Managing and Using Information Systems A Strategic Approach 4th Edition Solution Manual

Managing and Using Information Systems A Strategic Approach 4th Edition By Pearlson, K.E. and Saunders, C.S.

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Chapter 1. The Information Systems Strategy Triangle Chapter Overview This chapter presents a very simple framework, the Information Systems Strategy Triangle, which links business strategy with organizational strategy and information strategy. The chapter describes this model, and builds on several other popular strategy models and organizational models. The goal of this chapter is to make sure every student has a basic understanding of both strategy and organizations (in many management programs, one or both of these are either reserved for the most senior students or left out entirely). For students well versed in strategy and organizational behavior, this chapter is a review of key points from those two fields.

Key Points in Chapter The Information Systems Strategy Triangle links business strategy with organizational strategy and information strategy. The use of the triangle is done to suggest that all 3 points are in balance in any organization, and if they are out of balance, then organizational tension or possibly crisis exists. A company is out of “alignment” when their business strategy is not supported by there IS. There are several implications from this model. First, business strategy drives organizational and information strategy; Second, organizational strategy must complement business strategy. Third, information strategy must complement business strategy. Fourth, organizational and information strategy should complement each other. Finally, if a change is made to one corner of the triangle, it is necessary to evaluate the other two corners to insure balance is maintained.

That means that if the business strategy is changed (i.e. such as becoming a "bricks and clicks" company) then the manager must also consider redesign of both the organization (i.e. do we have people that can be successful in this new strategy) and the information systems (i.e. do we have the capability to process inquires taken off of the web).

Strategy is defined and the mission of the organization is covered (with several example mission statements (figure 1.2) and discussion of how Dell has creatively adjusted its business strategy to meet the rapidly changing computer industry.

There are several ways to describe business strategy. This chapter summarizes 2 wellaccepted models: the Porter generic strategies framework and the D'Aveni hypercompetition model. Current examples are offered to illustrate the models.

The Porter generic strategies framework (Differentiation, Cost Leadership, Focus) has spawned many variants. Two are presented here: shareholder value model and unlimited resources model. Depending on the business objectives, a particular strategy is employed to achieve those objectives. Chapter 2 discusses strategic use of information resources, building on these and other models.

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The chapter also summarizes several frameworks for describing organizational strategy.

Included are the business diamond and the managerial levers framework. The business diamond links 4 key components of the organization: business processes, values and beliefs, management control systems and tasks and structures. The managerial levers framework is somewhat more comprehensive, linking organizational structure variables, control variables and cultural variables. Chapters 3 and 4 build on these frameworks and more fully flesh out how to work with organizational strategy. Chapter 5 builds on the business process concepts.

The information strategy suggested in this chapter, and embellished more fully in the architecture and infrastructure chapter, is a very basic model. This framework highlights the four components of the information system, the hardware, software, networking and data, and the key managerial concerns for each, what, who and where.

The Food for Thought section draws from Rosenzweigs “Misunderstanding the Nature of Company Performance: The Halo Effect and Other Business Delusions,” California Management Review, (49 4) Summer 2007, 6 -20”. He refers to problems Dell was having with its performance and suggests that they suffered from the halo effect (the basic human tendency to make specific inferences on the basis of a general impression).

He describes three misconceptions that are created by this effect.

Illustrative Answers to Discussion Questions This is a summary chapter of the key models for the information systems strategy triangle, so discussion questions were provided to get students focused on and thinking about using these models. Below are some sample answers, but expect creative answers from your students that are not represented here (please send us some of your best answers so we can share them with other instructors).

1. Why is it important for business strategy to drive organizational strategy and IS strategy? What might happen if business strategy was not the driver?

Ans: The primary point in this chapter is that in any well-run organization, the business strategy drives the rest of the operational strategy, and information systems is no different. However, typically, managers seem to think that changing or upgrading an information system (or even a component of an information system) will only positively impact a business. Quite the opposite, in fact, is true. By making changes in organizational strategy or IT strategy first, the triangle is "out of balance" and there will be consequences in the affected areas. For example, building a virtual organization, but not changing the business strategy to something like "insuring our people are productive and have the widest possible work place opportunities" can lead to significant disconnects between workers, their managers, and their customers. And, worse, without supplying the virtual worker with the appropriate information system (a computer at home, a laptop, etc) will lead to a decrease in productivity by the virtual worker, and a major disruption of business operations.

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2. Suppose managers in an organization decided to hand out laptop computers to all salespeople without making any other formal changes in organizational strategy or business strategy. What might be the outcome? What unintended consequences might occur?

Ans: Sales people might not use them, with out training and reconfiguring their job. They may be used to the paper system and resist moving to the laptop systems. If they do use them, there will eventually be strain on the rest of the organization if it doesn't adapt to this new technology. For example, messaging might become messy if sales people use email on their laptops and voice mail. Where is the primary place to contact them? When someone is needed fast, it is a hindrance to have multiple places to check. Likewise, if the laptops are used for order entry, but the order process is not changed to accommodate the laptops, there will be problems. And support systems must be redesigned. It does a sales person little good to have to bring their laptop into the office for repairs, especially if they live a far distance away. Support processes will have to adapt to the mobility of the technology, or the company can expect to have agents further resist.

3. Consider a traditional manufacturing company who wanted to take advantage of the Internet and the Web 2.0 tools. What might be a reasonable business strategy and how would organizational and IS strategy need to change?

Ans: A reasonable business strategy might be to provide what the customer wants when the customer wants it. The idea is to use the web as a mechanism to connect to customers, to take their orders, to provide services when the customer wants them and to link with suppliers and partners. To do that the organization would have to be organized around responsiveness, and would have to include elements of empowerment and authority. It would not work to have a centralized decision making authority if the organization wants to be responsive because it would take to long to get information up and decisions back to the field. The manufacturing process might be organized around build-to-order rather than on market analysis and product histories, but then there would need to be a series of organizational processes and people that would be in place to make sure the manufacturing company is able to actually build the products when they are ordered. The IS strategy to support this business strategy would be one of rethinking the use of the web as a tool for delivering information to customers, suppliers and employees.

Also, to take advantage of the collaborative nature of Web 2.0 technologies.

Organizations could use these Web 2.0 technologies to advertise, set up discussion groups, monitor discussions on social networking sites, use tools like Second Life to promote its products and services, etc.

4. This chapter describes key components of an IS strategy. Describe the IS strategy of a consulting firm using the matrix framework.

Ans: The matrix framework is a very simple structure for decomposing the confusing IS architecture of an organization. For a consulting firm, some of the components would look like this:

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Element Hardware

What Laptops, servers to store information and back up laptops

Who Consultants have their own laptops, managed by the centralized IS dept, who also "owns" the servers

Software

Office suite, collaboration tools

Consultants have the software on their PCs/Laptops, but software is managed centrally by the IS group

Networking

Internet, hard wired connections from office, dial up and/or high bandwidth lines from remote (home and client) locations

Data

Engagement data such as details of the work done for clients, client data with info about who the client is, previous engagements done for them, etc. personnel data so consultants can be identified and assigned to projects.

ISP service is obtained from AT&T or AOL or other provider who has international access numbers for dialing in. Company has own IS group provide the necessary servers to be connected to the internet All data is "owned" by the company, but is made available to any consultant on an as needed basis

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Where Laptops are mobile, traveling with consultants. Servers are fixed at corporate offices All resides on laptops but is backed up on servers. Some corporate applications are only on the servers.

Global access is needed. Nodes are not managed by the consulting company, but by the ISP they contract with.

Data reside in the servers, but are "replicated" to the laptops as needed.

Information is not considered part of the company until it is on the servers, therefore information only residing on the laptops would not be recognized until uploaded to the servers.

5. What does this tip from Fast Company mean: “The job of the CIO is to provide organizational and strategic flexibility”?

Ans: The job of the CIO does not just narrow in on information systems (IS) or solely focus on developing IS strategy. Rather the CIO must work with top level executives and functional executives to insure that the IS strategy is aligned with the business and organizational strategy. A particular challenge for the CIO is to ensure that the IS architecture and infrastructure can support the business and organizational strategy. In making long-term decisions about IS architecture, the CIO must attempt to promote flexibility in the future with scalable architecture that meets the organization’s present and future needs.

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Further Discussion Questions 1. What is the difference between knowledge literacy and information literacy, and how does it affect decision-making?

2. What are some differences between technology that provides operational support and technologies that provide strategic advantage?

3. What specific Web 2.0 technologies could be used to further help and organization to “align” its strategy?

Case Study 1-1: Roche’s New Scientific Method 1. How does the business strategy affect information systems and organizational decisions?

In order to take advantage of advances in the genomics revolution, Roche is rethinking the way it builds teams (organizational strategy), rewards teams (organizational strategy), hires people (organizational strategy), creates a culture (organizational strategy) and processes data (IS strategy). In particular, it is shedding its ultracompetitive approach in favor of culture-changing collaborative approaches. It is now recruiting through advertisements run on the back pages of Science magazine. Its IS strategy incorporates the GeneChip and FailFast approach to speed the screening of compounds that are tested.

IS must be designed to handle the large volume of data that must be analyzed.

2. What generic strategy does Roche appear to be using based upon this case? Provide a rationale for your response.

Roche’s business strategy appears to be first to market with a new drug to cure cancer or other diseases whose genes are identified in through the genomics project. Thus, they appear to be applying the differentiation strategy of having a drug that adds value in the cure of a disease. (It could be argued, though, that Roche is applying a focus/differentiation strategy by concentrating on cancer or strokes… it is not entirely clear what Roche’s overarching business strategy is from the case).

3. Apply the hypercompetition model to Roche. Which of the 7 Ss are demonstrated in this case?

The hypercompetition model suggests that speed and aggressiveness of moves and countermoves in any given market can create strategic advantage. Clearly this case demonstrates Roche’s concern with a speedy discovery. An example is its ‘Fail Fast’ philosophy. To uncover successful drugs, it is conducting thousands of experiments… a series of small steps. To compete, Roche is taking advantage of its deep pockets and is relying on its timing and know-how. Below are some possible applications of D’Aveni’s 7-Ss:

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7-S Superior stakeholder satisfaction

Application Maximizing customer satisfaction by adding value through the discovery of breakthrough drugs to cure cancer, stroke, or other disabling diseases Strategic soothsaying Seeking new knowledge in a variety of ways: applying new technologies such as GeneChip; advertising for new employees in a wide range of sources, including Science magazine; leveraging on the knowledge of it employees through more collaboration and teamwork Positioning for speed Using IS to process large volumes of data more efficiently; applying ‘Fail Fast’ philosophy to identify winners more speedily Positioning for surprise Altering its organizational and IS strategies to speed the discovery of new breakthrough drugs Shifting the rules of competition Using breakthrough discoveries of revolutionary drugs to treat major diseases can result in new ways to serve customers that transforms the industry; Trying to take advantage of discoveries in the genomics projects Signaling strategic intent ?

Simultaneous and sequential ? strategic thrusts 4. How do information systems support Roche’s business strategy?

The article discusses a number of ways in which IS supports Roche’s business strategy: to screen compounds, to run simulations or GeneChip experiments with potential new drugs, and to identify and locate genes that are associated with stroke using Decode.

Case Study 1-2: Google 1. How is Google’s mission statement related to its business strategy?

Ans: Google’s primary goal is to organize the world’s information and make it universally accessible and useful (mission statement). Google continues to take risks and expand into new markets to further its reach into the information world. It takes advantage of new avenues to expand its market share by making information freely available on its Intranet, and by willing to take risks by investing in speculative and strange projects if they see a large potential payoff.

2. How does Google’s information systems strategy support its business strategy?

Ans: Through openness and innovation. It permits users to download their own software, maintain official and unofficial blogs, and buys and makes software to suit the needs of the business. IT encourages innovation by allowing employees to spend 20% of their time on a project of their own choosing. This “flexible” IT structure supports the innovation and creativity that its business strategy espouses.

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3. How does Google’s organizational strategy supports its business strategy?

Ans: Google has a culture of innovation and creativity. However, it still provides a level of structure when making decisions. Specifically, Google’s mission statement relates to its business strategy by making data on all ongoing projects and systems available to all of its employees through its corporate Intranet. Any employee can see what is transpiring in other areas and can lend a hand through Google’s “free day” policy and other open work-environment strategies.

4. Which of Porter’s three generic strategies does Google appear to be using based upon this case? Provide a rationale for your response.

Ans: Differentiation, though one may argue that cost leadership is also utilized with its very reasonable ad costs. However, though the use of its innovative processes, and unique business model, Google has differentiated itself from its competitors by keeping a clean and simple interface (which most of the other search engines have emulated), and by continuing to invest in its employees, to provide innovation on a large scale.

5. Using D’Avenis Hpercompetitive Framework analyze Google’s strategy and the type of market disruption it has created.

Ans: In some form or another Google has utilized almost all of D.Aveni’s framework.

Specifically, it has gained superior stakeholder satisfaction through offering a superior product to its customers and adding new products that provide value to its customers (adsense, etc.). They are continually seeking out new knowledge through its innovative management styles and by its willingness to invest in risky projects that have a highreturn potential. Google positions for speed and surprise by constantly innovating by setting limitations on how long it will take to make changes to its products and services.

Through this innovative approach it is able to stay on the cutting edge of technology and lead this market of IT world. Through its new products and services (adsense, GoogleApps, etc.) and its low cost marketing its shifts the rules of competition by finding new and better ways to serve its customers.

Additional Mini Case: Cisco Systems* Cisco Systems, Inc. was one of the early successes from the Internet. Cisco makes the routers, switches and other technologies necessary to make the Internet work. They provide products and services to customers who want to build their own networks or who want to connect to others. Customers include large enterprises with complex networking needs, service providers who provide network, cable, or other telecommunication services, and smaller businesses who want to connect to the Internet. And they have been quite successful, growing from revenues of $1.3 billion in 1994 to $12.2 billion in 1999,

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and their stock is up more than 2,300% in the same time period.

In order to fuel the explosive growth, Cisco executes a business strategy of acquiring companies to complement their core strengths. As of October 1999, Cisco had acquired 43 companies (the latest was just hours before this case was written) in fields related to their goal: Be the biggest supplier of equipment needed to build, run, and manage the Internet. The acquisitions provided Cisco with immediate infrastructure, technology, and smart people. John Chambers, the CEO and President of Cisco since 1991, described his strategy to Business Week magazine as, [Mergers and acquisitions] are a requirement, given how rapidly customer expectations change. The companies who emerge as industry leaders will be those who understand how to partner and those who understand how to acquire.

Customers today are not just looking for pinpoint products, but end-to-end solutions. A horizontal business model always beats a vertical business model. So you've got to be able to produce that horizontal capability in your product line, either through your own R&D, or through acquisitions.

Cisco is not only a vendor of components for the Internet, they run their business on the Internet. Their business strategy has been to build the “ultimate model of an efficient Net company,” and to do so, they use the Internet for connecting to customers, suppliers, and other stakeholders.

Cisco connects to customers though a series of Web pages that allow customers to read and learn about products and services. In addition, like many companies, customers can learn about Cisco, order products, seek support and service, and contract for training.

However, unlike many companies, Cisco sells more than 75% of their products over the Net, which amounts to about $30 million a day. And almost 80% of customer support issues are handled this way. There are several benefits to this method of doing business.

First, that gives the customer control over part of the ordering process because they can choose and enter exactly what they want. Second, Cisco instantly gives them back information regarding availability and delivery, often without a person intervening. It means Cisco can respond instantly to a customer order by accepting and managing the electronic order. And it means that response is less costly to Cisco than to competitors where human intervention is needed.

But Cisco’s interaction with customers is only part of their success. Cisco has built an extensive network of suppliers, partners, resellers, and contractors who are also connected directly to Cisco. An order received by Cisco is sent to suppliers who manufacture some of the products for Cisco. The suppliers, in turn, are able to provide exactly what Cisco's customers want to Cisco. And this is done automatically by the information system.

In order to accomplish this e-business, Cisco has about 19,000 employees all over the world. Employees, too, interact with the Internet for much of their business. Recruiting and candidate screening is done on the network. Managers have access to staff records on the network. Information on competitors is available on the network. And all financial information is gathered and stored on the network, making it possible to virtually “close”

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business on any day of the quarter. That means they can accurately evaluate their entire company’s financial performance on any day of the year. Processes are virtually paperfree, where just about anything that can be done on the Net is done on the net. And Cisco’s success internally only provides additional fuel for their story externally: Doing business on the Internet is the only way to go. *Adapted from: “Meet Mr. Internet,” Business Week, Sept. 13, 1999, pg. 128-140, from Cisco website, www.cisco.com on October 28, 1999, and from “John Chambers: The Art of the Deal,” Business 2.0, October 1999, website: www.business2.com/articles/1999/10/text/chambers.html Questions for Discussion: 1. How does the business strategy affect information systems and organizational systems decisions?

2. Why does Cisco management insist on putting all of their business processes on an internal network?

3. How does candidate screening on a network support their business strategy?

4. What options does Chambers, CEO of Cisco, have other than to use the Internet so aggressively?

The point of this case is to look at a star organization in the area of linking business strategy, organizational strategy and information systems strategy. Cisco has been a leader almost from it's beginning.

1. How does the business strategy affect the information systems and organizational systems decisions?Ans: It's clear that Cisco's information systems are a critical component of their business strategy. They would not be able to link their supply chain with such depth without it.

And their organizational strategy also supports the business strategy, by taking great pains to integrate acquired companies into the Cisco family. Acquisitions don't work if everyone leaves the company when it's acquired. So Cisco managers have had to really think through the organizational strategy. Further, by acquiring companies, Cisco is able to "grow" in a modular fashion both with technology and with people, another key component of the organizational strategy.

2. Why does Cisco management insist on putting all of their business processes on the internal network?

Ans: Several reasons. First, managers "walk the talk" meaning they do their business as they suggest their customers do business...using internet technologies. By running their business processes this way, they are a living example of how it can be done. But also, by using the internal network as they do, they make it possible for employees to do business anywhere. As the company grows and acquires other companies, the internal network becomes the backbone of the acquired company more easily than traditional methods used by companies with business processes not on a network. Paperless work

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environment implies that work can be done anyplace, since all needed records are available anyplace.

3. How does the candidate screening on their network support their business strategy?

Ans: By using the network to initially screen candidates, Cisco is assured of only getting applicants who are somewhat knowledgeable of the internet. They may not want to have to completely train new hires on that basic understanding.

4. What other options does Chambers, CEO of Cisco, have than to use the Internet so aggressively?

Ans: Good open ended question. I'm not sure he has other options, given the nature of Cisco, and the evolution of e-business. If he were to not use it so aggressively, he would be selling his company short. It is interesting to note that Chambers has gone on the record as a big supporter of e-learning, and that the Cisco site gives many suggestions on how to set up e-learning. Of course, e-learning is important for companies as a training tool, but it is another application on the Internet, and as such will help Cisco sell more product and services.

Supplemental Readings Cases: Sun Microsystems, Inc: Web Services Strategy by Eisenmann, T. R., Suarez, F. F. Harvard Business School Publishing. 2005 (20 pages) Microsoft and IBM have excluded Sun Microsystems from the board of the Web Services Interoperability Organization (WS-I), an industry consortium that will shape the evolution of Web services standards. Sun managers must decide whether to join WS-I as a contributing member--a less influential role that lacks the veto and agenda-setting powers of a board position. Sun has recruited leading IT vendors--including several WS-I board members--to create technologies that compete with proposed standards jointly developed by Microsoft and IBM. Volkswagen of America: Managing IT Priorities by Austin, R. D., Ritchie, W. & Garrett, G. Harvard Business School Publishing. 2005 (19 pages) Describes the efforts of Volkswagen of America, the U.S. subsidiary of Volkswagen AG, to arrive at a process for setting IT funding priorities so that they align with business priorities and the company's overall strategy.

Kemps LLC: Introducing Time-Driven ABC by Robert S Kaplan,.; Harvard Business School Publishing; 08/03/2005; (10 pages)

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Managers use the information to enhance process efficiencies, negotiate new terms with customers, and attempt to win new business. The company now faces some crucial decisions about how to forge new relationships with key customers UCB: Managing Information for Globalization and Innovation (A) by McFarlan, F. Warren; Brian & DeLacey; Harvard Business School Publishing; 02/12/2003; (47 pages) his case presents a complex total MIS strategy case for a $3 billion European pharmaceutical/chemicals company based in Brussels. It covers corporate strategy alignment of IT portfolio, IT operations issues, and global coordination of IT. Offshoring at Global Information Systems, Inc.; by William E. Fruhan, Jr. Harvard Business School Publishing; 04/23/2004; (19 pages) This case explores the topic of offshoring high-tech jobs several perspectives. The issues presented include determining the stock price consequences of offshoring, examining the economic consequences of the offshore job to both the transferring and receiving countries, considering the competitive consequences of not offshoring, and thinking through the challenge of investing in a career that is vulnerable to future offshoring.

British Airways: Using Information Systems to Better Serve the Customer by Sasser, W. Earl, Jr.; Klein, Norman; Harvard Business School, 1994 Explores the uses of scanning technology, interactive software, and powerful data bases to assist customer relations representatives in resolving customer The Ritz Carlton: Using Information Systems to Better Serve the Customer by Sasser, W. Earl, Jr.; Jones, Thomas O.; Klein, Norman; Harvard Business School 1995 Explores the interface of an information system that keeps track of guests and their preferences, and the people systems that deliver multiple services.

(Note: supplement this case with “Room for Two, Scott Berinato, CIO Magazine, May 15, 2002, http://www.cio.com/archive/051502/two_content.html) Manheim Auctions, Communications of AIS, June, 1999, Volume 1 Article 20 http://cais.aisnet.org/articles/default.asp?vol=1&art=20 (setting: global) This is an online case that explores the question of setting up an online auction in the US and globally. IS strategy must be aligned with organizational and business strategy Introducing Expert Systems at The Corporation by Liebowitz J., Idea Publishing Group. IT5555, 8 pages (setting: US) This case study highlights the concept the “management” of the technology is usually the limiting factor causing the demise of a project rather than the “technology” itself. This

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real case study involves creating an awareness of a new technology within the company and trying to start a much-needed project using this technology.

Risks and Rewards at Frontier Communications: Improving Customer Service Using Client/Server Technology by Mathieson, K. and T. Toland , Idea Publishing Group. IT5561, 11 pages (setting: US) The case shows how a firm can improve a critical business function with new technology.

In addition, the case shows that a firm can use new technology to build mission-critical information systems and examines the risks and benefits of restructuring.

Business Reeingineering at a Large Government Agency by McGarry, N.and T. Beckman, Idea Publishing Group. IT5562, 25 pages (setting: US) This case describes the difficulties and successes encountered in a reengineering effort.

A team of consultants undertook reengineering the delivery of compensation and benefits at a large quasi-governmental agency. Benefits included six programs which accounted for time-intensive processes such as “cafeteria plan,” options enrollment period where information is dispersed to assist employees in plan selection and retirement accounts.

End-User computing at BRECI: The Ordeals of a One-Person IS Department by.

Moffitt, K. Idea Publishing Group. IT5563, 11 pages (setting: US) The intention of the case study is to show an unsuccessful attempt at the introduction and use of information technology in a small business, leading to the finding that the application and understanding of technology is lacking in many small businesses that could benefit greatly from its use.

Implementing a Wide-Area Network at a Naval Air Station: A Stakeholder Analysis Hocevar, S.P., B.A. Frew, and V.C. Bayer. Idea Publishing Group. IT5568, 13 pages (setting: US) This case study illustrates the use of a non-traditional approach to determine the requirements for the Naval Air Systems Team Wide-Area Network (NAVWAN). It is considered to be non-traditional because the case data enable the use of Stakeholder Analysis and SWOT (strengths, weaknesses, opportunities, threats) assessments to determine the requirements instead of asking functional proponents about function and data requirements.

Reengineering the Selling Process in a Showroom by Crnkovic, J., N. Janicijevic, and G. Petkovic, Idea Publishing Group. IT5630, 14 pages (setting: Yugoslavia) The case study describes a process of successful re-engineering of a small Yugoslavian showroom wholesale company (“Wissol”) during the period of economy in transition.

An established organizational solution was not supported by adequate IS support. It

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opens possibilities for designing IS prototype and for planning future steps in IT and IRM. Enterprise Wide Strategic Information Systems Planning for Shanghai Bell Corporation by Long, Y., F. Fui-hoon Nah, and Zhanbei Shu. Idea Publishing Group.

IT5581, 16 pages (setting: China) This case examines Shanghai Bell Corporation, Limited, a leading telecommunications enterprise located in Shanghai, China’s initiative to develop its new generation Information Technology/Information Systems (IT/IS) plan. The issues covered include alignment of IT strategy with evolving business needs, application of a methodology to develop the enterprise-wide strategic IT/IS plan, and the evaluation of strategic planning project success.

Other cases: - Tesco PLC (HBS case 503-036, March 6, 2003) - PassAct, Inc. (HBS Case 602-026, March 13, 2003) - Telewest Communications, PLC (HBS case 802-011, Oct. 15, 2002, setting: UK) - Government E-Procurement: Electronic Tendering System in the Hong Kong SAR (UHK case HKU238, June 25, 2002, setting: Hong Kong) - Wyndham International: Fostering High Touch with High Tech (HBS case 803-902, Feb. 11, 2003, setting: global) - iSteelAsia--2001 (HBS case 302-074, Dec. 17, 2001, setting: Asia) - Alibris (A) (HBS case 601-111, Mar. 13, 2002, setting: internet) - Webvan (HBS case 602-037, Mar 13, 2003) - British Airways: Using Information Systems to Better Serve the Customer, Sasser, W. Earl, Jr.; Klein, Norman; Harvard Business School, Nov. 1994. Product Number: 9395-065 - The Ritz Carlton: Using Information Systems to Better Serve the Customer, Sasser, W. Earl, Jr.; Jones, Thomas O.; Klein, Norman; Harvard Business School Case 9395-064, May 1995 - Manheim Auctions, Communications of AIS, June, 1999, Volume 1 Article 20 http://cais.aisnet.org/articles/default.asp?vol=1&art=20 (setting: global) - Introducing Expert Systems at The Corporation” by Jay Liebowitz, Idea Publishing Group. IT5555, 8 pages (setting: US) - Risks and Rewards at Frontier Communications: Improving Customer Service Using Client/Server Technology,” K. Mathieson and T. Toland , Idea Publishing Group.

IT5561, 11 pages (setting: US) - Business Reeingineering at a Large Government Agency,” N. McGarry and T. Beckman, Idea Publishing Group. IT5562, 25 pages (setting: US) - End-User computing at BRECI: The Ordeals of a One-Person IS Department,” K. Moffitt. Idea Publishing Group. IT5563, 11 pages (setting: US) - Implementing a Wide-Area Network at a Naval Air Station: A Stakeholder Analysis,” S.P. Hocevar, B.A. Frew, and V.C. Bayer. Idea Publishing Group. IT5568, 13 pages (setting: US)

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Reengineering the Selling Process in a Showroom,” J. Crnkovic, N. Janicijevic, and G. Petkovic, Idea Publishing Group. IT5630, 14 pages (setting: Yugoslavia) Enterprise Wide Strategic Information Systems Planning for Shanghai Bell Corporation,” Y. Long, F. Fui-hoon Nah, and Zhanbei Shu. Idea Publishing Group.

IT5581, 16 pages (setting: China) Enron – What Went Wrong (Ivey case 9B04C001, 2001) (setting: large organization, US) Information Systems Strategy at the Toronto Stock Exchange (Ivey case 8B00E05, 1999, 13 pages: setting: medium organization, Canada) Tesco PLC (HBS case 503-036, March 6, 2003) PassAct, Inc. (HBS Case 602-026, March 13, 2003) Telewest Communications, PLC (HBS case 802-011, Oct. 15, 2002, setting: UK) Government E-Procurement: Electronic Tendering System in the Hong Kong SAR (UHK case HKU238, June 25, 2002, setting: Hong Kong) Wyndham International: Fostering High Touch with High Tech (HBS case 803-902, Feb. 11, 2003, setting: global) iSteelAsia--2001 (HBS case 302-074, Dec. 17, 2001, setting: Asia) Alibris (A) (HBS case 601-111, Mar. 13, 2002, setting: internet) Webvan (HBS case 602-037, Mar 13, 2003)

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Readings/Articles: Warren McFarland & Richard Nolan, “Information Technology and the Board of Directors” Harvard Business Review 83(3) 2005 Most boards remain largely in the dark when it comes to IT spending and strategy, despite the fact that corporate information assets can account for more than 50% of capital spending. This article spells out the conditions under which boards need to change their level of involvement in IT decisions, explaining how members can recognize their firms' IT risks Tarun Khanna, Krishna G Palepu & Sinha, Jayant “Strategies That Fit Emerging Markets” Harvard Business Review 83(2) 2005 If Western companies don't come up with good strategies for engaging with emerging markets, they are unlikely to remain competitive. The best way to do this, the authors have found, is by using the five contexts framework. The five contexts are a country's political and social systems, its degree of openness, its product markets, its labor markets, and its capital markets.

“Linking business strategy with information technology” Chief Executive. (92): 52-70. 1994 Mar. Companies have spent billions on IT. The value of IT depends on how it is used strategically to improve the organization, not on how much it costs. If many CEOs feel shortchanged, however, it may be because they have failed to manipulate IT to maximum advantage. In a roundtable discussion, CEOs and experts explore ways to align strategy and infrastructure. They agree that the CEO can no longer afford to be a bystander, merely passing judgment on proposals put forward by the CFO or CIO. The members of the roundtable underscore that too often; technology competence is thought to be an end in itself. Companies should not benchmark their IT; they should benchmark their core competence.

Eryn Brown, “Nailing the Housing Boom,” Fortune. September 30, 2002. http://www.fortune.com/fortune/articles/0,15114,368439,00.html Article is available online. Describes how IT has helped KB Homes change the nature of its business from a cyclical business to a non-cyclical business. Some questions that come to mind are: (1) How has IT changed the nature of the way KB Home does business? Give some examples of how managing the information has impacted KB Home. and (2) In your opinion, will managing information the way this article describes change the cyclicality of the home building business? What advantages and disadvantages do you see for KB Home with this change?

Regina F. Maruca, “Are CIOs Obsolete?” Harvard Business Review. 78 (2): 55-63.

2000 March-April.

Interviews with six experts (CIOs, consultants, professor) on the issue.

Robert S. Kaplan and David P. Norton, “Having troubles with your strategy? Then map it.” Harvard Business Review. 78(5): 167-176. 2000 Sep/Oct.

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A workforce needs clear and detailed information to execute a business strategy successfully. Until now, there have not been many tools that can communicate both an organization’s strategy and the processes and systems needed to implement that strategy.

But Kaplan and Norton, the creators of the balanced scorecard, have adapted that seminal tool to create strategy maps.

Petter Gottschalk, “Studies of key issues in IS management around the world”, International Journal of Information Management. 20(3): 169-180. 2000 Jun. Information systems departments face many challenges in today’s rapidly changing environment. One approach to understanding these challenges is to survey IS managers to elicit what they consider are key issues. Studies of key IS management issues have been conducted for some years in many nations and regions. Based on such studies and a theoretical framework, this paper predicts the 4 key issues into the 21st century. For future studies of key issues in IS management around the world, this paper provides an overview of research approaches to initial key issues selection and key issues surveys.

Marianne Broadbent, Peter Weill, “Improving business and information strategy alignment: Learning from the banking industry”, IBM Systems Journal. 32(1): 162179. 1993.

An empirical study was conducted to examine business and information strategy alignment in the Australian banking industry. Differences in the banks’ organizational practices are used to identify 15 propositions concerning the alignment of business and information strategy. The results indicate the emergence of strategy-enabling, information-based advantages require a firm to have consistent practices in 4 areas: firm wide strategy-formation processes, organization structures and accountabilities, information system responsibilities and policies, and technology strategy.

Books: Carr N.G. Does IT Matter? Information Technology and the Corrosion of Competitive Advantage MA: Harvard Business School Press, 2002.

