1 The Evolving Role of Information Systems and Technology in Organziation: A Strategic Perspective

Process', paper presented at International Conference on Information Systems, Las Vega

Outline:

* Information Systems (IS), Information Technology (IT) and 'Digital'

* Digital Disruption': The Impact of IS/IT

* A Three-ear Model of Evolving IT Application in Organizations

* A Classification of Strategic Uses of IS/IT

* Success Factors in Strategic Information systems

* A Portfolio Management Perspective on IS/IT Investments

* What Is IS/IT or Digital Strategy?

* Form Strategies Alignment to Strategy Co-evolution

* Digital Strategies for the 21st Century: Building a Dynamic Capability to Leverage IS/IT

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Most organization in all sectors of industry, commercs, not-for-profit, and government are now fundamentally dependent on their information systems (IS) and information technology (IT).

In industries such as telecommunications, media, entertainment, gambling and financial services, where the product is already or is being increasingly, digitized, the very existence of an organization depends on the effective application of IS/IT. With the commercialization of the Internet, the use of technology has become the expected way of conducting many aspects of business and some business online. Government and public administrations have launched many digital services.

The ubiquity of mobile devices and new forms of social media are rising consumer demands for immediacy of access and speed of response. The increasing pervasiveness of smart connected devices and 'things' of all kind is opening up opportunities for new products and services, further operational efficiencies and new types of businesses and business models.

While organizations want to develop a more 'strategic' approach to harnessing and exploiting IS/IT, most have arrived at their current situation as a result of many short-term. tactical' decisions. Many would no doubt like to rethink their investments, or even begin again with a 'clean sheet', but unfortunately have a 'legacy' resulting from a less than strategic approach to IS/IT in the past; many organization including banks, insurance companies, and public administrations still depend on systems first developed over 30 years ago.

2 The Strategic Management of Information Systems________________________

Even investments that were once seen as 'strategic' eventually become part of a costly and complex legacy. Learning from previous experience - the successes and failure of the past - is perhaps one of the most important aspects of strategic management.

Much of the learning about the capability of IT is experiential and organizations tend to learn to manage IS/IT by doing, not appreciating the challenges until they have faced them.

However, few organizations are likely to have been exposed to the whole range of IS/IT experiences; nor is it likely that those experiences have been evaluated objectively.

This chapter provides an overview and appraisal of the general evaluation of IS/IT in organizations, from which lessons can be learned for it future strategic management. This evolution is considered from a number of viewpoints, using a variety of models, some of which are further developed and used later in the book, when considering the particular approaches required in thinking and planning strategically for IS/IT investments.

A number of forces affect the pace and effectiveness of progress in using IS/IT and delivering operational and strategic benefits. The relative importance of each factor varies over time and will also vary from one organization to another. These factors include:

* the capabilities of the technology and applications that are feasible;

* the economics of acquiring, deploying and maintaining the technology: application, services, and infrastructure;

* the skills and abilities available, either in-house or external sources, to design and implement the applications;

* the skills and abilities within the organization to use the applications and information;

* the capability to manage any organization changes accompanying technology development;

the pressures on the particular organization or its industry to improve performance or adapt to changing circumstances, such as a regulatory environment or 'digital disruption'.

This list is not meant to be exhaustive and could be expressed in other terms - but it is a deliberate sequence of increasing 'stress', as the complexity and criticality of management decision making become more strategic. Most assessments of the evolution of IS/IT in organizations tend to focus on one or two aspects of its development, such as organizational, applications, management of technology or planning, but in this chapter these various perspectives will be brought together, as much as possible.

Information Systems (IS), Information Technology (IT) and 'Digital'

Before considering a strategic perspective, it is important to have a clear understanding of the terms information system (IS) and information technology (IT) and how they are distinguished. While IS and IT are often used interchangeably or even casually, it is important to differentiate between them to create a meaningful dialogue between business staff and IS/IT specialists; this is essential if successful IS/IT strategies are to be developed. Recently the term 'digital' is being used more frequently in many organization and in the practitioner and academic literature' - so how digital relates to IS/IT is also important to recognize.

Chapter 1 The Evolving Role of Information Systems and Technology in Organization

Information systems (IS) existed in organizations long before the advent of information technology (IT) and even today, there are still many 'system' present in organization with technology nowhere in sight. IT refers specifically to technology, essentially hardware, software, and telecommunications networks, including devices of all kinds: computers, sensors, cables, satellites, servers, routers, PCs, phones, tablets, and all types of software: operating systems, data management, enterprise and social application and personal productivity tools.

