networking) are now considered for
outsourcing through the cloud offerings of SaaS (software-as-a-service), IaaS (infrastructure-as-a-
service), and PaaS (platform-as-a-service). Eric Lundquist (VP and Editorial Analyst for InformationWeek
Business Technology Network) argues that the job of the CIO in 2013 has changed whereby the CIO now
has four distinct roles: chief innovation officer, infrastructure officer, integration officer, and intelligence
officer.
1
Regardless of the roles, the CIO must assume responsibility for leveraging the firms investments
in IS, and for ensuring that the return on investment is achieved.
Example of a typical CIO role
Consider, for example, the CIOs role in the implementation of an enterprise system. To successfully
implement a new enterprise system (ES) in-house, as opposed to SaaS, an organization must typically
purchase
The ES application
New server hardware to run the software
New hardware for users
Database software to support the ES application
Operating systems software and network operating systems software (because in many cases the
change requires a change in this infrastructure as well)
Security and recovery software to protect the organization from failures of the system
In addition, the organization will contract services for
Consulting on how to configure the new system
Telecommunications provision, as part of the extended network
Training users in how to operate the new system
In most cases, the cost of the software and hardware represents less than 20% of the investment in an
enterprise system. When you consider the number of vendors involved in this activity and the number of
internal stakeholders likely to be affected by the implementation of the system, you can see why
communication and negotiation are essential skills of the CIO.
As a contrast, the IS manager would assist in the technical issues of the selection process. When the
decision is made, the CIO hands off the physical task of implementation to the manager. Projects,
timelines, and resource allocation are the responsibility of the IS manger, with close executive support
and commitment from the CIO. The CIO communicates the implementation status to senior
management, and ensures that IS has the financial resources and the staff to succeed.
Chief security officer
The chief security officer (CSO) is responsible for all aspects of an organizations security; physical,
system, and intellectual. Like the chief knowledge officer, it is a specialized role, but when there is a
designated CSO executive, their portfolio often includes defining the strategy of the corporate security
vision, its implementation, limiting exposure and risk, and creating the policies and procedures
responsible for all controls within IT security.
Chief knowledge officer (CKO)
The role of the chief knowledge officer (CKO) is different than that of the CIO. The CKO is a senior
executive whose responsibility is to facilitate knowledge sharing throughout the organization. The CKO
typically works with the CIO to assess how technology may be used to facilitate knowledge sharing. But
sharing of knowledge goes beyond the technologies used to share information, and the role of the CKO is
often much broader, although only very specialized organizations have a CKO.
Demand for current skills
One of the biggest challenges for IS-dependent organizations is the rate of obsolescence of IS skills. New
technologies and new methods of working with technologies are emerging at an increasing pace. (See
Topic 1.6.) The result is a short lifespan for specific IS skills and a high demand for skills updating for
people who work in this field and for those who manage them.
This rapid obsolescence of skills is a key source of stress for IS workers, resulting in both personal
(health and emotional) and organizational (turnover, lost productivity) consequences. IS workers describe
the pressure to keep up as a constant battle or a never-ending race, and they invest significant
efforts in trying to keep pace so as to provide value to their firm.
2