R. D'Aveni Hypercompetition: Managing the Dynamics of Strategic Maneuvering. New York: Free Press, 1994.

P. Evans and T. Wurster Blown to Bits. Boston, MA: Harvard Business School Press, 2000.

M. Porter, Competitive Advantage. New York: Free Press, 1985.

M. Porter, Competitive Strategies. New York: Free Press, 1988.

Websites: www.cisco.com

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The cisco website is an excellent source of additional information on the importance of linking business, organizational and IT strategy. Look at the annual report letter from the CEO, and at the numerous cultural and organizational references Cisco describes as part of their various programs and opportunities. www.brint.com This @Brint website is a good general starting place for articles and other web links related to the management and use of IT in business. This page contains many links to other portals on more specific topics such as e-business strategies, organizational strategies, business strategies, and IT management. www.cio.com CIO and CIO.com are published by CXO Media Inc. to meet the needs of CIOs (Chief Information Officers) and other information executives. CIO is read by more than 140,000 CIOs and senior executives who oversee annual IT budgets in excess of $175 million. CIO.com serves over 12 million pages annually.

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Chapter 2: Strategic Use of Information Resources Chapter Overview A long-standing management topic for information systems courses is the use of information and information systems for strategic advantage. The triangle model of chapter 1 sets up this discussion by making the link between IT and business strategy.

This chapter explores some of these concepts, building on the classic Porter models.

Key Points in Chapter Innovative use of a firm’s information resources can provide companies with substantial advantages over competitors. The introduction to this chapter explores Zara, a Spanish apparel manufacturer, who has taken this idea to an extreme, by having a continuous flow of new products that are typically limited in supply. Zara has created a system that draws its clientele into their stores, on average, 17 times per year as compared to 4 times per year for most stores. They are able to do this by aligning its IS model with its business model. The conclusion is that a company can achieve substantial advantage over its competitors through innovative use of its information resources.

The evolution of information resources for business advantages is explored. Building on the eras model of Harvard Business School professors Applegate, McFarlan and McKenney, this model succinctly summarizes how IT has been used to create efficiency, effectiveness, strategic gain and value creation. This model is useful to show how leading edge companies have engaged IT for more than just automation of activities and removal of paper from the business. The model also incorporates the economics of information vs. the economics of things that was discussed as a Food for Thought in chapter1. Students might be engaged in discussion as to what a business's objectives are and how IT can help achieve those objectives, based on the objectives discussed in figure 2.1.

The term information resources is defined as the available data, technology, people, and processes available to perform business processes and tasks. Information resources can be either assets or capabilities. IT asset is anything, tangible or intangible, that can be used by a firm in its processes for creating, producing and/or offering its products (IT infrastructure is an asset). IT capability is something that is learned or developed over time in order for the firm to create, produce or offer it products. Table 2.2 (new to the 4th edition) shows these resources with a definition and then an example. Students would do well to understand the difference between an asset and a capability.

Crafting advantages using information resources is the job of the manager. Information resources include the technical systems, as well as the people and processes associated with the systems. To evaluate the business advantages of using a particular information resource, 5 questions are asked: • What makes the information resource valuable?

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Who appropriates the value created by the information resource?

Is the information resource equally distributed across firms?

Is the information resource highly mobile?

How quickly does the information resource become obsolete?

Information resources can be used strategically. They can influence competitive forces (see Porters model in Figure 2.3). For example, the potential threat of new entrants is influenced by using information resources to build barriers to entry. The bargaining power of buyers is influenced by using information resources to build switching costs.

The bargaining power of suppliers can be influenced by using information resources to integrate backwards or to reduce costs of linking with other suppliers. Substitute produces are more difficult to create if information resources are used to add value to a business’s product and service offerings. And, industry competition can be influenced by information resources when these resources are used to differentiate products or services and to build new markets such as net markets. In Figure 2.4 the 5-forces model evaluates how Zara was able to gain competitive advantage through the strategic use of IT resources and services.

Information resources can be used to alter the value chain of a business, creating strategic advantages through lower costs and/or increased value. Porter's value chain suggests primary and support activities a business can use to create value. Information resources lower activity costs, which may create an advantage for the firm. Information resources add value only if a firm has accurate information regarding customers. By extending Porter's model to include supply chains of business partners, information resources are useful to create advantages through innovative linking of a business's supply chain and distribution channel chain. Students often fail to apply the value chain to business partners. Figure 2.4 shows Porter’s Value Chain model and Figure 2.5 applies the value chain model to show the extended value system and the interconnected relationships between organizations. Figure 2.6 shows a table applying these concepts to the grocery chain. CRM is covered and shown and how it is applied to the value chain. Figure 2.7 describes the value added to primary and support activities provided by IS at Zara. The main focus is on the value added to Zara’s processes, but it also shows how its suppliers and customers realize this value.

Next there is discussion on the Resource-Based View (RBV). It is a useful approach to identify two subsets of information resources: those that enable a firm to attain competitive advantage and those that enable a firm to sustain the advantage over the long term.

Information resources can support the strategic purposes that drive the use of the business's resources or strategic thrusts. While not discussed in this chapter, a lecture on this topic might include a discussion of Wiseman's theory of strategic thrusts. There are four types of thrusts: differentiation, cost, growth, and alliance. To find specific strategic opportunities, this model suggests asking three questions: • What is the mode of the thrust?

• What is the direction of the thrust?

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• What is the strategic target of the thrust?

Figure 2.8 indicates that extent to which the attributes of each information resources may add value to Zara (new to this edition). In the table you will notice that the resources are categorized by asset and capability and then by value creation and sustainability. A discussion on this table may be useful to have students provide their own experiences and frame of reference on each of these resources.

Next in the chapter is a discussion of strategic alliances. Supply chain management (SCM) is used as an example. A discussion of Brandenburger and Nalebuff’s coopetition theory demonstrates that some virtual corporations are formed with competitors.

The last section in this chapter includes a discussion of risks of information systems.

This discussion, which describes information systems that failed, is necessary to balance the discussion of competitive advantages afforded by information systems. Instructors are encouraged to have a discussion about the risks and to challenge students to come up with additional risks.

The food for thought idea in this chapter is about co-creating IT and business strategy.

The focus of the chapter has been on how IT strategy is aligned with business strategy. It discusses how information is increasingly a core component of the product or service offered by the firm, that IT strategy is business strategy – they cannot be created without each other. FedEx is considered as an example, and since its main product is information that it cannot function without IT even though they are primarily a package delivering company. The section ends up asking the question if IT is always necessary for strategic advantage. Some experts say no, but many will gain advantage through its uses.

Illustrative Answers to Discussion Questions 1. How can information itself provide a competitive advantage to an organization? Give two or three examples. For each example, describe its associated risks.

Ans: There are many appropriate responses to this question. This chapter explores some of them, such as building barriers to entry, creating switching costs, cutting operating costs, opening up new markets, and creating time-based advantages. Encourage students to give specific examples from companies they know about. For each example, explore the risks (i.e., awaking a sleeping giant, demonstrating bad timing, implementing IS poorly, failing to deliver what users want, or running afoul of the law). Discuss their answers in context of Zara and FedEx. 2. Use the five competitive forces model as described in this chapter to describe how information technology might be used to provide a winning position for each of these businesses: a. A global airline b. A local dry cleaner c. An appliance service firm (provides services to fix and maintain appliances) d. A bank e. A web-based wine retailer Ans: The five forces are substitutes, supplier, buyer, new entrants, and inter-industry. The question asks the student to pick a force and describe how each of these 5 types of business might use information resources to reduce the threat of that force. An example of analyzing the substitute force is given below:

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• Global airline-it is difficult to think of what might be a substitute threat for a global airline.

Perhaps it might be a cruise ship offering "offices at sea". In that case the global airline might use information resources to offer "offices in the air".

• Local dry cleaner- substitute services might be using a customer's own washer/dryer to be able to wash "dry clean only" clothes. In that case, information resources might be useful to create switching costs using a frequent customer card, or to provide customers with information about their garmets such as how to extend the life of the material using the dry cleaner's services (note that these ideas might also be useful to reduce the threat of other forces, too.)

• Appliance Service Firm- A substitute service might be where an individual building manager hires his/her own service person to keep systems up and running. The service firm can reduce the threat of that happening by using remote sensoring devices on appliance equipment to remotely monitor and in some cases repair devices, keeping them up and running without the building owner even knowing the equipment had trouble, and reducing the cost to an information flow cost rather than a repair-person visit cost.

• Bank- A substitute service that might threaten a bank is a trend to keep money in a brokerage firm.

Banks might use their information resources to offer other services of value to the customer such as instant on-line loan application and approval, extra incentives for longevity in accounts, and links with brokerage firm partners.

• Web-based wine retailer – A substitute service might be a brick and mortar wine shop where customers could actually taste the wines prior to buying or a grocery store or other wine retailer where the customer has instant access to the wine (if sold their). The web-based wine retailer might use IS to offer a broader array of wines with a more helpful information on the wine is paired with foods, and feedback from customers on each wine and expert recommendations. Also, the web-based retailer could create value by setting up discussion forums for customers where they could interact with other interested in their particular wine selections.

3. Using the value chain model, describe how information technology might be used to provide a winning position for each of these businesses: a. A global airline b. A local dry cleaner c. An appliance service firm (provides services to fix and maintain appliances) d. A bank e. A web-based wine retailer Ans: The value chain has primary activities (inbound logistics, operations, outbound logistics, marketing and sales and service) and secondary activities (organization, human resources, technology, and purchasing). The question asks the student to describe how each of these 5 businesses might use information resources to add value to the activities to their company (and possibly to partners in their supply chain). An example of analyzing the inbound logistics is: • Global airline- the reservation system data can be analyzed by an information system to see which customers fly particular routes….When the seat occupancy drops on these routes, the customers that frequently fly such routes could be contacted and offered a reduced price on a ticket for flying that route during the next month…. In that way the load factor could be improved (this could also be modified to be a marketing and sales activity) • Local dry cleaner- an information system could be programmed with an Economic Order Quantity model to determine when it is best to order dry cleaning supplies. This could also improve the outbound logistics activities of its supplier for these goods.

• Appliance Service Firm- an information system can be used to keep track of the repair skills of firm employees. When the system indicates a skills deficiency in an area, an employee can be sent to a school to acquire the missing skill. The employee record can be updated when the skill is updated. In this example, labor would be considered an input that would be subject to inbound logistics. (This could arguably considered add value to a Human Resource activity.)

• Bank- The telecommunications system may support Electronic Funds Transfers to ensure the transfer of funds into the bank. This could also make the outbound logistics of the Federal Reserve Bank more efficient.

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• Web-based wine retailer – a system could be set up where the wine retailer has a direct connection with wine companies and even growers to reduce costs that can then be passed on to consumers to drive up revenues. Also, predictive analytics could be used to help the retailer predict future demand for various types of wines which could be communicated to suppliers up stream.

4. Use the resource-based view as described in this chapter to describe how information technology might be used to provide and sustain a winning position for each of these businesses: a. A global airline b. A local dry cleaner c. An appliance service firm (provides services to fix and maintain appliances) d. A bank e. A web-based wine retailer Ans: The resource based view The Resource-Based View (RBV) looks at gaining competitive advantage through the use of information resources. Two subsets of information resources have been identified: Those that enable firms to attain competitive advantage (rare and valuable resources that are not common place), and those that enable firms to sustain competitive advantage (resources must be difficult to transfer or relatively immobile). The question asks the student to describe how each of these 5 businesses might use information resources to add value to the activities of their company.

• Global airline- they could utilize their global relationships to market strategically to customers through a CRM system that would be difficult to imitate because of their global reach. They could utilize IT talent from all parts of the world to create systems that are innovative and strategic in nature (specialized billing system for example).

• Local dry cleaner- a customer preference system could be set up that markets to customers that have not utilized the cleaner recently. Perhaps offer coupons to these customers, etc.

• Appliance Service Firm- similar to the local dry cleaner, an IS system could be used that tracks repairs of appliances and determines which appliances seem to have problems with specific components.

They could then use customer service to get feedback on these appliances and help customers to select appliances in the future that are more reliable, thus generating customer loyalty and service.

• Bank- provide a new service through their ATM machines that takes advantage of a service that is unique to that bank, and difficult to emulate.

• Web-based wine retailer – take advantage of its online presence to offer other services like wine recommendations, possibly creative cooking recipes, and other services that would enhance its services.

5. Some claim that no sustainable competitive advantages gained from IT other than the capability of the IT organization itself. Do you agree or disagree? Defend your position.

Ans: This is, of course, a very open ended question. As the chapter discusses, sustainable advantage is hard to come by. Just about any advantage gained by a company seems to be copied by another at some point in the future. Students who agree with this statement might argue that the key to sustaining any advantage comes from the way all business resources are organized and used, and ultimately that comes down to how the managers and the people are able to perform. Students who disagree with this statement might argue that even the capability of the IT organization is not a sustainable advantage because people come and go, they can be bought by another organization as a move to create the capability elsewhere, and their skills and knowledge atrophy over time, when new capabilities arise. Witness IT organizations who excelled at managing mainframe applications, who are now struggling to keep up with web-based applications.

6. Cisco Systems has a network of component suppliers, distributors, and contract manufacturers that are

linked through Cisco’s extranet. When a customer orders a Cisco product at Cisco’s Web site, the order triggers contracts to manufacturers of printed circuit board assemblies when appropriate and alerts distributors and component suppliers. Cisco’s contract manufacturers are aware of the order because they

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can log on to Cisco’s extranet and link up with Cisco’s own manufacturing execution systems. What are the advantages of Cisco’s strategic alliances? Does this Cisco example demonstrate SCM? Why or why not?

ANS: Cisco is linked via its extranet to contract manufacturers who print circuit board assemblies. The circuit boards can be provided when the order is made, or shortly thereafter. This reduces the circuit board inventory that Cisco needs to maintain. Similarly, since it is linked to component suppliers, it can be anticipated that Cisco’s inventories for component supplies can be maintained for several days (or less) of manufacturing needs, instead of for weeks or months. The distributors linked via the extranet can be alerted that a customer order is being processed. This can help them schedule the delivery and complete the paper work so that the customer order can be completed more speedily. By making the processing more efficient, inventory and processing costs may be reduced. Ultimately this may result in reduced prices and speedier delivery to the customer. b) Does the Cisco example demonstrate SCM? Why or why not?

ANS: Supply Chain Management is an approach that improves the way a company finds raw components it needs to make a product or service, manufactures that product or service, and delivers it to customers. This example demonstrates improvements through collaboration with trading partners in the handling inventory, and in delivering the product to the customers. This is an example of Supply Chain Management.

7. Tesco, the UK retail grocery chain used their CRM system to generate annual incremental sales of £100 million. Using a frequent-shopper card, a customer got discounts at the time of purchase and the company got information about their purchases, creating a detailed database of customer preferences. Tesco then categorized customers and customized discounts and mailings, generating increased sales and identifying new products to expand their offerings. At the individual stores, data showed which products must be priced below competitors, which products had fewer price-sensitive customers, and which products must have regular low prices to be successful. In some cases, prices are store-specific, based on the customer information. The information system has enabled Tesco to expand beyond groceries to books, CDs, DVDs, consumer electronics, flowers, and wine. The chain also offers services such as loans, credit cards, savings accounts, and travel planning. What can Tesco management do now that they have a CRM that they could not do prior to the CRM implementation? How does this system enable Tesco to increase the value provided to customers?

ANS: With the CRM system, Tesco has been able to gather and effectively analyze large amounts of consumer data, including buying patterns, demand for products, etc. With a CRM system they are able to function like a smaller neighborhood market that can meet the needs of its regional clientele. Without a CRM system it would be difficult if not impossible for Tesco to meet the needs of its regional clientele and would have to rely on gross collected data to make decisions. The value provided to customers is in meeting their specific needs, competing with other stores in pricing, and superior responses to customer demand (even on a regional and local level).

Further Discussion Questions 1. In contrast to the first text discussion question, using the five forces, discuss some examples from industry where technology has unexpectedly removed what was previously a competitive advantage.

2. Apple Computer’s iTunes is an interesting example of how the unexpected consequences that were contributing to the detriment of an industry (specifically the recording industry and digital file transfer and file sharing applications) were “turned around,” or, approached from a new direction, that lead to the development of a new strategic initiative for the corporation and industry. Discuss other examples from industry.

Mini Case: Lear Won’t Take a Back Seat

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1. What is the strategic advantage afforded to Lear from virtual reality? How does this technology help it compete?

Ans: In combination with Computer-Aided Design (CAD), virtual reality helped Lear reduce turnaround time for new models. This allowed Lear to distinguish itself from the competition in General Motors’ eyes. Unlike its competitors, Lear was able to leverage virtual reality as a means of survival in an dynamic environment. Lear also gained strategic advantage from its aggressive acquisition strategy. Information Systems played a supporting role in Lear’s acquisition strategy.

2. How long is Lear’s window of opportunity for strategic advantage given by the virtual reality system. That is, do you think that competitors will follow suit and implement a similar systems… and if yes, when?

Ans: In the fast-changing, competitive environment that Lear finds itself, any given strategic advantage is unlikely to last for very long. In the case of virtual reality, the expense of the system is likely to create barriers to entry. Thus, Lear can benefit from the first mover advantage. However, any information system can be copied, or even improved upon. Lear will lose its competitive advantage when a competitor implements a similar, or better, system.

3. Do you think the CAD system offers Lear strategic advantage? Explain.

Ans: Many companies use CAD systems. Lear is unlikely to gain strategic advantage from a system that is possessed by many of its competitors. However, Lear may gain strategic advantage through the way that it uses CAD in combination with virtual reality.

4. Apply the value chain to demonstrate how the virtual reality system adds value for Lear and for General Motors.

Ans: The virtual reality technology allows Lear to experiment with designs and propose a shell of the vehicle. This reduces Lear’s product development cycle by a year and a half and adding value to inbound logistics activities. The design is at the front end of Lear’s primary activities. Since General Motors recognizes that Lear’s use of technology makes it possible to respond to contracts with speed and flexibility, value is also added to the technology support activities. Lear has repeatedly implemented technologies such as virtual reality and CAD to be able to compete more effectively. It could be argued that the Reality Center is a visible way of demonstrating Lear’s use of technology during sales activities. From General Motors’ perspective, the prototypes help it plan better for production, assisting its inbound logistics, and possibly its operations.

5. What other types of competitive advantages might Lear executives seek from IS in general?

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Ans: Lear might use information systems to make the manufacturing process more efficient by using systems to control inventory and develop production schedules. Lear can also use organizational strategies to gain a strategic advantage. For example, working in teams around the world might result in innovations that provide competitive advantage.

Mini Case: ZIPCAR This is an interesting, short case about how a new type of rental car company is able to operate in a completely new business model, as compared to other rental car companies, and embrace Web 2.0 technologies to gain further competitive advantage.

1. Analyze the business model of Zipcar using Porter’s five forces model.

Ans: Zipcar has created a model that would be difficult for other companies to imitate with its technology infrastructure and low over-head. This model would be difficult for traditional car rental companies to model due to their existing infrastructure and model.

Buyers could utilize other rental companies, but they would lose the convenience offered by the Zipcar model of hourly rental agreements, and convenient locations. Zipcar does not really have to worry about supplier power since it does not rely on proprietary goods.

2. Discuss the synergy between the business strategy of Zipcar and information technology.

Ans: There is tremendous synergy between Zipcars business and IT strategy. Zipcar is heavily dependent upon an automated process, and supports social networking of its clients, so that they can freely provide feedback on the company and its products and services. IT completely supports what Zipcar is trying to accomplish.

3. Are there any network externalities in the workings of Zipcar? If so, do they add value? How? Ans: Through their use of social networking they provide value to the customer by providing an open exchange of ideas, and feedback to Zipcar.

4. As the CEO of Zipcar, what would you do to sustain a competitive advantage?

Ans: Continue to innovate through the use of IT and by listening to customer feedback on the social network sites. Look for strategic partnerships with suppliers or other potential providers of services that Zipcar could leverage to improve its service or add extra value.

Additional Mini Case: K-Mart* K-Mart Corporation operated one of the more successful retail operations in the discount industry. Competing with companies like Wal-Mart, Target Stores, and many others, K-

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Mart continued to grow and provide substantial returns to investors. The company has over 2,150 K-Mart, Big K-Mart and Super K-Mart stores in all 50 states in the U.S., and in Puerto Rico, Guam, and the U.S. Virgin Islands. To support operations, K-Mart developed sophisticated database marketing capabilities to track 2 billion transactions annually from more than 85 million households, in order to reach customers using targeted direct mail and eventually e-mail.

The company started as a five-and-dime store in downtown Detroit in 1899. Everything in the original store cost either 5 or 10 cents, and low prices appealed to customers.

Founder S. S. Kresge’s success fueled expansion to 85 stores by 1912. In 1953, a new era of retailing began expanding the variety offered by Kresge stores to other goods, such as wrapping papers, ribbons, and housedresses also at discount prices. Success continued, and in 1976 the S. S. Kresge Company opened 271 K-Mart stores. In 1977, K-Mart Corporation became the official company name, and by 1987 the company had sold all the remaining Kresge stores to concentrate only on discount merchandising. During the 1980s and 1990s, K-Mart acquired several companies including Walden Book Company, Builders Square (a home improvement retailer), Pay Less Drugstores, PACE Membership Warehouse, The Sports Authority (a sporting goods retailer), Borders (a bookstore chain), and 22 percent interest in Office Max (an office supply superstore chain). By the mid1990s, management refocused on the core discount store business and by 1997 all of these acquisitions had been sold or divested.

An aggressive expansion plan, followed by declining profitability, resulted in a full restructuring in the mid-1990s. Every task of the turnaround was based on the mission statement: Kmart will become the discount store of choice for middle-income families with children by satisfying their routine and seasonal shopping needs as well as or better than the competition.

The stores have been redesigned to offer large assortments, big floor plans, and significantly improved shopping experiences. The new stores focused on selling name brand consumables, children’s clothes, and home fashions. Organizational systems were also realigned with the mission statement. Associates are taught to put the customer first, including doing whatever is necessary to provide customer satisfaction. One element is the K-Mart Price Guarantee, empowering employees to match competitors price. Another was the redesign of return and exchange policies make it easy for customers to bring unwanted merchandise back. And the company also focused on enhancing the company website to not only include company information and press releases, but to support secure online shopping and specialty sites such as wellness tips from a certified fitness professional.

A key initiative for K-Mart is to continually improve the in-stock position. As recently as late 1994, Kmart stores were in stock less than 90 percent of the time, creating significant customer dissatisfaction. The target, and benchmark for all competitors in the industry, was an in-stock position of at least 98%. One avenue to achieve this objective was the

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Seasonal Merchandise Management System (SMMS). Holiday merchandise can exceed $2 billion. Running out of an item at that time of year severely impacts not only the immediate bottom line, but the company’s reputation and the customer satisfaction in general. Customers who experience a stock-out on a item for a Christmas gift typically go to a competitor.

SMMS provides buyers and planners at headquarters with daily sales and inventory data.

That means seasonal goods can be managed differently. Inventory and pricing decisions can be based on sales performance at the individual stores, rather than on projected trends system wide. Managers can maximize profits by keeping tabs on stores where items are selling well, and can build specific strategies for stores who need to move inventories before the season ends. Before SMMS, seasonal merchandise was managed at the corporate level, mandating chainwide markdowns when sales failed to meet projections.

There was no consideration of local demand, and therefore no ability to customize sales plans for each store. Often stores where items were selling well ran out of merchandise when prices were discounted, leading to significant stock-out situations at peak season.

The system uploads sales and inventory data from each store overnight. In the morning, buyers and planners at corporate headquarters, and regional merchandising coordinators, can quickly assess the status of seasonal merchandise. Buyers and planners can view sales performance at a variety of levels such as item, department, and store or region. In addition, the system lets managers take action to meet sales targets. Items are managed end-to-end, from the decision to buy it to the stock in the store, until it is sold. That means customers experience better shopping experiences and managers can insure that their individual stores are able to meet demand at their local level.

Discussion Questions 1.

What is the strategic advantage afforded K-Mart from the SMMS system? How does that system help it compete against its competition?

2.

How long is the window of opportunity for K-Mart for an advantage such as that given by SMMS? That is, when do you think competitors will follow suit and implement their own SMMS? 3.

SMMS is not an Internet application. Why not? Is there any significant advantage to be gained from putting it on the Web? 4.

What other types of competitive advantages might K-Mart executives look for from IS in general? * Adapted from Megan Santosus, “Kmart Corp.: A Seasoned Performer.” CIO Magazine, January 15, 1995; CIO Magazine website, www.cio.com/archive/011595_mart_print.html; and K-Mart press releases, October 14, 1999.

This case discusses the seasonal merchandise management system of Kmart. This seemed like an interesting case for discussing strategic advantages with information resources because, while it is not the primary information system for Kmart, it is a critical one for both cost-based advantage as well as value-creation advantage.

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1. What is the strategic advantage afforded Kmart from the SMMS system? How does that system help them compete against their competition?

Ans: For a relatively low cost, SMMS gives Kmart executives a clear picture of how their business is performing in real time during the peak season. They can move merchandise around with knowledge that it is going to sell rather than by guessing if it will sell. And they can enjoy the higher profit margins on merchandise if they can sell it during, rather than after, the season.

2. How long is the window of opportunity for Kmart for an advantage such as that given

by SMMS? That is, when do you think competitors will follow suit and implement their own SMMS? Ans: I expect their competition already has a similar system. If they don't I would expect them to have one soon. If seasonal merchandise is as high a percent of the annual business as it is for Kmart, managing that merchandise must be a high priority. But the discussion of this question can be refocused on another type of business...ask the students if they can think of an example where the window of opportunity is very long. That is, what would be an example of a use of information systems where the competition might take years, if ever, to catch up?

3. SMMS is not an Internet application. Why not? Is there any significant advantage to be gained from putting it on the Web? Ans: Kmart is very centralized, and using the web might be inconsistent with that organizational strategy. But if SMMS was a web application, we would expect the management to also implement a decentralized way of managing inventory. Local store managers, for example, could manage their own inventories much more closely, and order their own merchandise based on what their store would sell. Of course, managers would have to be trained differently to do this (again a change in the organizational strategy).

4. What other types of competitive advantages might Kmart executives look for from their information systems in general?

Ans: In general, there are probably lots of options for Kmart managers to increase/gain advantages from information systems. For example, Kmart managers might look at using their information systems to get a better handle on their specific customers, keeping information on customers, sending them personalized flyers/e-mails etc. They would want to look for ways to both "lock customers in" and to provide services that differentiate them. But being a low cost provider makes it necessary to identify ways to use IT to continually drive costs down, and SMMS is one way to do that.

Supplemental Readings

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Cases: UCB: Managing Information for Globalization and Innovation (A) by F. Warren McFarlan, & DeLacey, B. Harvard Business School Publishing; 02/12/2003; (47 pages) This case presents a complex total MIS strategy case for a $3 billion European pharmaceutical/chemicals company based in Brussels. It covers corporate strategy alignment of IT portfolio, Carnival Cruise Lines; by Applegate, L.M. & Robert J Kwortnik,. Gabriele Piccoli,; Harvard Business School Publishing; 07/07/2005; (33 pages) Highlights the potential value of customer data and the choices and challenges the firm faces when attempting to capture this value. Carnival collects a significant amount of individual-level behavioral and demographic customer data. Senior management must now decide how to leverage such a wealth of data.

Information Systems at FirstCaribbean: Choosing a Standard Operating Environment by Beaubien L & S.Mahon Ivey School of Business; 3/22/2005; (12 pages) The Canadian Imperial Bank of Commerce and Barclays Bank PLC were in advanced negotiations regarding the potential merger of their respective retail, corporate and offshore banking operations in the Caribbean. Currently there are four systems inoperation in the region. All are carry-overs from the pre-merger operation of the bank.

Each of the systems has different pros and cons consisting of degree of fit with the organization strategy, likely impact on organizational culture, and functionality.

Kemps LLC: Introducing Time-Driven ABC by Robert S Kaplan,.; Harvard Business School Publishing; 08/03/2005; (10 pages) Managers use the information to enhance process efficiencies, negotiate new terms with customers, and attempt to win new business. The company now faces some crucial decisions about how to forge new relationships with key customers Change Management of People & Technology in an ERP Implementation by Edwards, H. E.; Humphries, L. P. Idea Group Publishing; 2005 Eighteen months after adopting an enterprise resource planning (ERP) system the chief executive officer wanted an investigation into the performance of the system. The results of the investigation reported here reveal problems with the acquisition and implementation process.

Continental Airlines: Continental Airlines: Outsourcing IT to Support Business Transformation, by Keri Pearlson and Neils Christensen, 1/97 (on website)

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This case nicely sets up the issues of using information technology to support customer service and sales initiatives. It would be a good case to bridge several chapters in the text. As a strategic use of IT case, the discussion would center around how Continental Airlines is setting up their IT systems to assist them in their business objectives, and how critical IT is to help them achieve and maintain their competitive advantage.

Federal Express: The Role Of Information Technology In Customer Service by David Paul and Keri Pearlson, available directly from the authors (kpearlson@kppartners.com), 1995.

This case nicely outlines the use of IT before the Internet. FedEx's strategic intent was to build barriers to entry and switching costs by placing PCs linked to FedEx's system on the desktop of their best customers. This case, while dated, is useful to discuss how advantages are achieved with IT, and how desk real estate was used as a competitive tool.

The discussion can be extended to the Internet with demonstrations of FedEx's web site, highlighting the sustainability of IT-based competitive advantages.

Frito-Lay, Inc.: A Strategic Transition, 1980-1986, by L. Applegate, Harvard Business School Publishing Case 194-107 1996 Describes the environmental, organizational, and information technology context in the late 1970s that led to the development of the initial vision for change and the actions taken to implement that vision. The case ends with the abrupt departure of the CEO as profits plunge. Students have an opportunity to explore what went wrong and to define an action plan that addresses both the short-term and long-term challenges faced by the incoming CEO Otisline by W. McFarlan and D. Stoddard, Harvard Business School Publishing case 1 86304, 7/15/90 Describes the company's use of information technology to strengthen its position in the elevator sales and service market. Also demonstrates how information technology can be used to better manage and control a large geographically dispersed service organization.

Data Administration in Citibank Brazil (Abridged), by Shoshana Zuboff ; Gloria Schuck Harvard Business School Publishing case number 486081 10/27/86 Describes Citibank Brazil's development of a new generation of information technology designed to support the new corporate business strategy that emphasizes product innovation. There are high expectations for the strategic value of the technology and speculation regarding its organizational and human resource implications. However, the implementation process falls short of fulfilling these expectations. The case invites an analysis of why this was and what organizational innovations are required to fulfill the technology's strategic promise. While it's old, the case discussion can be extended to discuss newer technologies and their role in organizations such as Citibank Brazil.

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Developing Inter-Organizational Trust in Busines-to-Business E-Commerce Participation – Case Studies in the Automotive Industry, P. Ratnasingam, Idea Publishing Group Case, 11 pages, IT 5610 (setting: Australia) The case study describes the process involved in an EDI implementation in the Australian automotive industry. Buyer-supplier interactions during EDI implementation and its impact on technical, political, behavioral and trading partner trust aspects are discussed in this case study between Ford Australia (manufacturer) and Patents, Brakes and Replacements Limited 9their first tier supplier).

Analyzing the Evolution of End User Information Technology Performance: A Longitudinal Study of a County Budget Office, J. Sacco and D. Hackler, Idea Publishing Group Case, 14 pages, IT 5611 (scope: U.S.) This case study examines end user information technology evolution from microcomputers to World Wide Web applications in a large county budget office over a fifteen-year period. The study evaluations end user information technology performance and comments on organizational, technical and social issues that accompany information technology implementation.

Risk in Partnerships Involving Information Systems Development: Lessons From a British National Health Service Hospital Trust, G. Harindranath, J.A.A. Sillince, and R. Holloway, Idea Publishing Group Case, 22 pages, IT 5619 (setting: UK) This case study presents a UK-based project that promised new healthcare service delivery by redesigning healthcare procedures and developing sophisticated new information systems through a unique partnership between public and private sectors.

The case study concentrates on one of the more important determinants of success or failure of such partnerships involved in information systems development, i.e., ‘risk’.

