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ACTA U N IV ER SITA TIS LODZIENSIS

FOLIA OECONOM ICA 167,2003

A nna Sadow ska*

INFORMATION SYSTEMS M ANAG EM ENT

IN PERSPECTIVE OF BUSINESS BENEFITS

In fo rm a tio n T e c h n o lo g y is an in te g ra l p a r t o f e v e r y fir m , o r g a -n iz a tio -n a -n d d iffe r e -n t ty p e s o f i-n s titu tio -n s (g o v e r -n m e -n t, m ilita ry, h e a th a n d c u ltu re ). In e v e r y c a s e In fo rm a tio n sy s te m s su p p o r t v a -rie ty ra n g e o f b u s in e s s a n d th e re a r e to ta lly d iffe r e n t a im s I T h a s to f a c e in e a c h situ a tio n .

T o re a c h th o s e g o a ls it is n e c e s s a r y to m a k e s u ita b le c h o ic e o f th e b e s t I T sy s te m s c o m b in a tio n , th e c h o ic e o f le v e l a n d w a y s o f in te g r a tio n in th a t m o d el, a n d th a n a n s w e r m a n y m a n y q u e stio n s lik e w h ic h p a r t o f th e c o m b in a tio n is w o rth d e v e lo p in g w h ich o n e s h o u ld b e sto p in vestin g , w hen it is n e c e ss a ry to c h a n g e b a c k g r o -u n d o f th e te c h n o lo g y a n d w hen it is not. T h is is n e v e r e n d in g d e c i-sio n -m a k in g p r o c e s s s h o r tly c a lle d I T stra teg y.

N o w a d a y s , it is o b v io u s th a t w ith o u t w e ll-p r e p a r e d I T str a te g y d ir e c te d to th e type, siz e a n d b ra n c h o f b u sin ess, it is im p o s s ib le to re a c h m a in b u s in e s s g o a ls a n d u se n e w in fo rm a tio n te c h n o lo g ie s e ffe c tiv e ly . O n e o f th e p a r t (to o l) o f th e s tra te g y is: tlie le v e l o f in -te g r a tio n a n d th e m e th o d s o f e stim a tio n I T in v e s tm e n t return, w h ic h I w a s c o n s id e r in g d u rin g la s t co n feren ce.

T h is p a p e r d e s c r ib e s p o s s ib le w a y o f b u ild in g a n e ffe c tiv e I T s tr a te g y in p e r s p e c tiv e o f lo n g -te rm b u s in e ss b e n e fits in o r d e r to s iz e o f th e fir m , b ra n c h a n d th e ty p e o f b u sin ess. F irs tly th e g e n e r a l s c o p e o f th is w a y is g iv e n a n d in th e s e c o n d p a r t th e c a s e c o n -n e c te d w ith b u ild i-n g a -n a p p ro p r ia te I T str a te g y f o r e c o -n o m ic a l H ig h S c h o o l is d e s c r ib e d a s a n exa m p le.

IT investm ents characteristic

To build an appropriate IT strategy it is im portant to take into consideration the classification o f IT investm ents, which can be grouped by different criteria.

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There are given two possible ones, which seem to be significant in the process o f constructing IT strategy.

D ifferent types o f IT Investm ents

IT investm ents can be divided into hardw are and softw are as following:

Basic infrastructure like:

Local Area N etw ork/W ide A rea N etw ork, Internet access points, speed o f data transm ission and others. Basic infrastructure has a huge im pact on security and efficiency o f IT solutions.

O ffice infrastructure

O ffice infrastructure m eans both hardw are equipm ents like personal com -puters, printers, and office program s (office editors, e-mail exchange standards, w orkflow softw are)

A pplications’ infrastructure

A pplications’ infrastructure is a very im portant elem ent o f IT investm ent - application servers, databases, m iddlew are layer and other technical solutions without which business softw are cannot work properly.

Business A pplications

N ow adays no single system satisfies end users at any level o f hierarchy in an organization and it is im possible to avoid using at least a few inform ation system s in an enterprise. W hich is the best com bination o f business applications for the firm at the m om ent and in perspective o f long-term benefits? - This is the main question IT strategy has to answ er to.