IT' facilitates the acquisition and collection, processing, storing, delivery, sharing, and presentation of information and other digital content, such as video and voice. Sometimes the term Information and Communication Technologies (ICT) is used instead of IT to recognize the convergence of traditional computer technology and telecommunications.

Information systems (IS) are the means by which people and organizations, increasingly utilizing technology, gather process, store, use, and disseminate information. The domain of interest for IS researchers includes the study of theories and practices related to the social and technological phenomena which determine the development, use, and effects of information systems in organizations and society.

It is thus concerned with the purposeful utilization of information technology, not the technology per se.

It is part of the wider domain of human language, cognition, behaviour, and communication.

Consequently, 'IS will remain in a state of continual development and change in response both to technological innovation and to its mutual interaction with human society as a whole'.

Some information system are totally automated by IT. For example, airlines, comparison website, bank and some public agencies have systems where no human intervention is required.

People can find it difficult distinguishing between IS and IT because the technology (the T of IT) seems to overwhelm their thinking, obscuring the business information system that the technology is intended to support or enable. This perhaps also gives a clue as to why organizations may fail to realize benefits from many of their investment in IT.

Technology investment are often made without understanding or identifying the business benefits that could or should result from improving the performance of activities by using IT. We have even heard stories recounted of senior executives returning from business trips abroad, demanding that a new technology be purchased or a new application be implemented because they have seen an advertisement in an airline's in-flight magazine!

It is important to acknowledge that IT has no inherent value - the more purchase of IT does not confer any benefits on the organization; these benefits must be unlocked normally by making changes to the way business is conducted, how the organization operates or how people work. Achieving organization change on any scale can be difficult, even without the introduction of new technology.

Another term that is frequently used along with IS and IT is application, i.e. an application of IT to handle information in some way. Essentially, an application refers to software or a combination of software and hardware, used to address or enable a business or personal activity: for example, in businesses for general accounting, production scheduling, patient administration, customer order management or enabling collaborative working; or for an individual to book theatre tickets, check in for a flight or pay for parking. Other examples include general uses of hardware and software to carry out tasks such as word processing, e-mail, preparing presentation materials or conducting online meetings. They are usually large, general-purpose program that can do many different things, built on top of operating systems.

These applications can be purchased, pre-written software programs for a particular business activity or developed 'in-house' to provide particular functionality. Many applications for personal productivity as well as business use are now delivered via mobile devices of all kinds and increasingly they are being provisioned from the cloud computing. Some business application software packages can be tailored or customized to the specific requirements of an organization. One of the key selling of large Enterprise Resource Planning (ERP)and Customer Relationship Management (CRM) software suites is that they can be configured, to some extent, to meet the specific way in which an organization operates.

Box 1.1

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[ Software has evolved from cutom-coded, proprietay applications to pre-packaged or off-the-shelf applications and now to development of Internal-centric applications. The convergence of software and IT infrastructure to an Internet-centric enviornment has enabled the concept of cloud provider is a thrid-party service firm that deploys, managers and remotely hosts a pre-packaged software application through centrally located servers in a 'rental' lease or 'pay-as-you-go' arrangement.

In exchange for accessing the application, the client renders rental-like payments. An early example of a cloud-based service, although it wasn't referred to as such at the time it was launched, is Hotmail (www.hotmail.com), which provides an email address with storage and access from any browser. Individuals with a Hotmail account can access their email and send email from any location as long as they are connected to the Internat.

No matter the cloud provider is structured, the ultimate objective is a 'sea less' service, in which the client interacts only with the cloud. The most significant elements of 'seamless' integration of services include providing the hardware and software, integration and testing, a secure network infrastructure, reliable mission-critical data center facilities and a highly qualified team of IT experts managing the entire solution. The primary categories of cloud services provided to data are:

* Applications provisioning - essentially providing an information handling capability, either through proprietary applications such as property management, specialized healthcare record keeping or analytical/mathematical services, or widely used software package from the leading ERP and CRM vendors. This is often as Software as a Services (SaaS).

* Infrastructure operations - which can include provisioning the customer's desktop environment, as well as operating data centers to host the applications. Data center operations include the full range of hardware/systems software management, provisioning services, security, and disaster recovery as well as necessary back-office system such as service usage, monitoring accounting and billing. This is often referred to as Infrastructure as a service (IaaS).

