CHAPTER 8

Strategic Management
of IS/IT: Organizing
and Resourcing

1
 Outlines
Organizing strategies for IS/IT
management
Models and framework for guiding
management action

2
 Objectives of the IS/IT
Management Strategy
To ensure IS/IT strategies, policies and plans reflect
business objectives and strategies.
To ensure potential business advantages from IS/IT are
identified and exploited.
To ensure strategies, etc. are viable in terms of business
risks.
To establish appropriate resource levels and reconcile
contention/set priorities.
To create a culture for the management of IS/IT that
reflects the corporate culture.
To monitor the progress of business-critical IS/IT
activities.
To achieve the best balance b/w centralization and
3
development of IS/IT decision making.
 Traditional IT Organization
IT
Executive

Finance and
admin.

Consulting Development Service

Plans and Systems Operational

control development services

Plan Implement Deliver

4
Source: Luftman
 Centralization
CIO

Systems
Administration Operations
Development

Planning Design Data Centers

Research Programming Telecomm.

HR Maintenance Help Desk

Data
... ...
Management

... ... ...

5
Source: Luftman
 Decentralization
CEO

CIO

VP Finanace VP Marketing VP Product ABC VP Product XYZ

Function 1 Function 1 Function 1 Function 1

Finance IT Marketing IT ABC IT XYZ IT

6
Source: Luftman
 Federal or Hybrid
CEO

CIO

VP Systems development
for finance Administration Operations
Finance

Systems development
VP PLA for product line A

Systems development
VP PLB
for product line B

7
 Benefits of Federal Model
IT vision
and
leadership
Scale
economics
Users control
IT priorities
Leverage
Unresponsive standards Excessive $ to group
BU ownership Variable standards of IT
No BU ownership and tools
No BU control of central competence
overhead $ Control Responsive to Reinvention of wheels
Does NOT meet every architecture BUs needs No synergy and
BU need integration
Critical mass
of skills

Centralized IT Strategic control

synergy
Decentralized IT
- + + -
8
 Factors for Selecting
Organizational Structure
The organizations depend on IT
Its stage of maturity in terms of its application
portfolio
The geography of the enterprise, especially for
organizations with a global presence
Its business diversity and rate of change of the
types of business and competitive pressures in
each business
The potential benefits of synergy b/w business in
both trading goods and services and information
exchange
The economics of resourcing, obtaining and
deploying skills 9
 La Belle and Nyce
While the business units should be responsible
for applications- architecture, development and
operation- certain areas should be centralized
These included: telecommunications, hardware,
software architecture, information architecture,
risk management and security, shared services
and utilities, and human resources.
The activities of the units had to be coordinated
with the central architecture development via
steering group or committee

10
 Division of Responsibility:
IT Architecture Management
Function: Develop and maintain information
architecture
Central IT group:
Monitor process; provide assistance if requested
Business unit operations
Complete business architectures defining business by
location
Complete translation of strategy into technology
requirements
Define information architecture
11
 Cont..
Function: Develop and maintain application
architecture
Central IT group
Set standards, monitor process
Review architectures and report on adequacy to
Technology Committee
Ensure appropriate commonality
Business unit operations
Define requirements and develop architecture
Coordinate b/w units for common business

12
 Cont..
Function: Develop and maintain data
architectures
Central IT group
Coordinate development/establishment of
common database management process
Create/maintain corporate databases
Business unit operations
Define requirements
Develop in accordance with standards
13
 Cont
Function: develop and maintain
hardware/operating system architecture
Central IT group
Monitor development/implementation within sectors
Develop and maintain architecture for corporate
users-support operations
Business unit operations
Develop in accordance with corporate standards and
business requirements
Request variances as appropriate; make change
recommendations
14
 Cont
Function: Develop and maintain
telecommunications architectures
Central IT group
Develop in accordance with standards and
business requirements
Business unit operations
Define requirements
Report performance/responsiveness problems

15
 Balancing IS Demand and IT
Supply
Business units receive a responsive
service from decentralized IS functions
While at the same time a corporate IS
function provides group wide IT services
and exerts some degree of central
leadership and control of IT activities