D ifferent types o f IT costs

Every type o f IT investm ents given above consists of/can be divided by different types o f costs connected with im plem entation, using and developing inform ation technologies. It is im portant to be aw are o f the fact that m aking a choice o f proper IT solution isn’t the last im portant decision but IT strategy must also consider follow ing kinds o f costs:

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R equirem ents’ analysis

R eliable and professional requirem ents’ analysis is essential to reduce the total cost o f IT strategy im plem entation. Very often external consulting firm m akes this analysis - on one hand it is good - it m eans know ledge o f internatio-nal specialists, on the other side - it makes our IT strategy m ore risky if it is unpopular branch with specific business processes.

Com pleting IT solutions

Basing on assum ptions defined during the analysis the suitable solution can be designed.

Firstly the com plete dedicated business softw are should be take into con-sideration (O racle e-Business Suit, My SAP, IFS and so on). The final com bina-tion o f inform abina-tion technologies can also consist o f custom ized products if there are specific business needs that must be supported by IT.

The cost o f im plem entation

Follow ing the IT model that has been designed, the next significant type o f cost is connected with IT model im plementation. It m eans the total cost connec-ted with purchasing, installation, and running both hardw are and softw are o f IT model specification. Very often the cost o f im plem entation is a significant expanse but decisions in the area should take into account not only the price and quality o f com ponents but also IT model requirem ents and the way o f im ple-mentation which is the key factor in becom ing com petitive at the m arket.

O perating costs

All standard operating cost like adm inistration o f IT infrastructure, training for end users, sh o rt-term costs o f reducing the effectiveness o f em ployees w or-king with new IT solutions/environm ent etc. should be included by IT strategy. M aking decision in this area it is worth com paring inside operating cost with possible outsourcing services fee.

Support and services costs

O f course, IT solutions should work properly all the time but it is im portant to be prepared for additional expenses connected with unexpected problem s with applications’ work. IT strategy should include the em ergency procedures and a budget necessary to keep IT infrastructure w orking all the time.

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D evelopm ent

W ell-prepared IT strategy takes into consideration the cost connected with developing IT model. N ever ending inform ation science rapid progress m akes it necessary to overview IT strategy and to adjust it to the actual technologies and business needs.

A table below contains IT investm ent characteristic (source: self-elaborated)

Business strategies characteristic

To better understand the process o f constructing IT strategy that is given in this paper, it is necessary to explain a m eaning o f basic definitions connected with this issue, which are used in the next part o f this paper.

D i f f e r e n t ty p e s o f b u s i n e s s s t r a t e g i e s

‘S trategy’, like many other words in Econom y science has got different m e-anings and definitions depending on m acroeconom ic situation, the size o f enter-prise, holding position in the m arket, business objectives and others. C lassifica-tion given below contains short descriplassifica-tion o f the most frequently used ones.

C orporate strategy

C orporate strategy is an essential part o f m anagem ent process o f every firm. C orporate strategy sets main directions for enterprise’s developm ent and inclu-des such elem ents like: operating sectors, inclu-destination position in each market, desirable custom er profile, final products’ portfolio and designs a corporate bud-get.

This is the m ost im portant strategy and all other strategies in the enterprise should be founded on to the corporate strategy.

C om petition strategy

This strategy aims at identification o f possible w ays to distance com peti-tors. C reating this strategy it is necessary to make an analysis o f strengths and w eakness o f firm ’s position at the m arket what can be useful in a com petitive struggle. SW O T analysis is very popular in this situation.

