8 b alexandersetchin

Alexander Setchin, Topic 8B

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615-328 TUTORIAL PAPER

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:: Abstract Through critical analysis of management theories, fundamental concepts of enterprise computing and detailed statistics on several large companies this paper aims to define the importance of an effective IT infrastructure and various difficulties of managing it globally. Firstly it defines the critical importance of enterprise computing as a process of managing global information systems. Then, to further explain the process, it highlights its four underlying management concepts and the integral challenges behind them.

:: Introduction At present the business world is experiencing globalisation, internationalisation of markets, e-business and the knowledge economy. These are among the interconnected phenomena whose emergence creates new challenges for the growth and adaptation of numerous businesses (Raymond, 2003). Organisations which adopted a dependent view (IT infrastructure investments derived from strategic context) or an enabling view (infrastructure capability is a core competence and integrated with strategic context) are highly dependent on their present IT infrastructures (Broadbent, 2001) which link them with partners into unified networks that share resources, best practices, sales information and “increase communication with partners in order to react rapidly to market changes and deploy products efficiently…” (Laudon & Laudon, 2000). Companies are facing constant challenges of planning, designing, implementing and managing global information systems and IT infrastructures. IT infrastructures have become one of the most critical and intricate investment decisions made by executives and are an important factor in businesses’ long-term competitive prospects.


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:: Four Management Concepts of Enterprise Computing In order to understand the complexities of managing a global Information Systems, the term enterprise computing and four underlying management concepts (IT investment portfolio, IT infrastructure, business logic and information architecture -Figure 1) need to be closely examined. According to the two leading academics Kenneth Laudon and Jane Laudon, enterprise computing is a method of planning and designing of systems that “integrates the key business processes within a firm and even integrates business processes across an entire industry” (Laudon & Laudon, 2000). IT investment portfolio is the first management concept, which from Weill’s and Broadbent’s point of view is an approach which aggregates all investment decisions such as costs, risks and benefits of investments into one unified procedure (Weill and Broadbent, 1998). The challenge that comes with IT investment portfolio is determining whether it is returning an acceptable benefit to the firm given the competitive circumstances. It is up to the company to ascertain what benefits it values most, whether it is substantial of financial returns or long-term market-dominating strategic position. Several challenges are apparent in establishing what benefits a current portfolio may bring to a global organisation. Evaluation and measurement methods are constantly being developed to tackle that difficulty. One of the most prominent methods remains a balanced scorecard (BSC) which was initially developed by Robert Kaplan and David Norton to allow businesses to evaluate corporate IT and on the whole to drive their strategies based on measurement and follow-up (Grembergen & Bruggen, 2000). Additionally, another challenge for the management is recognising exactly how one firm’s strategic position is affected by the organisation-wide IT investment. This yet again, requires looking at organisation’s obje ctives and business strategy and comparing this to the current and future-standing strategic position. The second component in enterprise computing is an IT infrastructure which according to a well known theorist James O’Brien consists of IT equipment, software and human resources required to control the equipment. This definition is indeed analogous to Weill’s and Broadbent’s definition of the structure of IT infrastructure which according to them consists of shared and standard IT applications, shared IT services, human IT infrastructure and IT components (Weill and Broadbent, 1998). The key complex decisions which managers face is determining whether the

FIGURE 1 (Laudon & Laudon , 2000)


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right hardware, software and human resources have been chosen and most importantly whether current infrastructure is capable of achieving the firm’s strategic objectives. These decisions are indeed critical to business success and ultimately determine whether an organisation will achieve low return on investments or introduce an IS system which is highly standardised for compatibility, cost efficient, of high availability and extensible for further updates. According to two prominent academics Weill and Vitale, presently many businesses handle such issues by establishing satisfactory performance benchmarks and then comparing them to the results. Many aspects of an IS such as source code quality, data quality and reliability, system reliability, ease of use, output quality and portability of a new or modified IS are critically analysed (Weill & Vitale, 1999). Business logic is another significant component of enterprise computing. It determines an organisation’s business rules; that is how a firm is delivering its products or services and broadly speaking what business processes exist to achieve set business strategic objectives. In case of an infomediary or an online auction broker such as e-Bay the business logic would be to deliver highly sought-after information or to encapsulate the unimportant intricacies of online transactions between customers, businesses or a combination of the two. Subsequently, the definition and scope of this business logic is completed by implementing online information portals or auctions and charging users monthly subscription fees (i.e. Businessweek.com) or transaction fees in case of online auction brokering or transaction brokering (i.e. PayPal.com). Lastly, to support the business logic and key business processes, sound information architecture must be designed and implemented. Information architecture encompasses everything an IS holds within itself, from large-scale applications to networks which facilitate communication, transactions and service delivery on a global scale. Presently, numerous businesses still see information architecture as just hardware and software and thus fail to align the current IS with organisational strategic objectives (McKeen & Smith, 1996). The infrastructure must be closely evaluated to determine whether business processes have been improved and optimised, that correct design and implementation decisions have been made and whether or not a satisfactory business value have been realised (Laudon & Laudon, 2000). Once again, benchmarking of information architecture is highly recommended to be used by organisations to determine the level of success.