A computing platform - typically including an operating system, programming language execution environment, database, and web server. Application developers can then develop and run their software solutions on a cloud platform without the cost and complexity of buying and managing the underlying hardware and software layers. This is known as Platform as a Service (PaaS). Some PaaS providers like Microsoft Azure and Google App Engine offer underlying computer and storage resources that scale automatically to match application demand so that the cloud user does not have to allocate resources manually.

* Network connectivity - providing connections to the Internet forend-customers or the application provider (essentially acting like an Internet service provider (ISP). Reliability, performance, and security of network communications are potentially weak link in the chain.

Supporting services - providing hardware installation and maintenance services at customer sites or end-to-end management services for all aspects of implementation and operations across the entire cloud delivery chain for the duration of the services contract.

Services are accessed, via the Internet or a private network, without having to pay for the installation, the hardware or the software. Price per user month (PUPM) has emerged as the standard pricing method for cloud services. The root of this model stem directly from user-based license pricing for applications and the PUPM model allows providers to manage pricing based on numbers of users as well as by categories of users. User categories include designations such as 'power user' or 'inquiry user' which refer to access privileges and functionality. Cloud service models are seen as:

* Reducing cost of ownership * Shifting IT spend * Flexibility to exit or radically change operating scale * Quicker deployment of new a applications and IT capabilities].

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With the emergence of smartphones and tablets, the concept of an app has entered the lexicon and it is usually seen as differing from an application.

In recent years, 'digital' has been gaining attention, with the label being increasingly used. Many consultancies and IT vendors are now promoting their wares under the label of 'digital disruption', 'digital transformation' or the 'digital enterprise', Governments have relabelled e-government as 'digital; government'. Organizations of all types are looking to build 'digital strategies' or 'digital business strategies'. We have even encountered one company where they refer to their digital strategy as social media, mobile devices, analytics and cloud computing (so-called SMAC); everything else is seen as IT!

In our parlance, these are all IT. The challenge is figuring out the purpose for which these are going to be used by the organization.

In this book, we are using the label 'digital' to embrace both IS and IT. For us, digital has both an IS component and an IT component. We emphasize that in building a digital strategy it is imperative to understand how information and systems (IS) will be leveraged and used as well as the underpinning technological (IT) capabilities that will be required.

'Digital Disruption': The Impact of IS/IT

Disruption caused by IS/IT actually began many decades ago when it was known at the time as 'business transformation' or 'business process re-engineering'. Today's focus on 'big data' and analytics is another iteration of the promised 'information revolution' that was predicted in the late 1970s, because more feasible in the 1990s with the arrival of Data Warehousing and Online Application Processing (OLAP) tools, but as yet has been more a data deluge for many organizations rather than the source of strategic opportunities. Indeed back in 1985, Porter and Millar wrote a seminal article titled 'How information gives you a competitive advantage' with prescriptions that still resonate today. Microsoft founder Bill Gates noted:

"I have a simple but strong belief. The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose."

However, many still struggle with this quest.

Despite the irritating "relabelling habit of the IT industry, advances in IT continue to challenge established, even dominant, views about organizations and organizing, markets and competition.

Digital Disruption of Organizations

For some decades now, technology has been undermining the very logic of the organization, particularly those that are vertically integrated. Nobel economist Ronald Coase, in his seminal 1937 article "The Nature of Firm", argued that organizations were created because the 'transaction cost' of doing business in the open market were too great for complex enterprises, like building railroads, manufacturing cars or creating telephone networks. Large, vertically integrated companies were established to reduce these transaction costs. Coase's work was later extended by Oliver Williamson with his transaction cost economics.

A transaction cost is incurred in making an economic exchange, i.e. the cost of participating in a market. Information is at its core. Transaction costs include search and information costs such:

those incurred in determining that the required good or service is available on the market, which provider has the lowest price etc.; bargaining cost required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract; and policing and enforcement costs to make sure the other party stick to the terms of the contract, and taking appropriate action if necessary. Many economists argue that the value of organizing (and therefore organizations), is based on the principle of exploiting information asymmetries (i.e. specialization), culminating in thinking of organization as knowledge 'engines' or 'information processors' operating in a knowledge economy.