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I T I n v e s tm e n t ty p e s : R E Q U I R E M E N T S ’ A N A L Y S I S C O M P L E T I N G I Г S O L U T I O N S I M P L E M E N T A T I O N O P E R A T I N G C O S T S U P P O R T A N D S E R V I C E S D E V E L O P M E N T B A S I C I N F R A S T R U C T U R E W h a t is th e n u m b e r a n d ty p e o f e n d - u s e r s ? W h a t is th e n u m b e r o f tra n sa c tio n in th e p e rio d o f tim e ? P o ss ib le a rc h ite c tu re s o f IT s o lu tio n fa c e s th o s e re q u ire m e n ts in c lu d in g : p re s e n t in fra s tru c tu re . L o cal A re a N e tw o rk , W id e A re a N e tw o rk th e n u m b e r o f e n d p o in t, th e c o n fig u ra tio n o f s e rv e rs P o ss ib le in te rn e t an d h a rd w a re p ro v id e rs th e c o s t, te rm s a n d c o n d itio n s o f im p le m e n ta tio n N e tw o rk a d m in is tra tio n . se lf-s e rv ic e p o s sib ilitie s. tra in in g p ro g ra m , m o n ito rin g o f n e tw o rk S u p p o rt an d s e rv ic e c o n d itio n s , th e tim e o f re a c tio n s in c e th e p ro b le m a c c u re d H o w fa r th e s o lu tio n is o p e n , p o s sib ilitie s o f d e v e lo p in g it (a d d in g n e w u s e rs , in c re a s in g d a ta tra n sm is sio n ) O F F I C E I N F R A S T R U C T U R E Is th e re an y sta n d a rd s o f o ffic e in fo rm a tio n e x c h a n g e (e -m a il sta n d a rd . W o rk flo w sta n d a rd , th e h ie ra rc h y o f ap p ro v a l) H o w m a n y d o c u m e n ts are c re a te d ? Is an y d a ta b a s e o f th o s e d o c u m e n ts ? P o s s ib le s ta n d a rd s o f s o ftw a re (M S O ffic e . L o tu s N o te s . O u tlo o k . W o rk flo w a p p lic a tio n , d a ta b a s e , w e b m ail a c c e s s) a n d h a rd w a re (p a ra m e te rs o f e n d - u s e r s ta tio n , th e n u m b e r an d ty p e o f p rin te rs ) T h e tim e n e e d to ru n th e s o lu tio n : a n d o th e rs : is it n e c e ss a ry to p a y e x te rn a l firm to im p le m e n t th e s o lu tio n o r it c a n b e im p le m e n te d by self- s e rv ic e ? T r a in in g fo r e n d u s e rs . Im p le m e n tin g n e w sta n d a rd s, th e p o lic y o f lic e n s e s C o n ta c t p o in ts an d n e c e ss a ry in s tru c tio n an d p ro c e d u re N e w v e rs io n co s t, w h e n it is n e c e ss a ry to p u t it; tra in in g fo r u sers

B U S I N E S S A P P L I C A T I O N S B u s in e s s re q u ire m e n ts n e c e ss a ry to s u p p o rt th e c o r e ta sk s in that b u s in e s s T h e c o m b in a tio n o f E R P . C R M .S C M . B1 s y s te m s , a n d o th e rs w h ic h a re s p e c ific fo r th e b ra n c h P o ss ib le p ro v id e rs, c o n s u ltin g firm s w ith b u s in e s s k n o w le d g e , th e tim e o f im p le m e n ta tio n , th e m e th o d o lo g y o f im p le m e n ta tio n T ra in in g p ro g ra m m e fo r n e w u se rs; a d m in is tra tio n c o s t: L icen se p o licy S u p p o rt an d se rv ic e c o s t an d co n d itio n s H o w o fte n n ew v ersio n is o ffe re d , h o w c o m p lic a te d is it to p u t n e w v ers io n s , w h at a b o u t m o d ific a tio n an d d e v e lo p m e n t n e c e ss a ry A P P L I C A T I O N S ' I N F R A S T R U C T U R E T h e te c h n ic a l p a ra m e te rs n e c e ss a ry f o r B A m o d e l, c o n n e c tio n w ith B asic a n d o ffic e in fra stru c tu re S e r v e r s , d a ta b a s e , m id d le w a re la y e r, th e w a y o f in te g ra tio n H a rd w a re p ro v id e r, in te g ra to r p a rtn e r o u ts o u rc in g p o s sib ilitie s. A d m in istra tio n co s t, k ee p in g q u o lifie d s ta f f o r o u ts o u rc in g fee T h e tim e o f reac tio n , p ro c e d u re o f reac tio n T e c h n o lo g ic a l d e v e lo p m e n l c o n n e c te d w ith c h a n g e a b le b u s in e s s re q u ire m e n ts Info rma ti on sy ste m s m a n a g e m e n t in p ers p ective of b us ine ss b e n e fi ts