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:: Difficulties of Developing an Effective Enterprise Computing Model One of the key challenges for IT managers is bridging the gap between the ideal enterprise model which states that in order to optimise the return on IT investments, “management decisions about firm infrastructure should be driven by business strategy, business models, business processes and information architecture decisions” (Laudon & Laudon, 2000) and the reality of complexities of doing business at the present moment. Currently many managers are unable to see and establish a link between business strategies, business environments, IT portfolio of investments, IT infrastructure, information architecture and business processes which is the recipe for optimising the return on investment in IT infrastructure. Very few corporations such as AOL Time Warner and Coca-Cola Amatil have realised that to optimise the returns on investments just enough infrastructure should be purchased to satisfactorily support present business processes and strategy, that there should be close coupling between the architecture and the business processes, an adequate strategy must be established to tackle rising competition and lastly a robust control model must be in place to ensure proper alignment of IT infrastructure to business strategy (Broadbent, 2001).

:: Conclusion The unification of computing, telecommunications, the pervasiveness of the Internet and other mediums of e-commerce, brought strategic opportunities and threats for each organisation. IT infrastructure has become one of the biggest and most central investment decisions. Many businesses struggle to generate returns on their IT investments, facing many challenges of choosing the optimum combination of technologies, maintaining alignment of business processes and architecture and establishing an adequate strategy to cope with soaring competitive pressures. In spite of this, several organisations through carefully structured enterprise computing models are able to implement robust IT infrastructures which generate acceptable benefits either as financial returns, long-term strategic positioning or greater market share.

WORD COUNT: 1275


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:: Annotated Bibliography 1. Laudon, K. C., & Laudon, J. P. (2000). Management information systems: organization and technology in the networked enterprise (Sixth ed.). Upper Saddle River, New Jersey: Prentice-Hall, Inc. (220 – 222)

Laudons clearly outlined the challenges of maintaining a robust enterprise computing model. Their detailed description of the four management concepts of enterprise computing helped underpin the importance of having management decisions being driven by business strategy, businesses models, business processes and information architecture decisions. They clearly outlined the most common challenges that come with managing a global IS – from deploying the most suitable technologies to aligning information architecture with the core business strategy.

2. McKeen J. D. & Smith A. H. (1996). Management challenges in IS: Successful Strategies and Appropriate Action. Chichester, New York.

Numerous challenges were identified by McKeen and Smith in regards to managing information systems - from selecting hardware and software, to applying right human resources for better system utilisation. In spite of this, the authors have not addressed the challenges faced by companies which operate at a global level. Furthermore, the book presented several evaluation methodologies which are crucial to the overall processes of managing global information systems but are not so relevant to the given topic of discussion.

3. O’Brien J. A. (1996). Management Information Systems: Managing Information Technology in the Networked Enterprise. Irwin, Chicago. 4. Raymond L, (2003), Globalisation, the knowledge economy, and competitiveness: A business intelligence framework for the development SMES, ProQuest. Vol. 3, No. ½

Raymond clearly outlined external variables which have a direct impact on successful management of global IT infrastructures. These variables were helpful in defining the possible issues IT managers must deal with when working on a global scale but no definitive challenges of managing global IT infrastructures were explicitly stated by the author.


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5. Van Grembergen, W., & Van Bruggen, R. (1997). Measuring and improving corporate information technology through the balanced scorecard. The Electronic Journal of Information Systems Evaluation, 1 (1). (245)

Grembergen and Bruggen identified the balance scorecard strategic management system for helping businesses to drive their strategies based on measurement and follow up. Whilst it was effective in defining the stages of applying the balance scorecard in practice, the paper was limited in identifying several of the key challenges of managing global IT infrastructures.

6. Weill, P. & Broadbent, M. (June 12, 2001). Competing with IT infrastructure Strategic Opportunities and Threats, With a Widening Range of Options, FPMastering (On-line). Available: http://www.nationalpost.com/features/fpmastering/061201story6.html (September 14, 2003)

Weill and Broadbent were helpful in understanding the structure and operation of global IT infrastructures and various types of systems such as the informational, transactional, infrastructure and strategic systems. These made the process of defining the complexities of managing global IS more apparent and assisted in understanding the ways that companies can obtain benefits from the IT investment portfolio which is one of the four principal management concepts of enterprise computing.

7. Weill, P., & Vitale, M. (1999). Assessing the health of an information system applications portfolio: an example from process manufacturing. MIS Quarterly , 23 (4), 601-624. (265)

8. Weill, P., & Broadbent, M. (1998). Leveraging the new infrastructure. Boston, Massachusetts: Harvard Business School Press.49-61, 85-93 (85)

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