16
 Summary of Structural Arrangements
for IS Function in Multiple BUs
Structural arrangements Strategies for managing Critical management
Advantages
for the IS Function IS/IT activities issues
Independent IS/IT BUs pursue BUs have ownership Integration
activities in business independent system Users control IS/IT Lack of quality control
units initiatives priorities of data
Responsive to BUs Variable standards of
needs IS/IT competency
Reinvention of wheels
and duplication of
effort
Little synergy across
Bus
Managing cost
Centrally-driven IS/ Corporate wide Scale economics Politics
IT activities IS/IT solutions Control of standards Unresponsive
imposed on BUs Critical mass of skill Does not meet every
Bus needs
Effect on customer
17
 Cont..
Structural arrangements Strategies for managing Critical management
Advantages
for the IS Function IS/IT activities issues
Informal Informal social Awareness of IS/ Coordination &
cooperation in IS/ networking b/w the IT issues across direction setting
IT activities across centre & Bus the enterprise Leaving too much to
BUs Usually brought about chance
by movement of key
IS/IT personnel
across BUs
Federalism Balancing central Group-wide IS/IT Complexity
(integrated IS/IT) control & BU autonomy strategy & Execution
without losing the architecture with Timing
advantage of global devolution where Defining where
coordination & appropriate appropriate
integration
18
 Imperative for the Management
of IS/IT: Rockart et al.
Achieve two-way alignment b/w the business
and IS/IT strategy
Develop effective relationships with line
management
Deliver and implement new systems
Build and manage IT infrastructure
Reskill the IS function with new competencies
and knowledge
Manage vendor partnerships
Redesign and manage the federal IS
organization
19
 Imperative for the Management
of IS/IT: Venkatraman
He argued the need for a different approach to
managing IT resources that consider the
sources of value to be derived from IT
resources.
He proposed that resources should be managed
as a value centre.
The value centre is an organizing concept that
recognizes four interdependent sources of value
from IT resources: cost centre, service centre,
investment and profit centre.

20
 Cont
The cost centre has an operational focus
that minimizes risks with an emphasis on
operational efficiency. Cost-centre
activities are good candidates for
outsourcing.
The service centre, although still
minimizing risk, aims to create an IT-
enabled business capability to support
current strategies.

21
 Cont
The investment centre has a long-term
focus and aims to create new IT-based
business capabilities. It seeks to maximize
business opportunity from IT resources.
The profit centre is designed to deliver IT
services to the external marketplace for
incremental revenue and for gaining
valuable experience in becoming a world-
class IS function.

22
Imperative for the Management
of IS/IT: Gartner Group
1 IT Leadership
Architecture Supply Demand
2
Development side 1 side
3 Business
Enhancement
4 Technology 2
Advancement
5 Vendor 3 Embedded
Management in the
4 business

Outsourced to
external
service
23
providers
 Cont
IT leadership, which includes IT envisioning,
fusing IT strategy with business strategy, and
managing IS resources.
Architecture development, which is concerned
with developing a blue-print for the overall IT
technical design.
Business enhancement, which includes business
process analysis and design, project management
and managing relationships with users.
Technology advancement, which is application
design and development.
Vendor management, which includes managing
and developing relationships with vendor and
suppliers, negotiating and monitoring contracts 24
and purchasing.
A Framework Guiding Action
What needs to be managed?
Where IS/IT resources should be
outsourced?
Who should manage IS/IT?
Coordinating mechanisms for the strategic
management of IS/IT
Define IS competency
Managing relationships
25
 What Needs to be Managed?
The activities that are traditionally seen as
necessary for IT, and consequently considered
as taking place within the IS function, can be
portrayed as delivering a range of services to
the business.
Strategy and planning services
Application development services
Application and technical services
Technology delivery and maintenance services

26
 Deciding on the organization of
IS/IT Resources
2 key issues must be considered
Location of IS/IT decision rights
What decisions should be centralized and what
aspects of IS/IT management should be devolved
into the business and out of the IS function?
The organization needs to define authority,
responsibilities, policies, coordinating mechanism
and control procedures.
Sourcing of IS/IT resources
Internal or interorganizational resources
The interorganizational arrangement places new
stresses, demanding additional coordination and
vendor relationship management. 27
Trading-offs in the Organization
and Resourcing of IS/IT
Distributed

Location of
decision
rights
Traditional
IS function
Centralized
Internal Interorganizational
Provisioning of
IS resources 28
 Cont
Organizations engaging in outsourcing at
some stage identify the need to realign,
change and/or develop different parts of
their IS/IT structures, competencies and
skills to enable them to maintain the link
b/w IS/IT and business prerequisites.