No IS department can succeed over the long term without a plan to keep skills current with the
technology and methods available in the marketplace. These will be discussed in more detail later in this
topic.
Skills of the IS professional
There is no such thing as a generic IS professional. Different jobs within IS require different kinds of skills
and different depths of knowledge in different skill areas. One way of categorizing skills requirements is
as follows:
technical skills including programming, hardware configuration, and so on
analytical skills especially around modelling systems requirements (data, process, and logic)
business skills including a good understanding of key business issues, because technology
needs to support business needs
communication skills required because IS involves a great deal of communication between users
and designers, between designers of different components, between IS personnel and vendors,
and between IS management and senior management
Each of these categories can be broken down into sub-categories. Technical skills, in particular, include a
whole range of diverse skills. Some employees need a wide breadth of technical skills but can sacrifice
depth in certain areas, while others are likely to need more in-depth skills but in narrower areas.
Being able to communicate clearly and effectively to different audiences is an important skill. Those who
work more closely with end users will require greater communication and business skills than those who
are more distant from users. The network infrastructure group (which ensures that networks and servers
operate at peak efficiency) needs deep technical skills but probably fewer business and communication
skills. Regardless of position, however, some degree of competence in all of these areas is beneficial.
Remember that these skill divisions are arbitrary categories to help with training plans. It is important
that IS people be multi-faceted as opposed to only trained in a particular skill set; however, it is equally
important to realize that training everyone in IS to be good communicators may not be the best use of
funds. Clearly, there are people highly skilled in the technical side of IS who would not be asked to
deliver presentations. This is not negative. This is applying training towards a recognized skill, which is
what the department and the company require.
Read a summary of the skills of the IS professional.
IS careers
Given these different skills and different skill requirements, it is a challenge for organizations to provide
rewarding career opportunities for all the employees they hire. In a more traditional career path,
promotion usually involves moving into positions of management. For many people, this is consistent with
their aspirations. But highly technical application developers who spend the bulk of their time writing
programs and optimizing program performance are strong on technical and analytical skills, but may have
less understanding of business and may not communicate as effectively with the range of stakeholders to
which IS answers. Would you want to promote them into a management role? They are highly effective
in their current job, but does that mean they will be effective in management? Given the skills profile
described here, it seems unlikely. However, if the reward for good performance is a promotion (often,
promotions mean larger salary increases and better benefits), failing to promote may send signals that
their performance is not valued. This could lead to dissatisfaction and eventually the departure of a highly
valued employee.
This scenario is common in IS organizations. The challenge is in providing a career ladder for those
employees who do not seek the role of manager but wish to stay in a technical role. This can be
accomplished by developing positions of different technical responsibility and rewarding them
accordingly. For example, perhaps there is a role such as technical guru that can be considered
equivalent to that of project manager from a salary and benefits perspective. Someone in this role might
be a source of specialized knowledge and talent, brought in to handle the most difficult of technical
problems across a range of organizational projects. Or a role such as mentor to one or more technical
apprentices might appeal to certain technical employees.
The important decision here is to provide a working environment beneficial for IS employees and IS
management. Some organizations determine the necessity of a management position by the number of
direct reports. Technical guru positions work well as recognition positions without a change in status, but
if apprentice employees report directly to the technical guru, it may threaten the IS or IT managers
authority. The point is to recognize that many IS positions hit a ceiling because the culture of the
organization defines it so. In IS, succession planning sometimes affords employees nowhere to go.
Whatever the approach taken, it is important to ensure that the kinds of capabilities that are necessary to
operate the information system within the firm are nurtured and rewarded within the IS department.
Unless this fit is created, high turnover and job dissatisfaction are the likely result.
Skills updating
A final and related issue to consider is that of skills updating. Given the pace at which technology
changes, there is a continuing need for IS employees to upgrade their skills on an ongoing basis. Some
updating can be accomplished through hiring new people with new skills, and sometimes this is
necessary. But to rely solely on turnover and new hires to provide new skills results in stagnation of the
IS organization and the loss of valuable corporate experience as more experienced staff leave, often
resulting in weeks and months of lost productivity while new staff become acquainted with the
idiosyncrasies of existing systems.
Challenges to skills updating
Organizations are often reluctant to invest in training for IS professionals. Such training is expensive and
time consuming, and the skills obtained are easily transferable to other organizational settings.
Organizations are sometimes reluctant to spend money on developing skills that may end up benefiting
their competitors rather than themselves. Over the long term, this argument is self-defeating because a
lack of good development opportunities leads to more rapid turnover. Organizations should combine skill
development with other means of retaining employees (for example, good working conditions, interesting
projects, and competitive salaries). Some organizations adopt commitment methods of ensuring the
return on their training investments with their employees. For example, if a highly skilled developer needs
skill updating in a programming language (a transitory skill that could be employed anywhere), non-
binding agreements are created and signed by both parties. This way the employee is aware (in a non-
threatening way) of the financial commitment the company is making to his or her education, and an
approximate time frame (one to two years) that the employer expects to warrant from its investment. By
signing, the employer also admits to the personal benefit of the training to the employee, and after the
agreed term, realizes that the employee may seek employment elsewhere. A problem with skills updating
in IS means that employees know that their financial value is often more appreciated elsewhere.
Skills updating also poses a challenging time problem. While attending training, employees are not
working on projects within the firm projects that may be of great urgency. In fact, interviews with IS
managers across a broad range of Canadian organizations suggest that time pressure is a bigger barrier
to skills updating than the cost. Many IS departments find that they set aside a budget for IS training, yet
cannot spend the budget because no one can take time away from work to attend training. This conflict
between the urgent work of today, between employee vacations, and the need to support the present
and prepare for the future is not an easy one to address. But finding the balance in each organization
and for each individual within the organization is necessary.
Alternatives to training
Training courses are not the only source of professional updating. Attending conferences is also a useful
source of information. Reading professional journals, taking time to experiment with new technologies,
and holding knowledge-sharing sessions among a group of employees are all parts of a complete skills
updating program. Google expects that employees spend 20% of their time (one day a week) working on
a project other than their daily work something that inspires them.
3

Pursuing the leading edge
While it is misleading to refer to IS personnel as homogeneous, there are some characteristics that tend
to be common among most types of IS workers. IS workers tend to be loyal to their field first, and their
organizations second. Like many professionals, they define themselves in terms of their profession rather
than in terms of their current employer. They tend to change jobs more frequently if organizations do not
provide the kind of professional environment that they seek. This is related to the next characteristic that
exists among most IT professionals an interest, at least at some level, in the technology itself. This
raises interesting ethical pluses and minuses to consider. For example, an ethical plus would appeal to a
kind of professional drive to pursue leading-edge technology for the sake of the technology itself. On the
ethical minus side, IT workers may engage in activities that are technologically cool, trendy, and exciting,
but potentially harmful to the organization.
Even business analysts, who spend most of their time working on business problems, tend to have an
inherent interest in the tools or toys. There is a tendency among IS workers to strive continually to
work with the latest in technology. Organizations that offer little in the way of opportunity to pursue new
technologies (at least to some degree) may find it difficult to retain the best IS talent. These IS
professionals see the potential for new technologies and do not want to miss out on the opportunities to
learn about new tools or processes.

1
Lundquist, Eric, (2013). CIO Role in 2013: Four-Headed Monster?, Information Week online. Retrieved
02/01/2013. http://www.informationweek.com/global-cio/interviews/cio-role-in-2013-four-headed-
monster/240005431
2
Tsai, P., Compeau, D., & Haggerty, N. (2007). Of races to be run and battles to be won: Technical skill-
updating, stress and coping of IT professionals. Human Resource Management, 46(3), 395-409.
3
Scott, Virginia. Google. Westport CT.: Greenwood Press, 2008.
1.6 IS's rapid pace of change
Learning objective
Assess the implications of managing rapid change. (Level 1)
No required reading
LEVEL 1
One of the hallmarks of the current business environment is constant change. The pace of change is
driven by the globalization of competition, the demands of consumers, and the changes in technology
that fuel both.
The pace of change
The first computer (the ENIAC, built in the 1940s) filled an entire room and weighed 30 tons. It operated
for only about 100 hours per week, needing service frequently. It was programmed by rewiring the
components, a process that took several weeks.
1
While it was an enormous improvement over human
processing speed for the calculation of firing trajectories and bomb tables (its primary application), it had
less computing power than the calculators given away as corporate promotional items today.
Rapid change has characterized every facet of information systems computing hardware, software,
telecommunications technologies, and programming and database languages, as well as the procedures
used to develop, maintain, and secure information systems assets in organizations. Exhibit 1.6-1 outlines
the differences between the first computers and those available now.
Exhibit 1.6-1: Comparison between past and present computers

