© 2004 Managing the Information Technology Resource, Jerry N. Luftman Chapter 1- Slide 1

Chapter 1Introduction

Managing the Information Technology Resource

Jerry N. Luftman

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Chapter Outline

• Evolution of role of IT

• Role of IT management versus other business functions

• View of IT by IT executives

• How to better manage IT resources

• Key issues in the management of IT

• Importance of successfully managing IT

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Primary Purpose

• IT is important and necessary for a successful organization

• Successful management of IT is necessary for competitive advantage

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3 Strategies for Competitive Advantage

• Cost leadership– Competing with lower costs

• Product differentiation– Competing with value

• Product focus– Competing by restricting one’s market

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IT Management Categories• Strategic

– Pertinent to long-term attainment of goals and business as a whole

• Tactical– Needed to achieve strategic plans and goals to

produce changes for success

• Operational– Process and actions that must be performed on

a day-to-day basis to maintain performance level

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Additional Skills of IT Managers

• Financial

• Human Resource

• Relationship Management

• Legal

• Governance

• Marketing

• Negotiating

• Leadership

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John Rockart“The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization’s efforts for the period will be less than desired.”

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3 Primary Computing Eras

1. Mainframe Computer Era

2. PC Computing Era

3. Pervasive Computing

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Historical View of IT

• Initially for government/military use

• Businesses used for financial automation

• Data Processing was key function

• Computers were costly and large in size

• Not widely used

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Historical View

• Cost decreased

• Size decreased

• Use of personal computers increased

• Business staff and IT staff began to interact

• Technology issues increased

• Networks, E-mail, and Internet became necessity

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Role of IT

• No longer just serves a business

• Integral in business strategy

• Impacts every area of business

• Complexity increases

• How does IT function vs. the entire organization

• Responsible for the integration of information

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Role of IT Today

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Enabler of E-Business

• All aspects of IT are more externally visible

• Serve as mediator among various functions– Disintermediation– Reintermediation– Hypermediation– Infomediation

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Disintermediation

• Eliminates the middleman

• Electronic stock trading

• Forces focus on service differentiation

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Reintermediation

• Use of Internet to reassemble buyers and sellers in new ways

• Allows negotiation of prices, warranties, quality, shipping

• Example includes merging of banking, insurance, and other financial services

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Hypermediation

• Interactions found via Internet transactions

• Complete, seamless, invisible supply chain to customers

• Leverages external partners

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Infomediation

• Allows technology users to manage large amounts of information

• Search engines and portals provide for narrowing searches

• Data mining technology is critical

• IT helps business sift through information for insight and clarity

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Change Agent

• Dynamic Stability– IT supports business in dynamic changes with

no change to business processes

• Can enable/inhibit incremental and radical changes

• Innovation may depend on IT

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Enabler of Globalization

• Expands business presence beyond borders

• IT maintenance of Infrastructure and Technologies

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IT/Business Gap

• IT/Business alignment critical

• Alignment– Application of IT in an appropriate and timely

manner, in harmony with business goals, strategies, and needs

• Enabler

• Inhibitor

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CSC Survey Top Rankings

• Information Systems alignment with Corporate Goals ranked 1st or 2nd 9 of 11 years!

• Organizing & utilizing data

• Connecting to customers, suppliers, and/or partners electronically

• Optimizing organizational effectiveness

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IT vs. Other Functions

• Encompasses entire enterprise

• Affects all business functions

• Extends beyond business boundaries

• Affects every level of management

• Impact affects entire value chain, including suppliers and customers

• Creates synergy between departments

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Porter’s Generic Value Chain

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Value of IT

• IT usage has increased three-fold since 1978

• Substantial capital expenditures

• Cost of doing business

• Productivity measurement

• Alignment with strategic business goals

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Luftman’s 6 Components

• Communications Maturity

• Competency/Value Measure-ment Maturity

• Governance Maturity

• Partnership Maturity

• Scope and Architecture Maturity

• Skills Maturity