Increase the complexity in managing IS/IT

29
Aspects Required for Distributing
IS/IT Decision Making
Content the decision areas that are being
managed (Table 8.4)
Authority the individuals or groups that have
the power actually to make decisions in the
various areas
Responsibilities the individuals or bodies
responsible for day-to-day execution in decision
areas. The definition of responsibility needs to
be integral to each persons job role and function
Coordination the mechanism and processes
for ensuring coherence across all decision areas
(eg. Steering committees, management groups)
30
 Cont
Policies statements of principles or
actions defining acceptable behaviour.
They provide a basis for consistent
decision making and resource allocation.
Control outlining the approached to
policing decisions, ensuring conformance
across the organization

31
 IS/IT Policies
Restraining policies are seen as
describing the rules of federation. They
define the parameters within which
decisions are made.
Enabling policies relate to the
dissemination of best practice.

32
Enabling and Restraining Policies
Restraining Policies Enabling Policies
Technical compatibility Making group-resourced
standards services available to division
Standards for buying Negotiating volume discounts
equipment & services Managing supplier
Common systems mandate relationships
Disaster recovery, security & Influencing behaviour through
quality policies charge-out rules
Group systems standards Setting criteria for selecting
Group job specifications common systems
Any conformance to industry Funding share assets
standards .
. .
. .
. 33
 Provisioning of IS/IT Resources
Insourcing IS/IT resources are provided
by a central IS function
Outsourcing delegation, through a
contractual arrangement, of all or part of
the technical resources, the human
resources and the management
responsibilities associated with providing
IT services, to an external vendor.

34
 Outsourcing Rationales
Financial and economic reasons
Technical reasons
Business reasons

35
 Classifying Sourcing Options
Purchasing style
Transaction style refers to one-time or short-term
contracts with enough detail to be the original
reference document
Relationship style refers to less detailed, often
incentive-based contracts, centred around the
expectation that the customer and vendor will do
business for many years.
Purchasing focus
Resource option, organizations buy vendor resources
such as HW, SW or expertise, but manage the use of
the resources in-house.
Result option, vendors manage the delivery of the IT
activities, using whatever resources are necessary, to
provide the customer with specified results.
36
Classifying Sourcing Options
Resource
PREFERRED
BUY IN
SUPPLIER
Purchasing
focus

CONTRACT PREFERRED
Result
OUT CONTRACTOR

Transaction Relationship
Purchasing
style
37
 4 Outsource Strategies
Contract out strategy - the vendor is responsible for
delivering the results of IT activity.
Buy-in strategy the organization buy in resources from
the external market, often to meet a temporary
requirement. Contracts often specify the skills required
and cost, with the resources then managed in-house.
Preferred contract strategy organizations contract long
term with a vendor to reduce risk, with the vendor
responsible for the management and delivery of an IT
activity or service.
Preferred supplier strategy this strategy takes buy-in
approach further, with an organization seeking to
develop a long-term close relationship with a vendor in
order to access its resources for ongoing IT activities.
The organization takes responsibility for managing these
resources.
38
 Vital Competencies for
Maintaining In-House
The ability to track, assess and interpret
changing IS/IT capability and relate them to
organization need.
The ability to work with business management to
define the IT requirements over time.
The ability to identify appropriate ways to use
the market, specify and manage IS/IT sourcing.
The ability to monitor and manage contractual
relations.

39
 When to Outsource
Position on the strategic grid
Development portfolio
Organizational learning
A firms position in the market
Current IT organiztion

40
 Position on the Strategic Grid
High Factory- uninterrupted service-oriented
information resource management
Outsourcing presumption: Yes, unless
company is huge and well managed
IT Impact on Core Operations
Reasons to consider outsourcing:
Possibilities of economies of scale for small
and midsize firms
Higher-quality service and backup
Management focus facilitated
Fiber-optic and extended channel technologies
facilitate international IT solutions
Support-oriented information resource
management
Outsourcing presumption: Yes
Reasons to consider outsourcing:
Access to higher IT professionalism
Possibility of laying off is of low priority and
problematic
Access to current IT technologies
Risk of inappropriate IT architecture reduced
Low IT Impact on Core Strategy
Strategic information resource management
Outsourcing presumption: Mixed
Reasons to consider outsourcing:
Rescue an out-of-control internal IT unit
Tap source of cash
Facilitate cost flexibility
Facilitate management of divestiture
Provide access to technology applications and
staffing skills otherwise not available
Turnaround information resource
management
Outsourcing presumption: Mixed
Reasons to consider outsourcing:
Internal IT unit not capable in required
technologies
Internal IT unit not capable in required project
management skills
Access to technology applications and staffing
otherwise not available
High
41
 Development Portfolio
Maintenance or high-structured projects=>
candidate for outsourcing
High-technology, highly structured work =>
strong candidate for outsourcing
Large, low-structured projects => difficult
coordination problems for outsourcing