Then Now
Computing hardware
room-sized
thousands of operations per
second
special purpose machines
palm-sized (or smaller)
billions of operations per second
general-purpose machines as well as special purpose
machines
ubiquitous
mobile
Telecommunications
technologies
expensive
complex
built and managed by
specialists
still expensive and complex for enterprise-level
technologies
now also have inexpensive, easy-to-use devices suitable
for consumer market
Operating system
software
proprietary
limited functionality
tied to hardware
open systems as well as proprietary
increasing levels of functionality (for example, web
browser essentially part of operating system and
integration of social media posting into OS)
platform independent (not tied to hardware)
becoming less critical as cloud computing means
applications are browser-based and the OS is secondary
Application software
limited functionality
poor usability due to need to
conserve hardware resources
broader functionality
suites of packages that integrate cross-platform
designed for ease of use, customization
hosted cloud solutions
Programming
achieved by changing physical
configuration of hardware
then through complex
languages based on machine
capability
based on human understanding using software to
convert to machine-level languages
centre around flexible architectures: web services, SOA,
SOAP, XML, AJAX
rise of the app culture as opposed to fully coded systems
Considering these changes in total, the trends in technology change are toward smaller, cheaper, and
faster devices with software (operating system, application software, and programming languages) that is
more intuitive for people to use and provides much broader capabilities. Proprietary technologies persist,
but are balanced now by open standards and technologies that are accessible to all.
The pace of technological change can perhaps best be seen in the changes in computer hardware.
Gordon Moore, the founder of Intel, observed the rate at which computer chips improved specifically,
the density of transistors on an integrated circuit, which is a key driver of performance and predicted
the following:
The number of transistors on an integrated circuit will double every 12 to 18 months (Moores Law).
Moores Law was surprisingly accurate over the period 1970 to 2007. While some continue to herald the
death of Moores Law, most predictions expect the pace of change to continue according to this law until
at least 2020. From an economic position, Moores Law has benefited those in IT who wait. New, highly
sought advanced hardware will often drop in price after one year to make way for the next wave of
hardware improvements.
Implications of the pace of change
The rate of change we continue to witness has several important implications for organizations. First, it
makes the notion of long-term planning problematic. It is impossible to view the environment and make
predictions about what it will look like even a few years into the future with any degree of confidence. If
a company created a five-year marketing strategy projection in 2003, it would have missed both the
launch of Facebook and Twitter. Strategies today tend to be rolling, and revisited on a yearly basis.
The second implication of the pace of change relates to its impact on employees. Faced with too much
change and no respite from the need to constantly shift the way in which they do their jobs, employees
sometimes become overwhelmed. Change is stressful. Human beings are creatures of routine, and the
lack of a stable routine undermines our basic needs in this regard. Too much change can promote
absenteeism, turnover, job dissatisfaction, and lower performance in effect, the opposite of what
organizations are trying to accomplish. Thus, managers must be sensitive to the demands they are
placing on employees (and sometimes customers) with the constant barrage of new technologies. These
issues will be addressed in more depth in Module 10.
Implications of the pace of speed
In 2000, James Gleick, an American science writer, released a book titled Faster: The Acceleration of Just
about Everything. He proposed that, as we speed things up to give us more free time, we have built
more things to do in that free time. The result is a constant cycle of acceleration. Change is an important
factor in organizations, and there are models to help deal with the stresses of change. Speed, however, is
something else. Reliance on information, and in real-time, means that IS must frequently improve not
only the quality of information, but also the manufacture of it. When one program at a time was not
sufficient, graphical user interfaces such as Windows and Mac OS were introduced so that more could be
done in the same time. Multitask is the term, although as a tasking method it has recently fallen out of
favour.
2
When one browser instance wasnt enough, simultaneous browsing tabs were introduced. The
speed of information, tied with the speed of decisions, makes for an uncomfortable union since, no
matter how quick the information arrives, it still needs to be read and digested. But as information
becomes more pronounced and immediate, the need for immediate decisions is heightened. And as
mobility frees information retrieval from fixed devices, we are urged to make decisions as fast as our
information arrives. For IS, this means change is only half of the equation. Not only must we adapt to
continuous change, but also provide and respond to instantaneous, location-based information. The genie
is out of the bottle. All we can do is wait, but not too long.
Predictions
Consider the following predictions about the pace of change of technology:
In 1995, Forrester Research projected that the Internet would have a worldwide user population of
34.9 million people by 1998. The real number ended up being in excess of 100 million users.
In 1995, Jupiter Communications projected $3.1 billion in annual business-to-consumer revenue
for e-commerce by 1998. Forrester predicted $2.3 billion. The real number turned out to be more
than $13 billion.
In 2004, Facebook reached nearly 1 million users. By November 2010, Facebook announced a
global active membership of 500 million users.
3
By October, 2012, Facebook claimed it had 1.01
billion users.
4

These examples show just how far off predictions can be even over a short period. Even more (in
hindsight) ludicrous predictions can be found on the Internet:
5

I predict the Internet...will go spectacularly supernova and in 1996 catastrophically collapse, Bob
Metcalfe, inventor and 3Com founder, said in 1995.
640K ought to be enough for anybody, Bill Gates, chairman of Microsoft, said in 1981.
There is no reason anyone would want a computer in their home, Ken Olson, president,
chairman and founder of Digital Equipment, said in 1977.
Where...the ENIAC is equipped with 18,000 vacuum tubes and weighs 30 tons, computers in the
future may have only 1,000 vacuum tubes and weigh only 1.5 tons, Popular Mechanics said in
1949.
I think there is a world market for maybe five computers, Thomas Watson, chairman of IBM,
said in 1943.