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Leading cost position strategy

T his strategy is an exam ple o f com petition strategy. T his strategy determ i-nes possible ways to m inim ize the total operating cost w hat im plicates the lower, com petitive prices o f final goods being more attractive for potential custom ers.

Product strategy

O ne o f assum ptions defined by corporate strategy is connected with prim a-ry products in portfolio. D eveloping this issue it is necessaa-ry to have a com plete product strategy describing the range o f product, potential custom er segm ent, the possible life cycles o f products defined in portfolio and other significant intor- mation.

M ethods using in constructing business strategies

SW O T A nalysis

Strengths W eaknesses O pportunities Threats - it is a very well know n ana-lysis used by m anagers during constructing business strategies. It lets them to estim ate the strategic position at the m arket and possible ways o f being more com petitive in different operating sectors.

B enchm arking

B enchm arking is a specific kind o f m ethod o f optim izing strategic business processes by com paring them to the sam e or sim ilar ones in leading com pany.

A ctivitv-B ased C osting and Activity Base M anagem ent

Activity Based C osting and Activity Base M anagem ent can be effective to-ols in estim ating the return o f IT investm ent. This calculation is necessary to find which o f IT solutions is the most effective one.

ABC m akes possible to calculate the cost o f each process and business be-nefits o f using inform ation solutions in context to those processes.

There are many other m ethods which are helpful in setting business strate-gies but because o f lim ited space it is im possible to give detailed descriptions o f all possibilities in this paper.

M e th o d s d e s c rib e d a b o v e are m o st s ig n ific a n t a c c o rd in g to p o s s ib le w ay o f c o n s tru c tin g IT s tra te g y w h ic h is g iv e n in th is p ap e r.

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IT strategy developm ent process.

IT strategy and corporate business strategy should be coherent across one organization. W hat’s more the business strategy should im plicate concrete directives for IT strategy like: critical sectors o f activities, business goals and desired results.

This part o f paper describes possible method o f constructing IT strategy in an average firm to m axim ize benefits o f using inform ation system s in an effi-cient way. In the next part o f the paper it is showed how the IT strategy could be used to m anage inform ation system s in longer terms.

B U S IN E S S S T R A T E G IE S - P R O D U C T S T R A T E G Y - C O M P E T I T IO N S T R A T E G Y

- L E A D IN G C O S T P O S IT IO N S T R A T E G Y - P R O D U C T S T R A T E G Y

Figure 1. Business strategies’ classification source: self-elaborated

D irections o f developm ent o f IT strategy

Business directives for IT strategy

The first step in constructing IT strategy is to im plicate main areas o f activities, w hich need to be supported by inform ation system s according to co rporate strategy’s directives. Those directives should be a part o f an official d o -cum entation called ‘Business directives for IT* which becom es a base for the next step in creating IT strategy.

Apart from this it is necessary to recognize the actual level o f inform ation technologies that are used across the firm.

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High-level requirem ents

W hen the docum ent o f business directives is done, high-level requirem ents o f using business application and inform ation technologies can be define. Those requirem ents should directly refer to business processes in the sector which is going to be supported by inform ation technologies.

Strategic business targets

Then requirements should be translated into strategic business targets such as: - M inim izing the cost o f activity process

- Im proving the effectiveness o f the process (m inim izing time needed to com plete the process),

- H igher quality,

- Im proving the m anagem ent process at the operation level - Im proving the effectiveness o f strategic m anagem ent

- Im proving firm ’s im age - it m eans all activities connected with m arketing, sales process, etc.