42
 Organizational Learning
A firms organizational learning ability influences
whether it can manage an outsourcing
arrangement effectively.
Many firms development portfolios include a
large number of projects aimed at process
reengineering and organizational transformation.
The success of both types of projects depends
on having the internal staff radically change the
way it works.

43
 A Firms Position in the Market
Firms that are far behind their peers often do not
have the IT leadership, staff skills, or
architecture to upgrade quickly to state-of-the-art
technology.

Must go forward with contemporary practice and

technology.
A firm whose IT capabilities have become
obsolete, it is not worth dwelling on how the firm
got where it is but vital to determine how it can
extricate itself

44
 Current IT Organization
The more IT activities are already
segregated in organizational and
accounting terms, the easier it is to
negotiate an enduring outsourcing
contract.
A stand-alone IT unit has already
developed the fundamental integrating and
control mechanisms necessary for an
outsourcing contract

45
 Who should Manage IS/IT and
Where should IT Report
Pluses Minuses
IT Technical expertise IT not aligned
directors Accurate Systems Education omitted
Sound technology Information overload
Systems integration Technical solutions
Finance Tight cost control Not always best value
directors Department for money
coordination Insufficient time to
Training costs devote to IT
integrated Opportunities missed
Strict authorization Short-term approach 46
 Cont
Pluses Minuses
Business IT investments linked to Systems not
-unit the business direction coordinated
head Locally-focused systems Incompatibility across
Continuous development BUs
Shorter reporting Duplication of data
structure Unnecessary costs
incurred
Board of Strategic direction Logistical details omitted
directors Appreciation of broader IS/IT underexploited
impact of decisions Infrastructure weak
Major problems tackled Slow to exploit
Funding allocated technology
47
 Changing Role of the CIO
Application portfolio
Mainframe era
Transaction processing-automation for
efficiency
Distributed era
Knowledge-worker support,
interorganizational systems, ERP systems
Web-based and Internet era
Electronic commerce, knowledge
management, virtual organizations, supply
chain re-engineering 48
 Cont
Senior business executive attitudes to IS/IT
Mainframe era
IT for cost displacement and automation
Distributed era
Increased involvement in IT issues and governance
Polarization of attitudes: IT as strategic asset or cost
to be minimized
Web-based and Internet era
IT, particularly the Internet, viewed as
transformational
IT investments now more attractive in terms of costs
and timescales
IS/IT now part of ongoing business conversation 49
 Cont
Input to business
Mainframe era
Advisor on How to do, not What to do
Distributed era
Access to senior executives
Invited seat at table
Web-based and Internet era
Member of executive team having a seat at the table
Helps define what to do

50
 Cont
Major tasks
Mainframe era
On-time delivery
Reliable IT operations
Distributed era
Manage IS function
Provide infrastructure
Manage vendors
Web-based and Internet era
Jointly develop business/IT model
Introduce management processes that leverage
technologies, particularly the Internet
51
Role
Cont
Mainframe era
Functional head
Operational manager
Deliver on promises
Distributed era
Strategic partner
Relationship builder
Technology advisor
Align IS/IT with business
Web-based and Internet era
Visionary
Relationship builder
Technology opportunist
Drive and shape strategy 52
 5 Roles for the Success CIO
Leadership
Visionary
Relationship builder
Politician
Deliverer

53
 Leadership: Characteristics
Broad business and organizational
knowledge
Broad set of relationships in the firm and
the industry
Excellent reputation and a strong track
record in a broad set of activities
Keen mind and strong interpersonal skills
High integrity and personal values
High level of motivation
54
 Leaders VS Managers
A sensible and appealing
picture or the future
Vision
A logic for how the vision
Leaders define can be achieved
WHAT