1
Weik, Martin. The ENIAC Story, reprinted from Ordnance: The Journal of the American Ordnance
Association, January, 1961.
2
Bregman, Peter, How (and Why) to Stop Multitasking, Harvard Business Review Blog, May 2010.
3
Source: http://www.facebook.com/press/info.php?timeline
4
Source: http://finance.yahoo.com/news/number-active-users-facebook-over-years-214600186--
finance.html
5
Source: Konrad, R., For 2001, futurists are a bit on the shy side, CNET News.com, December 28,
2000. http://news.com/2100-1017-250259.html
1.7 The ethics of information provision for CGAs
Learning objectives
Explain how competencies in ethics and professionalism equip CGAs to help make ethical strategic
choices in business. (Level 1)
Identify the ethical value added by accountants working in the IS area. (Level 1)
Relate the role of accountants as information producers, analysts, and distributors to work in the
IS and IT areas. (Level 2)
Required reading
Review Ethics Readings Handbook (ERH), Unit A1
Review Ethics Readings Handbook (ERH), Unit C3

(For all ethics-related readings in this course, it is assumed you are already familiar with Section A
and Units C1, C2, C3, C4, C5, and C10 of Section C of the Ethics Readings Handbook. ERH
readings are provided electronically under Resources.)
Module Scenario: Accountants in IS
You head a team of accountants and IT experts providing business advice to a newly formed company,
W&S Grocers Ltd., that is the result of merging a well-established importer, Woo Distributors Ltd., and a
chain of retail stores, Sandhu Food Shops. W&S Grocers Ltd. appears to have great business potential but
faces major challenges in terms of integrating two quite different information systems and management
styles.
Today you meet Mohammed (Moe) Ishmael, the newly recruited CEO of W&S for the first time. He starts
the meeting with the greeting Just call me Moe and talks about his vision for W&S. He says having the
right sort of information system for the newly created company is crucial. However, he admits his
experience is more in general management and he does not know a lot about information systems and
technologies. This is the reason they have brought in your team to advise them.
Moe says he realizes he is going to need to recruit more people into the IS side of W&S. Obviously, he is
going to need people with considerable technical expertise. All this computer stuff now moving off into
the clouds or whatever requires specialized knowledge. But I understand that you are a CGA. What on
earth would adding accountants to the IS side do for W&S? If you could explain that to me, it would be
very helpful!
You can tell from Moes tone the question is not meant to put you, as a CGA, on the defensive about your
qualifications to advise on IS. It is an honest request for information. You realize you must provide Moe
and other executives at W&S a clear and convincing picture of the value added accountants can bring to
IS in order to establish your own credibility as advisors, and to get the executives to buy into the
recommendations for a newly formed IS unit at W&S. So you say to Moe, That is a very good question.
Let me prepare a short presentation for you and your executive team on the role accountants can play in
forming an information strategy for an organization, and the value added accountants bring to the IS
area.
Moe replies, Thats super. I will plan to have your presentation two days from now in the board room.
In the back of your head, you already know a key part of that presentation is going to be about the
ethical value accountants bring to IS as trustworthy information providers. But you are also going to talk
about:
The key values and principles underlying accounting.
How expertise in IS has to be joined to ethics.
How strategic choices in IS should be shaped by ethical considerations.
Identifying key areas of ethical concern in IT and IS.
LEVEL 1
Making ethical strategic choices
In Topic 1.1, a strategy is defined as a plan of action or policy designed to achieve a major or overall
aim. Leadership, including strategic and organizational leadership, is a key competency area for CGAs as
is professionalism and professional knowledge. As noted in ERH A1, there are the three main competency
areas for CGAs (leadership, professionalism, and professional knowledge) and they form an integrated
package.
First, leadership, professionalism, and professional knowledge are related to each other. You arent much
of a leader as an accountant if you lack professionalism and professional knowledge. Ethics and trust
competencies are expressed across all the sub-areas of leadership, professionalism, and professional
knowledge. For example, strategic leadership requires a defined ethical vision and good ethical judgment.
Having a stakeholder focus means knowing who the stakeholders are from an ethical and business
perspective. In each of the areas of professional knowledge, there are ethics-specific issues to consider in
taxation (for example, tax reduction versus tax avoidance), provision of assurance services (for example,
recognizing and addressing threats to auditor independence), or other knowledge-specific areas.
The CGA Competency Framework offers this general description of competencies in Ethics and Trust:
Ethics is the foundation on which all sound professions build their reputation and instil trust in those they
serve. A key component of the CGA Associations commitment to professionalism is CGA-Canadas Code
of Ethical Principles and Rules of Conduct (CEPROC), a comprehensive set of rules and guidelines
designed to protect the public interest and ensure that CGAs maintain the highest ethical standards. All
CGA courses provide instruction in professional business ethics. CGAs are pledged to adhere to CEPROC,
which means they are committed to act with integrity and honesty, avoid conflicts of interest, maintain
confidentiality, exercise due diligence, and ensure that management is accountable for its decisions. By
doing so, they retain the trust of clients, employers, and the public.
1