Success and Failure in building Electronic Infrastructure in the Air Cargo Industry: A Comparison of the Netherlands and Hong Kong SAR, E. Christiaanse and J. Damsgaard, Idea Publishing Group Case, 13 pages, IT 5645 (setting: worldwide) This case describes the genesis and evolution of two IOSs in the air cargo community and provides information that lets students analyze what led one to be a success and one ot be a failure. The two cases are from the Netherlands and Hong Kong SAR. Success in Business-to-Business E-Commerce: Cisco New Zealand’s Experience, P. Ratnasingam, Idea Publishing Group Case, 19 pages, IT 5649 (setting: New Zealand) The case study about Cisco New Zealand permits students to learn about the factors that influence the successful trading partner relationships in business-to-business e-commerce participation among other pertinent issues.

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The Role of Virtual Organizations in Post-Graduate Education in Egypt – The Case of the Regional IT Institute, S. Kamel, Idea Publishing Group Case, 13 pages, IT 5653 (setting: Egypt) This case reports on the experience of Egypt’s Regional IT Institute in the field of education and training. The Regional It Institute was established in 1992 targeting the formulation of partnerships and strategic alliances to jointly deliver degree (academic) and non-degree (executive) programs for the local community capitalizing on the enabled processes and techniques of virtual organizations.

Other Cases: - Intertainer Asia (A): Programming and Distributing Hollywood Movies On-line in the Asia Pacific Countries, Olaf Rieck, Shirley Tan, 1998-2003, www.asiacase.com, The Asian Business Case Centre, NTU #ABCC-2003-015 , 17 pages (setting: Singapore) - Building Information Capabilities and Websales at Siam City Cement, Marchand, D. A. Chung, R, The IMD case collection at the ECCH # 302-125-1, 17 pages, 2002, www.asiacase.com (setting: Thailand) - Vicinity Corp.: Turning Web Traffic into Store Traffic (HBS Case 602-031, Nov. 30, 2001) - Tesco PLC (HBS case 503-036, March 6, 2003) - PassAct, Inc. (HBS Case 602-026, March 13, 2003) - CISCO Systems: Building leading Internet Capabilities (HBS Case 301-133, Dec. 17, 2001, Setting: Silicon Valley, CA) - Extending and Electronic Trade Network to Sustain Competitive Advantage (UHK case HKU157, Nov. 9, 2001, setting: Hong Kong) - Telewest Communications, PLC (HBS case 802-011, Oct. 15, 2002, setting: UK) - Japan Net Bank: Japan's First Internet Only Bank (UHK case HKU178, Jan. 24, 2002, Setting: Japan).

- iSteelAsia--2001 (HBS case 302-074, Dec. 17, 2001, setting: Asia) - PSA: The World's Port of Call (HBS case 802-003, Jul. 9, 2002, Setting: Singapore) - Wyndham International: Fostering High Touch with High Tech (HBS case 803-902, Feb. 11, 2003, setting: global) - Business Innovation: The MTR's eInstant Bonus Project (UHK case HKU201, July 26, 2002, setting: Asia) - Monster.com: Success beyond the bubble (HBS case 802-024, Jan. 7, 2002, setting: global) - DeRemate.com: Building a Latin American Internet Auction Site (HBS case 702-454, Jan 24, 2002, Setting: Latin America) - Webvan (HBS case 602-037, Mar 13, 2003) - Custom Made Apparel and Individualized Service at Lands' End, Communications of AIS, January 2003, Volume 11 Article 3 http://cais.aisnet.org/articles/default.asp?vol=11&art=3 (setting: North America) - Sherwin-Williams' Data Mart Strategy: Creating Intelligence Across the Supply Chain, Communications of AIS, May, 2001, Volume 5 Article 9 http://cais.aisnet.org/articles/default.asp?vol=5&art=9 (setting: USA)

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End-User computing at BRECI: The Ordeals of a One-Person IS Department,” K. Moffitt. Idea Publishing Group. IT5563, 11 pages (setting: US)

Readings/Articles: Gary, Loren “Network vs. Network: The New Arena of Competition” Supply Chain Strategy Harvard Business Publishing 2005 As companies increasingly build value through often far-reaching relationships with other firms--through alliances, outsourcing, deep supplier relationships, and other partnerships-more and more leaders are facing a new reality: to succeed, they and their partners must address the market as one competitive unit.

Anthony, Scott D “Open-Minded Innovation” Harvard Business Review 82(3) 2004 Ring, P.S., and Van de Ven, A.H. "Developmental Processes of Cooperative Interorganizational Relationships," Academy of Management Review (19:1) 1994, pp 90-118.

This article describes the process organizations go through to develop interorganizational relationships. It looks at both the individual and the organizational level.

Martin J. Garvey “IT helps utilities stay competitive” Information Week. (803): 375383. 2000 Sep 11.

For years, the specter of deregulation hung over the utility industry, threatening to bring major changes to what traditionally had been a slow-moving market. Now that the specter has become reality, utilities are using IT to reduce the trauma of deregulation, compete more effectively and efficiently, improve customer service, and boost profits.

Books: Carr N.G. Does IT Matter? Information Technology and the Corrosion of Competitive Advantage MA: Harvard Business School Press, 2002.

Ward, J. & Griffiths P. M. Strategic Planning for Information Systems (Wiley Information Systems Series) NY: Wiley & Sons 1996 This book takes a clear, practical and comprehensive look at the impact of information systems (IS) on business performance and its contribution to the strategic development of organizations. It provides the tools, techniques, and management framework for identifying and implementing the opportunities offered and shows how IS/IT helps organizations achieve a competitive advantage.

Boar, B.H. Strategic Thinking for Information Technology NY: Wiley and Sons, 1996 This book shows managers how to apply strategic thinking about information technology to their business process to create and maintain aggressive, competitive, and productive computer systems. A special chapter reviews forty strategic ideas and shows IT managers how to directly apply them to their system

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Evans, P. & Wurster, T. Blown to Bits. MA: Harvard Business School Press, 2000.

This book examines how the new economy is "deconstructing" industries such as newspapers, auto retailing, and banking while creating new opportunities for others. They write that the "glue that holds today's value chains and supply chains together" is melting, and that even "the most stable of industries, the most focused of business models and the strongest of brands can be blown to bits by new information technology (this is also a good book for the e-business chapter).

Websites: www.brint.com This website contains lots of interesting links to articles related to strategic use of IT. Of particular interest should be the e-business articles, and the reengineering articles, both of which discuss business strategy and IT. www.cio.com CIO and CIO.com are published by CXO Media Inc. to meet the needs of CIOs (Chief Information Officers) and other information executives. CIO is read by more than 140,000 CIOs and senior executives who oversee annual IT budgets in excess of $175 million. CIO.com serves over 12 million pages annually. www.zipcar.com The ZIPCAR web site shows how they function, rates, etc. Can be a good tool when discussing the case study.

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Chapter 3: Organizational Impacts of Information Systems Use Chapter Overview This chapter is about the organizational impacts of using information systems. It will set up, and in many ways complement, the following chapter, Chapter 4, IT and the Design of Work. Whereas this chapter is about the organizational level impacts, the next chapter is about the individual worker level impacts. Many students find these discussions complementary, and in some ways they overlap. But we felt it was important to present them as two different chapters to make sure the key points from both perspectives were not lost.

Key Points in Chapter The opening scenario, about Cognizant Technology Solutions, highlights how an outsourcing company had to change its model of managing its employees across the globe, particularly in India. Managers were moved to customer locations while the software engineers stayed in their original location. This lead to new headaches, but Cognizant learned that some of the teams were working, and they moved to a new structure that enabled the company to adopt a matrix structure that utilized the best of both styles of management.

An older, but classic example is Mrs. Fields cookies. Originally that was the lead case for this text, because it is such a simple business and because it so clearly illustrates how organizations are designed differently if they consider IT as a key resource in the design.

But many students complained that that case was too old so it is included here as a secondary case. Interested instructors are referred to the HBS case study on Mrs. Fields Cookies, (see case bibliography under supplemental materials for this chapter). What is so interesting about this case is that they actually built an information system taking into account the type of people they would be able to hire. That meant giving the computer a series of applications that supplemented the type of work their staff would do. They want the staff to sell cookies, so the computer did lots of things like figure out the baking schedule, keep track of inventory, report basic business information to headquarters, etc.

That frees up their staff to sell, which Mrs. Fields management felt was something people did much better than computers. Interesting to consider how the cookie business might look today with the Internet...what functions would be appropriate for that medium?

This chapter builds on the concepts in Chapter 1, particularly those around organizational design and strategy. The Business Diamond reminds students that there are several components to be considered when designing the organization, and the Cash, Eccles, Nohria and Nolan table (Figure 3.1) suggests how IT affects the design specifically. This table builds upon the discussion of managerial levers in Chapter 1.

The middle part of this chapter reviews some specific instances of how IT allows organizations to be structured differently. We present a brief overview of 4 classic

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organization structures: hierarchical, flat, matrixed and networked. These can be embellished in many ways with the use of IT. The resulting organization is often one that feels flat (because everyone can talk with anyone in the organization, and information is easily passed between organizational entities and workers) but has some semblance of structure. Further, IT allows a more easily reconfiguration of organization structures, because the history of the company is embedded in the IT, rather than in file cabinets or other paper artifacts. Reorganization is a completely different activity for an IT savvy company versus at "traditional company".

Today, most organizations are a hybrid of the traditional structures. Students will relate to the networked organization, which is well described in the HBR article by Applegate, Cash and Mills (HBR Nov-Dec 1988). Perhaps more interesting is an extension of networked organization, the T-form organization, described by Lucas (in the book, TForm Organization, 1996). That organizational design is technology-based, and suggests designs similar to many we see today: easy access to information, electronicallycoordinated work, larger span of control, electronically-based business processes, etc.

Informal networks are then discussed and their importance on management. Managers must be aware and actively seek to manage these informal networks. Some organizations are clearly able to utilize informal networks – like communities of practice – to get feedback, employee support, and learning groups.

IT's affect on management control is then discussed. Managers are able to use IT as a means of monitoring, evaluating, providing feedback, compensating and rewarding workers. An interesting discussion here might stem around the bounds of "what is possible" versus "what should be done". How can IT be used to monitor? When it is appropriate to deliver feedback via e-mail? What types of deliverables are appropriate/inappropriate for evaluation over the computer? When is it appropriate to monitor employees?

Then the text discusses how planning and IT interact. There are three ways in which IT can play a role in planning. Data can be provided to help in developing a strategic plan; to automate the process and can be the focus of the strategic initiative. Monitoring work can take on a completely new meaning with the use of information technologies. There are lots of software programs on the market that make it possible for companies to monitor exactly what their employees are doing. What web sites they visit, what keys they press on their keyboards, etc. Companies need to understand what is appropriate to monitor and what monitoring techniques may be perceived as overly intrusive and decrease employee morale.

Performance measurement and incentives and rewards are another part of management control systems. Managers can use this data to determine rewards, but they have to be careful of not over analyzing data to the point that decisions become bogged down in a glut of data. Some organizations use the 360 degree method of evaluation which can be useful when getting a better and clearer picture from all those that interact with the employee. Students need to clearly understand the importance of keeping evaluation data

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secret. Incentives and rewards need to be fairly and carefully created. Employees need to be recognized for their hard work, and rewarded for a job well done. Technology can support this and managers need to understand how this can be done.

New to this edition is the section on information technology and culture. With the globalization of many businesses this is an important and timely topic. Students need to understand that they cannot apply the same strategies across the board in an organization that may be comprised of many different cultures and cultural norms. What is acceptable in one culture may be extremely offensive in another. Make sure to spend adequate time discussing this topic and look for ways for students to share what they have seen in their particular environments (taking care not to demean other cultures). Figure 3.5 gives a summary of national cultural dimensions. Take time to go through and to discuss these with your class.

The food for thought section in this chapter is about immediately responsive organizations. This refers to how the web has allowed companies to speed up the way they operate. The section then talks about how to accomplish the goal of instant “customization”, an organization must master five disciplines: Instant value alignment – ready to provide exactly what the customer wants; Instant learning – building learning directly into the company’s tasks and processes; Instant involvement – using IT to ensure that everyone is ready to deliver products, services, etc; Instant adaptation – creating the culture to support this; Instant execution –using IT to cut cycle times to appear instant to the customer. It is important that the student understand that all organizations must embrace the “zero time” philosophy. In order to remain competitive, organizations must be willing to meet the dynamic needs of their customers.

Illustrative Answers to Discussion Questions Below are some sample answers, but expect creative answers from your students that are not represented here (please send us some of your best answers so we can share them with other instructors): 1. How might IT change a manager's job?

Ans: Managers traditionally are information managers. They get information from those working for them, they massage it, format it, add interpretations, etc, and pass it upwards in an organization. Likewise they take information from the top managers and pass it downwards. All of this can change with IT. The information system itself will handle the information sharing. Interpretation is still needed, and managers might do some of that. But information directly from the source where it is created, will always be more valuable than some passed through several layers of people who might distort, change or even lose some of it. Other managerial tasks will change, too. Managing people who you don't see every day is different than managing people sitting at desks near you.

2. Is monitoring an employee's work on a computer a desirable or undesirable activity from a manager's perspective? From the employees' perspective? Defend your position?

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Ans: From the managers point of view, computer monitoring is a mixed blessing. It is desirable because it is easy. Work done on the computer is accessible, and if it involves repetitive tasks (such as filling in forms) then it is easily measurable. An example is the traditional call center, where agents answer calls from customers. The duration of the call, the number of screens the agent had to use, the number of handoffs of the customer to other agents, etc are all easily measurable. However the numbers don't tell the whole story (not surprising). The quality of the interaction, as measured by how nice the agent was to the customer, how professional, how satisfied the customer was, etc are not easily measurable. So management can easily fall into the trap of measuring those things that are easily measurable, at the expense of measuring things that are important.

Regarding the employees, monitoring work done on a computer is not much different than monitoring any output. Should that monitoring take place covertly, that is without informing employees, then it becomes a different issue from an ethical perspective and in terms of increasing employee stress. Workers tend to work in a way that maximizes what they are monitored and rewarded for. If managers are monitoring them for how quickly they get work done on the computer, managers can expect workers to do things as quickly as possible, even if it means sacrificing quality.

3. Consider the brief description of the zero time organization. What is an example of a control system that would be critical to manage for success in the zero time organization?

Why? Ans: It would be critical to manage just about all the control systems to insure success of a zero time organization, so any example is probably good if it is supported well. For example, it would be important to monitor the people, processes and technology to insure that they are all able to respond instantly. It would be important to create evaluation criteria and feedback mechanisms to insure the success of the people when they respond instantly.

4. Mary Kay, Inc., sells facial skin care products and cosmetics around the globe. The business model is to provide one-on-one, highly personalized service. More than 500,000 Independent Beauty Consultants (IBCs) sell in 29 markets worldwide. Each IBC runs his or her own business by developing a client base, and then providing services and products for sale to those clients. Recently the IBCs were offered support through an ecommerce system with two major components: mymk.com and Mary Kay InTouch.

Mymk.com allows IBCs to create instant online sites where customers can shop anytime directly with their personal IBC. Mary Kay InTouch streamlines the ordering process by automatically calculating discounts, detecting promotion eligibility, allowing the IBCs to access up-to-date product catalogs, and providing a faster way to transact business with the company.16 a. How would organizational strategy need to change to respond to Mary Kay’s new business strategy?

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Ans: Organizational changes would need to be consistent with a revised organizational strategy. If no organizational changes were made, we’d expect the systems to be rejected by many of the workers. Managers would expect IBCs to use the systems, but IBCs are independent agents, so they would most likely delay in using the systems unless motivated to do otherwise. Thus the reward and compensation systems would need to be adjusted to accommodate the new system. And unless business processes were also changed to accommodate the new systems, we would expect problems to occur that make it difficult for the new systems to be used (information entered into the system might be just printed out, if the processes are expecting paper-based forms rather than screen shots).

You might also want to explore business process that would have to change to accommodate the new systems. The paper-based ordering system would have to be removed, if managers wanted IBCs to only use the new system, since running the older system discourages IBCs from using the new system. Fulfillment and reconciliation processes would be different with the use of mymk.com, since the order information was entered earlier into the system. If customers of IBCs place orders automatically, IBCs lose control over what is ordered, and will have to build new ways to keep track of their sales. If fulfillment processes are done using paper pick lists, then the process either needs to be redesigned to use electronic lists (shown on the screen or such) or to print out paper lists.

b. What changes would you suggest Mary Kay, Inc. managers make in their management systems in order to realize the intended benefits of the new systems? Specifically, what types of changes would you expect to make in the evaluation systems, the reward systems, and the feedback systems?

Ans: Evaluation systems would include a component of how well the systems were used by the IBCs. There would need to be an evaluation of the frequency and effectiveness of the use of the systems. That may translate into the reward systems, where IBCs are compensated for their use of the systems (direct bonuses, etc) or where they find that using the systems gives them advantages they didn’t get otherwise (faster orders, better book keeping, etc). IBCs might need incentive packages to encourage them to buy computers if they don’t have one already (such as discounts from a preferred vendor ).

Support processes would be needed to help IBCs learn how to use the systems effectively, and to help them identify new ways to do their business better. The results of the evaluation process would have to be used to provide feedback to the employees.

Possibly, in discussing an employees performance, it may be helpful to share with them average performance levels of other employees.

Further Discussion Questions 1. How has the progression of communication technology affected the business environment? For example, discuss how the evolution of standard business

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communications (from telephone, to fax, to email) has altered the process of doing business? How are capabilities and costs affected?

[NOTE: This question was suggested in the introduction to get students thinking about information technology in terms other than the Internet. The discussion surrounding this question should be more in-depth and approach the differences in these technological “staples” from different eras of IT from a more strategic mindset (building on chapters 13)].

2. Business and commerce are activities much older than the microchip (or the phone for that matter). In a similar vein as the previous question, imagine companies in the 1600s through the 1800s and how information as managed in these instances. The East India Company and the Hudson’s Bay Company (which still exists today) were some of the biggest companies of their day. Imagine how simple business tasks such as logistics and employee transfer (from one country to another) might have been accomplished. What might this tell us about how companies use IT today? What lessons can we draw from this knowledge?

Case Study 3-1: US Air and America West Merger Case This case study allows the students to explore issues related to the merger of two companies that basically offer the same services, but have two very different organizational structures and cultures. The merger was initially seen as a success but proved to be more complex than anticipated by the management at America West and US Airways.

1. How did different organizational structures create problems in the merger? What steps did the new US Airways take to reduce these problems?

Ans: America West had a younger, more entrepreneurial culture and a very different approach to management, and operations. This lead to a host of problems from the merger of the two very different IT infrastructures, and management approaches. One was focused on insourcing, while the other excelled at outsourcing. US Airways set specific metrics for each workgroup and centralized some key operational decision making.

2. When two companies merge, what steps should be taken to combine organizational structures and processes?

Ans: The companies should carefully examine each ones structure and processes and evaluate them in light of the culture of each. If one company has a very bureaucratic management structure and the other does not, steps should be taken to “re-educate” employees regarding the direction of the company and how, for example, the bureaucratic structure will be changed (lots of possibilities here for a variety of answers).

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3. How did the differences in culture create problems for the new US Airways? What, if anything, could the executives have done anything to lessen these problems?

Ans: It made it extremely difficult for the two companies to integrate processes and systems. Since one company was entrepreneurial and the other bureaucratic in nature, there was no easy way to change the culture over night. Management could have examined the structures prior to and during the merger and taken appropriate steps to prepare the employees for the merger and the change in focus, while maintaining a customer focus throughout (there could be lots of brainstorming here – take time to discuss this and/or assign the questions to groups in the class and then have them report to the entire class their findings and recommendations).

4. If you were a consultant brought in to advise on the merger, what advice would you have given to CEO Parker?

Ans: Don’t be in a rush to merge the systems. Let the airlines function in parallel until careful study had been done on the existing systems, culture, and management structure and then determine the best path to take, all the while keeping open lines of communication with the employees of the new merged company. Since America West had a more employee friendly environment, I would suggest that he capitalize on this fact to encourage change from the US Airways employees. (Look for lots of different answers to this question and seek to create an active and dynamic discussion around this question.)

Minicase 3-2: The FBI The FBI has always been an information intensive organization, but as part of the US Federal Government, IT spending is managed by an extensive budgeting process that can mean funds are not available, or insufficient for the necessary expenditures. There is a webpage on the IT at the FBI (www.fbi.gov/hq/ocio/ocio_home.htm). Recently, the FBI, and it’s history of IT leadership, has been discussed extensively in the popular press.

The interested instructor need only do a “google search” on “FBI Information Technology” or “FBI IT” to find several.

This is a case about the virtual case file system, which has caused FBI IT leaders many problems.

Sample Answers to Discussion Questions: 1.What do you think were the real reasons why the VCF system failed?

Ans: Some critics think it failed because there was a misalignment between ‘business goals’ and IT. Others, such as John Ashcroft, suggest it was hurt by deficient IT funding The case suggests a misalignment between the organization structure and culture and IT.

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But astute students may suggest other ‘real reasons’ such as an inherent lack of understanding over what the secretive FBI needs and what Congress will give it.

2. What were the points of alignment and misalignment between the Information Systems Strategy and the FBI organization?

Ans:. While there was some alignment at the top (clearly there was understanding that for the ‘business’ to succeed, they needed to spend significant ($170million) on a new case management system.) The case describes a problem with culture (everything has to be kept a secret) and org structure (a decentralized amalgam of 56 field offices) and the misalignment with the goals of the IT project (sharing information in a centralized way).

3. What do you think of the CIO’s final comment about how to change attitudes? Do you think it will work? Why or why not?

Ans: The final comment by the CIO suggests that the way to change attitudes is to let the agents see that technology can actually enhance their productivity. Some students will agree that showing them the benefits of the technology will change their attitudes about using the technology. Other students may suggest that the technology won’t change the attitudes, other organizational interventions are needed (for example, directives from the FBI director, examples of successful information sharing or culture change from the top as a way to show that it’s not only acceptable but expected, changing the incentive system to reward sharing, etc).

4. If you were the CIO, what would you do to help the FBI modernize and make better use of information technology?

Ans: As the CIO, you should be a member of the senior executive team of the organization. At least, you should have significant influence with the FBI Director. In that role, your job is more broad than just introducing new technologies. To help the FBI modernize, as the CIO, you would have to dive into organizational issues that are walls keeping modernizing techniques from working. You would have to suggest how to break down these walls (by perhaps helping redesign the organizational systems such as the compensation system, the incentive systems, the hiring process, etc) and the culture to make them more supportive of the goal of modernizing and change.

Supplemental Readings Cases: Offshoring at Global Information Systems, Inc. by William E., Fruhan, Jr.; Harvard Business School Publishing; 04/23/2004; (19 pages) This case explores the topic of offshoring high-tech jobs several perspectives. The issues presented include determining the stock price consequences of offshoring, examining the economic consequences of the offshore job to both the transferring and receiving

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countries, considering the competitive consequences of not offshoring, and thinking through the challenge of investing in a career that is vulnerable to future offshoring.

R&D Management at Universal Luxury Group: Perfumes and Cosmetics Division

by Manuel Sosa, INSEAD; 07/2005; (5 pages) This case describes the challenges faced by the cosmetics division of a large corporation when determining the set of products to develop in 2004. The key players involved are the centralized R&D center and the decentralized brands. The case provides data to estimate the utilization rate of the R&D center.

Sun Microsystems, Inc: Web Services Strategy by Eisenmann, T. R., Suarez, F. F. Harvard Business School Publishing. 2005 (20 pages) Microsoft and IBM have excluded Sun Microsystems from the board of the Web Services Interoperability Organization (WS-I), an industry consortium that will shape the evolution of Web services standards. Sun managers must decide whether to join WS-I as a contributing member--a less influential role that lacks the veto and agenda-setting powers of a board position. Sun has recruited leading IT vendors--including several WS-I board members--to create technologies that compete with proposed standards jointly developed by Microsoft and IBM. Technology Strategy at Banco Comercial Portugues by Soumitra Dutta, Paul Verdin & Howe, James; INSEAD; 05/2005; (24 pages) This case describes how Banco Comercial Portugues (BCP) has grown to become one of Portugal's largest and Europe's most admired banks by leveraging its technology excellence. BCP's success has been driven by the implementation of an effective strategy of technology-enabled innovations. BCP is also unique amongst most banks in having developed a core competence in integrating banking systems as it has merged with both small and large banks over the years.

Volkswagen of America: Managing IT Priorities by Austin, R. D., Ritchie, W. & Garrett, G. Harvard Business School Publishing. 2005 (19 pages) Describes the efforts of Volkswagen of America, the U.S. subsidiary of Volkswagen AG, to arrive at a process for setting IT funding priorities so that they align with business priorities and the company's overall strategy.

Connor Formed Metal Products by Linda. Applegate, D. Stoddard, and M. Conrad.

HBS Case 193003 1994 Connor Formed Metal Products was a small, privately owned manufacturer of custom metal springs and stampings. Since becoming president in 1984, Bob Sloss had implemented many changes to the company's organizational structure, management

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control systems, and information systems. In particular, he introduced a computer system in one plant to track product jobs through the manufacturing process. Employees at every function and level of the company could access information about a particular customer or job. In 1990, Sloss wondered whether to roll out this system in the company's four other plants.

Mrs. Fields, Inc. --1977-87 by Linda Applegate and Keri Pearlson, Product #: 194064, 16 pages, Publication Date: 2/21/95 Describes Mrs. Fields company and leveraged MIS resources. Objectives include IT architecture, management control, and strategy.

Mrs. Fields 1988-92 by Linda Applegate and Keri Pearlson, Product Number 194065, 12 pages, Publication Date: 11/11/94 Continues story of Mrs. Fields. Explores challenges of growth. Details delegation decision.

Verifone: The Transaction Automation Company by Donna B. Stoddard ; Richard L. Nolan ; Hossam Galal , Harvard Business Case Study number 195088 , 7/12/95 This case is the original case on Verifone, a company created from the beginning as a virtual organization with employees all over the world working as a single, guided entity.

Case Study of the St. Paul companies Virtual Ofice for Risk Control Division – N. Johnson, Idea Publishing Group Case, 11 pages, IT 5597 (scope: U.S.) This case reports the success of St. Paul Companies with their new virtual office (VO) working environment for their US distributed construction risk control and commercial risk control employees of the past six years.

IT Help Desk Implementation: The Case of an International Airline – S. Clarke and A. Greaves, Idea Publishing Group Case, 19 pages, IT 5614 (scope: worldwide) This case study concerns the practical implementation of IT help desk management within an international airline, and illustrates the issues raised by over concentration on technical factors. An alternative approach is proposed ad applied retrospectively to the case, based on constructs drawn form social theory.

Systems Development by Virtual Project Teams: A Comparative Study of Four Cases – D. Croasdell, A. Fox and S. Sarker, Idea Publishing Group Case, 17 pages, IT 5682 (scope: worldwide) This case study provides a comparative analysis of four cross-cultural virtual project teams as they analyze design and develop information systems. Specifically examining the issues organizations face in trying to understand what factors are determinants of

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success with respect to virtual teams. Additionally the case examines the factors causing managers to reconsider traditional IS development practices. These factors include increasing network bandwidth, continuously improving communication technologies, shifting global economies, and changes in social practices.

Other Cases: - Connor Formed Metal Products by L. Applegate, D. Stoddard, and M. Conrad. HBS Case 193003 1994 - Mrs. Fields, Inc. --1977-87 by Linda Applegate and Keri Pearlson, Product #: 194064, 16 pages, Publication Date: 2/21/95 - Mrs. Fields 1988-92 by Linda Applegate and Keri Pearlson, Product Number 194065, 12 pages, Publication Date: 11/11/94 - Verifone: The Transaction Automation Company by Donna B. Stoddard ; Richard L. Nolan ; Hossam Galal , Harvard Business Case Study number 195088 , 7/12/95 - Administrative Data Project (A) (HBS case 803-051, Feb. 19, 2003, setting: Boston) - Andia Bottling Co. (HBS case 102-040, Oct. 1, 2002, setting: South America) - Cisco China (HBS case 302-069, Dec. 18, 2001, setting: China) - 5 http://cais.aisnet.org/articles/3-5/default.asp?View=html&x=31&y=9 (setting: small town Illinois) - Case Study of the St. Paul companies Virtual Ofice for Risk Control Division – N. Johnson, Idea Publishing Group Case, 11 pages, IT 5597 (setting: U.S.) - IT Help Desk Implementation: The Case of an International Airline – S. Clarke and A. Greaves, Idea Publishing Group Case, 19 pages, IT 5614 (setting: worldwide) - Systems Development by Virtual Project Teams: A Comparative Study of Four Cases – D. Croasdell, A. Fox and S. Sarker, Idea Publishing Group Case, 17 pages, IT 5682 (setiing: worldwide) - Government E-Procurement: Electronic Tendering System in the Hong Kong SAR (UHK case HKU238, June 25, 2002, setting: Hong Kong) - Wyndham International: Fostering High Touch with High Tech (HBS case 803-902, Feb. 11, 2003, setting: global) - Administrative Data Project (A) (HBS case 803-051, Feb. 19, 2003, setting: Boston) - Andia Bottling Co. (HBS case 102-040, Oct. 1, 2002, setting: South America) - Cisco China (HBS case 302-069, Dec. 18, 2001, setting: China) - Alibris (A) (HBS case 601-111, Mar. 13, 2002, setting: internet) - DxR Case Study, Communications of AIS, March 2000, Volume 3 Article 5 http://cais.aisnet.org/articles/3-5/default.asp?View=html&x=31&y=9 (setting: small town Illinois) Readings/Articles: Werbach, K. “Using VoIP to Compete” Harvard Business Review 83(3) 2005 VoIP isn't just a new technology for making old-fashioned calls cheaper, says consultant Kevin Werbach. It is fundamentally changing how companies use voice communications.

What makes VoIP so powerful is that it turns voice into digital data packets that can be stored, copied, combined with other data, and distributed to virtually any device that connects to the Internet.

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Gary, Loren “Network vs. Network: The New Arena of Competition” Supply Chain Strategy Harvard Business Publishing 2005 As companies increasingly build value through often far-reaching relationships with other firms--through alliances, outsourcing, deep supplier relationships, and other partnerships-more and more leaders are facing a new reality: to succeed, they and their partners must address the market as one competitive unit.

Applegate L., Cash and Mills Information Technology and Tomorrow's Manager" Harvard Business Review, November-December 1988, pg. 128-136 This is a very interesting article to use to highlight the role IT plays in the design and implementation of management control systems. It's a bit dated, but it is still relevant to the discussions many managers are having today.

Taylor, W. C. “At Verifone It's a Dog's Life (And They Love It!)” FastCompany online at: http://www.fastcompany.com/online/01/vfone.html This article updates the case on Verifone, a company organized from the beginning as a virtual organization. It's a very interesting and relevant article to talk about how IT affects organizational structure, communications, and effectiveness.

JMJ Loeffen and JC Wortmann “IT challenges organizational design: How to connect manufacturing concepts to IT” International Journal of Technology Management. 19(6): 630-637. 2000.

The complex organizational design of the past Century proves to be too slow in adapting to the actual, ever-changing environment. During the past few decades, the distinction between routine and non-routine jobs was used to cope with this problem. Routine jobs are now executed quickly and accurately with the help of information technology (IT).

Non-routine jobs make use of specific organizational structures in order to simplify coordination between people: organizational design now focuses on unity of time, place and action: teamwork has become a central issue.

Markus M. L., B. Manville and C. E. Agres, “What Makes a Virtual Organization Work?” Sloan Management Review, Fall 2000, 42(1), pp. 13-26 This article addresses how traditional management tasks of motivating and directing employees change in the face of increasing virtuality of organizations? The authors answer this question by examining an example of an economic enterprise that acts in many ways like a voluntary organization: the open-source software movement.

Books: H. Lucas, Jossey The T-Form Organization: Using Technology to Design Organizations for the 21st Century. NY: Bass Publishers, 1996.

This book is the in-depth description of the T-form organization. It was written before the Internet was in full swing, but contains interesting ideas and suggestions for managers thinking about organizational impacts of IT.

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R. Yeh, K. Pearlson and G. Kozmetsky Zero Time: Providing Instant Customer Value-Every Time, All the time. NY: Wiley and Sons, 2000.

This book describes the vision of how companies must organize in order to be instantly responsive to dynamic customer expectations. The focus is on business strategy for the new economy and the organizational systems and information systems that must match the business strategy. It is useful for discussions of how to design organizations with the internet and other current technologies in mind.