- General requirem ents connected with local/national regulations.

Every strategic goal should be given as m easurable inform ation because we must estim ate the cost o f each goal. If the estim ation is im possible benchm ar-king o f sim ilar process at the leading firm can be done in this situation.

Infrastructure and technology

W hen high-level requirem ents, actual configuration o f inform ation system s and identified strategic goals are clear, it is possible to appoint directions o f d e-velopm ent for IT sector. It m eans to design the future configuration o f applica-tions and infrastructure which is suitable to the model.

C ost of getting strategic goals

To get strategic goals follow ing cost should be taken into consideration: analytical work, im plem entation, new hardw are equipm ents and infrastructures, cost o f specialists for keeping adm inistrating and developm ent o f system s, which are going to be im plem ented. This calculation m akes the estim ation o f future benefits and strategic goals arrangem ent possible.

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A nalysis o f strategic goals’ profitability.

Strategic goals can be achieved by using different com binations o f applica-tions and inform ation technologies. T o choose the best one it is necessary to make a profit/cost analysis o f each strategic goal in long-term perspective. There are different m ethods and rates that are helpful in estim ating the return o f in-vestm ent like ROI.

Every elem ent given above (the list o f strategic goals, estim ated value of profits/costs o f realization o f those targets, necessary infrastructure and the total, long-term costs o f the com bination) should be grouped in one form al docum ent nam ely ‘C om prehensive analysis o f business strategic goals’.

C onditions

D efining directions for IT strategy developm ent it is obligatory to follow prim ary assum ptions:

- IT strategy and corporate strategy should be always linked - especially while strategic goals for IT are defining.

- Before com pleting IT strategy, the analysis o f w orkability for each plan, according to different types o f conditions should be done. Reality o f the plan is necessary because non every high level requirem ent could be possi-ble to realize in every situation.

- IT model security analysis like the security o f data, unexpected stop in line o f production, should be included into IT strategy developm ent plan.

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IT STRATEGY

BUSINESS DIRECTIVES FOR IT

&

Figure 2. It strategy’s development source: self-elaborated

Creating strategic plan o f IT developm ent.

Prim ary assum ptions for strategic plan

On the basis on clear strategic goals and profit analysis o f strategic goals, the plan o f im plem entation can be defined. Follow ing elem ents should be d e-scribed in the plan:

- Schedule o f realization o f goals taking into account the materials and resources - M ethods o f realization which were m ade on bases o f high-level

require-m ents and actual firrequire-m ’s IT infrastructure

- D irectives o f trend o f technologies, architectures and security requirem ents. - Possible ways o f Integration o f inform ation system s.

Strategic plan is a basic tool o f IT strategy and it makes possible to m anage the realization o f IT strategy.

So again it is necessary the strategic plan should be a form ally accepted d o -cum ent called ‘Plan o f IT strategy developm ent’.

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Global IT architecture

W hen the plan is ready, next step is to draw up an inform ation system s ar-chitecture, according to follow ing assum ptions:

- Possible com binations o f inform ation system s and business architecture - Standard o f data stored by the model

- M ethods o f integration o f inform ation system s and necessary interfaces - Security

- Standard environm ent for end users

- Technological docum entation for adm inistrators - R equirem ents o f IT quality standards

- Local (national and regional) specific needs.

T he technological architecture should be described in ‘Technical and qu-ality standards for IT m odel’ - an official project docum ent.

O peratives objectives

On the base o f the plan and the architecture it is possible to assign an ope-rative task to each strategic goal according to follow ing steps:

- Strategic goal verification - R equirem ent analysis - Profit analysis

- W ork plan - operative targets should be defined as tasks in the plan of strategic go al’s realization.

O perative objectives make it possible to control and m anage the w hole pro-cess o f strategic goals realization. T hose objectives should be defined clearly by docum entation according to m ethodology accepted earlier in ‘Plan o f IT strategy developm ent ‘ docum ent.