When CGAs are involved in strategic planning, ethics should always be an essential consideration.
Accountants as information providers
To understand the ethical responsibilities of professionals in a particular area, such as medicine, law,
engineering, or accounting, it is crucial to identify the kinds of tasks the professionals perform, and those
who benefit from the performance of those tasks. For example, physicians and nurses provide health
services (the task) to individual patients or to populations in public health (the beneficiaries).
The preamble to CEPROC offers this description of professional tasks:
The characteristic tasks performed by Certified General Accountants include the production, analysis, and
distribution of information. In addition, the provision of ancillary services is related to the core expertise
in accounting.
Accountants are information producers, analysts, and distributors. Each of these roles has important
implications for CGAs working in IS and IT areas. In other words, IS and IT can then be seen as tools
used to produce, analyze, and distribute information in accord with the values articulated in CEPROC. The
challenge is to relate accounting ethics standards, including CEPROC, to IS and IT management.
As a CGA, is the information I am producing accurate and relevant?
Am I gathering, producing, or analyzing information in a way that is ethical or unethical (for
example, stealing private information or misusing confidential information for personal purposes)?
How can I help ensure data integrity and reliability (that is, act as a responsible data custodian)?
Is the analysis I am providing insightful or does it potentially mislead?
How do I bring the values of skepticism and objectivity to work in IS and IT?
The preamble to CEPROC goes on to define the beneficiaries of accounting services:
Certified General Accountants are committed to the public interest. Normally, acting in the public interest
is achieved by acting in the interest of one's client or employer. However, whenever there is a conflict
between these interests, the professionals first obligation is to the public at large. Acting appropriately in
such situations may require the courage of one's convictions.
As noted here, the normal beneficiaries of a CGAs work in the provision of IS or other accounting
services are ones client or employer. There may be situations where the provision of particular
accounting services comes into conflict with the public interest, for example, if it is in violation of the law
or ethical principles. In that case, the obligation is to serve the public interest. This, again, has important
implications for CGAs providing IS or IT services:
Am I providing information to the right parties in the right way?
Am I keeping confidential information that should be kept confidential?
What are the ethical limits of confidentiality? For example, does endangering public safety, the
environment, or the property rights of others constitute a limiting case to confidentiality?
How can I deter the misuse of data by unauthorized third parties?
How can I deal with complex and sometimes conflicting standards and regulations in different
jurisdictions?
How can I help the clients and organizations to use IS to act in socially responsible ways?
Ethics: an extreme example
One way of understanding the importance of ethics in the provision of IS and IT services is to think about
a situation in which ethics were fundamentally lacking. The example here is drawn from the popular
series The Sopranos, which appeared on television from 1999 to 2007. The series described a mobster,
Tony Soprano, who heads a New Jerseybased crime family.
Tony is a ruthless and very successful leader. Key to his success is the use and analysis of information.
All five forces identified by Michael Porter apply to Tonys business (see Topic 1.2):
Threat of new entrants
Bargaining power of customers
Bargaining power of suppliers
Threat of substitute products or services
Rivalry among existing competitors
Tony can also follow Porters strategies to compete:
Reduce costs
Differentiate products or services
Focus
Lock in suppliers or customers
Create alliances
Raise barriers to entry in the market
Create new products or services
To survive and thrive in the tough world of crime, Tony needs timely information. In a contemporary
environment, Tony uses modern information technologies as well as traditional ones such as informants
and stolen documents. Tony hires savvy professionals. He certainly needs smart lawyers. Undoubtedly,
he wants clever accountants to help him move money to safe havens, for legitimate enterprises, and to
avoid taxes and conceal illegal transactions.
Tonys crime enterprise is an exemplar of an unethical and immoral business. It acts for illegal and
immoral ends using violence, intimidation, and deception as its means. It is a thoroughly unethical
enterprise. Even though they are highly skilled, the professionals who work for Tony are likely knowingly
engaged in unethical and unprofessional activities.
Of course, crime families have their own codes of ethics in which loyalty to the crime boss and the family
is paramount. They even have codes of honour (Never rat on a fellow gang member). They distinguish
between those who deserve to get killed or beaten up and those who do not. They may even have an
elaborate initiation procedure in which aspiring gang members prove their commitment to the group by
committing terrible crimes. And some gang members do describe themselves as professionals with such
specialties as assassination, break and enter, and safe-cracking.
This extreme example of The Sopranos is designed to encourage thought about the importance of ethics
in business and professional life. It is not just a set of technical skills to get the job done that makes a
real professional. There has to be an ethical orientation to the tasks and the stakeholders involved. The
end must be good and the means used must be right.
Summary
The subject of this module is the value added by accountants providing IS and IT services. While
technical accounting skills and knowledge of IS and IT are indispensable requirements, there are central
values of ethics and professionalism as outlined in the CGA competency requirements. To put it simply,
professionals are committed to bringing together technical expertise and sound ethics. As the extreme
example of Tony Soprano shows, simply getting the job done cannot be the motto of the good
professional.

1
Certified General Accountants Association of Canada, CGA Competency Framework. Revised July 2009.
Module 1 self-test
1. Describe how information systems have changed the way businesses operate.

Source: Kenneth C. Laudon, Jane P. Laudon, and Mary Elizabeth Brabston, Management
Information Systems: Managing the Digital Firm, Fifth Canadian Edition (Toronto: Pearson Canada,
2011), page 27. Reproduced with permission from Pearson Canada.

Solution
2. List and describe the management challenges posed by strategic information systems in
organizations.

Source: Kenneth C. Laudon, Jane P. Laudon, and Mary Elizabeth Brabston, Management
Information Systems: Managing the Digital Firm, Fifth Canadian Edition (Toronto: Pearson Canada,
2011), page 91. Reproduced with permission from Pearson Canada.

Solution
3. What are the challenges in finding and retaining the key people to work in an IS department?

Solution
4. What are the seven competitive strategies enabled by information systems?

Source: Adapted from Kenneth C. Laudon, Jane P. Laudon, and Mary Elizabeth Brabston,
Management Information Systems: Managing the Digital Firm, Fifth Canadian Edition (Toronto:
Pearson Canada, 2011), page 91. Reproduced with permission from Pearson Canada.

Solution
5. It has been said that there is no such thing as a sustainable competitive advantage. Do you agree?
Why or why not?

Source: Kenneth C. Laudon, Jane P. Laudon, and Mary Elizabeth Brabston, Management
Information Systems: Managing the Digital Firm, Fifth Canadian Edition (Toronto: Pearson Canada,
2011), page 91. Reproduced with permission from Pearson Canada.

Solution
6. List and describe the major challenges to the development of global systems.

Source: Kenneth C. Laudon, Jane P. Laudon, and Mary Elizabeth Brabston, Management
Information Systems: Managing the Digital Firm, Fifth Canadian Edition (Toronto: Pearson Canada,
2011), page 362. Reproduced with permission from Pearson Canada.