S. Davis and C. Meyer Blur NY: Perseus Books, 1998.

This book is about the bluring of lines and deliniations in life. Business and personal life, on-line and off-line, social and private, etc. It is an interesting book for fueling the discussions of how IT is changing organizations in general.

Websites: www.brint.com/EmergOrg.htm This is one of the BRINT websites. It contains a very comprehensive list of other websites, articles, and references for the virtual organization, change management, and other emerging organizational forms. Most of these articles and links are about forms enabled by the use of information technology in general. www.cio.com CIO and CIO.com are published by CXO Media Inc. to meet the needs of CIOs (Chief Information Officers) and other information executives. CIO is read by more than 140,000 CIOs and senior executives who oversee annual IT budgets in excess of $175 million. CIO.com serves over 12 million pages annually.

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Chapter 4: Information Technology and the Design of Work Chapter Overview This chapter is complementary to chapter 3. Chapter 3 is focused on organizational level issues, and manager's issues, and chapter 4 is focused on individual worker level issues.

Individual level issues include how work is performed, the design of work, satisfaction, and effectiveness. IT affects the work of employees by creating new work and new working arrangements, and by presenting new challenges. This chapter also includes a discussion of telecommuting and alternative work arrangements. This edition takes the collaboration and communication issues that were partly moved from chapter 3 and discusses the technologies that enable collaboration. Included is a discussion of IM, VoIP, and other tools used in collaboration. And the topic of virtual teams is discussed in chapter 4 rather than chapter 3 in the 3rd edition.

Key Points in Chapter Work design is traditionally the job of the manager. A simple framework can be used to assess how emerging technologies may affect work, and that framework is discussed in this chapter. This simplistic framework makes clear the point that some work is best done by computer, and other is best done by a person. The manager must make that decision, although today many managers seek the input of the workers as part of the design process. And while computers continue to get increasingly more sophisticated, there is still a set of tasks that are best done by people. For example, interactions with people, particularly when the interaction involves an emotional situation such as a system failure, product return, etc, are best done with other people, not with computers.

IT supports communications and collaboration. This is new to the text, and several technologies are given to show how IT has influenced and assisted with communications and collaboration. For example, E-mail is now a must for all people, and may people have multiple e-mail addresses for home, work, etc. Instant Messaging has moved from a casual non-professional environment, to the workplace. It is used by large corporations as an internal communication system. Voice Over IP has allowed companies to integrate voice and data in one network, and to take advantage of existing infrastructure to lower costs. One example of an easy to use VoIP system is Skype. At any time there are millions of users on the system (see www.skype.com) and rates are very low for national and international calls. This is a key topic as more and more organizations are moving to VoIP. Cisco Systems is a good web site to visit to read more about VoIP. Also, video teleconferencing, unified communications, and virtual private networks are discussed as tools that enable communication. Under collaboration, there is discussion of Web 2.0 technologies such as social networking, virtual worlds, web logs (Blogs), and Wikis.

Lastly, groupware is covered as another collaboration tools. Make sure that students understand that tools like WebCT, Blackboard, and Angel are all examples of collaboration tools. If you use one of these, or another course management system for your course, make sure to review this and discuss some of the pros and cons of these

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systems. You may want to give students a chance to give their input on how they would change the design of your particular course management system.

IT is changing the nature of work. There are three primary ways IT affects employee life: 1) by creating new types of work, 2) by creating new ways to do traditional work and 3) by presenting new challenges in managing work.

IT changes where work is done. Work can be done in a variety of places rather than only from the office. Telecommuting has become a popular concept which includes workers who work from home or other remote location. And mobile workers describes the worker who must work from a variety of locations rather than from one, remote location.

Factors affecting the trend towards more telecommuting and mobile work are 1) work is increasingly knowledge based, 2) new technologies enable working from remote locations, and 3) workers increasingly desire to "time-shift" their work to accommodate their lifestyle. Disadvantages include difficulty in managing remote workers, increased worker stress, difficulty in coordinating with remote workers, and difficulty in feeling connected to the organization for the remote workers. This section is complementary to the discussion of virtual teams from Chapter 3.

IT enables more group work (collaboration). Organizational strategies increasingly require higher levels of collaboration--collaboration between workers, with workers in various departments, and with customers, suppliers and others outside the organization.

IT strategies increasingly involve the use of collaborative tools, such as groupware, videoconferencing, and web-based chat rooms, intranets etc.

A popular topic is the "virtual team,” where people are located wherever they want to be, and the information system provides the "glue" to hold everything together. True virtual teams (and organizations) are becoming increasingly more prevalent, but most take small steps in that direction by providing telecommuting options for employees. One great website to look at for telecommuting is the AT&T web site (www.att.com/telework) which has information for companies who want to telecommute, and they provide many strategies, forms, stories and tips for both employees and managers who are considering this option.

A key component of today’s virtual organization is the virtual team. The section describes what virtual teams are and distinguishes them from more traditional teams.

Students should relate well to this topic since at school, they are members of multiple virtual teams (just about every course they take requires team projects and those teams don’t reside together…this is a good jumping off point for a discussion about the benefits and drawbacks of virtual teams. Maybe start with a question like, “think about the teams you are on for your work at school. What are some of the benefits of a team structure like this? What makes this type of team difficult to work on?”). Take time to discuss the managerial issues of telecommuting and mobile work. Ask your students to consider how they would manage, evaluate, and reward these workers.

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The next section is about gaining acceptance of Information Systems. To explain factors leading to actual system use, the Technology Acceptance Model is presented. The TAM is a useful way for managers to think about how to help their organizations accept any change, but particularly those changes motivated by IT. A useful discussion of this model might include the FBI case (mini-case study 3-2 on page 82 of the 3rd edition of the text).

Food for thought in this section is security with remote workers. The example of the VA and its compromise of 2.2 million active-duty military personnel was a shock, since the information was put on a laptop that was stolen from an employee’s home. Talk about the importance of communicating and posting proper security procedures and a security policy for proper IT use. Perhaps a discussion of other security concerns with a mobile workforce could help to make the discussion more real, as more and more organizations embrace telecommuting and virtual work and teams. Technology solutions are then introduced and explained. Discuss the role managers must play in making sure that security is enforced and communicated properly, and how they must identify and protect those “entry points” that are most vulnerable and information that is most sensitive.

Illustrative Answers to Discussion Questions 1. Why might a worker resist the implementation of a new technology? What are some of the possible consequences of asking a worker to use a computer or similar device in his or her job?

Ans: Resistance might come because the worker is afraid his/her job will significantly change and he/she will be unprepared for the new requirements. Resistance might come because the change is distasteful (like having to do more repetitive work, rather than the thinking work). Resistance may come because new skills are needed but compensation is not altered to reward the use of new skills. Possible consequences of using a computer are numerous. The opening case in this chapter discusses how IT created confusion and distanced workers form the work process itself. In effect, the workers were just watching numbers and data, whereas before the computers they were actually doing the "art" of the work itself. The newer job required more interpretation of the numbers and different skills in judging and decision making. As a note to the instructor: Zuboff's work also described a paper mill, where workers used to mix paper by hand, using smell and feel as key aids in making just the right mix. When automation was introduced, these same workers were put in a control room and asked to use their computers to monitor the process and make the paper. Needless to say, using the information on the computer was significantly different to the workers than mixing a vat of paper. Many such examples exist. To overcome resistance to change (by applying the Technology Acceptance Model), managers need to combat negative perceptions about the systems usefulness and systems developers need to design systems that are easy to use.

2. How can IT alter an individual's work? How can a manager insure that the impact is positive rather than negative?

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Ans: IT can alter an individual's work by changing the work itself, changing where the work is done, changing communication and collaboration patterns, changing the ways that organizational decisions are made, or by changing how work is managed (these are topics from the chapter). A manager can help insure a positive impact through traditional management processes (as discussed in Chapter 3) such as the way individuals are rewarded, evaluated, compensated, etc. Training is an important factor in insuring success. And communication is important. Managers cannot communicate enough about changes that will take place in an individual's job.

3. What current technologies do you predict will have the most impact on the way work is done? Why? Ans: This is a very open ended question, designed to let students consider the most current technologies and their potential impact. At the time of the writing of this book, a sample answer might be the Internet, which has the potential to change just about every job done. It might be used to change who is working with whom. It might be used to change how knowledge and learning are delivered to workers (using e-learning). It might be used to remotely control equipment. Also, a number of individual technologies such as blackberries, IPods, etc are increasingly popular. Students may focus on these technologies. Students might focus on specific application domains on the Internet, such as blogs (See chapter 7 text/IM for more on this technology).

4. Given the growth in telecommuting and other mobile work arrangements, how might offices physically change in the coming years? Will offices as we think of them today exist by 2012? Why or why not?

Ans: Offices in the future might look significantly different. The objective of this question is to let students have a chance to practice visioning. One such vision might be that all offices are gone, and people just work from wherever they are. Another vision might be that offices as we know them today are more like hotels, with workers checking into cubicles when they need to work someplace. With the widespread use of cellular phones and personal digital assistants (PDAs) with access to the internet, people may be carrying access to their entire office in their shirt pocket (or purse), making a physical office less important. However, offices provide places to go, locations for gathering people with common objectives, and a physical space for a company to exist. These are harder to replicate in the virtual world. So while offices will most likely exist in 2010, they may look more like a place for groups to meet, for companies to provide a common cultural experience, and for occasional drop in workers, rather than like they do today, where people have a specific desk they report to daily. Many companies already have sites that are purely meeting space for employees that are mobile and work from home, or wherever they happen to be (IBM is a good example of this new office philosophy).

5. How is working at an online retailer different than at a brick and mortar retailer?

What types of jobs are necessary at each? What skills are important?

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Ans: Again, this question is designed to get students thinking differently about business today. There are similarities between online and brick and mortar retailers. Both must deal with end user customers, both have inventories to manage, sell, and distribute. Both have the same basic business functions including marketing, finance, accounting, sales, and administration. And clearly, working at the online retailer means you need web skills, whereas you may not need them for the brick and mortar retailer. But there are other examples of different skills. For example, whereas a brick and mortar retailer must get goods to the store, where customers come to buy them and take them home, online retailers only need get goods as far as a warehouse, but need significantly different logistics to get them to their customers' home. Working at an online retailer might be different in that facing the customer must be done electronically, rather than face to face.

That requires one to have different communication skills. For example, working in customer service for an online retailer would mean being able to write (e-mail) significantly well, where as customer service at a brick and mortar retailer would mean handling face-to-face interactions very well. Sales skills for the online retailer mean proactively thinking about how to build the website, instead of how to talk a customer into buying your goods.

6. Paul Saffo, director of the Institute for the Future, noted “Telecommuting is a reality for many today, and will continue to be more so in the future. But beware, this doesn’t mean we will travel less. In fact, the more one uses electronics, the more they are likely to travel.” Do you agree with this statement? Why or why not?

Ans. On one hand the students can argue that electronic communications obviates the need to travel. One of the motivating factors for initially starting telecommuting programs was to reduce the travel required by organizational workers. Instead of driving in to work five days a week, telecommuters may travel only one or two days a week (or less). On the other hand, many telecommuters work at locations that are very distant from their employer’s headquarters…that is, they may live out of state, or even across the country. Thus, though they may travel to the office only a few days every other week, the total distance may increase dramatically. Further, it could be argued that communication and information technologies opens a businesses horizons to include the entire world. As the world shrinks through the use of technology, the need for some faceto-face communications may increase global travel overall.

7. (This long question is about information-driven self-service options and the predicted backlash). Does this mean the end of doing business the ‘old fashioned way?” Will this put a burden on the elderly or the poor when corporations begin charging for face-to-face services?

Ans: This is an opinion question. One perspective would say “yes, this is the end of doing business the old-fashioned way” but that is a good thing. Evolution always means survival of the fittest, and self-service must be the preferred way to do business or else more businesses would abandon it for other alternatives, maybe even the old-fashioned way. Another perspective would say “no, there is room in the business community for both. Companies will pick the best alternative for their customers. It’s not the end of the

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‘old fashioned way.” There may be a burden placed on elderly and poor if corporations begin charging for face-to-face service. Elderly who have not grown up in a self-service environment may not be comfortable with the lack of personal assurances that the business transaction has occurred. They might not be able to do the service their self (my father can’t read a computer screen so he can’t do the internet-based self service options offered by many). Poor also might be burdened, if they do not have access to the selfservice outlets (for example, if they require a computer and the individuals can’t afford one). It’s up to the businesses to insure that their customers have access to their business.

The alternative is that they will lose that business to some other company who does pay attention to these issues.

Further Discussion Questions 1. How might VoIP protocols change the way work might be conducted in the future?

Will it be different than simple ‘telework’ or will it have further advantages?

Disadvantages?

2. What would some of your concerns be if you were a manager with several individuals reporting to you, most of whom telecommuted?

3. What would be your concerns if you were a telecommuting worker?

4. How is collaboration impacted by the new Web 2.0 technologies? Has it been a positive or negative change? Why?

Case Study 4-1: Automated Waste Disposal, Inc. This minicase is written to look at an industry, baseball, which one might think would never be using information systems. Yet, information systems has changed many of the jobs done by the "team", from how players learn, practice, and fine-tune their skills to how managers recruit new players and track competition.

1. How is the job of the catcher different as a result of the use of information systems?

Ans: Catcher looks at information in addition to (or possibly as a replacement for) watching the players themselves. This is an example of "informating" the job.

2. Using the scouting information has changed the job of the managers from one of intuition to one of information. Team managers run the team, and are responsible for activities such as negotiating deals with new players, trading players with other teams, and pulling together the roster for each game. Describe how you think the managers job has changed with the use of scouting information systems.

Ans: Managers have a large database of statistics to analyze to help them make decisions.

Knowing the competition so better calls can be made is just one example. Managers find

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the information is valuable in determining how much a player is worth, since they can easily pull player histories out of the database. They can use this tool to negotiate differently when trading players and discussing contracts. They can use the statistics to decide which players to pull up from the minor leagues and when. They can use the information to design more precise practice and training programs for each player. They can use it to identify new players to recruit.

3. How have scouting information systems changed WHERE work is done for the baseball team?

Ans: Information about a player is no longer just collected at the time of the game, or at the previous games that season. Instead it is collected throughout their entire playing history.

4. What new jobs must a team have in order to successfully use information systems?

Ans: Each team will now need someone to manage their information systems (the computers, software, laptops used by scouts, etc). They will also need someone to collect the special information only that team collects (scouts may have to do their job differently and enter it into their laptops, or a new team may be needed to identify and collect this information).

Case Study 4-1: Automated Waste Disposal, Inc. This is an interesting short case about using IT to monitor employees. IN this case it’s a GPS system used to monitor the location of trucks and company cars. Ultimately, however, it plays out as a system to monitor drivers and salesmen. Management must walk a fine line as they build a process to implement such a system in an organization.

As an extension to this discussion, the instructor might ask “would it be easier for management to implement a GPS system in an existing company (who previously didn’t have one) or in a new company (where all employees are just learning the processes and systems)?

Sample Answers to Discussion Questions: 1. What are the positive and negative aspects of Viento’s use of the GPS-based system to monitor his drivers and salesmen?

Ans: Positive aspects might include the ability of Viento to know where his trucks are at any given time. If someone has to go into an ‘unsafe’ area and/or is not where they are supposed to be at a given time, Viento can help them by knowing where they are. The case also mentions the money savings that accrued due to the reduction in overtime, presumably because the drivers knew they were not only ‘on the clock’ but being watched. The negative aspects might include the cultural impacts…his drivers feel big brother is watching, which may make them resent the system or at worst case, sabotage it.

It might drive unintended consequences such as drivers speeding or taking unsafe risks

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because they know their management is watching and they have certain time restrictions and milestones to make.

2. What advice do you have for Viento about the use of the system for supervising, evaluating and compensating his drivers and salesmen?

Ans: it’s one thing to use the system to monitor behavior and correct it. It’s another entirely to use it as part of the evaluation and compensation system. Viento must be very careful how he introduces that to the workers. IF they are unionized, he must make sure to have buy in from the union. But in any case, he should start by letting the drivers get used to the system without fear of it impacting their compensation. After they are used to it and have changed their behavior, he can slowly introduce a plan to use the information for evaluation and compensation. Should he not do it slowly, he can expect some employees to not only complain, but possibly sabotage the systems, break them (and claim it was an accident or something they know nothing about). Astute students will use the TAM model to structure their response to this question.

3. As more and more companies turn to IS to help them monitor their employees, what do you anticipate the impact will be on employee privacy? Can anything be done to ensure employee privacy?

Ans: this is an opinion question. The impact on employee privacy is clearly an issue when IT is introduced to monitor behavior and activities. We’ve seen lots of legal action regarding monitoring of e-mail, but usually the courts come down on the side that company email systems are the property of the company, and therefore monitoring the emails is not an invasion of individual privacy. On the other hand, monitoring individuals such as the drivers in this case study, can uncover some information that may be deemed private (like visiting their girl friends, their local bar, or other private activity).

What the company does with that information is the key here. To ensure employee privacy, companies need very clear guidelines on what information they plan to collect, what they will do with that information, and what consequences result if the guidelines are not followed. These guidelines must be clearly communicated to both management and monitored employees, so that all is out in the open and the monitoring is not seen as a spying operation or subversive management activity.

Case Study 4-2: Virtually There This is an exciting case that shows how technologies, particularly collaborative and Web 2.0 based systems can help to save lives. The case shows how an innovative cancer surgeon is attempting to get patients and their doctors to communicate and share their findings on a network that permits collaboration not only between the doctor and patient, but with other patients, and other doctors from around the world. Once this system is fully functional, patients will be provided with a wealth of treatment options, and data about each option (success rate, recovery time, possible complications, follow-up, etc.).

Sample Answers to Discussion Questions:

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1. Why does this case offer an example of a virtual team? In what ways are the team members on this team dispersed (i.e., location, organization, culture, etc.)?

Ans: A virtual team consists of individuals who are connected using technology and can communicate from anywhere. In this case, the doctors and patiens can communicate with each other, and with other physicians and patients from around the globe. If a physician needs to consult on a particularly difficult case, she can do so without ever having to meet with the other physician face-to-face. It would be worthwhile to discuss the cultural issues of this case, and how some cultures deal with medical issues such as cancer.

2. What are the advantages of the virtual team described in this case?

Ans: It permits a greater level of collaboration and participation between the members.

A virtual community could be created that uses a Wiki type system to post and comment on treatments, survival rates, other options available to patients and physicians, research in the field, etc. Also, this provides for much more responsive and timely communications, which is critical when deciding on treatments (time is usually a critical factor).

3. What technological support is needed for the virtual team to meet its goals?

Ans: Examples would include staff to set up, monitor, backup, and secure the information base created by the virtual team members. Web servers, databases, collaborative software, etc. is needed to support the system. Lastly, a call center to handle techical issues, and assist users of the system.

4. What suggestions can you offer Dr. Esserman for managing this virtual team?

Ans: Make sure that the environment is patient centered, and that the physicians are trained on the proper usage of the system. She needs to explain the benefits of such a system and the benefits of having the patient research and understand exactly what they are going to experience. Periodically perform some type of evaluation of the system from both the patients and physicians perspective. (This might be an interesting question to have your class investigate further and provide group discussions that could produce suggestions to be shared with the rest of the class.)

Supplemental Readings Cases: Amagansett Funds (A) by A.P. McAfee Harvard Business School Publishing; 2005 Amagansett Funds has had a troubled history with its customer relationship management (CRM) system. Sales agents feel that they derive no value from it and that it is a "tax on their jobs." Amagansett is investigating whether CRM can be improved by making its

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data available wirelessly to Blackberry devices. These devices will also provide mobile phone and e-mail capability.

R&D Management at Universal Luxury Group: Perfumes and Cosmetics Division

by Manuel Sosa, INSEAD 2005 This case describes the challenges faced by the cosmetics division of a large corporation when determining the set of products to develop in 2004. The key players involved are the centralized R&D center and the decentralized brands. The case provides data to estimate the utilization rate of the R&D center.

Kemps LLC: Introducing Time-Driven ABC by Robert S Kaplan,.; Harvard Business School Publishing; 08/03/2005; (10 pages) Managers use the information to enhance process efficiencies, negotiate new terms with customers, and attempt to win new business. The company now faces some crucial decisions about how to forge new relationships with key customers UCB: Managing Information for Globalization and Innovation (A) by McFarlan, F. Warren; Brian & DeLacey; Harvard Business School Publishing; 02/12/2003; (47 pages) his case presents a complex total MIS strategy case for a $3 billion European pharmaceutical/chemicals company based in Brussels. It covers corporate strategy alignment of IT portfolio, IT operations issues, and global coordination of IT. Offshoring at Global Information Systems, Inc.; by William E. Fruhan, Jr. Harvard Business School Publishing; 04/23/2004; (19 pages) This case explores the topic of offshoring high-tech jobs several perspectives. The issues presented include determining the stock price consequences of offshoring, examining the economic consequences of the offshore job to both the transferring and receiving countries, considering the competitive consequences of not offshoring, and thinking through the challenge of investing in a career that is vulnerable to future offshoring.

Otis Elevators: Managing the Service Force, J. Cash, J. O'Neil and K. Ostrofsky, HBS Case 191-213, 1992 Continues the story of Otisline by examining the field service force organization, information systems, organizational systems, and control systems. Portable terminals, hand-held radios, and other portable technologies are discussed as methods to transform the service force. Three cities are used as example organization forms. The objective is to present the interaction and mutual adaptation of the MIS organization and control systems--when any of these is changed, the others must also be changed.

Chemical Bank: Technology Support for Cooperative Work, L. Applegate and D. Stoddard HBS case 193-131, 1995

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This case discusses using information technology in a financial services setting to support cooperative work. Describes the organization and IT environment that Bruce Hasenyager found when he arrived at Chemical Bank. Goes on to explain his decision for implementing Lotus Notes as an "indispensable" management tool.

New Technology and Job Design in a Phone Company, R. Walton, HBS case 483073, 483074 and 483075 1982 The introduction of new information technology in a phone company redefines the nature of certain jobs. Describes the basic changes, and states that morale and performance have suffered. Students are asked to explain how the nature of the new jobs may be contributing to these problems. This is an older series of very short cases that nicely frame the issues faced when implementing new technologies.

An Internet-Based Workflow System: The Case of Lawrence Livermore National Laboratories’ Zephyr Project, J. Gebauer and H. Schad, Idea Publishing Group, 12 pages, IT 5544, (setting: U.S.) This case enumerates how Lawrence Livermore National Laboratories’ Zephyr System demonstrates how emerging technologies can help streamline procurement processes and improve the coordination between participants in engineering projects by enabling new ways of collaboration.

The Telecommuting Life: Managing Issues of Work, Home and Technology, G. Kelly and K. Locke, Idea Publishing Group, 11 pages, IT 5553, (setting: U.S.) This case introduces one company that has decided to experiment with the telecommuting arrangement. Through the eyes of one teleworker, many of the benefits and challenges of telecommuting are explored.

The Lonely Comate: The Adoption Failure of an Intranet-Based Consumer and Market Intelligence System, P. Hendriks and W. Jacobs, Idea Publishing Group, 21 pages, IT 5562, (setting: U.S.) The case study concerns the disappointing reception of an intranet application at TopTech, a prominent player in the field of electronics. The application in question, called Comate, which stands for ‘Consumer and Market Intelligence Technology Environment’, was conceived and build by the central staff department for Consumer and Marketing Intelligence (CMI) of the company. This case study focuses on the organization’s decision to form a project team to investigate why users did not accept the system change.

Other Cases - Tale of Two Airlines in the Network Age: Or Why the Spirit of King George III is Alive and Well (HBS case 302-128, Jun 11, 2002, Setting: US)

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-

Business Innovation: The MTR's eInstant Bonus Project (UHK case HKU201, July 26, 2002, setting: Asia) - Dubai Ports Authority (A) (HBS case 603-061, Feb. 5, 2003, setting: middle east) - Otis Elevators: Managing the Service Force, J. Cash, J. O'Neil and K. Ostrofsky, HBS Case 191-213, 2/92 - Chemical Bank: Technology Support for Cooperative Work, L. Applegate and D. Stoddard HBS case 193-131, 9/15/95New Technology and Job Design in a Phone Company, R. Walton, HBS case 483073, 483074 and 483075 12/2/82 - An Internet-Based Workflow System: The Case of Lawrence Livermore National Laboratories’ Zephyr Project, J. Gebauer and H. Schad, Idea Publishing Group, 12 pages, IT 5544, (setting: U.S.) The Telecommuting Life: Managing Issues of Work, Home and Technology, G. Kelly and K. Locke, Idea Publishing Group, 11 pages, IT 5553, (setting: U.S.) - The Lonely Comate: The Adoption Failure of an Intranet-Based Consumer and Market Intelligence System, P. Hendriks and W. Jacobs, Idea Publishing Group, 21 pages, IT 5562, (setting: U.S.) - Xerox PeopleNet - Creating HR/IT Synergies, A. Mukund, 2002, ECCH Case Collection# ICMR 50, 6 pages, www.asiacase.com (setting: India) Readings/Articles: Shin, B. , Omar A. El Sawy, Olivia R. Liu Sheng and Kunihiko Higa “Telework: Existing Research and Future Directions” Journal of Organizational Computing and Electronic Commerce 2000 10(2) Economist “Solving the Paradox,” Economist.com, Sept 21, 2002, http://www.economist.com/displayStory.cfm?Story_ID=375522 This article provides a concise presentation of indicators supporting and arguing against the productivity paradox.

Brynjolfsson, E. J., T. Malone, V. Gurbaxani & A. Kambil “Does Information Technology Lead To Smaller Firms?”

MIT working paper, CCS-TR #123 September, 1991 (available at: http://ccs.mit.edu/papers/CCSWP123/CCSWP123.html) The primary goal of this paper is to assess the hypothesis that the rapid growth of information technology (IT) is at least partially responsible for one important organizational change, the shift of economic activity to smaller firms. This paper uses industry-level data on IT capital and four measures of firm size, including employees per firm. It finds broad evidence that investment in IT is significantly associated with subsequent decreases in the average size of firms and that the effects of IT on organizations are most pronounced after a lag of two to three years.

Karsten, H. “Collaboration and collaborative information technologies: A review of the evidence” Data Base for Advances in Information Systems. 30(2): 44-65. 1999 Collaborative information technologies have been claimed to enhance collaboration in organizations, under certain conditions. This claim was found problematic in several

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respects, also in the light of the results of 18 case studies of Lotus Notes use. The cases may be split into three groups: 1. exploratory, conservative or cautious use, 2. planned and expanding use, and 3. extensive and engaged use of Notes. A number of issues emerged in the review that could help to understand the relationship of collaborative information technologies and changes in work and organization.

Zuboff , S. “New Worlds of Computer-Mediated Work” Harvard Business Review reprint 82513 9/1/82 This is a very early, but still relevant, HBR article on computer mediated work and it's implications for managers and workers. Information technology alters the individual's relation to the task. The new relationship is called "computer-mediated." The computer mediation of simple jobs creates tasks that are routine and unchallenging, while demanding focused attention and abstract comprehension. Computer mediation shifts the overall shape of the organization from a pyramid to a diamond because managers will perform a variety of tasks that others once did for them, thereby diminishing clerical support staff and swelling the number of professionals and middle managers Reynolds, C. “Global compensation and benefits in transition” Compensation & Benefits Review. 32(1): 28-38. 2000 In the millennium, international human resources will undergo a rapid transformation.

Expatriate compensation once consumed most of the time and resources of international HR. Today, strategic areas such as the integration of compensation, global staffing and business strategy and a variety of other international HR challenges are taking over. This article describes the evolution of the field of international compensation and benefits, the forces shaping its development, and the prospects for the future. It also explores information technology, outsourcing and other issues that will shape careers in the field.

Sedam, S. “E-Dreams for the new millennium” Professional Builder. 65(1): 69-70.

2000 A few predictions are offered on the Internet and information technology's impact on the home building industry. Predictions include: 1. Scheduling suppliers and trades via the Internet will become routine for both initial building and service. 2. The tool of choice for all field personnel wi11 be a hand-held digital assistant that includes voice, paging and data in a single unit. 3. Purchasing everything from lumber to plumbing fixtures to office supplies will be Internet-based and highly automated. 4. A majority of customer-selected colors and options and virtually all of the related paperwork will be done via the Internet.

5. Traditional real estate brokerages will change or die.

Comerford, R. “An interview with John Patrick” IEEE Spectrum. 37(1): 49-50. 2000 John Patrick is vice president for Internet technology, IBM Corp., and chairman of the Global Internet Project, an international group of senior executives committed to fostering continued growth of the Internet. In a brief interview, he discusses the challenges facing information technology. The Internet is the one advance in information technology that will likely have the most impact on the way people live and work in the future.

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Books: B.Travica, New Organizational Designs: Information Aspects NY: Ablex 1999 P. A. Strassmann. Information Productivity : Assessing Information Management Costs of U. S. Corporations NY: Information Economics Press 1999.

A statistical analysis of the productivity paradox researched in over 1500 firms. It provides a nice way to quantitatively study this problem and a set of diagnostics to evaluate additional companies.

S. Zuboff In the age of the Smart Machine: The future of work and power NY: Basic Books 1988.

This is a great book for those who like well-written academic prose about key managerial topics. The book goes into great detail about how IT is changing the work done by individuals. It is based on extensive research at a number of organizations around the world. Difficult for the average person to understand, but worth the effort for students of IT and job design.

R.E. Walton, Up and Running : Integrating Information Technology and the Organization. MA: Harvard Business School Press1989.

This book presents a framework for managers to follow as they design and implement IT in their organizations.

C. Alan The Inmates Are Running the Asylum : Why High Tech Products Drive Us Crazy and How To Restore The Sanity NY: SAMS 1999.

This book highlights the darker side of how IT is changing our lives and our jobs. It is a humorous and well written book about the many impacts, intentional and unintentional, of IT. Websites: www.brint.com/EmergOrg.htm This @Brint web portal has a number of interesting links to articles, sites and other information portals related to the use of IT and the design of work. www.simnet.org SIM has inspired the minds of the most prestigious IT leaders in the industry. Highly regarded as the premier network for IT leadership, SIM is a community of thought leaders who share experiences and rich intellectual capital, and who explore future IT direction.

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Chapter 5: Information Technology and Changing Business Processes Chapter Overview This chapter explores the relationship between transformation of business and information systems.

There are three key concepts in this chapter. The first is that businesses operate as a set of business processes, rather than as a set of functions, departments or other organizational forms. Second is that business processes are redesigned using both radical (reengineering) and incremental techniques. And third, IT is a tool used to transform a business (by way of changing their business processes). Two of the major concepts discussed in the chapter are Integrated Supply Chains and Enterprise Systems. This edition spends time covering the subjects of agility and constantly redesigning processes and the idea of a shared services model. Also, business process management systems are introduced.

Key Points in Chapter IS can enable or impede business change. IS enables change by providing both the tools to implement the change, and the tools on which the change is based. But IS can impede change, particularly when the desired transformation is mismatched with the capabilities of the IS. The chapter starts out with the case study of Cemex and how this company was able to change the way it did business through efficient management of its processes. This is a good case to discuss with your students and to set the stage for the importance of the process management model.

To understand the role IS plays in business transformation, one must take a business process, rather than a functional, perspective. Business processes are a well defined ordered set of tasks that have a beginning and an end, a set of associated metrics, and cross-functional boundaries. Most businesses operate business processes, even if their organization charts are structured by functions rather than by processes.

Making changes in business processes is typically done through either TQM or BPR techniques.

TQM techniques tend to imply an evolutionary change, where processes are improved incrementally. Six Sigma is mentioned as an example of a TQM approach. BPR techniques, on the other hand, imply a more radical objective and improvement. Both techniques can be disruptive to the normal flow of the business; hence strong project management skills are needed.

Horizontal integration is a term for looking beyond individual business processes and considering the bigger, cross functional picture of the corporation. Integrated databases, web 2.0 technologies and services, and common infrastructure are the tools IT brings to the implementation of horizontal integration. Many organizations have restructured their common business processes into a shared services model. This model consolidates all individuals from all business units into a single organization, run centrally, and utilized by each business unit. This model is important to discuss with your students and should be used as a discussion point. The Shared Services model is the opposite of the Outsourcing model. Basically, the IT function becomes a kind of internal service provider.