But since the commercialization of the Internet and the accelerated shift online, all these transaction costs have plummeted as technology made it easier to search for information and transact with workers, suppliers, and customers. Companies can focus on their so-called core competencies and outsource or buy in others.

For example, through automated supply chains, information sharing, and transparency manufacturers no longer have to hold raw material stocks 'just in case' a supplier has production or logistic problems. By providing visibility, suppliers essentially become an extension of the manufacturer.

Work by Shapiro and Varian has highlighted the difference between 'physical goods' and 'information goods' in the digital world and profound implications of those differences for strategy.

One critically defining attribute is that the market value of information goods is derived from the information they contain. So an immediate stock price is likely to be valuable to a trader than a family photo, even though the latter will be larger in terms of bytes. Other core distinguishing features of information goods are listed in Box 1.2.

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Box 1.2

Distinguishing features of information goods

Information goods are experience goods, that is the customer has to experience them in order to value them. How do you know the value of a newspaper until you have read it? Or whether you like a piece of music until you have listened to it? Or the usefulness of a report until you have read it? Therefore customer choice decisions are influenced by emotional expectations rather than cognitive product attributes. Information inputs such as critics' reviews, word of mouth and advertising, as well as latent product interest, are also important determinants of consumer choice.

The lack of tangible cues the customer to assess the quality of information products poses particular problems for their marketing A way around this problem is to distribute samples or previews of parts of the information product for free. Building a brand and reputation, which provides some sort of guarantee that the content will have a certain quality or profile, also becomes a critical activity. For example, Gartner Group conducts research in the IT industry and makes it available to its membership, who pay a subscription to have access to their analysis and reports. Prospects can browse its website to get samples of the information products it sells. Gartner has established a strong brand that sees chief information officers (CIO) form many of the world's largest corporations look to its advice and trends in the technology area.

Digital Disruption of Industries

While no industry is immune to the impact of IT, some have been affected than others. Gambling and real estate, for example, have largely moved from the physical to the virtual world, making it no longer necessary to have a physical presence to compete. IT also accelerates the speed of disruption. Wi?ht its iTunes store, it took Apple only five years to become America's largest music retailer, search engine Google Alibaba Amazon etc. As technology puts new tools into innovators' hands, the old boundaries between sectors are breaking down. New business models that are being shaped, by the capabilities of new technology are also disrupting industries, harnessing information to deliver now value propositions to consumers. To deliver this service requires a significant application of IS/IT.

This instrumenting of physical products, assets, and all 'things' physical has led to the emergence of the so-called Internet of Things (IoT) is the global network of physical objects or 'things' embedded with electronics software, sensors, and connectivity to enable it to achieve greater value and services by exchanging data with the manufacturer, operator and/or other connected devices.

The Characteristics of Digital Disruption

* From physical to virtual space

* Blurring of physical/digital divide

* Move from push to pull economy

* Development of open standard

A Three-era Model of Evolving IT Application in Organizations

The evolving of the role of information systems and technology in organization can be described as encompassing three eras.

The first early investments in IT - traditionally known as the Data Processing (DP) era - were concerned with automating manual information processes using computers. Later, the concern was about providing information from operations for managerial decision-making - the so-called Management Information Systems (MIS) ERA.

In the early 1980s, a third ear began and continues today - it is often called the Strategic Information Systems (SIS) era - which refers to the search for opportunities to create or achieve Strategic advantage from IS/IT.

Although it is tempting to simplify nearly 60 years of often-haphazard, uncertain progress with the benefit of hindsight into three, albeit overlapping, eras, it must be remembered that it is never that simple.

However, while the 'three eras' view is easy to criticize as being over-simplistic, it has proved popular IS/IT theories, researchers, and practitioners, resulting in some analyses from which valuable insight and conclusions can be drawn. It is first worth clarifying the fundamental differences and interdependencies of the three eras.

The prime objective of using IS/IT in the eras differs:

* Data Processing (DP): to improve operational efficiency by automating information flows and processes (often referred to as digitizing processes today).

* Management Information Systems (MIS): to increase management effectiveness by satisfying their information requirements for decision making.

* Strategic Information Systems (SIS): to improve competitiveness by changing the nature or conduct of business (i.e IS/IT investment can be a source of strategic advantage).

The objective of DP and MIS are, strictly speaking, a subset of the SIS objective - to improve competitiveness, but this tends to be achieved indirectly by using IS/IT to improve current business processes and practices.