Solution
7. What are the roles of CIO, CSO, and CKO in an organization as they relate to the management of
information systems?

Solution
8. You are a senior business analyst for a multinational consulting firm. As part of your offices new
recruit training program, you have been asked by your manager to prepare a presentation on how
organizational structure in global organizations affects the types of information systems found in
those organizations. You are to include a description of how each type of organizational structure
relates to the information systems most commonly found in global organizations. Provide at least
one example of a company for each given strategy.

Required

Prepare the necessary presentation slides and speakers notes using the following format. Limit
your presentation to 12 slides.

Solution
9. Read the case, How the Royal Canadian Golf Association Cut Costs and Improved Customer
Service (pages 29-30 in your textbook), and answer Case Study Questions 1-4 on page 30. This
case considers the challenges faced by companies when existing systems lack flexibility, and are
replaced by newer technologies and information systems that are more responsive and geared to
web-based customer service.

Solution
10. What is the point of the story about The Sopranos in Topic 1.7?

Solution
Module 1 self-test solution
Question 1 solution
Here are some ways in which information systems have changed the way businesses operate, as well as
products and services:
Wireless communications, including computers, cell phones, smartphones, and tablets, are keeping
managers, employees, customers, suppliers, and business partners connected in every way
possible.
E-mail, online conferencing, the web, and the Internet, provide new and diverse lines of
communication for all businesses, large and small.
Through increased communication channels and decreased costs of the communications,
customers demand more from businesses in terms of service and product, and at lower costs.
E-commerce has changed the way businesses attract and respond to customers.
Social media has provided ways to communicate with customers in open and shared forums,
impacting customer service in more direct and collaborative ways.
Ability to track customer preferences online, and modify web pages to individual customer linkings,
incorporated in Customer Relationship Management (CRM) applications.

Source (first 4 bullets): Adapted from Dale Foster, Instructors Manual to accompany Management
Information Systems: Managing the Digital Firm, Fifth Canadian edition, Pearson Canada, 2011,
Chapter 1, pages 19-20. Reproduced with the permission of Pearson Canada.
Module 1 self-test solution
Question 2 solution
Information systems are closely intertwined with an organizations structure, culture, and business
processes. New systems disrupt established patterns of work and power relationships, so there is often
considerable resistance to them when they are introduced.
Implementing strategic systems often requires extensive organizational change. Such transitions are
often difficult, painful, and time consuming to achieve. Moreover, not all strategic systems are profitable.
They are expensive and difficult to build because they can entail massive changes within the
organization. Other firms easily copy many strategic information systems, so that the strategic advantage
is not always sustainable. The complex relationship between information systems, organizational
performance, and decision making must be carefully managed. Sometimes, the advantages are found
more in the way a management team makes decisions on the information provided by IS, than by the
supposed strategic advantage of the system alone.
Source: Adapted from Dale Foster, Instructors Manual to accompany Management Information Systems:
Managing the Digital Firm, Fifth Canadian edition, Pearson Canada, 2011, Chapter 3, pages 92-93.
Reproduced with the permission of Pearson Canada.
Module 1 self-test solution
Question 3 solution
With competition and a shortage of skilled workers with in-demand current skills, it requires planning and
effort to pursue and retain these workers. As the module notes explain, IT workers have different
motivations from other workers, and these need to be considered. Companies must also take an active
role in training and identifying workers who can adjust to changing strategies or technologies. Rapidly
changing technology is a key source of stress for IT professionals, sometimes resulting in dissatisfaction
and turnover. On the other hand, the rapid pace of change is exciting to some, and can be a real
motivator. IS managers must be astute about the motivations of their employees if they wish to retain
them.
Module 1 self-test solution
Question 4 solution
Seven strategies that can be used to compete, based on Porters model, are:
Low-cost leadership: use information systems to improve inventory management, supply
management, and create efficient customer response systems. Example: Walmart.
Product differentiation: use information systems to create products and services that are
customized and personalized to fit the precise specifications of individual customers. Example:
Google, Dell, eBay, Apple, Lands End.
Focus on market niche: use information systems to produce and analyze data for finely tuned sales
and marketing techniques. Analyze customer buying patterns, tastes, and preferences closely in
order to efficiently pitch advertising and marketing campaigns to smaller target markets. Example:
Hilton Hotels, Harrahs.
Strengthen customer and supplier intimacies: use information systems to facilitate direct access
from suppliers to information within the company. Increase switching costs and loyalty to the
company. Example: IBM, Amazon.com
Create alliances that allow companies to leverage one anothers resources (such as AirMiles and its
retail partners)
Create new products and services: for example, those that embed technologies to provide new
functionality
Raise barriers to entry, by demanding costly IT infrastructure and IT management capability as
necessary elements of a new firm
Source: Adapted from Dale Foster, Instructors Manual to accompany Management Information Systems:
Managing the Digital Firm, Fifth Canadian edition, Pearson Canada, 2011, Chapter 3, page 89.
Reproduced with the permission of Pearson Canada.
Module 1 self-test solution
Question 5 solution
Students may argue both sides, and there is no definite answer to the question. There is little that a
company can do that cannot be duplicated over time. Specifically in relation to technology, as Nicholas
Carr remarked. Citibank and its ATM machines and American Airlines and its reservation systems are
good examples. In contrast, some companies, such as Walmart, maintain a strategic advantage for a long
time. Walmart maintains its lead by striving to advance even further through technology, and by
extending its reach through a closely managed supply chain.
Gary Hamel, whom some call the leading strategy expert in business today, says there is no such thing as
sustainable strategic advantage. Hamel is founder and chairman of Strategos, and a research fellow at
Harvard Business School. He believes that, in the past, most companies were built to do one thing
exceedingly well for an exceedingly long period of time. In todays marketplace, companies built for scale,
replication, diligence, and exactitude must learn to change, adapt, and experiment at the speed that you
see in the new economy. Flexibility and agility are the new measures of how well a company is positioned
to succeed.
New economy companies must master some virtues of the old economy too. These companies are
learning that scale, operational excellence, and global infrastructure are important foundations. For many
organizations, they can constitute hard-to-duplicate competitive advantages that allow them to
capitalize on their own particular business model innovation. Old-economy thinking trained people to
believe that there is no such thing as sustainable competitive advantage, and there is innovation in
products and technology, not innovation in business models. People were trained to assume being radical
is risky, and being incremental is safe. We have to rewire people with new thinking skills that make them
challenge the status quo.
Source: Adapted from Dale Foster, Instructors Manual to accompany Management Information Systems:
Managing the Digital Firm, Fifth Canadian edition, Pearson Canada, 2011, Chapter 3, pages 93-94.
Reproduced with the permission of Pearson Canada.
Module 1 self-test solution
Question 6 solution
The major challenges are:
cultural particularism regionalism, nationalism, language differences: different standards for
electronic data interchange, email, and telecommunications.
social expectations brand-name expectations, work hours: phone networks are not uniformly
reliable.
political laws transborder data and privacy laws, commercial regulations: different data transfer
speeds and shortages of skilled consultants.
multiple currencies and multiple languages must all be supported, and capable of integration.
Source: Adapted from Dale Foster, Instructors Manual to accompany Management Information Systems:
Managing the Digital Firm, Fifth Canadian edition, Pearson Canada, 2011, Chapter 11, page 420.
Reproduced with the permission of Pearson Canada.
Module 1 self-test solution
Question 7 solution
The CIO (chief information officer) is:
the senior manager in charge of the information department.
responsible for overseeing the use of information technology functions in the firm.
responsible for strategic IS planning.
responsible for ensuring that all IS plans, systems, and operations support the organizations
overall strategy.
the major link between all vendors and strategic partners of the organization.
The CSO (chief security officer) is:
the senior executive responsible for the organizations physical, system, and intellectual security
strategies.
The CSO portfolio includes defining the strategy of the corporate security vision, its
implementation, limiting exposure and risk, and creating the policies and procedures responsible
for all controls within IT security.
The CKO (chief knowledge officer) is:
the senior executive in charge of the organizations knowledge management program for
protecting and distributing identified knowledge resources.
involved in designing programs and systems to find new sources of knowledge or to make better
use of existing knowledge in organizational and management processes.
Module 1 self-test solution
Question 8 solution
Slide 1