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Business Process Management (BPM) Systems are a class of systems that emerged to help manage workflows in the business. They primarily helped track document-based processes where people executed the steps of the workflow. They go way beyond the document-management capabilities, including features that manage person-to-person process steps, system-to-system steps, and those processes that include a combination. Systems include process modeling, simulation, code generation, process execution, monitoring, and integration capabilities for both company-based and web-based systems. The tools allow an organization to actively manage and improve its processes from beginning to end.

Enterprise systems, or alternatively enterprise information systems (EIS), are large information systems that provide the core functionality needed to run a business. These systems are typically implemented in order to help organizations share data between divisions. However, in some cases EIS are used to affect organizational transformation by imposing a set of assumptions on the business processes managed by the EIS. SAP R/3, the most widely used enterprise system around the world, is called an enterprise resource planning (ERP) software package. Other vendors offer systems, and some companies have chosen to put together their own enterprise system rather than buy a single package from one vendor. Implementing an EIS, regardless of the vendor, is an enormous task. EIS are well suited to drive business process design when organizations are just building their processes, when the operational business processes are not a source of competitive advantage, and when current systems are in crisis. It is inappropriate for the EIS to drive business process design when the strategic advantage of the organization is derived from these processes, since using a vendor-designed EIS might force the organization to change their processes and lose their advantages.

The text has a section on integrated supply chains. This is the concept of linking business processes across companies. A supply chain is the process that begins with raw materials and ends with a product or service ready to be delivered to a customer. Integrated supply chains have to overcome several challenges such as information integration, synchronized planning and workflow coordination. The challenges for integrating ERP systems between companies is covered in this section. Similarly to the integrated supply chain issues, there are issues of what to share, how to share it, what to do with it when it’s shared, and how to secure it.

The food for thought section in this chapter discusses if ERP is a Universal Solution and looks at the cultural challenges of building processes across cultural boundaries. The issues of change is important to discuss with your students and why people will resist change. The major ERP vendors, like SAP and Oracle, show a western bias in reporting best practices. Due to problems encountered, businesses in non-western companies/locations are turning to local vendors. If the system is based on a cultural model that conflicts with the local customs and which cannot easily be accommodated by the ERP it should not be implemented. So managers must be aware of the cultural intricacies of their organization and determine the best way to implement a system that will meet the needs of the organization as a whole. It would be helpful to brainstorm on this section to determine the best way to handle a situation where a system is being introduced in a cross-cultural environment. Perhaps the students can brain storm ideas that may help to minimize issues as they relate to culture.

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Illustrative Answers to Discussion Questions 1. Why was radical design of business processes embraced so quickly and so deeply by senior manager of so many companies? In your opinion, and using hindsight, was this a benefit for businesses? Why or why not?

Ans: This idea was embraced so quickly because managers realized they needed to change the way they did business and reengineering offered them a roadmap to do that. Reengineering was written up as the method to use to achieve very significant (75% or more) increases in productivity, decreases in costs, and increases in efficiency.

It was a benefit for businesses in part because even if they didn't achieve the radical objectives they set for themselves, they did realize that changing their operations was not only possible, but also critical if they want to operate at a reasonable cost level. Other managers realized that business processes were the critical unit of business, not function or geographical region. Still other businesses achieved real savings and real productivity gains from the process of reengineering.

It was not necessarily a benefit to business because the process of reengineering was very disruptive to daily operations. Many people were pulled out of the daily business and put on reengineering teams. Those left in the operations were overloaded, and in many cases, the business was forced to abandon reengineering efforts. This was costly.

2. Off-the-shelf enterprise IS often forces an organization to redesign their business processes.

What are the critical success factors to make sure the implementation of an enterprise system is successful?

Ans: The critical success factors would include things like a well-thought-out design of the business process when the EIS is used, a comprehensive communications plan to insure everyone affected is informed, and a well-tested technology to insure that no technology problems get in the way of operations.

3. Have you been involved with a company doing a redesign of their business processes? If so, what were the key things that went right? What went wrong? What could have been done to better minimize the risk of failure?

Ans: This is a very open ended question. Depending on the student's background, they may or may not have any insights to answer it. For a less-experienced student, the instructor might suggest trying to redesign a process at the school (or work location) to gain some insights.

Typically things that go right include a good process design, a high-energy team ready to make changes, good people working on the process design and other technology and process oriented issues. Things that go wrong typically include insufficient resources (people, time, money), poor communication with those affected by the changes, lack of strong leadership (or senior leadership support), and other people-oriented issues.

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4. What do you think that Jerry Gregoire, former CIO of Dell Computers, meant when he said, “Don’t automate broken business processes.”

Ans: Often the system development process starts by looking at the current system. This is good for understanding the environment and determining problems with the current system. However, it may bias the systems designers and keep them from seeing innovative approaches to resolving problems and meeting organizational needs. Business process reengineering involves radically rethinking how system components can best work together. Often this means coming up with a new set of processes instead of designing the system around current inefficient and/or ineffective processes.

5. What, in your opinion, are the advantages and the disadvantages of a shared services model for IT? What are some example activities done by a relationship manager from a shared services organization?

Ans: (There is lots of room for a variety of answers on this question.) The shared services model would provide for consistency and standardization throughout an organization. This would make it more efficient when assigning resources to projects and making sure that these projects align more closely with the objectives of the organization (mission and vision statement). The disadvantages might be a greater degree of bureaucracy could stifle creativity and slow down response time to departmental and location specific needs. Also, the shared services model would put the same level of burden on all parts of the organization for funding this model (which may turn out to be inequitable and a cause of rifts within the organization).

A relationship manager is responsible for working with individual business units to facilitate alignment of services to business needs. This might mean that a new ERP system may need to be customized to meet the needs of the payroll department, or chaning the way the contact management system works so that the sales force can readily see the clients in their area and what their recent sales have been.

6. What might an integrated supply chain look like for a financial services company such as an insurance provider or a bank? What are the components of the process?

Ans: A bank may use this type of system to link payroll services that it sells to its customers, but is actually purchased by the bank from a 3rd party organization which in turn links directy to its customers through a web site where customers order the particular payroll items they want, which is then forwarded by the bank to the 3rd party organization and then sent to the customer. Another example, could be the printing of new checks for a client of a bank. The client orders the checks from the bank which in turn automatically forwards the order to a 3rd party printer, who in turn mails the checks directly to the client. To the client this transaction is transparent. They only know that they need checks, and ordering them online through their bank and getting them as soon as possible is their primary concern.

Further Discussion Questions

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1. What are some of the costs that might sometimes be described as “hidden costs” that must be considered in BPR or the implementation of enterprise systems.

2. Does the business outsourcing model make it easier for an organization to undergo complex BPR or more difficult? Describe some of the advantages and disadvantages that might exist in a heavily outsourced organization.

3. What are some of the challenges of managing the processes or an organization and how can BPM systems help? What are some of the challenges of integrating a BPM system?

Case Study 5-1: SANTA CRUZ BICYCLES This case is to show how innovation of processes can significantly improve time to market of new designs through simulation prototyping. The company was able to significantly shorten the designto-prototype process (from 28 to 14 months).

1. What, in your opinion, was the key factor in Santa Cruz Bicycles’ successful process redesign?

Why was that factor the key?

Ans: The change of how they did their design and prototype process. This lead to the implementation of a simulation and design system that permitted the prototypes to be designed and tested in a confined and semi-realistic environment. Changing the process allowed the R&D team to work in a much more efficient and timely manner. If the organization had not changed the way they were doing R&D, they would have been in the same dilmena of a long design-toprototype process.

2. What outside factors had to come together for Santa Cruz Bicycles to be able to make the changes they did?

Ans: The introduction of PLM software. They were able to leverage the same type of system used by a large, global manufacturer which was obviously affordable to Santa Cruz Bikes. This permitted the designers to created and modify the designs and model them in a simulated environment. Also, the company hired a master frame builder so that construction of new designs could be done more quickly with greater control. Lastly, the purchase of a new system for fabricating parts for the prototype. All of these changes were done due to the change in how the company viewed the processes that were currently being performed.

3. Why is this story more about change management than software implementation?

Ans: Software implementation can be done by any organzation, at least theoretically. This new way of doing business by Santa Cruz Bicycles was spurred by a willingness to change the way the company did R&D. If they had not been willing to change their system of processes, then the new software would probably never have been implemented.

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Case Study 5-2: Boeing 787 Dreamliner This case explores the challenges of implementing a radical process change into a large organization and relying on an extensive supply chain that is integrated across many companies.

1. Why did Boeing adopt the radical redesign for designing and developing the 787 Dreamliner?

In your opinion, was it a good move? Defend your choice.

Ans: They decided to rely on collaboration and to use collaboration as a competitive tool, rather than on just technical know-how in a new global supply chain process. It hoped that this change would spur cost and time savings for the company. They were confident (perhaps overly so) that they could pull off such a radical process change.

(This next part of the question is opinion, so there will be lots of possible answers.) If a student states that it was a good move, then they need to discuss such things as long term effect of the new system on Boeing and how it could radically change and improve the way things are done once the kinks are worked out. If they say that is was not a good move, they may say that Boeing should have tested the nes system on a lower risk and lower profile project.

2. Using the Silo Perspective vs. Business Process Perspective analyze the Dreamliner program.

Ans: The dreamliner program suffered from some of the disadvantages of the silo perspective.

Vendors were not communicating with each other in the supply chain which lead to delays and defects in the products delivered to Boeing. The goal of the program was to “change” the process and adopt a perspective that links all members of the supply chain together into one giant seamless process. So even though Boeing set out to emulate the business process perspective, and that was the desing of the new system, they encountered problems that would normally occur in a silo perspective environment.

3. Develop a risk analysis scenario using the Risks of Radical Redesign framework discussed in the chapter.

Ans: It appeared from the case the Boeing did have the support of senior management, but perhaps they were not investing the time that is needed. One of the identified risks is lack of senior management support at the right time or that management was not investing enough of their time into the project (up to 50% is needed). There was obviously a lack of a coherent communications program since several of the vendors were not communicating with each other, which lead to the major set backs of the project. There was probably unnecessary complexity in the new system for a process that had worked in previous iterations of Boeing airliners. The new integrated supply chain system had not been proven on a less critical project. They also did not properly estimate the amount of effort that was needed to design and implement the new system, as there were failures in using the new system. Lastly, they outsourced (downsized) some of the major components, wings and fuelage, while attempting to reengineer. This may have created an environment in which the employees made it difficult to implement the system.

4. If you are the program manager, what would you have done differently to avoid the problems faced by the Dreamliner program?

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Ans: Made sure that the system was tested on part of the new system prior to roll out to the entire product. The manager could have tested the idea on a different, less high-profile, product that still had a large number of suppliers in the supply chain. Careful monitoring and testing is critical.

Also, the manager should have established a clear communication flow chart for the suppliers that needed to interact with each other, and closely monitored and facilitated this communication.

(Your students will have a plethora of suggestions for the project manager. Take the time to discuss this question as many of them will be either involved in a project like this, or may even be the manager of such a project.)

Supplemental Readings Cases: (The following cases can be found on the instructors website that accompanies this text.)

Continental Airlines Continental Airlines entered into a ten-year outsourcing agreement with EDS when Continental Airlines was suffering financial setbacks and bankruptcy. This agreement was initially designed to provide expertise to Continental in an area that was not a core competency, and to also help cut costs for the airline. However, Continental successfully turned their business around in the mid1990s, and this case discusses the implications this has for the relationship between Continental and EDS. While this relationship had worked well initially, there were some strains developing by the mid-1990s, and this case focuses on where Continental should go with their relationship with EDS. Integrated Systems: Management Approaches To Acquiring Them In Australian Universities This case describes the situation that Central Queensland University (CQU) found itself in during the late 1990s as they faced increasing pressures from the government for information reporting, internal pressures to decrease administrative requirements of their systems and yet provide increasing responsiveness to their students, and the deadline of December 31, 1999 to solve their Y2K problem. To address all of these concerns, CQU decided to implement PeopleSoft. This case describes the process that a consortium of universities in Australia went through in trying to address these issues, and then the process that CQU specifically went through.

Integrated Systems in State Government This case describes the process that the State of Louisiana went through in implementing SAP R/3.

They were the first state government to make this transition, and the process was not always a smooth one. This case describes the interactions between the State and their consultants. It also stresses the importance of planning for the changes inherent in any systems development effort of this magnitude. This is the key focus of this case.

Stately Furniture And Décor This case describes the various business processes involved in taking and filling customer orders for custom-built furniture at Stately Furniture. These processes are explored from the view of a number of different departments in the firm: information systems, production, quality control, sales and marketing, and accounting and finance.

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WWW.Flexlease.com The Flexlease case describes a unique combination of two traditional businesses - an auto leasing firm and an Internet Service Provider (ISP). These two enter into a joint venture to offer automobile leases via the World Wide Web. This case could be used in the BPR case, as it describes how the current business processes had to be revised in order to make Flexlease a reality. The case further points out how some of the benefits of the system cannot be recognized because not all of the trading partners of Flexlease have the ability to tie into their electronic systems. This case concludes with a brief appendix that describes the workflow modeling technique used in the case.

Other cases Offshoring at Global Information Systems, Inc.; by William E. Fruhan, Jr. Harvard Business School Publishing; 04/23/2004; (19 pages) This case explores the topic of offshoring high-tech jobs several perspectives. The issues presented include determining the stock price consequences of offshoring, examining the economic consequences of the offshore job to both the transferring and receiving countries, considering the competitive consequences of not offshoring, and thinking through the challenge of investing in a career that is vulnerable to future offshoring.

Carnival Cruise Lines; by Applegate, L.M. & Robert J Kwortnik,. Gabriele Piccoli,; Harvard Business School Publishing; 07/07/2005; (33 pages) Highlights the potential value of customer data and the choices and challenges the firm faces when attempting to capture this value. Carnival collects a significant amount of individual-level behavioral and demographic customer data. Senior management must now decide how to leverage such a wealth of data.

An Experiential Case Study in IT Project Management Planning: The Petroleum Engineering Economics Evaluation Software Imperative by Davis, C. K.; Idea Group Publishing; 2005 The case covers key issues in information technology dealing with developing a full set of project plans, including milestones, tasks, schedules, staffing, deliverables, and projected costs, for a complex software development project.

Change Management of People & Technology in an ERP Implementation by Edwards, H. E.; Humphries, L. P. Idea Group Publishing; 2005 Eighteen months after adopting an enterprise resource planning (ERP) system the chief executive officer wanted an investigation into the performance of the system. The results of the investigation reported here reveal problems with the acquisition and implementation process.

Pillsbury: Customer Driven Reengineering by Robert Kaplan (HBS Case 195-144)

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After initial successes applying activity-based costing to manufacturing operations, two senior executives decide to collaborate to propose a major reengineering project across the company's entire value chain. The case describes the project's definition and scope to yield projected annual cost savings and margin improvement between $100 and $300 million.

Reengineering at Cigna Corporation by Donna Stoddard, Sirkka Jarvenpaa and Raymond Caron (HBS case 195-097) 1996 This case describes the reengineering efforts undertaken by Cigna, an international provider of insurance and financial services. Their 5-year effort to reengineer their organization saved more than $100 million by completing over 20 reengineering initiatives.

Profiling at National Mutual (A) by John J. Sviokla; Audris Wong (HBS Case) 1997 This case series describes a company grappling with organizational change through information technology. National Mutual Life Association vies for Australian insurance industry leadership with its long-time competitor. It has purchased an expert system called Client Profiling, developed in the United States, that will allow its extensive field force to perform financial planning. The system should aid agents in making multiple and increased dollar-value sales. Its use will require more time from agents and clients and will change traditional modes of selling.

Vandelay Industries by David Upton and Andrew McAfee (HBS Case 697-037) 1995 This is a good enterprise information systems case that discusses ERP basics, pros and cons of process reengineering and standardization, and change management issues. Note that this is a fictitious company named after the Seinfeld (television show) company invented by the character George Costanza.

Cisco Systems, Inc: Implementing ERP by Robert Austin, Richard Nolan and Mark Cotteleer (HBS Case 699022) Reviews Cisco System's approach to implementing Oracle's Enterprise Resource Planning (ERP) software product. This case chronologically reviews the diverse, critical success factors and obstacles facing Cisco during its implementation.

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Balancing Custody and Rehabilitation through IT: the Transformation of Singapore Prisons Department, Sia Siew Kien, May Tang, 2000, www.asiacase.com, The IMARC Case Series #I00-005, 31 pages (setting: Singapore) Tapping the Potential of ERP, Prashanth Shetty, 2000, www.asiacase.com, T. A. Pai Management Institute (TAPMI), Manipal, India # 1998-2000-49 , 2 pages (setting: India) Inland Revenue Authority of Singapore (IRAS), Demeester, L Vandenbergehe, K Blackwood, G, INSEAD CASE # 602-037-1, European Case Clearing House, 2002, 19 pages (setting: Singapore) PassAct, Inc. (HBS Case 602-026, March 13, 2003) Tale of Two Airlines in the Network Age: Or Why the Spirit of King George III is Alive and Well (HBS case 302-128, Jun 11, 2002, Setting: US)

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Dubai Ports Authority (A) (HBS case 603-061, Feb. 5, 2003, setting: middle east) Webvan (HBS case 602-037, Mar 13, 2003) NIBCO's Big Bang, Communications of AIS, January, 2001, Volume 5 Article 1 http://cais.aisnet.org/articles/default.asp?vol=5&art=1 (setting: USA) Beginning SAP R/3 Implementation at Geneva Pharmaceuticals, Communications of AIS, August, 2000, Volume 4 Article 2 http://cais.aisnet.org/articles/default.asp?vol=4&art=2 (setting: global) Consumer-Centric Reengineering at the Colorado Department of Revenue, Communications of AIS, June, 2000, Volume 3 Article 16 http://cais.aisnet.org/articles/default.asp?vol=3&art=16 (setting: Colorado government) Information Technology,Process Reengineering, and Performance Measurement: A Balanced Scorecard Analysis of Compaq Computer Corporation, Communications of AIS, February, 1999, Volume 1 Article 8 http://cais.aisnet.org/articles/default.asp?vol=1&art=8 (setting: USA) Big-Bang ERP Implementation at a global Company, N. Pliskin and M. Zaratski, Idea Publishing Group, 16 pages, IT 5510, (setting: Israel) Implementation Failure of an Integrated Software Package: A Case Study from the Far East, Idea Publishing Group, 18 pages, IT 5511, (setting: Hong Kong) Reinventing Business Processes Through Automation: A Case Study, D. Paper, Idea Publishing Group, 11 pages, IT 5543, (setting: U.S.) An Internet-Based Workflow System: The Case of Lawrence Livermore National Laboratories’ Zephyr Project, Idea Publishing Group, 12 pages, IT 5544, (setting: U.S.) Business Process Reengineering for the Use of Distance Learning at Bell Canada, T. Whalen, Idea Publishing Group, 14 pages, IT 5551, (setting: Canada) The Clinical Information System: A Case of Misleading Design Decisions, G. Dhillon, Idea Publishing Group, 13 pages, IT 5560, (setting: U.K.) Business Reengineering at a Large Government Agency, N. McGarry and T. Beckman, Idea Publishing Group, 11 pages, IT 5562, (setting: U.S.) A Comprehensive Process Improvement Methodology: Experiences at Caterpillar’s Mossville Enging Center (MED), Idea Publishing Group, 12 pages, IT 5566, (setting: U.S.) Identifying Business Processes for, and Challenges to, Electronic Supply Chain Management: A case study in a small business in North-West Tasmania, Australia, T. Sinkkonen, Idea Publishing Group, 14 pages, IT 5586, (setting: Australia) The Dilemma of Farm Group between Redesigning of Business Processes and Rebuilding of Management Information Systems, E. Ng., A. Farhoomand, P. Banerjee, Idea Publishing Group, 19 pages, IT 5601, (setting: Asia Pacific) Adopting the Process View: A Case Study of Modeling Change in the Not-for-Profit Sector, A. Bryant and V. Syan, Idea Publishing Group, 22 pages, IT 5609, (setting: U.K.) Everyone’s Watching: The Remarkably Public Reorganization of the Nevada Department of Motor Vehicles, W. Kuechler and D. Edberg, Idea Publishing Group, 16 pages, IT 5613, (setting: U.S.) Reengineering the Selling Process in a Showroom, J. Crnkovic, N. Janicijevic, and G. Petkiovic, Idea Publishing Group, 14 pages, IT 5630, (setting: Yugoslavia) A Process Approach for Selecting ERP Software: The Case of Omega Airlines, J. Verville, Idea Publishing Group, 26 pages, IT 5655, (setting: U.S.) Business Process Redesign in Travel Management in a SAP R/3 Upgrade Project, M. Schallert, 14 pages, IT 5674, (setting: Australia)

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Rx for Integration: Lessons Learned in Health Care EAI, H. Nemati, S. Stewart, F. SherrillHuffman, Idea Publishing Group, 17 pages, IT 5680, (setting: U.S.) Constructing an e-Supply Chain at Eastman Chemicals, Ali Farmood, Pauline Ng, Ben Yen, Asia Cases, www.asiacase.com, 2001-2002 (setting: chemical company, Asia) Transforming Singapore’s Public Libraries, Hallowell, Roger Knoop, Carin-Isabel, Neo Boon Siong, www.asiacase.com, 1992-2001 (setting: government/non-profit Singapore) Balancing Custody and Rehabilitation through IT: the Transformation of Singapore Prisons Department, Sia Siew Kien, May Tang, 2000, www.asiacase.com, The IMARC Case Series #I00-005, 31 pages (setting: Singapore) Tapping the Potential of ERP, Prashanth Shetty, 2000, www.asiacase.com, T. A. Pai Management Institute (TAPMI), Manipal, India # 1998-2000-49 , 2 pages (setting: India) Inland Revenue Authority of Singapore (IRAS), Demeester, L Vandenbergehe, K Blackwood, G, INSEAD CASE # 602-037-1, European Case Clearing House, 2002, 19 pages (setting: Singapore) Mihindra & Mihindra’s e-Business Initiatives, S. Dutta and K. Kumar, www.asiacase.com, 1995-2003 (setting: automotive and automobile, India)

Readings/Articles: *Note: There are a very large number of articles and reading on this topic. For the most current, I recommend doing a quick search on the Internet. Harvard Business Review and Sloan Management Review have dozens of articles on related issues. A few classics are listed here.

Davenport, T. H. “The Coming Commoditization of Processes” Harvard Business Review 83(2)2005 A new world is coming, says the author, and it will lead to dramatic changes in the shape and structure of corporations. A broad set of process standards will soon make it easy to determine whether a business capability can be improved by outsourcing it. Such standards will also help businesses compare service providers and evaluate the costs vs. the benefits of outsourcing.

Davenport, T. "Need Radical Innovation and Continuous Improvement? Integrate Process Reengineering and TQM," Planning Review, May/Jun 1993.

Davenport, T. and Short, J. "The new Industrial Engineering: Information Technology and Business Process Redesign," Sloan Management Review, Summer 1990, pp. 11-27.

Hall, G. Rosenthal, J. and Wade, J. "How to Make Reengineering Really Work," Harvard Business Review, November-December 1993, pp. 119-131.

Markus, Lynne and Robert Benjamin, "The Magic Bullet Theory in IT-Enabled Transformation" Sloan Management Review, Winter 1997, pp. 55-68 Venkatraman, N. "IT-Enabled Business Transformation: From Automation to Business Scope Redefinition," Sloan Management Review, Winter 1994, pp. 73-87.

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Austin, Robert, Cedric Escalle and Mark Cotteleer, "Enterprise Resource Planning Technology Note" Harvard Business School Press, product number 699020, February 1999.

Plotkin, Hal, "ERPS: How to make them work" Harvard Management Update, Harvard Business School Press, March 1999, product number U9903C. Davenport, T. "Putting the Enterprise into Enterprise Systems", Harvard Business Review, July 1998, product number 98401.

Koch, C. “The ABCs of ERPs”, CIO.com, http://www.cio.com/research/erp/edit/erpbasics.html Books: *Note: there is a large number of reengineering books and an equally large number of enterprise information systems books. A few I've found useful are listed here: Hammer, M. & Champy, J. Reengineering the corporation: a manifesto for business revolution NY: HarperBusiness Press 2001 Hammer, M. & Champy, J. Reengineering the Corporation NY: HarperBusiness Press, 1993 This classic is the one that got reengineering started. There have been many subsequent books on the topic of reengineering, and a few from M. Hammer or J. Champy. But the original still best describes the concepts that caused the business world to really, fundamentally rethink how they did business.

Davenport T. Process Innovation: Reengineering Work through Information Technology MA: HBS Press, 1993 This was one of the first books published on the topic. This book gives a good description of how to redesign business processes and it more clearly links it to information systems. It has a more practical approach than the Hammer/Champy book, but is less well known.

Sethi, V. & King, W. Organizational Transformation Through Business Process Reengineering: Applying Lessons Learned NY: Prentice Hall 1998 This is a textbook with a number of readings of "classic" reengineering and related topics. It also includes measurement issues, operational aspects, and quality improvement readings.

Davenport T. Mission Critical: Realizing the Promise of Enterprise Systems MA: Harvard Business Press 2000 This book takes the point of view that companies must change information systems, business processes and business strategies at the same time, and offers many examples of real organizations that do that. It is a good book for understanding the challenges as well as the benefits of enterprise information systems.

Cook, M. Building Enterprise Information Architecture: Reengineering Information Systems NY: Prentice Hall, 1996

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This is a good basic book to use to understand what an Enterprise architecture is and how to develop one. The book provides a step-based approach to help a company define and evolve its enterprise architecture. It's not a technical book, but has enough jargon to be useful to the management and information systems student.

El Sawy, O. A. Redesigning Enterprise Processes for e-Business NY: McGraw-Hill, 2001.

This is one of the newer books in this area, and nicely combines reengineering concepts with enterprise information systems and process flow concepts. It includes a CD-ROM with an academic version of business process redesign software (Workflow.BPR from HoloSofx Inc.)

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Websites: www.brint.com This website contains lots of interesting links to reengineering and enterprise information systems readings. In fact, reengineering was the first subject to be included in the site, so the readings list is extensive. www.eil.utoronto.ca/tool/BPR.html Tools for business process reengineering.

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Chapter 6: Architecture and Infrastructure Overview All students believe they need an understanding of the technologies to understand how their businesses can prosper with information systems. They are right and wrong. A basic, fundamental understanding of technologies is necessary but a detailed, technical understanding of all technologies is not only unnecessary but a fruitless exercise. Any technology covered in a course today will most likely be out of date by graduation time. Therefore it is the point of view of this book, and this chapter in particular, to offer a very basic framework for understanding technologies and for learning how to manage them. It is envisioned that students will use the basic framework, but in any specific situation, they will need to deeply study the specific technology they intend to use. However, make sure that the focus is on how organizations move from architecture (design), to actual infrastructure (implementation of design). A good exercise would be to walk students through the design of client-server network for a small office, and then have them discuss how they would implement such a design (could search the Internet for actual products and services, etc.). This could also be used as a project for the course. Also, make sure to communicate the added information from this new edition on Service Oriented Architecture (SOA), Software-as-a-Service (SaaS), and Web-Oriented Architecture (WOA).

Lastly, make sure to spend adequate time discussing the new section on Enterprise Architecture.

That being said, this is a good chapter in which to include discussions of hardware, software, and network technologies that make up the infrastructure of an organization. That includes the latest architectural trends (mainframe, client/server, peer-to-peer, wireless, etc), business communications trends (broadband, ISDN, DSL, etc.), and information management trends (data warehousing, database management, web services such as Web 2.0, etc). There are a number of key technological topics that the instructor might consider along with this chapter. This chapter is intended as an appetizer, not as a main course, and should be supplemented appropriately based on the instructor's and the student's interests and background.

To supplement this chapter in a classroom setting, students can be asked to research and report on a current technology. The reporting can take place in a number of ways. Students can prepare a written report (I suggest making it 5 pages or less, since writing less is much more difficult than writing more). Students can prepare a 1-2 page briefing (which they can copy or post on a web site for their classmates). Students can deliver a presentation on the topic. Or students can be charged with teaching the topic to classmates (which, in my class, meant anything but a PowerPoint-type presentation...it had to be fun, entertaining, and teach something specific about their chosen topic).

Key Points in Chapter Every firm has an information architecture and an information infrastructure. The beginning of this chapter describes People’s Bank’s business need for an integrated information system. The client/server architecture is distinguished from the three-tiered infrastructure.

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This chapter focuses on architecture and infrastructure using comparisons to a structural architecture approach. First there is a vision of what should be built. Then the architect develops plans based on the vision. The plans provide guidance and direction for others involved in building the system (or building). The architecture is the blueprint which translates the business strategy into a plan. The infrastructure is the physical components which when assembled best suits the plan.

The large number of IT choices available, coupled with the fast speed of technology changes, makes it nearly impossible to build the best architecture. But managers must, nevertheless, make decisions in this environment. The first step is translating strategy into architecture, and the second is to translate architecture into infrastructure. Strategy drives a number of business goals that in turn drive business requirements which drive architectural requirements. The architecture drives a number of functional specifications, which in turn drive decisions about hardware, software, data, and networks.

A simple framework is presented for use by managers who seek to understand both what a current information systems looks like, and what questions to ask in order to build a new one.

The framework is shown in the table below (this is a simplified version of the figure 6.6 in the textbook).

Component Hardware Software Data Network

What

Who

Where

This framework is most useful when applied to both architectural and infrastructure decisions.

Figure 6.6 in the text illustrates typical questions to answer in order to populate this matrix.

Enterprise Architecture is new to this edition. Information from experts Ross, Weill and Robertson from their book “Enterprise Architecture as a Strategy” are the main source of information for this section. Specifically, focus on what an enterprise architecture really is, and the four key elements of its components. TOGAF is included in this section along with the Zachman framework, which were both included in the 3rd edition under other frameworks.

Enterprise Architecture is important to highlight as many companies have embraced enterprise systems (SAP, Peoplesoft, etc.). A good discussion point for this section may be to discuss the challenges of implementing such a framework, particularly within a global organization, or use the TennisUp case.

Other managerial considerations when designing and implementing an appropriate information system are explored. The first is to understand existing architecture, which allows the manager to evaluate if requirements of an evolving business strategy in terms of IT capacity and capability. Second, is the issue of strategic time frame. By the time an IT decision is made, the technology is often already out of date. The architecture must take into account technological advances and have the capability to evolve as technologies evolve. Life of the strategy needs to be covered. Third, technical issues including adaptability, scalability, standards, and security

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(new to this edition) are introduced. It is important to focus on the security portion of this discussion since that is a tremendous risk for organizations and must be carefully and properly planned. Fourth, financial justifications for IT investments is difficult, if not impossible, to calculate. Payback calculations in the form of increased productivity, increased interoperability, improved service, and others are often considered "soft numbers." (Financial issues are discussed in greater detail in chapter 10: Funding IT.) This chapter takes students through a simple case, TennisUp, to illustrate how to go from strategy to infrastructure, using the framework and questions posed in the chapter.

The food for though section is on cloud computing. This is a new topic that includes an explanation of what cloud computing is and how it works in an organization.

Alternative Approaches to Architecture/Infrastructure We appreciate the input from reviewers about alternate frameworks that can be used in this chapter. One reviewer and adopter of the first edition suggested including a section on Enterprise Architecture Planning, as well as a diagram and discussion of the Zachman framework. John Zachman proposed the framework for Enterprise Architecture that integrates business architecture, data/information architecture, application (systems) architecture, and technology architecture. Each of these architectures is composed of a number of complex components linked together to form a coherent, enterprise-wide solution. See the following for more detail: “Concepts of the Framework for Enterprise Architecture,” by John Zachman http://members.ozemail.com.au/~visible/papers/zachman3.htm “Enterprise Information Architecture,” by Clive Finkelstein http://members.ozemail.com.au/~visible/papers/Architecture.html From an earlier edition of the text, Professor Paul Cule provided a description of the model that he uses in his classes when covering this chapter: “I currently use the 1st edition of Managing and using information systems and have done starting with pre-release material. Although my course content has changed significantly over time since I started the course in 1996, the general philosophy of the course has been constant. I find Keri’s approach mirrors the approach that I take in class so it is an ideal textbook. However, I do need to provide an overview of technology to students so that students know the terms when they come up in discussion. I use the framework below to discuss the elements of Hardware, Networks, System Software, and Application Software.