Strategies

Plans
Specific steps and timetables
to implement the strategies
Managers
define HOW
Plans converted into financial
projections and goals
Budgets 55
 Profile of the CIO
Behavior Competencies
Is loyal to the Is a
organization consultant/facilitator
Is open in management Good communicator
style Has IT knowledge
Is perceived to have Able to achieve results
integrity through others
Motivation Experience
Is goal oriented Sound experience in
Comfortable as a an IS development role
change agent (especially in system
Creative and analysis)
encourages ideas
56
Coordinating Mechanisms for the
Strategic Management of IS/IT
Steering group or committee
Reasons
Ensuring top management involvement in IS
planning
Ensuring the fit b/w IS and business strategy
Improving communication with top and middle
management
Changing user attitudes to IT

57
 Causes of the Problems with
Steering Committee
The wrong people involved
The activities of the steering committee
and the decisions taken have to be
integrated with the overall strategy
processed in the business.
The committee has no infrastructure to
support it and carry out its actions which
become the strategy.

58
Steering Organization for IS/IT
Strategic Management
EXECUTIVE
BUSINESS-LED STEERING
IT-LED
GROUP

BUSINESS
(or functional) IT STRATEGY
IS STRATEGY GROUP
GROUPS

APPLICATION SERVICE TECHNICAL

MANAGEMENT MANAGEMENT MANAGEMENT
GROUPS GROUPS GROUPS

DEMAND SUPPLY
MANAGEMENT MANAGEMENT
59
 Responsibilities:
Executive Steering Group
Interpreting business strategy and
agreeing overall IS/IT policies
Establishing priorities, agreeing resource
and expense levels, authorizing major
investments
Ensuring that strategic applications
achieve their objectives
Establishing the appropriate organizational
responsibilities and relationships
60
 Responsibilities:
Business IS Strategy Groups
Identifying business needs, interpreting
CSFs, assessing opportunities and threats
and IS implications in that business area
Prioritizing, planning and coordinating IS
activities and expenditure in the area and
ensuring planned benefits are delivered
Ensuring appropriate user resources are
allocated to projects and appoint
application managers
61
 Responsibilities:
IT Strategy Group
Interpreting IT trends and developments in the
context of the organizations business
Ensuring resources are deployed to meet
business priorities
Developing IT resources and services in line
with business IS plans and monitoring the
performance of those resources
Managing the supply of technology and
specialist bought-in services
Ensuring technical risks are minimized

62
 Responsibilities:
Application Management Groups
Identifying and specifying the needs, benefits,
business resources and costs of applications to
enable management to evaluate investments
and set priorities
Managing developments and ongoing use of
systems to ensure benefits are maximized
Ensuring business changes necessary to get the
benefits carried out
Ensuring that user resources are made available
as needed and used effectively on projects

63
 Responsibilities:
Service Management Groups
Translating business needs into technical
requirements and resource implications
Selecting the optimum means of meeting the
business needs
Monitoring performance against budgets/service
levels agreed with the business
Ensuring technical solutions are tested and
quality assured to avoid application failure
Planning the development of services and
resources to meet evolving demands

64
 Responsibilities:
Technology Management Groups
Understanding technology development,
formulating options and communicating the
implications
Assessing the capabilities of the technologies
against known and potential needs
Planning and managing infrastructure
developments and migrations to minimize the
risk to business applications
Resolving technical issues/problems with
suppliers and ensuring service groups are
effectively supported
65
 Managing the IS Function
3 enduring challenges in the exploitation of
IT
The challenge of business and IS/IT vision is
to address the need for two-way alignment
b/w business and technology
The challenge of delivery of IS services at low
cost and high quality is being transformed by
the evolving, vibrant service market
The challenge of IT design architecture the
choice of technical platform on which to
mount IS services
66
 Core IS Competencies
IS/IT leadership Integrating IS/IT effort with business
purpose and activity
Business Envisioning the business process that
system thinking technology makes possible
Relationship Getting the business constructively
building engaged in IS/IT issues
Architecture Creating a coherent blueprint for a
planning technical platform that responds to
current and future business
Making Rapidly achieving technical progress by
technology work one means or another
67
 Cont..
Informed buying Managing the IS/IT sourcing strategy that
meets the interests of the business
Contract Ensuring the success of existing
facilitation contracts for IS/IT services