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IT STRATEGY

BUSINESS DIRECTIVES FOR IT

HIGH-LEVEL REQUIREMENTS

£ ______ £

STRATEGIC STRATEGIC STRATEGIC

GOALS GOALS GOALS

PLAN OF IMPLEMENTATION

Ik

PLAN OF IMPLEMENTATION PLAN OF IMPLEMENTATION

&

&

О

Я,

Л

OPERATION GOALS OPERATION GOALS OPERATION GOALS OPERATION GOALS OPERATION GOALS

0

IT ARCHITECTURE

4*

О

OPERATION OPERATION OPERATION OPERATION OPERATION

ACTION ACTION ACTION ACTION ACTION

Figere 3 Strategic plan o f IT development source: self-elaborated

Effective Inform ation System s m anagem ent strategy

It is not enough to build IT strategy. It is necessary to m anage inform ation system s’ environm ent all the time. No IT strategy is good for years. IT strategy is based on many factors which are described in the previous section in this

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pa-per. It is obvious that a change o f one o f that factor im plicates a need o f IT stra-tegy’s m odification. The possible changes o f the most im portant factors which have an influence on IT strategy is given below. To m ake the business m ore and more com petitive and effective the m anagem ent o f inform ation system s’ envi-ronm ent m ust go on as long as the firm wants to exist at the m arket.

Changes at the level o f business strategies

C hanges at the business strategies level are m ainly connected with:

- V ariable operating conditions like new regulations at the local m arket, new com petitors, new contracts o f partnership etc.

- Increasing/decreasing firm ’s operation range - C hanges o f cycle o f product’s life

- M odification o f price/cost/com petitive strategy and other significant factors. A ccording to changes at the business strategies level, the follow ing m odifi-cations in IT strategy are necessary:

- Review o f business directives

- M odification o f high-level requirem ents - Review the list o f strategic goals

- A ccording to new strategic goals it is necessary to change the technical ar-chitecture and operating tasks.

Changes a t the level o f operating goals. Business processes optimizing.

W hile IT strategy is constructed the analysis o f business processes at enter-prise should be done. This analysis is called the firm ’s potential analysis.

O perating activities must follow business processes optim izing what very often m eans changes at the level o f operating goals. It im plicates a need o f review the most part o f IT strategy as follow:

- Analysis o f business processes and defining new operating goals - M odification at the level o f strategic goals if necessary

- Review o f technical architecture according to new operating assum ptions. O f course, changes at the level o f operating objectives influences IT strate-gies less than changes at the level o f corporate stratestrate-gies but business processes optim izing can be significant in distancing com petitors.

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Progress o f inform ation technologies.

Very often there is a need o f IT strategy’s m odification because o f techno-logy’s developm ent. C hanges at this level m ean a possibility to replace old solu-tions with the new ones what im plicates totally different operation goals and activities. It is also necessary to review the strategic goals analysis from future business benefits and possible cost points o f view.

Final conclusion

In many institutions the inform ation system s’ strategy is connected with previous practice and actual needs. W hat’s more, many decisions in this area base rather on international trends than on assum ptions defined by corporate strategy. IT strategy should be determ ined by specifics needs defined by diffe-rent business strategies which are totally diffediffe-rent in hospital, adm inistration o r variety type o f business.

The critical success factor o f effective IT strategy is a strong, direct co n -nection with the actual business strategies and never ending optim izing process up to variable m arket conditions.

B ibliography:

1. J. Spencer, Who took m y cheese?, 2000.

2. M. Romanowska, Strategie Rozwoju i Konkurencji, C1M, W arszawa, 2000.

3. H. M inzberg, J. B. Quinn, The Strategy Process. Concepts, Context,Cases, Prentice Hall Inter-national, 1996.

4. G. S. Yip, Strategia globalna. Światowa przewaga konkurencyjna, PWE, W arszawa, 1996. 5. A. A. Thomson, A. J. Stricland, Strategie Management. Concepts arut Cases, Irwin.

Home-wood, 1993.

6 . M. E. Porter, Strategia konkurencji. Metody analizy sektorów i konkurentów, PWE, W arszawa, 1992.

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