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“The diagram below shows the multiple levels of technology required that are required to provide the facilities that we as users see and use.

Level 1 is the hardware level. The academic curriculum addressing this level is called something along the lines of ‘Computer Engineering.’

For the hardware at level 1 to actually do something, it must have a controlling software layer.

This is the Operating System (Level 2a). Examples of operating systems are Windows98, UNIX and LINUX. Operating system design and development is the province of Computer Science.

The operating system manages the hardware and schedules other software applications. Level 2b contains the software necessary to develop applications and is Computer Science. This includes software such as language compilers, e.g., Java, C/C++; Utilities, e.g., formatters, communication software; Browsers, e.g., Netscape, Internet Explorer. Most applications today store their data in databases. The software that manages these data are called Database Management Systems (DBMS), Level 2c, and developing this software also falls under Computer Science.

Levels 1 and 2 amount to an IT infrastructure upon which we build Business Information Systems. Thus we have three distinct levels of information technology: Hardware, Level 1; System Software, Level 2; and Business Application Systems, Level 3. “ I supplement this with ad-hoc slides to illustrate the key points. Formally providing these as supplement to the text would be useful.

I do use supplementary readings although predominantly from HBR, Sloan Management Review, or the California Management Review. I also use my own articles on IS project risk and its management for the Project Management section. I might make my students aware of Fast Company just as we discuss what is currently in the Wall Street Journal or the Financial Times but I see little value in a reader.

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Illustrative Answers to Discussion Questions 1. Think about a company you know well. What would be an example of the IT architecture at that company? An example of the IT infrastructure?

Ans: This is an open-ended question, asking the student to draw upon their personal experience.

An answer would include a description of the architecture as distinct from the infrastructure, and the advanced student might even start with a strategic business goal and show how it was translated into an architectural goal, and an infrastructure. Others might use the matrix framework from the chapter to describe the architecture or infrastructure. Architectural goals might be to build an information system that efficiently connects up employees, customers and vendors and supplies them the information they need at the time they need it. The infrastructure that supports that architectural goal might be the use of the intranet along with desktop computers in every office, supporting software, and a data warehouse with the data available.

2. What, in your opinion, is the difference in a client/server architecture and a mainframe architecture? What is an example of a business decision that would be affected by the choice of the architecture?

Ans: This is a more difficult question for a non-IT manager. Client/server architecture would be one where the desktop PCs and the network itself contain intelligence, store data, and do processing, whereas a mainframe architecture is one where the majority, if not all, of the data and processing are done at the mainframe. In a mainframe architecture, the desktop systems just "connect" to the mainframe and the mainframe does all the work. An example of a business decision that might be affected is the decision to open up the company's systems to customers. If the architecture is mainframe based, the customers need only connect in. If the system is client/server based, the customers need to look like a client to the system. Security concerns differ for both architectures, based on where the data is stored and where the processing is done.

For example, mainframe architectures would need protection against problems that might bring down their whole system. Client/Server architectures would need protection from corrupting the data and software that might be stored on the client.

3. How does the Internet affect an organization's architecture?

Ans: The internet must now be considered part of every company's business strategy, at least as a means of reaching outside the company if not as a means of communicating within a company.

It affects the architecture in that it may require a re-alignment of architectural goals and visions.

The Internet means companies must design their systems so they can be accessed by the internet, and that may mean a complete redesign of how the screens look (sending traditional screen formats out to customers, especially ones that require entry of codes and abbreviations, in inappropriate), how data is entered (systems need to be usable by a wide range of people, so prompting and data correction is critical), how the processing is done (where will it be done?), and what systems are even accessible.

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4. Saab minicase.

The case is described in more detail at www.cio.com/archive/enterprise/051599_deen.html 1. Use this case to describe how Saab went from vision to infrastructure.

Ans: Saab’s vision was to produce high quality cars. This vision was reflected in its business strategy to improve productivity and reduce costs. To do so, it wanted to take advantage of the Internet while leveraging its legacy system. The business requirements derived from the business strategy could include facilitating dealer access to corporate information to improve the timeliness of the information and to consolidate the information about vehicles, customers, warranties, sales and service that is accurate to the xxx% level. These requirements were then translated into infrastructure: This IRIS system is written in Java using IBM DB2 running on the IBM AS/400. Lotus Domino is the middleware that mediates a between the legacy system and the front-end Web interface.

2. What criteria did Saab use in selecting its infrastructure?

Ans: Saab clearly was interested in cost (considering its business strategy of reducing costs) and such technical issues as scalability and reliability. Saab needed an infrastructure that was compatible with its existing legacy system. Other issues that were important in building its ebusiness infrastructure were probably: • Bandwidth to handle needs during its peak processing • Speed • Security • Mirror sites • Routing of internal vs. external traffic • Implementation approach (outsourcing) • Virtual Private Network for the Dealer Communication System Further Discussion Questions 1. The use of mobile technologies in the workplace have the potential to provide advantage to the organization. When thinking of mobile computing and communicating devices such as a BalckBerry or Palm Treo – how does this affect the complex interplay between choices of IT infrastructure, architecture and software?

For example, if FileMaker Pro, a database application has a superior mobile database application would that affect your IT architecture? What if the FileMaker application, integrated with a particular hardware choice or configuration? How might the various ‘cogs’ in the ‘wheel’ (or, small components of a larger whole) of IT and your organization interact? What complications might arise?

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Case Study 6-1: Hasbro This is a case of how a major company was able to purchase infrastructure for a new campaign. It shows how properly architecting a system can save money and provide needed service.

1.

What are the key components of the infrastructure Hasbro used for this project?

Ans: An application that utilized Amazon Web Services (AWS) and open source software to produce the infrastructure that backed up a website for the marketing campaign.

2.

Why do you think Hasbro used a 3rd party, Digitaria, to help them create this project? What resources would they need internally to do this themselves?

Ans: Save time, and money. Also, they wanted to take advantage of a proven service that already existed. They needed staff that clearly understood the system, and supportive management. They would also need to add servers and bandwidth to their system to handle the peak loads from incoming web requests.

3.

What are the advantages and disadvantages to Hasbro of using web services?

Ans: Advantages: time savings and cost savings; less risk since they were partnering with and using a proven resource (Amazon Web Services). Disadvantges: must rely on a 3 rd party vendor to provide the service and extra resrouces; communication breakdown risk; etc. (lots of options for a variety of answers here).

Case Study 6-2: Johnson & Johnson’s Enterprise Architecture This is a case about the process J&J used to build their architecture. It nicely lays out the process from the chapter, going from strategy to architecture, and what specific steps J&J management took.

Sample answers to discussion questions: 1. Discuss Johnson &Johsons’s approach to providing an IT infrastructure to support its oneface-to-the-customer strategy.

ANS: once the business strategy was understood, the IT executives translated it into specific IT strategy. They understood that the way they were organized, with decentralized operating units, would have to change somewhat and everyone in the firm had to think about IT in terms of corporate as well as operating level. They began by training the IT staff about the need for integrated systems and common standards. They shared their thoughts about the value to the business of this new approach. They changed the funding model so that corporate provided funds for the new centralized strategy. Over time, the decentralized operating units were not dismantled, but new operating units were formed to link these units with shared customers and markets. The process was a clear example of moving from strategy to architecture.

2. What are the strengths and weaknesses of this approach?

ANS: The astute students will discuss the strengths and weaknesses of centralized versus decentralized and realize that J&J was somewhat of a hybrid between the two. The strengths might include lower costs (due to standards and reduction of redundancy by centralizing shared technologies and customer information), reduction in errors since information can be stored in

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one central location, better alignment with the business strategy of shared information.

Weaknesses are that local, decentralized business units may not feel they can get the ‘customized’ IT solutions they need because the standardized, centralized systems can’t (or won’t) accommodate.

Supplemental Readings Cases: (The following cases can be found on the instructors website that accompanies this text.)

Stately Furniture And Décor This case describes the various business processes involved in taking and filling customer orders for custom-built furniture at Stately Furniture. These processes are explored from the view of a number of different departments in the firm: information systems, production, quality control, sales and marketing, and accounting and finance.

General Motors IS&S This case describes the creation of the virtual IS organization at General Motors following the divestiture of EDS in 1996. It describes the relationship that was developed between GM and EDS after the split, and how the internal IS organization was rebuilt, since everything had been turned over to EDS when the merger first occurred in 1984.

Other Cases: Scientific-Atlanta, Inc. by T. Eisenmann HBS Publishing 2004; (26 pages) Focuses on strategic challenges confronting Scientific-Atlantia (S-A), a leading manufacturer of cable TV equipment in mid-2004. The cases focuses on switching costs and their impact on competitive dynamics and industry structure.

Offshoring at EDC by H.W. Lane & D.T.A. Wesley; Richard Ivey School of Business Education Development Center (EDC), a non-governmental organization, is an example of offshoring best practice and will help identify factors for successful implementation of an outsourcing project.

Up In Smoke: Rebuilding After an IT Disaster by S. C. Ross, C. K. Tyran,; D. J. Auer Idea Group Publishing 2005 (18 pages) This case discusses the issues faced by the college as they resumed operations and planned for rebuilding their information technology operations. The almost-total destruction of the college's server assets offered a unique opportunity to rethink the IT architecture for the college.

End-User System Development: Lessons from a Case Study of IT Usage, by M. E. Jennex; Idea Group Publishing; 2005; (14 pages)

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This case looks at a study of end user computing within the engineering organizations of an electric utility undergoing deregulation. The case was initiated when management perceived that too much engineering time was spent doing IS functions.

Power Conflict, Commitment & the Development of Sales & Marketing IS/IT Infrastructures at Digital Devices, Inc., T. Butler,; Idea Group Publishing. 2005; (18 pages) The case reports on the web of individual, group and institutional commitments and influences on the IS development and implementation processes in an organizational culture that promoted and supported user-led development.

Amazon.com: Exploiting the Value of Digital Business Infrastructure by L. Applegate and M. Collura HBS case number 800330 2000 Enables a thorough analysis of Amazon.com and the company's value proposition, in terms of its business concept, digital business capabilities, and community and shareholder value. Examines the company's complex set of business models and web of business relationships, as well as Amazon's plan to monetize (generate revenues and earnings through) its assets. Teaching Purpose: To enable students and executives to analyze firm performance and value in a highly uncertain, rapidly growing business environment.

Brooklyn Union Gas: OOPS on Big Iron by B. Konsynski and E. Andersen (HBS case number 192144 6/12/1992) Faced with a situation of a changing external environment and aging information systems, Brooklyn Union Gas, a large natural gas distributor, chose to use object oriented programming to develop their new customer service system. The project was the first to use this technology in a large-scale transaction-based setting. The case chronicles the events leading up to the decision to use object-oriented technology, the development phase, and the technical and business implications.

PricewaterhouseCoopers: Building a Global Network by Ali F. Farhoomand; Marissa McCauley; Peter Lovelock; Minako Fukagata (HBS case number HKU096 2000 PricewaterhouseCoopers (PwC) built an intranet, KnowledgeCurve, to incorporate all the assets (knowledge, people, skills) of the company to be utilized by the firm. This case discusses the changes, issues, and challenges they faced building this system.

Hong Kong's National Information Infrastructure by Ali F. Farhoomand and Pauline Ng Hong Kong University Case (Library) 1998 This case describes Hong Kong's status as a world trading hub and the benefits of the NII in maintaining competitive advantage. Reports from the various task forces commissioned by the government have been presented with recommendations. How should the government play its "facilitating" role in bringing together a coherent NII for the benefit of the Special Administrative Region?

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Tom Thumb Supermarkets by Blake Ives 1994 (http://www.cox.smu.edu/mis/cases/tomthumb/case.html ) Describes the development of an IT infrastructure to manage Tom Thumb's Promise Card program.

Daton Corporation by Ajit Kambil (New York University), 1993 (http://www.stern.nyu.edu/~akambil/teaching/cases/daton.html) Describes the design and construction of a wide area network at a computer equipment manufacturing company.

Prudential Chamberlain Stiehl: The Evolution of an IT Architecture for a Residential Real Estate Firm, A. Borchers and B. Mills, Idea Publishing Group, 16 pages, IT5622, (setting: U.S.) This case describes the evolution of an IT architecture for Prudential Chamberlain Stiehl Realtors (PCSR), a 14 office, 250 sales agent real estate firm located in Southeast Michigan.

Information Systems Development and Business Fit in Dynamic Environements, P. Kanellis, P. Papadopoulou and D. Martakos, Idea Publishing Group, 12 pages, IT5669 This case describes the effects of privatization on a large industrial organization and sets the context for illustrating the vulnerability of information systems in turbulent environments. The case presents a detailed chronology of the events that lead to an increased awareness of the importance of information systems flexibility. The case examines the difficulties face by an organization when its inform systems were incapable of dealing with frantic changes in environmental contingencies.

Nation-Wide ICT Infrastructure Introduction and Its Leverage for Overall Development, P. Pale and J. Gojsi, Idea Publishing Group, 24 pages, IT5690, This case describes a ten-year effort of creating an information and communications technology infrastructure in Croatia. Although initially an independent agency, five years after it began operation Croatian Academic and Research Network – CARNet had been transformed into a government agency. The case explores the question of whether or not CARNet has truly been successful and seeks to answer the question of whether the initial goals have been realistic and achievements sufficient, considering the low penetration of ICT into the Croatian society.

Outrigger Hotels and Resorts: A Case Study, Gabe Piccoli 2005, Communications of AIS, Volume 15, Article 5 This case describes the history, strategy, and current information systems infrastructure of a midsize, privately owned hospitality firm. The case is designed to provide the substantial background information needed to engage successfully in setting direction for IS resources and their use at Outrigger Hotels and Resorts headquartered in Hawaii.

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Other Cases - PassAct, Inc. (HBS Case 602-026, March 13, 2003) - CISCO Systems: Building leading Internet Capabilities (HBS Case 301-133, Dec. 17, 2001, Setting: Silicon Valley, CA) - Japan Net Bank: Japan's First Internet Only Bank (UHK case HKU178, Jan. 24, 2002, Setting: Japan).

- Cisco China (HBS case 302-069, Dec. 18, 2001, setting: China) - Alibris (A) (HBS case 601-111, Mar. 13, 2002, setting: internet) - Microsoft Security Response Center (A) (Ivey case study 901E19, Jul 25, 2001, setting: USA) - Banking on the Old Technology: Understanding the Organisational Context of 'Legacy' Issues- Communications of AIS, July 1999, Volume 2, No. 8 http://cais.aisnet.org/articles/default.asp?vol=2&art=8 (setting: UK) - DSL Provisioning: Redefining "Customer Service", Communications of AIS, December, 2001, Volume 7 Article 21 http://cais.aisnet.org/articles/default.asp?vol=7&art=21 (setting: USA) - TDG Engineering: Do We Really Need Another Upgrade? Communications of AIS, February, 2002 , Volume 8 Article 17 http://cais.aisnet.org/articles/default.asp?vol=8&art=17 (setting: USA) Readings/Articles: Apgar, M. & Keane, J.M. “New Business with the New Military” Harvard Business Review 82(2) 2004 Virtually all aspects of the military are changing to ensure that it can fight unpredictable threats while sustaining the infrastructure needed to support and train forces. The military is turning to nontraditional business partners to meet a wide range of needs, from health care to housing to information technology.

Kane, K. “Leveraging the New IT Infrastructure for Strategic Agility” Balanced Scorecard Report Harvard Business School Publishing 2003 (5 pages) In most companies, IT infrastructure is built in an ad hoc, piecemeal manner, with heavy investments made on a project or operational basis--and little forethought given to how it must support the enterprise's evolving strategy. IT infrastructure along with thoughtful, deliberate decision making made jointly by business and IT leaders delivers the strategic agility organizations need in a rapidly changing world.

Managing Your 'Ecosystem', William M. Ulrich, Computerworld, (January 22, 2001) Component-based frameworks for E-commerce, Peter Fingar, Communications of the ACM Volume 43, No. 10 (Oct. 2000) Pages 61 - 67 Personalized communication networks, Doug Riecken, Communications of the ACM Volume 43, No. 8 (Aug. 2000) Pages 41 - 42

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Capturing human intelligence in the net, Paul B. Kantor, Endre Boros, Benjamin Melamed, Vladimir Meñkov, Bracha Shapira and David J. Neu. Communications of the ACM Volume 43, No. 8 (Aug. 2000) Pages 112 - 115 New I/O architecture draws strong backers, By Nancy Weil, Computerworld, (January 08, 1999) See also the companion article on this architecture at: I/O Rivals Declare Truce, Plan New Architecture, By Stacy Collett, Computerworld, (September 06, 1999) Schwab simplifies Web trade architecture, Carol Sliwa, Computerworld, (February 22, 1999) Architecture's promise of better performance will take a while, By April Jacobs, Computerworld, (April 27, 1998)

Books: NOTE: There are many books written about IT architecture and infrastructures, ranging from very technical to highly managerial. Interested faculty and students should visit local bookstores and/or online bookstores for the most current. Below is just a sampling.

McGovern, J. The Practical Guide to Enterprise Architecture NY: Prentice Hall 2003 Wiell, P. and Marianne Broadbent Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology MA: HBS Publishing 1998 Cook, M. Building Enterprise Information Architecture: Reengineering Information Systems Prentice Hall, 1996 Fitzgerald, Jerry, and Alan Dennis. Business Data Communications and Networking. John Wiley, 1996.

Kenn, Peter G.W. & Cummins, J. Michael. Networks in Action: Business Choices and Telecommunications Decisions. Belmont, CA; Wadsworth, 1994.

Rowe, Stanford H., Telecommunications for Managers. 3rd. ed., Prentice Hall, 1995.

Stallings, William, & Van Slyke, Richard. Business Data Communications. 2nd. ed., Macmillan, New York, 1994.

Stallings, William. Data and Computer Communication. MacMillan, 1993.

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Websites: www.techweb.com/encyclopedia TechWeb's TechEncyclopedia offers definitions and links for more than 20000 technology terms.

information

IS World Net has a number of articles and cases that may be of interest: http://www.cob.asu.edu/fac/ABhatt/ISTeachingCases.html www.informationweek.com www.computerworld.com www.beyondcomputing.com www.datamation.com All of these magazines regularly have articles on topics related to this chapter www.metagroup.com www.gartnergroup.com www.forrester.com www.ctp.com All of these research and advisory services have web sites with publicly available articles on topics related to this chapter.

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Chapter 7: Information Systems Sourcing Overview This is a new chapter that replaced the Doing Business on the Internet chapter from the 3rd edition. This chapter takes information from chapter 9 in the 3rd edition on outsourcing and covers the various types of “sourcing” now available in the IT world. This chapter looks at the “sourcing cycle” to consider the full range of decisions related to who should perform the information systems work of an organization (to buy or to rent). This includes outsourcing, insourcing, backsourcing, and more.

Key Points in Chapter This chapter begins with a case of how JP Morgan signed a huge outsourcing contract with IBM for most of its IT functionality. But, less than 2 years into a 7 year contract JP Morgan cancelled the contract and brought its IT back in-house. The case focuses on the fact that many factors must be considered when a company is considering “sourcing” part or all of its IT functionality.

This chapter provides a comprehensive overview of the various sourcing models and the decisions that go into deciding on which sourcing model would be the best fit for an organization. The chapter starts with a discussion on the “sourcing decision cycle framework”.

Key to this section is the series of questions that need to be asked by an organization when determining what type of sourcing model should be deployed. Figure 7.1 shows an example of the sourcing decision cycle framework. Make sure that students understand that deciding on a sourcing model is not easily answered, but requires attention to a number of issues.

Next, insourcing is discussed. Insourcing is the “make” decision, meaning it is going to be done in house. Examine the drivers that favor this decision and make sure that students discuss the challenges of this model. Figure 7.2 covers these issues.

Outsourcing is covered next with drivers being discussed, its challenges and how to avoid pitfalls. Make sure to discuss the drivers and have students discuss what events in the economy most influences the drivers. Figure 7.3 covers a variety of drivers to outsourcing. Also, spend time covering the challenges of outsourcing and include a discussion of how companies like JP Morgan end up brining their IT functions back in-house after trying outsourcing. One of the big challenges is giving up control of the IT function to another company. This was one of the root causes that JP Morgan stated when it brought IT back in-house. This would be a good discussion point for the class.

Outsourcing abroad covers the issue involved in moving IT to another country. There is offshoring and nearshoring. Offshoring is moving the IT function to a distant land, where nearshoring is moving the IT function to another country that is nearby. For example if a company in Texas outsourced some function to a nearby location in Mexico. One of the key issues in outsourcing is cultural and language differences. Managers must understand the culture of the country or region that they are considering offshoring their IT. Carefully examine the factors that drive a company to offshoring, as it is not always just a financial decision. There are

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also different Tiers of software exporting nations which may help a manager to decide which region makes most sense. Figure 7.5 shows some best practices of offshoring. Then, government involvement in offshoring is discussed. This would also be a good discussion starter to query the students on their position on offshoring. Do they think it hurts or helps their local economy? A lively debated could be prompted using this material. Nearshoring is a type of outsourcing where a company sends work to a foreign, lower-wage country that is relatively close in distance or time zone. The client company hopes to benefit from one or more ways of being close. This could include: geographically, temporally, culturally, linguistically, economically, politically or from historical linkages. Lastly, there is coverage of a captive center which is an overseas subsidiary that is set up to serve the parent company. This is an alternative to offshoring or nearshoring and there are four major strategies that are being employed: Hybrid Captive, Shared Captive, Divest captive, and Terminated Captive.

Make sure to take time discussing backsourcing and the drivers that influence the decision to bring the IT function back in-house. More and more companies are deciding to backsource for a variety of reasons (see the Deloitte Consulting study results). It is interesting to see that what was perceived as a significant cost savings by a corporation ended up costing the company more than anticipated, or was not what they expected. What is interesting is the comment on how the reasons for backsourcing mirror the reasons for outsourcing the IT function in the first place.

Lastly, there is coverage of other sourcing models. Such as crowdsourcing, full vs selective, and single vs multiple vendors.

The food for thought section is about outsourcing and strategic networks. There are many issues and risks involved with outsourcing. A strategic network is a long-term, purposeful web of close relationships for providing a product or service in a coordinated fashion. The company becomes a hub with suppliers as part of its network. This model can lower the cost of working with others in the network and the company can become more efficient than its competitors (and very flexible). Discuss the advantages and disadvantages of this type of model. Get students to discuss what the challenges may be for such a model.

Illustrative Answers to Discussion Questions 1. The make-versus-buy decision is important every time a new application is requested of the IS group. What, in your opinion, are the key reasons an IS organization should make its own systems? What are the key reasons it should buy an application?

Ans: There will be a variety of answers to this question, though students should integrate the information covered in this chapter to formulate an appropriate answer. Per the text, the key drivers to insource are: Good for core competencies; Good for confidential or sensitive IS services or software development; Time available in-house to complete software development projects; In-house IT professionals have adequate training, experience or skills to provide service or develop software. The buy decision will also depend upon things such as cost, availability of resources (human, technical, etc.), and other drivers. Per the text the drivers are: Offers costs savings; Eases transition to new technologies; Offers opportunity for better strategic focus;

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Provides better management of IS staff; Offers better ability to handle peaks; Makes it easier to consolidate data centers; Provides a cash-infusion 2. Is offshoring a problem to your country? To the global economy? Please explain.

Ans: This is an opinion question. People are on both sides of this question, and students will most likely be on both sides as well. It is important to make sure that students “opinions” are grounded in actual facts, not just emotionally charged rhetoric. Push students to think through the actual benefits and costs to a country and the world economy as a whole. Governments can hinder or support offshoring, but the playing field is not equal, and some countries subsidize offshoring. Look at the data in the text - Loss of jobs in countries offshoring (500,000 US jobs in 2004, expected to reach 3.4 million in 2015). The US congress proposed 20 federal law proposals to restrict offshoring and states have proposed laws to limit and or restrict offshoring.

3. Premiere Technologies, Inc., a fast-growing supplier of communication services in more than 30 countries, provides an example of successful use of an ASP. Premiere began to implement an enterprise resource planning (ERP) system, and found that whenever there was a problem or call to work on a “revenue producing” information system, all resources were diverted from the implementation of the ERP. Premiere decided to outsource the ERP applications. The ASP came in not only to help plan how to best make the ERP system successful, but it bought and maintained the servers on which the ERP runs, installed and configured the ERP software, and staffed the help desk to make the deployment smooth. When Premiere acquires a new company, something they do regularly, the ASP takes care of incorporating the new acquisition into the ERP. By one estimate, Premiere saved about $3 million over five years by using the ASP instead of doing it themselves.33 a. Discuss the advantages an ASP offers Premiere Technologies, Inc. Ans: Obviously it saved them money. Also, it allowed Premiere to focus on their core competencies, rather than spending an inordinate amount of time trying to get an ERP system work properly. b. What possible risks are associated with Premiere’s use of an ASP? Ans: Same risks as with outsourcing; • • • • • • •

A degree of control is surrendered.

Lack of adequate anticipation of new technological capabilities when negotiating outsourcing contracts.

Company gives up any real potential to develop them for competitive advantage.

Contract terms may leave clients highly dependent on their providers.

Competitive secrets will be harder to keep.

Savings may never be realized.

Other challenges of working with outsourcing firms.

c. What would determine which application(s) to give to an ASP versus the ones to keep inhouse?

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Ans: This would depend upon the critical nature of the application, and if the company (Premiere) had the technical ability or desire to run an application. Security and confidentiality are always drivers to keep applications in-house, so a company must decide if the risk of compromising proprietary data is worth the risk of outsourcing. d. Premiere Technologies was seven years old when it turned to using ASPs. When would it make senst to use an ASP for start-up companies?

Ans: It may make more sense for a start-up to use an ASP since they may need to focus as much time as possible on its core mission. This would also depend upon the type of company (technology vs non-technology). Also, a start-up would be able to expand its reach faster with an ASP that can easily handle addition services and load.

4. When does using crowdsourcing make sense for a large corporation that already has an IS organization? Give an example of when crowdsourcing might make sense for a start-up company?

Ans: Used by companies to increase productivity, lower production costs, and fill skill gaps.

Can be used for a variety of tasks. It would make sense when the product or service being developed is not a security risk to expose to the public as a whole, and when the company wants a significant amount of “public” input on a project. It can also be useful when it is difficult to acquire certain skills, and when the company want to get the work done without having to engage in long term consulting contracts, or the hiring of new employees. For a start-up, it might make sense when they are wanting some work to be done that is not needed in a timely manner, or is not security sensitive. Lastly, it may be very helpful when lots of input is needed from a variety of individuals across the globe.

Case Study 7-1: SODEXHO ASIA PACIFIC This case was used because 1. How were jobs actually saved by Sodexho's decision to outsource?

Ans: Prior to the creation of the new system, managers were not able to take advantage of new opportunities because the existing fragmented IS system made it extremely difficult. Through the increases in efficiency and reduction in costs they were able to focus more on their customers and to take advantage of new opportunities which enabled them to grow the business. It also realized a 3% increase in profits.

2. What are the important factors to consider when deciding whether to outsource a particular part of a business?

Ans: Cost reduction achieved through economies of scale (outsourcer may be able to negotiate lower prices on hardware and software). Help a company transition to new technologies through access to larger IT talent pools. Bringing in outside expertise can help management focus more attention on core activities rather than on IT issues. Outsourcing companies know how to hire,

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manage, and retain IT staff. Greater capacity on demand. Overcome inertia to consolidate data centers. (See slides) 3. Describe five advantages that are commonly attributed to outsourcing? Demonstrate how the Sodexho Asia Pacific case illustrates (or does not illustrate) each of these advantages.

Ans: Cost savings – Sodexho was able to decrease costs (infrastructure costs were reduced by 25%). Help a company transition to new technologies through access to a large talent pool – IBM helped Sodexho achieve the creation of the new system through the significant talent and resources at their disposal. Overcome inertia to consolidate data centers – IBM helped Sodexho integrate its IT infrastructure so that it could be managed form one location (Sydney).

Offers opportunity for better strategic focus – after Sodexho hired IBM to do the work of integrating their IT systems through their SAP ERP system, they were able to focus on strategic and core business issues. Provides cash infusion – not sure that this was achieved but they did see a 3% profit increase and reduced costs.

4. Why do you think Sodexho decided to offshore to an Indian provider? What do you anticipate were some of the challenges experienced in offshoring to an Indian provider?

Ans: India is known for its technology rich talent pool, and English is widely spoken. Location may also be an issue since they are not far from India (relative to many of their Asian Pacific locations). Challenges would include any time zone issues, cultural difference between the countries.

5. What steps did Sodexho take to make the outsourcing arrangement a success?

Ans: They hired a quality partner through IBM. They also involved their employees throughout the entire process to help with gaining their support. The company still holds two meetings a week to ensure support and maintenance is of the highest quality. Lastly, no jobs were lost due to the outsourcing relationship with IBM.

Case Study 7-2: Overseas Outsourcing of Medical Transcribing 1. Are Chris and M.D. talking about outsourcing? Is it an example of offshoring? Is it an example of nearshoring? Explain.

Ans: It sounds like this function is already done outside of the hospital by a local company (not sure). If so then this would not be outsourcing, but it would be offshoring. I wouldn’t consider it an example of nearshoring since the distance between locations is about 4,000 miles and the cultures are extremely different, as well as potential language barriers.

2. What advantage do you see in sending the medical transcription work to Malaysia?

Ans: Primarily cost. But Good Hospital must carefully consider the concerns raised by Chris about security, transcription language errors, etc.

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3. What challenges to you see in sending the medical transcription work to Malaysia? What would you do to reduce those challenges?

Ans: Language barriers, cultural differences and security. Make sure that the center where the transcripts are sent is made up of English speaking employees. Also, do some testing to see if the company can transcribe sample data accurately, and see how this would compare with the existing personnel doing the transcribing. Cultural may be difficult to rectify, but training could be done to help with making sure that the Malaysian transcribers are aware of certain word usage that may appear to be confusing. Lastly, assure that the data is properly protected through encryption and secure connections (perhaps set up a VPN or private Intranet for file transmission).

4. How would you respond to Chris’ question?

Ans: I would say that we need to do testing prior to making any kind of decision, and do complete financial analysis and pros and cons of this possibility (perform a SWOT analysis on the issue). This is a good question to get an active discussion going. Make sure to include the students in this particular question.

Supplemental Readings Cases: The following cases can be found at http://www.offshoringmanagement.com/research.htm.

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Outsourcing Case Study JPMorgan's multi-location strategy: "The ETC has also led to the development of what JPMorgan calls a multi-location strategy, which looks beyond near-shore to offshore options. Now, projects are planned based on what kind of work needs to be done at primary, secondary and tertiary locations, corresponding to risk, cost and technology profile evaluations." - Wall Street & Technology

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Outsourcing Solutions and Industry Expertise Power De Novo Bank For Exponential Growth : "Success In Motion" - Fidelity IFS

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Case Study: Was Outsourcing to India the Right Move? - Inc.com

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Why offshoring fails, by Tana George - IT Manager's Journal

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How BofA Banks on Offshoring; Having grown via acquisition, it's used to having farflung operations. Now with centers in Asia, it's able to keep projects moving 24 hours a day - "We ask ourselves, 'Is there a core competency where we wouldn't want our Infosys team to learn what we're doing?' We're very careful what we send to third parties," she says. "We're not going to give people access to something that is proprietary or differentiating." Business Week

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Strategic opportunities at the intersection of globalization, technology and lifestyles. In this article, we discuss four “hot” strategic opportunities for the next three-five year time frame arising from globalization and technology trends and present frameworks that can help business executives leverage these opportunities. - Handbook of Business Strategy 2006

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•

Beyond Offshoring: Assess Your Company's Global Potential D Farrell - Harvard Business Review, 2004

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Move Over, India: The Shifting Geography of Offshore Outsourcing Creates New Challengers India took an early lead in establishing itself as a center for offshore outsourcing. Now, however, according to experts at Wharton and elsewhere, as many as 40 locations - including cities in the Middle East, Eastern Europe and Latin America - are vying to attract BPO work. The next big phenomenon will be the emergence of a huband-spokes model in the globalization of services, says one Wharton professor.