Contract Protecting the businesss contractual

monitoring position, current and future

Vendor Identifying the potential added value of

development IS/IT service suppliers

68
Other Framework for IS
Competencies

Strategy

Define the IS Define the IT

Capability Capability

Exploitation Supply

Deliver
solution
69
 Cont
Strategy: the ability to identify and evaluate the
implications of IT- based opportunities as an
integral part of business strategy formulation
and define the role of IS/IT in the organization.
Define the IS contribution: the ability to translate
the business strategy into processes,
information and system investments and change
plans that match the business priority- IS
strategy
Define the IT capability: the ability to translate
the business strategy into long-term information
architecture, technology infrastructure and
resourcing plans that enable the implementation
of the strategy- IT strategy
70
 Cont
Exploitation: the ability to maximize the benefits
realized from the implementation of IS/IT
investments through effective use of information,
applications and IT services.
Deliver solutions: the ability to deploy resources
to develop, implement and operate IS/IT
business solutions that exploit the capabilities of
the technology.
Supply: the ability to create and maintain an
appropriate and adaptable information,
technology and application supply chain and
resource capacity.
71
 Cont
Strategy
Business strategy
Technology innovation
Investment criteria
Information governance
Define the IS contribution
Prioritization
IS strategy alignment
Business process design
Business performance
improvement
Systems and process innovation
Define the IT capability
Infrastructure development
Technology analysis
Sourcing strategy
Exploitation
Benefit planning
Benefit delivery
Managing change
Deliver solutions
Applications development
Service management
Information asset management
Implementation management
Apply technology
Business continuity and security
Supply
Supplier relationships
Technology standards
Technology acquisition
Asset and cost management
IS/IT staff development 72
 Mapping Location of Resources
against IS Components
Resources from IS function Technology
focused
Supply
Define the IT
capability
Deliver solutions

Exploitation

Define the IS
contribution
Strategy
Business
Resources from the business focused

73
IS Competencies

74
Hygiene Factors for Keeping Key
Staff
Training new recruits from school or university,
which is expensive
Recruiting experienced staff from other
organizations, which can be risky
Training existing non-IS people, especially in
application skill in user areas, which may require
the development of new job roles
Using external resources, either on a short-term
basis to overcome peak loads, or long-term to
provide the organization with particular skills

75
 Use of Resources
STRATEGIC HIGH POTENTIAL

Users Technology
Train users in specialist
application-based Buy in expert help
skills (use own and transfer
resources) knowledge

Train users in
exploitation of Users
IS/IT professionals package software
Recruit to displace IT
and/or train professionals
specialists Outsource to
release resources
KEY OPERATIONAL SUPPORT

Application service provider

Facilities management
Contractors
Software development 76
 Keens 4 Major Role Categories
Business services requiring strong
business, organizational and planning
skills
Business support business and
organizational as well as some technical
skills
Development support strong technical
and good business skills
Technical services - strong technical skills
77
 Managing Relationships: 3 Key
Relationships (Venkatraman & Loh)
With outside IT suppliers, who will inevitably do
increasingly more of the work through
outsourcing arrangement.
With the business managers and system users,
to enable the business to identify and realize the
benefits from the applications investments and
to obtain maximum value from the services
provided.
With IT specialists in other companies,
especially trading partners

78
Internal Organizational Relationships
Organizations contain subcultures often
associated with functional specialism or
geographical location.
These subculture can be dyfunctional.
IT as a functional specialism has introduced new
subculture and one that is often difficult to
reconcile with the dominant culture in the
organization.=> culture gap
This implies that the viability of the IS strategy
will depend on the extent to which it is derived
from the shared values of those who have to
implement the strategy. 79
 6 Staged Model Regarding
Shared Value
Stage 1 Very few shared values since the focus of IT is
Adhocracy internal and they are unable or unwilling to
seek a coherent relationship with the business.
They relate more closely to IT supplier
Stage 2 The priesthood of IT begins to develop and IT
Starting the staff perhaps cultivate a unique culture based
foundations on technology worship often seriously at
odds with the business
Stage 3 When IT management often reacts to business
Centralized managers concern over excessive spending
dictatorship on IT and views of poor delivery performance
by becoming defensive and exerting control
over what it does to redress the balance 80
 Cont
Stage 4 IT specialists recognize the need to work in
Democratic cooperation with business managers
dialectic and toward achieving business goals, but still
cooperation expect the business to cooperate with ITs
set of values
Stage 5 Recognition in the business that IT can
Entrepreneurial deliver new, potentially strategic, benefits
opportunity through innovative use often leaves the IT
department looking after the legacy and
struggling to provide any value to the newly
liberated users
Stage 6 Rarely achieved, due to the difficulties in
Integrated reconciling differing values, overcoming
harmonious historical precedents and prejudice, and
relationship requiring a new openness in all aspects of81
IT activity
 Bridging the Gap
CEO CIO
Leadership
Structure and
Processes
The IS
business Roles Function