Slide 2

Slide 3

Slide 4

Slide 5

Slide 6

Slide 7

Note: Responses and presentation will vary, but the primary concepts should be addressed. In the
assignments, marks will be awarded for correct spelling, grammar, and the overall layout of the
presentation (slides are the appropriate length and contain only the key points, and the speakers notes
are detailed enough to be useful when giving the presentation). Presentations should include an
appropriate title slide, introduction, and conclusion as needed.
Module 1 self-test solution
Question 9 solution
CASE STUDY
How the Royal Canadian Golf Association Cut Costs and Improved Customer Service
1. Why did the RCGA invest in information technology?

The RCGA supports thousands of members, and dozens of golf clubs and tournaments across
Canada. Their customers are geographically dispersed. However, until 2003, the RCGA computer
system accepted entry from only one location, Oakville, Ontario. Once tournament schedules were
compiled, changes could only be made at the Oakville location, and then compiled again. The
inefficiency of the system created extra work, slowed down simple processes, and required manual
forms and entry. The RCGA could not adequately service their existing customer base.

With the low cost advantage of telecommunications, specifically available through the Internet,
RCGA opted for an information technology solution to their information issues. They wanted a
solution that gave them mobility (access from any location), but also wanted the output schedules
and other information available to all its customers.
2. What were the disadvantages of the old system?

The customer base of the RCGA was spread across Canada, so the idea of sustaining an
application on a single computer based in Oakville created logistical problems. There was no
communications component to the application, making it truly stand-alone. Wherever a
tournament was held, someone had to be at the Oakville location to manually enter any changes.
Also, the application represented a single point of failure should the hardware stop working. The
design could not scale up to the increasing demands for integrated entry and shared results
anywhere a tournament was located. Their success had outgrown the restrictions (centralized
entry) of the old system.
3. What do you think might have been the obstacles to overcome in developing the new
tournament application?

To compete in a marketplace that demands information access, the RCGA had to adapt their
information technology to a new model. A web-based solution gave them access from any
location, and also presented their customers with instantaneous updates on their website.
However, a solution that uses communications as its backbone meant that the RCGA would have
faced new obstacles. Security, privacy of information, connectivity through multiple browsers, and
the ability to scale up to handle hundreds or thousands of simultaneous requeststhese are all
new concerns with the web-based solution.

The RCGA also had to contract the services of an outside consulting company, Matron Inc. to
design the application. Placing the development of something so critical to the success of your
company into the hands of another company is stressful. A new platform (web), the concept of
developing this application in a MS-Windows program development framework (.Net) with its
benefits and limitations, the move to decentralized entry (anywhere an Internet connection is
available), all were obstacles to overcome with the new application.
4. How do you think the new website(s) help the RCGA fulfill its mission and strategy?

The RCGA transformed the way it approached golf tournaments. It moved the information logistics
of the tournament from a backseat, to equal importance with the golf itself. Its mission for the
project, a more sophisticated, user-friendly, website that was easy to update and to find
information on. could only be realized through major changes.

The benefits the RCGA experienced from the new system were immediate. The tournament
application can be accessed from anywhere, players can register online and immediately contact
RCGA employees and volunteers with questions, and fans have better access to information than
ever before.