Knowledge@Wharton explores the topic

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Cutter Consortium: TWO POSITIONS: THE OFFSHORE OUTSOURCING DEBATE: There are two positions held by the supporters and the opponents in the offshoring debate. Generally, supporters of offshoring cite a persuasive list of global businessrelated advantages that result from offshore outsourcing. Most of the opponents concentrate mainly on the loss of jobs and the loss of technological advantage in the outsourcing country. We will discuss some of the main arguments from each side of the debate.

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Near-Term Growth Of Offshoring Accelerating Forrester has increased its estimate of how many US services jobs will go offshore in the near term. Long term, we believe that our previous projection of 3.3 million by 2015 is still accurate. The near-term increase is driven by a combination of the following four factors: 1) Visibility has encouraged more conservative companies to experiment with going offshore to protect themselves competitively; 2) a broadening of the IT services offered by offshore vendors like Wipro and Infosys; 3) the establishment of captive offshore centers by user companies for business process outsourcing (BPO); and 4) onshore IT technology and services vendors setting up shop in locations like India, China, and Belarus to develop/maintain products or provide lower-cost services.

Readings/Articles: Cross, J. “IT Outsourcing: British Petroleum's Competitive Approach” Cross J. Long Range Planning, Volume 28, Number 4, August 1995 , pp. 128-128(1) The cornerstone of BP's outsourcing strategy is a novel arrangement: multiple IT suppliers that act as one. The suppliers saw themselves not only as allies but also rivals competing for business.

As a result, one problem was reluctance to share information. BP's experience with outsourcing convinced the company that the market allows consideration of options not thought possible a few years ago. It has allowed the focus of internal energy to be on ensuring that finding and producing hydrocarbons is possible.

Fogarty, Kevin. (2008, May 16). “The State of Outsourcing IT.” Located at http://www.baselinemag.com/c/a/Outsourcing/The-State-of-Outsourcing-IT/.

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The market for outsourcing services is shifting as U.S.-based customers divide their outsourcing work among more providers, build in simple ways to break contracts and hire more U.S.-based software-as-a-service providers in addition to offshore outsourcing services.

Jae-Nam Lee, Shaila M. Miranda, Yong-Mi Kim. “IT Outsourcing Strategies: Universalistic, Contingency, and Configurational Explanations of Success” Focus on individual outsourcing decisions in IT research has often yielded contradictory findings and recommendations. To address these contradictions, we investigate a holistic, configurational approach with the prevailing universalistic or contingency perspectives in exploring the effects of IT outsourcing strategies on outsourcing success. Based on residual rights theory, we begin by identifying three dimensions of IT outsourcing strategies: degree of integration, allocation of control, and performance period. We then develop a model of fitas-gestalt, drawing from literatures on strategy, governance, interorganizational relationships, and outsourcing.

Mandel, Michael. (2007, June 18) “The Real Cost Of Offshoring. U.S. data show that moving jobs overseas hasn't hurt the economy. Here's why those stats are wrong.” Located at http://www.businessweek.com/magazine/content/07_25/b4039001.htm Whenever critics of globalization complain about the loss of American jobs to low-cost countries such as China and India, supporters point to the powerful performance of the U.S. economy. And with good reason. Despite the latest slow quarter, official statistics show that America's economic output has grown at a solid 3.3% annual rate since 2003, a period when imports from low-cost countries have soared. Similarly, domestic manufacturing output has expanded at a decent pace. On the face of it, offshoring doesn't seem to be having much of an effect at all.

Metcalfe, Lisa. “The Ins of Outsourcing.” (Unknown date) Located at http://technology.inc.com/managing/articles/200802/metcalfe.html Making the move to outsource functions, such as IT, may be intimidating for businesses the first time around. But it may be cost effective in an economic downturn. As the dollar continues to decline and markets remain volatile, businesses throughout the U.S. are looking at ways in which they can save on expenditure and bring in more profits. For some businesses this may involve hiring less staff, restructuring the company or seeking capital, but for many, outsourcing can helps accomplish these goals.

Mitchell, Bradley “Information Technology Outsourcing, How Outsourcing Affects Your Career in IT”. Located at http://compnetworking.about.com/cs/careersjobs/a/career_outsourc.htm In the United States, corporations plan to outsource many thousands of Information Technology (IT) jobs to outside firms. Most of these jobs will belong to so-called offshore organizations in India or Southeast Asia. The media buzz and corporate momentum around IT offshoring and outsourcing continues and shows no signs of abating.

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Overby, Stephanie. “Backsourcing Best Practices: Backsourcing—that is, bringing IT functions back in-house after they’ve been outsourced—may be the right move to make for some ... Located at http://www.cio.com/article/10510/_Backsourcing_Best_Practices_ Backsourcing—that is, bringing IT functions back in-house after they’ve been outsourced—may be the right move to make for some companies, such as JPMorgan Chase. But it isn’t easy.

"There isn’t a lot of quantitative data out there on how to do this right," says Jeff Kaplan, senior consultant with the Cutter Consortium’s Sourcing and Vendor Relationships Advisory Service and the managing director of ThinkStrategies. But some best practices are beginning to emerge.

Rosenthal, Beth. (2008) “How Outsourcing Helped John Wiley's IT Department Keep the Business Going During an Acquisition” Located at http://www.outsourcing-informationtechnology.com/wiley.html.

Three years ago book publisher John Wiley & Sons was about to purchase Blackwell Publishers.

The acquisition created a challenging situation for Wiley’s IT department: it had to keep its other businesses going before, during, and after the acquisition. But the publisher didn’t want to grow its internal IT staff. Offshoring was the answer. (2008)

Books: Brown and Wilson (2005) “The Black Book of Outsourcing: How to Manage the Changes, Challenges, and Opportunities.” Wiley; 1 edition (May 2, 2005) ISBN-10: 0471718890 The Black Book of Outsourcing is a comprehensive guide and directory for the emerging field of outsourcing, including expert advice on how to operate an outsourcing program, how to deal with the political aspects of outsourcing, and how to find a career in outsourcing. A controversial and emotional subject among business leaders and workers in the global business community, outsourcing is fast becoming one of the greatest organizational and industrial shifts in modern history. In this one-of-a-kind resource, outsourcing gurus Douglas Brown and Scott Wilson chart a course for business leaders charged with managing outsourcing initiatives and present a wealth of employment opportunities for workers who want to enter this growing field.

Kennedy and Sharma. (2009) “The Services Shift: Seizing the Ultimate Offshore Opportunity.” FT Press; 1 edition (January 19, 2009) ISBN-10: 0137133502 “Global Sourcing of Services is a powerful source of competitive advantage as economic borders become thinner... Kennedy pulls up the curtain and explains the what, why, and where of offshoring. His work with both providers and customers illuminates both the potential and the challenges of global sourcing. The Services Shift provides insights on the shifting business paradigms. This book cuts through the rhetoric and provides managers practical advice. A must read!!!” –Anurag Jain, Managing Director, Asia Pacific; President for Applications Solutions (AS); and President of Insurance & Business Process Solutions (IBPS) for Perot Systems

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Power, Desouza and Bonifazi. (2006) “The Outsourcing Handbook: How to Implement a Successful Outsourcing Process.” Kogan Page (February 28, 2006) ISBN-10: 0749444304 A comprehensive, 'user-friendly' nicely organised reference and guide which is confidently recommended reading." The Midwest Book Review "Provides a strategy that any manager can implement." European Foundation for management development "A hands-on and applied approach to exploring the intricacies of commencing, managing, renewing and/or terminating outsourcing engagements." Journal of Economic Literature "Helps the reader understand each stage of the outsourcing process, improves and strengthens the process once it has been implemented and gives important details needed to ensure success." Abstracts of Public Administration, Development and the Environment "Provides detailed insight into the processes, issues, pitfalls and successes for any type of outsourcing activity. The detail and advice given in the core of the book are first class; the authors do not assume any prior knowledge of the subject matter and they provide a valuable set of customer outsourcing methodology activities" E-Code Tjia and Carmel (2006) “Offshoring Information Technology: Sourcing and Outsourcing to a Global Workforce.” Cambridge University Press (June 13, 2006). ISBN-10: 0521843553 '... there are some fascinating insights here for IT executives ... The superb content isn't surprising once you realize that co-author Erran Carmel ... was a leading expert on globally dispersed software teams long before CNN's Lou Dobbs ever heard of offshore outsourcing. ...

As you'd expect, the book has country sketches and thoroughly covers subjects such as managing contractors, risks and legal issues. But for me, the richest sections deal with 'soft' topics like cross-cultural issues and overcoming the problems of distance, time zones and language. For example. there's a great danger of miscommunication with Indian IT workers if Americans use slang, business code words or too-subtle hints. An American who says, 'I was a bit disappointed that ...' may actually be upset, but the Indian may interpret that statement as 'It doesn't really matter'. And while American IT workers use the word contractor as a business term, in India, the term could mean one who cleans toilets. Don't fly to Bangalore without reading this book.'

Computerworld

Websites: www.cio.com http://news.cnet.com www.wired.com http://www.outsourcing-information-technology.com/ - this site has lots of articles and information about outsourcing.

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http://www.unisys.com/services/outsourcing/it__outsourcing/ - IT Outsourcing at Unisys http://www-935.ibm.com/services/us/index.wss/itservice/so/a1000414 - IBM Outsourcing and hosting.

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Chapter 8: Governance of the Information Systems Organization Overview Many managers have never had to interact with an information systems group. The point of this chapter is to introduce the roles in the IS organization, as well as the goals, operations, processes and responsibilities the IS organization does. The objective of this chapter is to set realistic expectations on how an IS organization works. When teaching this chapter, I recommend bringing in a guest speaker who is a CIO of a company. It would be ideal to bring in a CIO Of a large, Fortune 500-type business, but anyone with the CIO title will have an impact on the general student.

Key Points in Chapter This chapter begins with a brief discussion of 3M’s IT department and how the new CEO changed the structure of how IT was managed for large scale projects. It is interesting from several perspectives. The CIO was not happy with the disbanding the management group he realized that the new structure held the individual department areas more accountable and the CIO must constantly work to align his IT department’s goals with those of the corporation.

The CIO is the chief information officer of a business. This person is an executive, not a day to day manager. He or she has responsibility to help set strategic direction for the business and to help execute the strategic plans from the information systems perspective. The historic evolution of the CIO role is explored. And 12 responsibilities of the CIO are listed. Gartner published an article describing the skills needed for a CIO, and these are included in this chapter.

Not all organizations have a CIO. Someone is responsible for running the computers in the business, but no one in particular is charged with helping the business understand the strategic use of IT. There may be no one on the executive team charged with these responsibilities. In today’s business environment, the Web has taken such a large chunk of the executive team’s attention, that in some cases they believe that e-business is MIS. But it’s not, and the astute student will see both the connection between e-business and MIS and the opportunities lost when no CIO exists.

There is a number of “CXO”s in some organizations. A Chief Knowledge Officer, Chief Technology Officer, Chief Network Officer, Chief Privacy Officer, etc. are increasingly commonplace. Students might be asked to name some of the more creative “CXO”s they have seen (Fast Company magazine or website is a good source for finding creative titles of executives) and what their relationship might be to the CIO. There are a number of other roles in the IS organization. Some more traditional jobs are the Systems developers, database administrators, and analysts. Some newer jobs are webmasters, web designers, and web developers. Some IS shops have such extensive web organizations that new jobs and roles are creeping up everywhere. Students might be asked about web jobs they’ve seen (maybe even advertised in the school placement office) and what the tasks might be for someone with those job titles.

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The processes of the MIS organization are what the MIS folks really do. They have processes for traditional activities such as systems development, system maintenance, data center operations, and network operations. And there are processes for introducing new technologies, possibly for researching new technologies, and for getting rid of older technologies. There are processes for web-based activities that may be similar to traditional activities or may look very different (especially if these processes are run as part of other business units). And there are general management processes, such as resource management, administration, and general support.

Finally, there are usually a number of support processes which aid others in the company who need to access IT services or systems.

This chapter includes a section on what to expect from the IS organization. It was included to explicitly discuss how general managers and IS managers might work together. Typical projects are anticipating new technologies, forming strategic direction, innovating new processes, forming internal partnerships, managing suppliers, and setting standards. Also, included is a short discussion on promoting enterprise security, and a longer section on business continuity planning.

As information systems in an organization are increasingly web-based, making sure corporate assets are secure and operational is becoming more important to IS organizations. The general manager can expect discussions with IS personnel on how to make and keep information assets secure and operational, even in times of disaster. Using business continuity planning as a source for discussion, or an assignment would be well worth the students time.

The IS organization doesn’t do everything (although some IS people feel like there are no limits to what they may be asked to do). For example, typically the business unit has individuals who do some activities that look like something the IS organization might do. The business unit may have their own person doing technology scanning for applications specific to their business. They may be responsible for their own implementation projects. The applications strategy might be managed by the end user community. The point here is that each organization has its own boundaries. A general manager must understand where those boundaries are in order to effectively interact with the MIS organization.

The term “IT Governance” is visited again, and includes discussion on centralized vs decentralized structures, and further discussion on the Weill’s five categories of IT decisions (principles, architecture, infrastructure strategies, business application needs, and investment and prioritization). Centralized organizations offer advantages of control and scale. Decentralized organizations offer the advantages of local responsiveness. Both are desirable when managing IS. Federalism is a combination of the two and can offer advantages of both or simply disadvantages of both.

Lastly, under IT governance, there is discussion of decision making mechanisms and managing the global consideration. Under the global consideration make sure to discuss the research by the Concours Group and the four drivers that are shaping the IT organization. Obviously growth and innovation, demand for integration, changing workforce demographics, and expand options of technology supply. This becomes particularly challenging in a global environment (refer back to previous chapters on cultural issues, etc.).

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The food for thought section is on CIO leadership profiles and how the scope and complexity of this position has grown. CIO’s don’t just manage IT but many are responsible for managing another corporate function. A discussion of a recent study is covered on the profiles that characterizes the CIOs leadership role (IT Orchestrator, IT Advisor, IT Laggard, IT, and IT Mechanic).

Illustrative Answers to Discussion Questions 1. Using an organization with which you are familiar, describe the role of the most senior IS professional. Is that person a strategist or an operationalist?

Ans: Most students have some work experience on which to draw an answer to this question. Some students will be familiar with very large fortune 500 companies, consulting firms or service organizations, which usually have a CIO. In that case, they will most likely describe an executive type individual who is a strategist for the company. In other cases, the student will have worked for a company where the most senior information systems person is either the person running the data center or someone who makes sure all the PCs are running. IN that case, the description will be of an operationalist, someone concerned with operations but not involved with the business strategy on a regular basis.

2. What advantages does a CIO bring to a business? What might be the disadvantages of having a CIO? Ans: The CIO brings both a business and a technical perspective to a business. He or she typically has a technical background (although not always) and a general business background. The CIO helps the senior executive team make decisions with information systems impacts in mind. Not having a CIO might mean that a business decision is made which either costs too much to implement or is technically infeasible. A disadvantage of having a CIO might be that this person is often expensive. Finding someone who understands the business side of the equation as well as the technical side is difficult, and for some organizations it is too costly. Another disadvantage is that in some cases, having a CIO is seen by other managers as a signal that they, themselves, do not have to understand or worry about information systems impacts. Their thinking goes like this, “if there is a CIO, then he/she is going to worry about the IS side of things and I don’t have to”. But in an increasingly web-based marketplace every manager must be knowledgeable about IS and understand the impacts as they are wide reaching and devastating if problems occur.

3. The debate about centralization and decentralization is heating up again with the advent of network computing and the increasing use of the Internet. Why does the Internet make this debate topical?

Ans: The internet makes this debate topical for several reasons. First the Internet makes decentralization much more cost effective because it lowers the costs of transporting information between locations. It is possible to be miles apart and act as if, technically, people are in the same building. Second, the number of applications on the internet make possible local decisions (decentralization) on new ways to use IS to do business. But centralization is also an issue. Who

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will manage a company’s use of the internet? Will it be a central MIS group or local business unit managers? How will standards be set? Can a business unit use any old web vendor they find?

What happens when the web vendor disappears or fails to provide the services needed? Who will be responsible?

4. Why is the concept of decision rights an important issue for IT departments and the CIO? Ans: Who has the rights to make a decision is critical to the success of an organization. It determines how the organization as a whole is organized (centralized, decentralized, etc.). The CIO must know how the decision structure is organized and who has the power to make decisions particularly when it involved the IT structure.

5. Why can an IT governance archetype be good for one type of IS decision but not for another?

Ans: It would depend upon the type of decision needing to be made and the speed and flexibility needed for the decision. In a centralized environment decision making may be slower and more bureaucratic, but decision control is easier to manage since power is consolidated. In a decentralized environment or at a lower level (business unit) those closest to the system and/or problem have a greater level of influence on the decision. Steering committees and other group decision models can produce more sophisticated results but may also take more time than may be available for a critical decision that must be made on the spot.

Case Study 9-1: IT Governance at UPS 1. Discuss the IT governance mechanisms used at UPS. Ans: They started out with an executive steering committee in the 1980’s but in 2001 it refocused to an overseer role on UPS’s long term IT strategy. It has since been replaced by a committee made up of 15 senior managers from all functional areas within UPS and headed by the CIO. This committee was chartered with studying the impacts and application of new technology and to provide short term direction.

2. What does the representation of UPS’s executive steering committee suggest to you? Do you think that IT plays a strategic role at UPS? Why or why not?

Ans: That IT is seen as a critical success factor at UPS. The company relies heavily upon IT and the executive steering committee shows this focus. Yes, IT does play a strategic role at UPS. This can be seen by the inclusion of all areas of the organization is decision making regarding IT infrastructure.

3. What type of skills do you think are important for UPS’s CIO? Explain your answer.

Ans: The ability to relate and interface with all areas of the company (finance, accounting, sales, delivery, supply chain management, etc.). Also, a solid business understanding and how

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technology can be used to create competitive advantage (and not just technical know how). UPS has set up a structure that includes input from the entire corporation and the CIO must be versed in the entire business structure.

4. Why can decisions about standards be important?

Ans: Standards will influence or sometimes dictate what hardware and software can be used by an organization. Also, they are difficult to “undo” if it is determined later that this was not a good or the best possible choice (since substantial investments may have already been made).

Case Study 9-2: The Big Fix at Toyota Motor Sales (TMS) 1. Describe the advantages of TMS’s new decentralized IS structure. What are its disadvantages?

Ans: Note: Although the article talks about a decentralized structure, the astute students may note that the structure is more of a federated one. The DIOs are assigned to the business units and work closely with them. However, six major enterprise systems have been implemented, a high-level steering committee makes decisions about funding, and funding appears to be billed to the corporate level.

The primary advantage to this new structure is IT’s ability to better meet the needs of the users. By becoming more involved in and gaining a better knowledge of the operational units, IT personnel would produce more effective and probably more efficient tools for the business units. This should also reduce the number of varying IT systems used within the organization now that the IT department was more involved. Possibly, this would lead to a clearer unified business strategy with a more integrated IT strategy. The new steering committee reflects a high level of executive involvement. It should now be able to better prioritize projects and provide more focus to IT initiatives.

As far as the disadvantages, ongoing communications and training amongst the IT staff will be more difficult with a decentralized structure. Sharing of technical knowledge amongst the staff will require more effort since they are more spread out throughout the organization. Further, the IS department may have more difficulty getting funding since all departments must vie for limited funding. On the other hand, the IS department may be less accountable for its activities or projects that have gone sour than if a chargeback funding system had been employed since the business unit heads (and not the steering committee) would be carefully monitoring every expense. The students may point out that the steering committee may lack the requisite IT knowledge to make good decisions. That is why it is important for Cooper to serve on the committee.

2. What problems was Cooper trying to solve with the new IS structure? How successful do you think the new structure will be in solving these problems?

Ans: The students are fairly good in identifying the problems Cooper was trying to solve. Look to see how logical there response is about the likely success of the new structure.

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With the new structure, Cooper was trying to address the decreasing profits of the company due to the increased IT spending. Business units were allowed to buy their own systems due to the ineffectiveness of the company’s IT department. She recognized that this was caused by IT’s isolation from the rest of the company and an overall lack of understanding of the costs involved with maintaining an effective IT department. By integrating the department in with the business units, she could eliminate the need for unlimited spending on technology within the company and gain better control of the policies and procedures used to gather and maintain information.

Additionally, they can better serve the needs of the business units by finding the best and most efficient technology solutions. Finally, Cooper was trying to get higher executive support on project approval and also wanted to control the IT projects that were approved. Cooper was pretty successful as she got the steering committee not to approve any project unless there is a support from higher business executive.

3. Describe the role of the Executive Steering Committee at TMS. Do you think the Executive Steering Committee is a good idea?

Ans; The students have probably already addressed this question partially in answering the questions above. Be sure to point out that the steering committee is a good way to align the requests of the business unit with business strategy. Since many good projects will be requested and not all of them can be funded, the steering committee is a way to consider vying interests and to select the projects that are best for the organization based on criteria that are established by the committee. Point out that the steering committee should represent all key units. If IT is truly viewed as strategic by TMS, then high level executives should be on the committee, which appears to by the case. Further, Cooper should be on the committee to make sure that IT issues are understood.

Additional questions that you may wish to ask: 5. Describe chargeback, allocation and corporate budget funding methods. Which, if any, appears to be the approach used by TMS? Provide a rationale for your responses. What are the pros and cons of TMSs funding approach to recovering costs? (Chapter 10) Ans: Chargeback – Assigning costs to the departments/people who actually incur the costs and “charging” that department for those costs. Although this method is the most fair of the three, it also requires the most work and money to maintain.

Allocation – Allocating the costs of IT to different areas based on things such as number of employees or revenues earned in a department. This method, though similar to the chargeback method, may not be as fair since it doesn’t base the funding on the actual amount of usage time, but it provides for potentially easier calculations and maintenance.

Corporate Budget Funding – When the corporate executives decide on budget restraints for IT usage. This is done proactively rather than after the fact like in allocation and chargeback. If the company goes over the budget it may not allow another project to be ensued until the following fiscal year. This method is the easiest for IT to use.

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I believe Corporate Budget Funding is being used. I think this is used because of the phases assigned to the projects and the project will not receive more money until the phase is completed properly with good results. Also if a project is over budgeted then the excess money can be used for another project, which would show the money was already earmarked for specific projects and phases. Budgeting is more restrictive and requires more detail and the methodology used by the phases is a good match for budget funding. This is especially the case when budgets are set each year and if the company knows which phases it might have completed within a year then they would be able to budget more accordingly. This control will now allow the committee members to ensure all project spending is in the best interest of the business strategy. This requires a level of commitment and buy-in from management. On the other hand, accountability could be lost within operations and animosity could grow amongst operational leadership when their projects are not placed on the priority list. Some necessary projects could go unnoticed due to a lack of information at the steering committee level.

6. As a result of recent proposed GM cutbacks, it appears that Toyota may soon lead all other companies in the sale of automobiles in the United States. Based upon the information provided in the case above, which of Porter’s Generic Strategies does TMS appear to be applying? (Chapter 1) Ans: This question and the next are a good way to remind students of material covered earlier in the semester. They may confuse Porter’s Generic Strategies with Porter’s Competitive Forces Model.

Because the information is skimpy in the case, several different strategies may be argued. Be sure to consider the logic of the student’s arguments. For example: TMS seems to be adopting the cost focus strategy. TMS can’t be the low cost provider on the market while there are other companies like Hyndai or Kia. It can’t be a specialist either, since it has three divisions that encompass different segments of the market. However, it can carve its niche on the market by lowering its costs, being more productive and identifying its product with the customer’s expectations. While a customer does not buy a Toyota or a Scion because it is the cheapest car on the market, it is one of the most reliable ones at an affordable price.

OR…Based on the case, it appears that TMS is applying the low cost strategy. Cooper’s efforts are focused primarily on identifying the source of the excessive IT spending. Executives were looking more to the US market as a profit source since sales in Japan seemed to be losing market share.

This reliance led to more scrutiny on the numbers in the US division. Since revenues weren’t as able to be controlled, they began focusing attention on the cost of sales that was reducing profit.

7. Describe the three components in the Information Systems Triangle. Based on the information provided in the case, describe how TMS is aligning these components. (Chapter 1) Ans: Toyota’s business strategy is to make a profit from selling cars to customers and cutting the costs associated with selling cars to maximize their profit. TMS’s business strategy drives its organizational strategy and the Information Systems strategy. Cooper has changed the organizational strategy to align with the business strategy by creating a more decentralized, and more responsive IT department. This also called for some slight reorganization in other departments as executives were require to be a part of some of the meetings. This organizational strategy fit into the business strategy in that it has made employees be more responsive to the needs

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of the company, thus cutting costs and maximizing profit. Obviously the Information Systems strategy was changed to align with the business strategy. Because executives are involved and have to accept responsibility for the IT projects, it greatly decreases the costs of projects which are aligned with the business strategy. It also provides the entire company with the best technology, because the support must be there for the executive to sign off on it. Having the best technology from the price allows the firm to make a greater profit. Business strategy, organizational strategy, and information systems strategy are all complementary. While the business strategy drives the others, they must all support each other if a company is to maintain competitive advantage.

Supplemental Readings Cases: (The following cases can be found on the instructors website that accompanies this text.)

Case Study On The Creation Of A Commercial South African Software Development Company This case looks at many of the factors necessary for the development of a software development company, or an entire industry, in a developing country. The case firm is in South Africa, and the authors draw comparisons between software development companies in South Africa with those in Ireland, India, and Israel.

Continental Airlines Continental Airlines entered into a ten-year outsourcing agreement with EDS when Continental Airlines was suffering financial setbacks and bankruptcy. This agreement was initially designed to provide expertise to Continental in an area that was not a core competency, and to also help cut costs for the airline. However, Continental successfully turned their business around in the mid-1990s, and this case discusses the implications this has for the relationship between Continental and EDS. While this relationship had worked well initially, there were some strains developing by the mid-1990s, and this case focuses on where Continental should go with their relationship with EDS. For this chapter or possibly chapter 5 (Business Transformation) General Motors IS&S This case describes the creation of the virtual IS organization at General Motors following the divesture of EDS in 1996. It describes the relationship that was developed between GM and EDS after the split, and how the internal IS organization was rebuilt, since everything had been turned over to EDS when the merger first occurred in 1984. For this chapter or possibly chapter 6 (Architecture and Infrastructure) Other Cases: UCB: Managing Information for Globalization and Innovation (A) by F. Warren McFarlan & B. DeLacey. Harvard Business School Publishing. 2003 (47 pages) This case presents a complex total MIS strategy case for a $3 billion European pharmaceutical/chemicals company based in Brussels. It covers corporate strategy alignment of IT portfolio, IT operations issues, and global coordination of IT.

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NTT DoCoMo, Inc.: Mobile FeliCa by Stephen P Bradley, Thomas R Eisenmann, et al Harvard Business School Publishing. 2005 (23 pages) DoCoMo, Japan's largest mobile phone company, are formulating a strategy for mobile FeliCa: contactless integrated circuits that will be built into DoCoMo phones. The options, which are not mutually exclusive, include: reducing mobile phone subscriber acquisition and retention rates by offering "sticky" differentiated new services; extracting monopoly rents from a joint venture (with Sony, FeliCa's inventor) that will license FeliCa technology to other mobile phone companies and application providers; and profiting from eMoney (retail payments) either through partnerships with incumbent financial services firms or by offering payment services directly.

Change Management of People & Technology in an ERP Implementation by Edwards, H. E.; Humphries, L. P. Idea Group Publishing; 2005 Eighteen months after adopting an enterprise resource planning (ERP) system the chief executive officer wanted an investigation into the performance of the system. The results of the investigation reported here reveal problems with the acquisition and implementation process.

Offshoring at Global Information Systems, Inc.; by William E. Fruhan, Jr. Harvard Business School Publishing; 04/23/2004; (19 pages) This case explores the topic of offshoring high-tech jobs several perspectives. The issues presented include determining the stock price consequences of offshoring, examining the economic consequences of the offshore job to both the transferring and receiving countries, considering the competitive consequences of not offshoring, and thinking through the challenge of investing in a career that is vulnerable to future offshoring.

Samsung Electronics by Jordan Siegel & James Jinho Chang Harvard Business School Publishing.

2005 (27 pages) How Samsung should best respond to large-scale Chinese entry into its industry.

Cisco Systems, Inc, Richard Nolan and Kelley Porter, HBS case 398-127 This case describes how Cisco has used IT to build an Information Age organizational structure that not only provides a highly competitive cost structure, but also enables the company to provide extraordinarily high service levels. Much of the focus is on the “renaissance” CIO, and the strategic impact of strong IT leadership Xerox: Outsourcing Global Information Technology Resources, Lynda M. Applegate; Kevin Davis.

In order to increase revenues, develop new technologies, and manage information technology more efficiently, Xerox decided to sign a 10-year, $3.2 billion contract with Electronic Data Systems (EDS). This case describes the events that preceded Xerox's decision to outsource information technology.

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Xerox Corp.: Leadership of the Information Technology Function; HBS, Lynda Applegate, Case 191-024.

This case describes the initiatives taken by Tosh Barron, head of corporate information management at Xerox. It outlines Barron's team assessment of information technology needs for the 1990s and the long term challenges the Xerox Corp. faces.

The Information Plan for Celerity Enterprises, Inc.: A Teaching Case, Laurie Schatzberg, Idea Publishing Group, 27 pages, IT5513, (setting: U.S. and International) The case describes information and business planning, realities of the volatile industry, outsourcing for IS planning leadership, and using a combination of top-down and bottom-up planning in Celerity Enterprises, which competes in the semiconductor manufacturing industry.

The Training Challenge: Installing a POS for Improved Reporting and Customer Satisfaction, Janette Moody and David Jordan, Idea Publishing Group, 18 pages, IT5572, (setting: U.S.) This case chronicles the problems that can arise in outsourcing agreements due to factors such as poorly defined user requirements, passive resistance from technical support personnel, and lack of contract specificity and documentation detailing who performs what.

Information Systems & Technology Outsourcing: Case Lessons from “TravelTrack”, Jeremy Rose and Ray Hackney, Idea Publishing Group, 12 pages, IT5580, (setting: U.K.) The case concern an Information Systems and Technology (IS/IT) action research intervention into a train operating company in the newly privatized rail industry in the United Kingdom. The project involved information management in the maintenance wing of the company.

Large-Scale Sustainable Information Systems Development in a Developing country: The Making of an Islamic Banking Package, Adekunle Okunoye, Idea Publishing Group, 16 pages, IT5680, (setting: International) This case study explores the difficulties encountered in technology transfer to developing countries, specifically examining a company offering IT services to an Islamic bank. The case highlights the circumstances that led to the bank’s decision to develop the systems locally. The case looks at the outsourcing decisions, project management issues, and systems development problems as they relate to developing countries’ successful IS projects.

How to Successfully Manage an IT Department Under Turbulent Conditions: A Case Study, Awie Leonard, Idea Publishing Group, 18 pages, IT5684, (setting: South Africa) The case study describes the history of the IT Department of a South African bank and how it started to introduce information technology to gain competitive advantage. The case study explains the problems and frustrations end-users and IT professional experienced with regard to wrong decisions made by the management team. Management models for problem management and

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project management that were used by the management team to organize and direct the action of IT specialists are introduced.

Coors Brewing Company Point of Sale Application Suite: Winning Mindshare with Customers, Retailers, and Distributors, Jack Buffington and Donald J. McCubbrey 2003, Communications of AIS, Volume 13, Article 7 (Setting: United States) For many years, Coors was at a competitive disadvantage with its POS deployment process. The distribution of POS materials was costly and time-consuming, involving paper-based procedures for ordering and fulfillment. In 2001, Coors created an e-Business Department to address enterprise-wide opportunities such as the POS process. As one of their first efforts, members of the e-Business Department created a portal-based POS Application Suite that proved to be highly effective in addressing the needs of its distributors and retailers for POS materials in support of Coors marketing campaigns. As one element of the POS Application Suite, Coors partnered with HP to create an “e-POS system”. The e-POS system contains embedded innovative technology that permits distributors to customize POS materials for their specific needs while, at the same time, letting Coors maintain central control over what is permitted to be used under an important new national licensing agreement with the National Football League. The POS Application Suite gives Coors a first-mover advantage over its larger competitors.