Relationships

Behaviours

82
Models for Improving the Relationship
b/w IS Function & the Business
Earl and Sampler
Recognize disequilibrium
Emphasize supply management
Emphasizing demand management
Maintain equilibrium
Peppard
Get the basics right
Enlist key influencers
Build credibility
Seek involvement early in project
Place responsibility for IS with business
Cultivate and maintain partnership
83
 Earl and Sampler:
Recognize Disequilibrium
The organization articulates, explores and
analyses the crisis or loss of confidence in
IT in general and IS function in particular.
Symptoms and prescription
Business needs not satisfied
Technological problems
Management assessment
Start of new regime

84
 Earl and Sampler:
Emphasize Supply Management
The organization seeks radical performance
improvement of the supply side by setting
delivery goals and beginning to rebuild the
technology platform.
Prescriptions
Setting ambitious performance targets
Beginning to rebuild technical platform
Seeking early, visible results
Setting application priorities

85
 Earl and Sampler:
Emphasizing Demand Management
Emphasizes demand management,
shifting the focus from supply to demand.
The concern is with building IT capabilities
and creating future value.
Prescriptions
Work out the vision
Define demand management processes
Define value propositions
Plan the infrastructure
86
 Earl and Sampler:
Maintain Equilibrium
The organization completes the transformation
process by implementing final radical changes in
both demand and supply sides.
If business or technological discontinuities occur
and the company does not deal with them, it can
initiate a new transformation process by
returning to Stage 1.
Prescriptions
Recognizing that it is a continuous journey
Rethinking governance
Reskilling IT personnel
Creating a partnership with business and vendor
87
 Peppards Model
Get the basics right Enlist key influencers
IT leadership
Get business focused
Focus on internal quality
of IT organization
Examine internal
structures and
processes
Define value-added
aspect of IS/IT
Get buy-in and
commitment from all IS
staff
Get key influencers on
board
Agree role of the IT
organization
Listen to the business
Define key priority areas
Establish relationship
roles within IT
organization
Establish service level
agreements
Open communication
channels 88
 Cont
Build credibility Seek involvement
Build a dialogue with early in project
business Focus on benefits
Address values and delivery
beliefs of business Ensure IT involvement
management early in business
Demonstrate business projects and visa-
value versa
Initiate education
program to address
mindset blockages
Initiate internal
marketing programme
89
 Cont
Place responsibility Cultivate and
for IS with business maintain partnership
Move responsibility for Emphasis continual
IS demand out into the communication
business Revisit previous
Reframe IS/IT stages
governance structure
Create IT/business
processes
Define informational
roles
90
 Managing Relationships with
Vendors
4 critical areas that require close attention
The CIO function
Performance measurement
Mix and coordination of tasks
Customer-vendor interface

91
 The CIO Function
Partnership/contract
management
An informed CIO who
monitors performance
against the contract and
plans for and deals with
issues that arise helps an
outsourcing alliance adapt to
change.
Architecture planning
A CIOs staff must visualize
and coordinate a long-term
approach to networks, HW
and SW standards and
database architectures
Emerging technologies
A company must develop a
clear grasp of emerging
technologies and their
potential applications
Assessing technology
alternatives cannot be
delegated to a third party
Continuous learn
A firm should create an
internal IT learning
environment to bring users
up to speed so that they are
comfortable in a climate of
continuous change
92
 Performance Measurement
Companies must develop performance
standards, measure results.
Most important measures of success are
intangible and play out a long period of
time

93
 Mix and Coordination of Tasks
If not carefully managed, both the
contracts and the different geographic
locations of the outsourcing vendors
development staff may inhibit discussion
and lead to additional cost

94
 Customer- Vendor Interface
The interfaces b/w customer and the vendor are
very complex and usually must occur at multiple
levels.
The senior levels, there must be links to deal
with major issues of policy and relationship
restructuring
The lower levels, there must be mechanisms for
identifying and handling more operational and
tactical issues.
CEO level- policy discussion
Both side need regular full-time relationship
managers and coordinating groups lower in the
organization to deal with operational issues and
potential difficulties 95