Cost reductions were also a strategy for the project, and were quickly realized. Player entry online
reduced the number printed forms and processing costsboth in mailing costs and data entry.
Also, the skill set that the RCGA established through this project has enabled them to market that
skill to other golf organizations through website development and hosting. The IT component of
their business has diversified.
Source: Adapted from Dale Foster, Instructors Manual to accompany Management Information Systems:
Managing the Digital Firm, Fifth Canadian edition, Pearson Canada, 2011, Chapter 1, pages 27-28.
Reproduced with the permission of Pearson Canada.
Module 1 self-test solution
Question 10 solution
The Sopranos is an extreme case of the absence of ethics and the presence of many carefully executed
business and professional skills. It is meant to show business and professional skills (getting the job done
efficiently and serving organizations goals) are dangerously inadequate. The job itself and the
organization need to be ethical before it is legitimate for professionals to become engaged.
Module 1 summary
Strategic importance of IS
Evaluate the role of an IS strategy as part of an organizations overall strategic plan.
The effective management and use of IS is key to achieving the goals set out in an organizations
strategic plan.
In todays business environment, no strategy will succeed if it ignores the challenges and rewards
that IS offers.
IS is a vital component of any organization and as such is essential to any strategic plan.
Evaluation of the role of IS strategy includes identification of
o the organizations strategic goals
o the organizations view of strategy
o the dependency of the organization on IS
o the methods through which IS can align its goals with the organization
Evaluate a company or industry using Porters Five Forces and Barneys resource-based view of the firm, and
formulate several strategies that allow an organization to develop competitive advantage.
Michael Porter describes an industry in terms of Five Forces, each of which can be positively and
negatively influenced by the applications of IS in firms:
o threat of new entrants
o bargaining power of customers
o bargaining power of suppliers
o threat of substitute products or services
o rivalry among existing competitors
Strategically, IS is used to enhance one or more of these forces to improve some aspect of the
firms activities.
Alternatively, IS can be used to overcome one or more of these forces which currently
disadvantage a firm
The resource-view of the firm (Barney, 1991) complements this view, by explaining why some
sorts of advantage are more sustainable than others.
Resources (such as IS) that are valuable, rare, inimitable and non-substitutable will result in
advantages that are more likely to be maintained.
Using these tools in combination will help you to understand the potential and risks of employing
IS to aid in the strategic positioning of a firm.
Strategies that allow an organization to develop a competitive advantage:
While strategies are widely variable, certain generic approaches can be identified:
o cost leadership
o differentiation
o alliances
o locking in suppliers and/or customers
o raising barriers to entry
o creating new products or services
IS can be used to reduce cost, enhance or improve products, lock in suppliers, or lock out
competitors.
IS is used to overcome and adapt to these strategies.
Organizations must see IS as a tool for competitive advantage and not as the sole means of
sustainability.
Identify the types of strategies that produce a competitive advantage for an organization.
Identify and evaluate how IS can be used to support one or more of these strategies.
Look for opportunities to use IS to produce a competitive advantage.
Keep in mind that technology alone is easily imitable and cannot sustain a competitive advantage
on its own. But the combinations of technology, people, and process that make up an information
system have greater potential for sustainable benefits, by focusing on resources that are rare and
less easily imitable.
Reflect on the lessons of specific cases: Walmart, Dell, Toyota, Kia, and so on.
Recommend applications and processes through which IS can contribute to organizational and business
transformation.
IS can transform the way in which organizations conduct business by streamlining or automating
business processes. This can be done through
o the value chain model (primary and support activities)
o improving the accessibility of information (anywhere, anytime, anyone)
o reengineering (BPR) work/business process (seven principles of reengineering; benefits of
reengineering)
Evaluate the benefits and limitations of IS in relation to the globalization of business.
The growth of inexpensive telecommunications has made it easier to accomplish business
globalization.
Some of the global challenges and limitations of technologies include
o local practices
o design differences
o political, legal, and human resources factors
Explain the structure of the IS function and the kinds of people that work in a typical IS department.
There is a need for skilled workers and demand for current skills.
Pursuing and retaining skilled workers is a challenge.
People who design and operate information systems have different roles and activities in three
areas:
o operations
o development
o support
Discuss the human resource challenges in IS management and how these affect IS planning.
IS professionals need not only good technical skills, but also good analytical, business and
communication skills.
IS professionals need to understand the goals of the business in order to help develop the best
technical solutions.
An employer needs some creativity in rewarding technical employees, and must be able to
facilitate on-going skills updating through training, conferences, professional journals, and
knowledge groups.
An employer needs to be conscious that training IS employees improves their marketability, and
able to leverage this knowledge into employee loyalty.
Discuss the role of the CIO and understand its strategic significance.
The chief information officer (CIO) is the senior manager in charge of the information department
and acts in the following ways:
o oversees the use of information technology functions in the firm
o takes responsibility for strategic IS planning
o takes responsibility for ensuring that all IS plans, systems, and operations support the
organizations overall strategy
o acts as the major link between all vendors and strategic partners of the organization
Assess the implications of managing rapid change.
The rapid pace of change has an enormous effect on IS.
Moores Law describes the pace of change in hardware development.
Implications of the pace of change include
o challenges for long-term planning
o impact on people and organization
o challenge of prediction
o impact on the speed of decision making related to the speed of information delivery
Explain how competencies in ethics and professionalism equip CGAs to help make ethical strategic choices in
business.
The three main competency areas for CGAs (leadership, professionalism, and professional
knowledge) form an integrated package.
Ethics and professionalism provide a framework for leadership and the use of professional
knowledge and skills.
Identify the ethical value added by accountants working in the IS area.
Accountants are trusted information providers because they internalize and act upon ethical and
professional values.
Accountants are mentored and supported by their professional associations.
Expertise without ethics is either immoral or non-moral.
Relate the role of accountants as information producers, analysts, and distributors to work in the IS and IT areas.
The main tasks of accountants are to produce, analyze, and distribute information.
IS and IT provide significant means for each of these areas.
Information provided should be accurate and reliable. This has implications for data security and
reliability.
Information has to be provided to appropriate parties and not to others. This has implications for
confidentiality and privacy.
Using good information appropriately helps organizations be socially responsible.