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Additional cases: − Dakota Office Products (HBS case 102-021, Aug. 7, 2001, setting: US--note: this is an accounting case about ABC with an MIS slant.) − Siemens ShareNet: Building a Knowledge Network (HBS case 603-036, Nov. 5, 2002) − Postgirot Bank and Provment AB: Managing the Cost of IT Operations (HBS case 302-061, Feb. 26, 2002, setting: Sweden) − Administrative Data Project (A) (HBS case 803-051, Feb. 19, 2003, setting: Boston) − Microsoft Security Response Center (A) (Ivey case study 901E19, Jul 25, 2001, setting: USA) − Cisco Systems, Inc, Richard Nolan and Kelley Porter, HBS case 398-127 − Xerox Corp.: Leadership of the Information Technology Function; HBS, Lynda Applegate, Case 191-024. − The Information Plan for Celerity Enterprises, Inc.: A Teaching Case, Laurie Schatzberg, Idea Publishing Group, 27 pages, IT5513, (setting: U.S. and International) − The Training Challenge: Installing a POS for Improved Reporting and Customer Satisfaction, Janette Moody and David Jordan, Idea Publishing Group, 18 pages, IT5572, (setting: U.S.) − Information Systems & Technology Outsourcing: Case Lessons from “TravelTrack”, Jeremy Rose and Ray Hackney, Idea Publishing Group, 12 pages, IT5580, (setting: U.K.) − Large-Scale Sustainable Information Systems Development in a Developing country: The Making of an Islamic Banking Package, Adekunle Okunoye, Idea Publishing Group, 16 pages, IT5680, (setting: International) − How to Successfully Manage an IT Department Under Turbulent Conditions: A Case Study, Awie Leonard, Idea Publishing Group, 18 pages, IT5684, (setting: South Africa) − Development Bank of Singapore: Outsourcing of Integrated Helpdesk Functions (www.asiacase.com, 2000, setting: Singapore) − Tata Consultancy Services: High Technology in a Low-Income Country (www.asiacase.com, 2001 and beyond, setting: India) - Andia Bottling Co. (HBS case 102-040, Oct. 1, 2002, setting: South America) - Monster.com: Success beyond the bubble (HBS case 802-024, Jan. 7, 2002, setting: global) - Alibris (A) (HBS case 601-111, Mar. 13, 2002, setting: internet) − Evaluating the Integrated Measurement and Evaluation System IMES: A Success Story, September 1999, Communications of AIS, Volume 2 Article Readings/Articles: “The End of Delegation? Information Technology and the CEO,” Harvard Business Review, September-October 1995, 161-172.

Six IT experts give their views on which IT responsibilities CEOs should delegate and what roles other managers, including the CIO, should assume.

Ridout, R. “The Virtual IT Organization” CIO Forum September 22, 1997, Issue: 649 Section: 500: http://www.techweb.com/ Information Week article on the virtual IS organization. Interesting article about how Dupont and others are outsourcing their IS functions.

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Rice, V. “She knows her brownies - CIO brings the Girl Scouts into the Internet age.” eWeek Sept 11, 2000 http://web1.infotrac.galegroup.com/ This article describes CIO of Girl Scouts, Marcia Balestrino’s comprehensive approach to updating the 87-year-old organization’s systems and processes. It details her Y2K compliance efforts, master technology plan, security feature implementation, web sites revamp, and merchandising management system implementation.

Cope, J. “One Plus One Equals One'; How Honeywell and AlliedSignal merged IT, with 90 days to plan, 90 days to do it.” Computerworld May 8, 2000 This article describes the successful merging of two very different IT organizations and two sets of IT systems, Honeywell and AlliedSignal. Challenges detailed included distinct corporate cultures, degree of centralization, legal issues, and cost control. The CIOs formed 20 IT integration teams each with a well-defined scope, deliverables, target dates, communication and reporting processes.

Rosen, C. “Quest For Calm Waters -- Royal Caribbean is on an aggressive voyage to overhaul IT and its business culture.” InformationWeek. Oct 30, 2000 Quinn, J.B. “Outsourcing Innovation: The New Engine of Growth.“ Sloan Management Review Summer 41(4) 2000 The article describes how technology helps make outsourcing of innovation possible. Many examples of joint design and development are explored including Dell, Intel, Cisco, and Boeing.

Ulfelder , S. “Oh No, not another O,” CIO Magazine Jan 15, 2001 http://www.cio.com/archive/011501/ohno_content.html Discusses the role of the Chief Privacy Officer and the challenges that they face.

Books: J.S. Brown, J.S. & P. Duguid. The Social Life of Information. MA: HBS 2003 Whitehead, R. Leading a Software Development Team: A Developer's Guide to Successfully Leading People and Projects NY: Addison-Wesley. 2001.

Holtsnider, B. & Brian D. Jaffe IT Manager's Handbook: Getting Your New Job Done. NY: Morgan Kaufmann Publishers. 2000.

This unique book provides a guide to help create budgets, manage projects, evaluate technology and hire and motivate personnel. The authors provide sound advice for an overall, winning strategy for success Plotnick, N. IT Professional's Guide to Managing Systems, Vendors and End Users. NY: Osborne.

1999.

PC Week columnist and veteran IT manager Neil Plotnick provides valuable insights and tested techniques for the day-to-day management of an effective IT department

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Websites: www.brint.com This site has many interesting links to sites on the web that relate to this topic. A Brint site with many links on the topic of outsourcing and alternative MIS organizational forms is listed below:. http://www.brint.com/EmergOrg.htm www.infoweek.com, www.computerworld.com These magazines have frequent articles on MIS organizations, CIOs in the news, and strategic business decisions made by information systems executives. www.CIO.com This magazine is devoted to issues of interest to CIOs and senior IS managers. It is a good site for finding current case studies and in-depth interviews with CIOs. www.cio.com/archive/061500_case.html This site describes four companies whose IS departments are adapting well to change. The entire June 15, 2000 issue of CIO magazine focuses on the future of CIOs and MIS organizations. Other linked articles include: articles about the survival of IS management, the new leadership focus, strategic planning in a rapidly changing environment, and successful outsourcing. Links to the successful companies are also provided.

CIO.com also has a web area dedicated to outsourcing and to ASPs:. www.cio.com/forums/outsourcing/ www.cio.com/forums/asp/

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Chapter 9: Using Information Ethically Overview Managers are regularly faced with decisions that call into question the ethical or moral aspect of using information. Just because something can be done, technically or organizationally, does not mean it should be done. The objective of this chapter is to bring this debate out in the open in order to sensitize the general manager to situations and consequences of information system decisions.

Key Points in Chapter This chapter begins with a discussion on the problem encountered at TJX Co. when if found the largest security breach in the history of retailing. It estimated that as many as many as 94 million customer’s credit card data had been compromised. According to law, they had up to 45 days to contact the customer’s about the security breach. They faced the dilemma between immediately notifying their customers so that they could take action to prevent themselves from identify theft, but if they notified them before they had corrected the problem they might have more problems from other hackers who might take advantage of the breach and it may hurt their image and in turn impact their shareholders value. Managers must serve as the guardians of the information entrusted to them by their customers and must be prepared to know all of the legal issues involved in protecting and . But it highlights the main message of this chapter: technology allows companies to create valuable competitive advantages with information, but at the same time, technology, and the new knowledge created, must be managed, protected, and used responsibly, ethically, and legally.

Managers must deal effectively with issues related to ethical and moral governance of IS. Unfortunately, as with many emerging fields, well accepted guidelines do not exist. Therefore, managers bear a greater responsibility as they make decisions. The managers are the guardians of the public and private interest and must act accordingly. Managers must assess current information initiatives with particular attention to possible ethical issues. Managers in the information age must translate their current ethical norms into terms meaningful for the electronic corporation. To begin to develop this new language, this chapter presents three normative theories of business ethics: stockholder theory, stakeholder theory and social welfare theory.

The stockholder theory begins with the assumption that stockholders engage corporate managers to act as agents to advance stockholder interests, usually interpreted as maximizing stockholder value.

This theory implies that managers must employ legal means to do business and that managers must take the long-term view of stockholder interest (they must forgo short term gains if doing so will maximize value over the long term. This theory provides a limited framework for moral argument because it assumes the ability of the free market to fully promote the interests of society at large.

While the singular focus on profit at the expense of moral and ethical considerations is not often compatible with the long-term success with which managers are charged.

The stakeholder theory suggests that managers are bound by their relationship to stockholders and in addition entrusted with fiduciary responsibility for all individuals and groups who have a stake in the organization. That means stockholders; as well as employees, management, unions, customers,

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vendors, the local community, and a number of other groups. This theory calls for managers to balance the often-competing interests of these groups and to act responsibly to make decisions.

The third theory, the social contract theory, puts the needs of society first and foremost in the priority of corporate managers concerns. The overriding objective of managers, under this theory, is to create value for society in a manner that is just and nondiscriminatory. The problem with this theory is that, in the absence of a contract, it is difficult for managers to put societal interests ahead of corporate profitability simply in the name of altruism. Yet the strength of this theory is the broad assessment it gives to evaluating morality of business activities. It is important that students understand that even though each of theses theories are distinct they are not incompatible. Many organizations employ a hybrid approach to normative ethics.

Control of information is covered next and there are four key areas where control of information is critical, as summarized by Mason’s PAPA framework: Privacy, Accuracy, Property, and Accessibility. For example, most Americans consider privacy to be one of the most important areas in which their interests need to be safeguarded. Customers expect a certain level of information gathering as part of normal management activity. But used inappropriately, the information gathered through normal business processes for management purposes becomes the focus of legal actions designed to protect individual privacy rights. Even if companies don’t intend to share personal information, allowing accessibility can negatively impact individuals, as in the case when it leads to identity theft. This is becoming increasingly important with the rash of identify thefts that take place on a daily basis, and with new laws being enacted by government agencies, managers must know what they can and cannot do with the information stored in there IS. This is also true for the accuracy of the information in the system. Clients must have confidence that the information stored about them is accurate. Imagine the hardship that someone must endure if their financial or health data is incorrect, or the potential physical harm that could befall a patient at a hospital if their information is entered incorrectly or mixed up with another patient’s information.

In the networked age, many managers have begun to question the efficacy of technology in the workplace. Increasing number of products allow managers to monitor or restrict access of employees to certain Internet sites. The use of monitoring and surveillance software highlights an increase in the level of control employers can exert over employees. Environmental issues are a third area of concern for managers, as societal pressures on businesses have increasingly focused on worker health and atmosphere pollution. Information usage guidelines must come from senior executives, however every manager is responsible to make his or her decisions in an ethical and moral manner.

Security and control of the Internet is another issue concerned with protecting organizational data from hackers and undesirable viruses. Threats to security can be both internal and external. While a number of tools exist to help managers implement security and control policies to counteract these threats, it is still up to the general managers, not just the information systems managers, to set the policies. Further, managers at all levels must champion the protection of their employees’ rights and information. The importance of training and awareness programs is stressed. DDoS and other types of attacks need to be at least partially understood by managers so that they can appreciate the seriousness of these attacks (see Figure 9.3 for some tools that are used to restrict access).

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The next section covers IT Governance and Security. Important to any organization is a well planned security strategy. Weill and Ross Framework for IT governance (see Chap 8) offers a new perspective for assigning responsibility for key security decisions. Figure 9.4 shows an appropriate governance pattern for each decision. A good project for students would be to evaluate several information security policies of different kinds of organizations and then to recommend one for their own company (create a fictitious business case). The infrastructure must be carefully planned to enhance security and the proper tools (firewalls, intrusion detection and prevention systems, etc.) must be implemented to provide for a secure environment (within constraints defined by the organization). Employees must be properly educated and trained on the security strategy and policies. Something as simple as how to create a strong password should be communicated to the employees (see http://www.microsoft.com/protect/yourself/password/create.mspx for a brief explanation).

The Sarbanes-Oxley Act of 2002 has brought security and controls to the attention of IT managers as well as CEOs, CFOs and auditors. Though not originally intended for them, IT managers are finding that they play a critical role in ensuring the accuracy of financial data and implementing organizational control. The section specifies five IT weaknesses that were repeatedly uncovered by auditors. Some frameworks for implementing Sox include COSO, COBIT, and the ITIL. COSO (Committee of Sponsoring Organzations) of the Treadway Commission created three control objectives for management and auditors that focused on dealing with risks to internal control.

COBIT (Control Objectives for Information and Related Technology)is an IT governance framework that is consistent with COSO controls. It was issued in 1996 by the Information Systems Audit & Control Association (ISACA). A company determines the processes that are the most susceptible to the risks that it judiciously chooses to manage. Control objectives are then set up with more specific key indicators. The advantages of COSO are that it is well-suited to organizations focused on risk management and mitigation, and very detailed. Disadvantages are that is can be costly and time consuming (see Figure 9.5).

The food for thought section of this chapter focuses on Green Computing. More and more organizations are embracing environmentally responsible computing. Gartner has put Green Computing at top of list of upcoming strategic technologies which puts pressure on companies to implement these strategies. Companies are working to become more efficient through a number of strategies (make sure to discuss this point with students and have them brainstorm on other ways that an organization can become more efficient.

Illustrative Answers to Discussion Questions 1. Private corporate data is often encrypted using a key, which is needed to decrypt the information.

Who within the corporation should be responsible for maintaining the "keys" to private information collected about consumers? Is that the same person who should have the "keys" to employee data?

Ans: This question is designed to provoke thoughtful decision making about protecting security.

Maintaining the key can be done by the system itself, by the owner of the system, by the IS organization, or any number of other individuals or groups. There is no reason the person

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maintaining the key for customer data should not be the same person as the one maintaining the key to employee data, if that person’s job is a security-type job. On the other hand, marketing may manage customer data, and therefore manage the key to that data. And HR might manage the employee data and hence manage the key to that data.

2. The Lotus Marketplace case study highlighted the potential of combining otherwise unthreatening databases. In their case, the resulting database showed patterns of spending and placed consumers into categories that reflected personal data the consumers felt was private. But many organizations these days collect individual information, including your credit card provider, your bank, your creditors, and virtually any retail store in which you use a credit card or other identifying customer number. Who owns the information that is collected? Do you, the person who initially provided information to the collector? Or the collecting organization that spent the resources to save the information in the first place?

Ans: Again, there is no right answer to these questions. Some feel that the individual customer owns the information about purchases, credit cards, etc. Others feel that when a credit card is used, the customer gives permission to the retailer to use that information to make a purchase. If the student thinks the customer owns the information, then using it for anything other than the single transaction authorized at the moment is a violation of implied agreement between the customer and collector. In that case, the collector should not store the information at all (a debatable action), and certainly should not use that information for any further transactions (such as alerting customers to related opportunities, etc). But most websites, for example, collect such information and regularly use it to alert customers of information they may be interested in. For example, Amazon.com keeps track of my book purchases and suggests books I might want to know about when I next log in. Other companies are more intrusive, sending me information via email or fax. The astute student will give some indication where their personal line is, and examples of when it is crossed.

3. Consider arrest records, which are mostly computerized and stored locally by law enforcement agencies, but have an accuracy rate of about 50%--about half of them are inaccurate, incomplete or ambiguous. But these records are used by others than just law enforcement. Approximately 90% of all criminal histories in the United States are available to public and private employers. Use the 3 normative theories of business ethics to analyze the ethical issues surrounding this situation.

How might hiring decisions be influenced inappropriately by this information?

Ans: The perspective from the three theories might be: a. Stockholder theory- Managers must collect all information on employees if that information may give indication that the employee may cause potential loss of profit to a company. For that reason alone, managers must get this information to make the responsible hiring decisions its stockholders expect. b. Stakeholder theory- Managers must collect all information on employees if that information indicates that the new hire may cause harm or damage to the interests of the other stakeholders. The new hire him/her self is a stakeholder, but under this theory, the effect on the many would often outweigh the potential harm to the individual. Managers have the responsibility to check to make sure the information is accurate, and possibly should confront the potential new hire to seek an

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explanation (which may point out that the information is inaccurate). But ultimately it is only the manager’s responsibility, under this theory, to consider the impact on all stakeholders and make the responsible decision. c. Social contract theory- This theory, with the widest net cast on concerns the manager must consider, would question the validity of even requesting the information if it is known how inaccurate it is likely to be. A responsible manager may still want to collect this information to make sure the organization, and all it constitutes, are protected if possible, but it would also be the responsibility of the manager to make sure that inaccurate records are cleared up. That means at a minimum, confronting the potential hire and giving him/her a chance to explain or clear up his/her record.

A manager who gets information indicating a person has a criminal record might be discouraged from hiring a potential candidate. But if that information is incorrect, and if the candidate were to learn that the information was known by the organization, then there might be opportunity for legal action to be taken against the organization who manages the criminal information.

4. The European Community’s Directive on Data Protection that was put into effect in 1998 strictly limits how database information is used and who has access to it. Some of the restrictions include registering all databases containing personal information with the countries in which they are operating, collecting data only with the consent of the subjects, and telling subjects of the database the intended and actual use of the databases. What effect might these restrictions have on global companies? In your opinion, should these types of restrictions be made into law? Why or why not? Should the United States bring its laws in agreement with the EU Directive?

Ans: The effect of these restrictions on global companies can be looked at from an economic perspective and from an ethical perspective. From an economic perspective these restrictions are at best costly and at worst would keep managers from doing interesting and potentially valuable business in the European Community. Contacting, seeking consent, and managing the replies received from all individuals in the database in every country in which the data exists is a costly venture. But worse would be the vast complexities in each country that must be known and managed using local customs and laws. Ethically, however, this type of restriction begins to protect the individual citizens by alerting them to the information collected on them. Using the three theories from the chapter would show that the stockholder theory and possibly the shareholder theory would suggest that this type of compliance would only be done if it was a law or if local reaction was anticipated to be so strongly negative as to affect the company’s ability to do business.

The social contract theory would suggest that such a restriction would be a reasonable way to safeguard the individuals in each country. This type of restriction, however, might keep companies from doing business in the European Community because of the enormous cost of compliance and the potential risks of noncompliance. Students are asked for their opinion on whether this type of restriction should or should not be implemented. Either answer is acceptable, provided an explanation is given.

5. Should there be a global internet privacy policy?

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Ans: This could be a very lively discussion question for students. Perhaps write it on the board or put in the PPT presentation to start off the class, or embed after the slide on privacy policies. There will most likely be a diverse set of answers and opinions on this subject. The pros of creating this policy would be to standardize the way data is handled and treated around the globe. This would make it easier for companies to do business in other nations and regions. Cons would include the enforcement of such a policy (very difficult and expensive). Also, who would be responsible for this policy and have control and influence over what goes in to the substance of the document.

This could be problematic and may cause more problems than it could potentially fix. The U.N. is likely to come up as a managing body, but it will be interesting to see how students respond to this question.

6. Is anonymous click-stream tracking and profiling objectionable? Is sending targeted advertising information to a computer using cookie ID numbers objectionable?

Ans: There will be a significant amount of disagreement on this question. Students that are concerned with any data being tracked and profiled will see this as an intrusion on their privacy and use of the Internet. Students that see the benefit of this data collection from a business perspective will see the potential competitive advantage that may be achieved will be more lenient. The discussion should be addressed from the social contract theory to help students determine the infringement issues that this question raises. They should discuss informed consent versus anonymous tracking, and how anonymous that tracking really is.

7. What is your opinion of the English ID card discussed in this chapter?

Ans: Remind the students of the purpose of the card - “in the United Kingdom a debate is underway about making compulsory a national identity card that would contain 49 different types of information including name, birth date and place, current and past addresses, a head and shoulders photograph, fingerprints, an iris scan and other biometric information, personal reference information, and registration and record histories. The British government is arguing that the card would give people a convenient way of proving their identity and preventing identity theft. It would also offer a secure way of identifying people for national security, detect crime, aid in enforcing immigration controls, prevent illegal working, and assist in providing public services. Opponents fear the card will create a “Big Brother” world.”

On the one hand, the card would provide for easier identification of the holder. But, it also contains a significant amount of information on the holder that could be compromised if lost or stolen.

Also, it may give too much information and be used against the holder by government agencies and employers. Students need to debate this issue from a variety of perspectives (national security vs personal privacy).

Further Discussion Questions When the video cassette recorder (VCR) was introduced charges were laid against one of the largest manufacturers of the device that the manufacturer should bear the liability for the ability the VCR gave consumers to steal copyrighted material (copy movies and videotapes). The company in

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question successfully defended itself and established a long-held precedent that a manufacturer should not be liable if its products are misused. The manufacturer was Sony. Sony is now one of the largest owners of digital content libraries in the world, and it aggressively prosecutes individuals that steal copyrighted material. And, in a radical change of direction, Sony is attempting to bring legal action against software development companies for the production of software that allows peer-to-peer (P2P) sharing of material. The claim Sony is making is that these corporations are providing a tool that allows individuals to steal Sony’s intellectual property. The companies defending themselves against Sony are using the “Sony Defense.”

1. Discuss whether you think companies should be allowed to develop P2P applications; what are the dangers of stifling such development? Can it truly be stopped?

2. What alternatives might Sony pursue, rather than aggressive litigation, to solve the problem it currently faces in the theft(piracy) of copyrighted material.

3. Discuss how legitimate Sony’s claim is, given its past defense.

Case Study 9-1: Ethical Decision Making These six small situations can be used to spark discussion about how to think about and use the ethical frameworks from the book. While the simplicity of these situations is unrealistic, it is useful to begin a dialog about ethical issues before a manager actually faces one and has to make a decision. It is in this light that these situations, and my comments, are offered.

Situation 1: The point of this minicase is to highlight that even though you have the ability to look at something, it may not be right to do it. The supervisor is in a difficult position, since Doug wants him/her to look at individual hard disks. Technically, the hard disks and anything on them belongs to the company, but historically, it has been treated as though it was private for the person using the computer. How might the supervisor handle it? He/she might ask Doug for more specific criteria to enhance quality of the work (go to the root of the problem and look for a more ethical way to handle it). He/she might ask each member of the pool to submit a document and/or take part in regular reviews. Or he/she might just go on the hard disk and get the document sample, if a good process is put in place to evaluate and respond to the information found. In any case, the pool needs to know that in the future all work on the disk is the property of, and hence can be looked at by anyone at, the company. This open communication may help improve the level of trust between the manager, supervisor and employees at this company. The management can communicate that the data may be used to provide rewards for good performance, or to indicate areas where more training is needed.

Situation 2: The dilemma comes into play because while Olsen is violating a company principle of no personal calls, he is doing so for an emergency situation, a sick child. Essex might want to have a discussion with Olsen to make sure he knows company policy, but at the same time, reassure him that an emergency situation will not mean expulsion from the company. Essex might also work to make sure the management practices take into account personal emergencies so there is no ambiguity next time this happens. Have the students analyze this case from the perspective of stockholder versus stakeholder versus social contract theories.

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Situation 3: Legally, Jane is required to get rid of his backup copy when the license is revoked and the company cannot still use the system beyond any contracts they have already executed with the original company. The critical nature of the system only increases the anxiety about finding a new system to replace it. We_Sell_More.com might want to negotiate with the parent company for continued rights beyond any contract they already have.

Situation 4: Point out to the students that although this case led to Napster filing for bankruptcy and ultimately reorganizing under a new business model, the issues are still relevant. Those students who argue that Napster should have been allowed to continue their operations often argue that the record companies do not treat customers or artists fairly. Explore with them the arguments that they may make regarding the fact that copying music files is a widespread practice. While it could be argued that Metallica is losing money from the copying, students often counter that they primarily earn money from their concerts and not from the sale of the music. In fact, some music files are available for free on the Metallica site. Explore the issue from the perspective of the various stakeholders.

Situation 5: This situation ties in with the current US debate about the rights of individuals vs. the need for the government to enact stringent measures to combat terrorism. Congress is clearly divided, as are the states. Some states are participating in MATRIX while even more have decided not to. Why did some states decide to pull out of MATRIX. Explore the situation from the perspective of various stakeholders.

Situation 6: This situation is another version of Situation 1. At issue here is the right of an organization to employ software to study the emails of its employees. Legally, emails may be read by employers. Given the pervasiveness of email usage in the workforce, is this an ethical practice?

Here again, the surveillance without notifying the employees is an important issue. Discuss steps managers should take if the software is installed. Explore the situation from the perspective of various stakeholders.

Case Study 9-2: Midwest Family Mutual Goes Green This case focuses on how a company can become more responsible with its use of natural resources. Midwest saw a substantial decrease in energy consumption through its implementation of a number of green initiatives (virtual work from home office environment). They also found that being “green” helped their bottom line but decreasing expenses. Through the use of IT, the company has been able to achieve this remarkable transformation.

1. Do you think that the economic benefits that Midwest Family Mutual realized as a result of green computing are unusual? Do you think most companies can see similar types of economic gains? Explain.

Ans: I don’t think they are unusual for a service industry, but it would depend upon the type of company and the need of having the employees work in close physical proximity. A company that is involved in manufacturing would not be able to realize the same level of economic gain, since its employees would need to be at the plant location. However, any type of insurance company or

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company that didn’t rely on the need to be at a particular physical location could see the same results.

2. What are some possible disadvantages the employees of Midwest Family Mutual may be experiencing as a result of their new virtual "work from home" office environment?

Ans: Isolation from other workers, accountability from supervisors, always being at work (when home). Teleworkers tend to work more hours since their work is just down the hall or in the other room. Security and reliability of their connection to the corporate network, including the VoIP system could easily be disruptive due to an issue in their neighborhood. The company will need contingency plans in case of wide spread outages of services with their employees.

3. Apply the normative theories of business ethics to this situation.

Ans: In the stockholder theory the company would be helping to maximize shareholder value by minimizing costs and maximizing profit. For stakeholder theory the company is considering its employees, customers, and others, but it may have an indirect impact on companies in close proximity to the office (fewer people eating at local restaurants, supplies are in smaller demand, etc.). For the social contract theory, they are hitting a home-run. By reducing energy costs, and keeping more vehicles off of the road.

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Supplemental Readings Cases: AdNet by Ashish Nanda Harvard Business School Publishing 2004.

DoubleClick, Inc by T.D. Fields & J, Cohen, Harvard Business School Publishing 2003 International Rivers Network and the Bujagali Dam Project (A), by Benjamin C. Esty; Aldo Sesia Jr. Harvard Business School Publishing 2004 (25 pages) To consider the ethical implications of large-scale investments in developing countries, including the roles and responsibilities of the major parties involved (i.e., project sponsor, host government, and project financiers). To consider the implications of project information disclosure, or the lack thereof, to all parties, including the consumers of electricity.

Tata Consultancy Services, by Rohit Deshpande; Seth Schulman Harvard Business School Publishing; 2005 (11 pages) Canadian Imperial Bank of Commerce: Digital Employee Privacy by M. Wade & K. Mark Richard Ivey School of Business. 2001 Lotus Marketplace: Households... managing information privacy concerns. Culnan, M. J., & Smith, H. J. (1995). In Johnson, D. G. & Nissenbaum, H. (Eds.). Computers, Ethics, and Social Values. Englewood Cliffs, NJ: Prentice-Hall, 269-278.

The Lessons of the Lotus MarketPlace: Implications for Consumer Privacy in the 1990's by Mary Culnan, available at the CPSR website: http://www.cpsr.org/conferences/cfp91/culnan.html Contains commentary on the original Lotus situation.

Incident at Waco Manufacturing, by John Sviolka, HBS Publishing, Case Number 189142 (March 1990) Describes an information system that continually traces the location of every employee. This data is used by a visiting manager to assess a problem situation Competitive Information Policy at Pratt and Whitney by Lynn Sharpe Paine, HBS Publishing, Case Number 394154 (July 1994) Officials at United Technologies Corp. (UTC) must decide on an ethics policy to govern competitive intelligence gathering. The flow of competitor information into the Pratt & Whitney division has declined sharply since adoption of UTC's code of ethics.

Additional Cases: -

Postgirot Bank and Provment AB: Managing the Cost of IT Operations (HBS case 302-061, Feb. 26, 2002, setting: Sweden)

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-

-

-

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Administrative Data Project (A) (HBS case 803-051, Feb. 19, 2003, setting: Boston) Microsoft Security Response Center (A) (Ivey case study 901E19, Jul 25, 2001, setting: USA) Cisco Systems, Inc, Richard Nolan and Kelley Porter, HBS case 398-127 Xerox Corp.: Leadership of the Information Technology Function; HBS, Lynda Applegate, Case 191-024.

The Information Plan for Celerity Enterprises, Inc.: A Teaching Case, Laurie Schatzberg, Idea Publishing Group, 27 pages, IT5513, (setting: U.S. and International) The Training Challenge: Installing a POS for Improved Reporting and Customer Satisfaction, Janette Moody and David Jordan, Idea Publishing Group, 18 pages, IT5572, (setting: U.S.) Information Systems & Technology Outsourcing: Case Lessons from “TravelTrack”, Jeremy Rose and Ray Hackney, Idea Publishing Group, 12 pages, IT5580, (setting: U.K.) Large-Scale Sustainable Information Systems Development in a Developing country: The Making of an Islamic Banking Package, Adekunle Okunoye, Idea Publishing Group, 16 pages, IT5680, (setting: International) How to Successfully Manage an IT Department Under Turbulent Conditions: A Case Study, Awie Leonard, Idea Publishing Group, 18 pages, IT5684, (setting: South Africa) AOL, Cisco, Yahoo!: Building the Internet Commons (HBS case 302-088, Mar. 26, 2002, setting: USA) Digital Certificates and Signatures: Microsoft Corporation, UHK case HKU203, Jul 12, 2002, (setting: global) The Free Internet Initiative in LaGrange, Georgia, HBS case 302-041, Feb 14, 2002, (setting: US) Microsoft Security Response Center (A), Ivey case study 901E19, Jul 25, 2001,(setting: USA) Lotus Marketplace: Households... managing information privacy concerns. Culnan, M. J., & Smith, H. J. (1995). In Johnson, D. G. & Nissenbaum, H. (Eds.). Computers, Ethics, and Social Values. Englewood Cliffs, NJ: Prentice-Hall, 269-278.

The Lessons of the Lotus MarketPlace: Implications for Consumer Privacy in the 1990's by Mary Culnan, available at the CPSR website: http://www.cpsr.org/conferences/cfp91/culnan.html Incident at Waco Manufacturing, by John Sviolka, HBS Publishing, Case Number 189142 (March 1990) Competitive Information Policy at Pratt and Whitney by Lynn Sharpe Paine, HBS Publishing, Case Number 394154 (July 1994) Enron-What Went Wrong? Ivey case 9B04C001, 2001, 17 pages (setting: large organization, US) Coastal Uniforms, Ivey case 9B05M014, 2002, 5 pages (setting: medium organization, US)

Readings/Articles: (note: the interested instructor should investigate the IS World website (www.isworld.org) on ethics resources for a comprehensive and current list of interesting articles on this topic.

Smith, H. J. “Information Privacy and Marketing: What the U.S. Should (and Shouldn't) Learn from Europe” California Management Review 2001

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Herzlinger, R. E. & Bokser, Seth “Note on Accountability and Information in the U.S. Health Care System” Harvard Business School Publishing. 2001.

Smith, H. J. and Hasnas, J. Ethics and Information Systems: The Corporate Domain MIS Quarterly, 23(1) 1999 Couger, J.D. “Preparing IS Students to Deal with Ethical Issues,” Management Information Systems Quarterly, 13(2) 1989 Davies, S. G. « Re-engineering the right to privacy: how privacy has been transformed from a right to a commodity. » In Agre, P. E., & Rotenberg, M. (Eds.), Technology and Privacy: The New Landscape. Cambridge, MA: MIT Press, 1997.

Mason, R. “Four Ethical Issues in the Information Age” MIS Quarterly 11(1) pg. 4-12 Gentile, J. & J. Sviokla “Information Technology in Organizations: Emerging Issues in Ethics and Policy” Harvard Business School February 1990.

This technical note from the Harvard Business School nicely discusses issues such as….In addition, it contains an annotated bibliography of references in this area including some of those listed here.

Shneiderman, B. “Designing Trust into online Experiences” Communications of the ACM 43(12) 2000,, pg. 57-59 Olson, J.S. & G.M. Olson “i2i trust in e-commerce” Communications of the ACM, 43(12) 2000, Pages 41 - 44 Kreie, J. and T.P. Cronan “Making ethical decisions” Communications of the ACM, 43(12) 2000, Pages 66 - 71 Books: Information Ethics: Privacy, Property, and Power Adam D. Moore (Editor) Seattle: University of Washington Press. 2005.

Lane, F.S. Naked Employee, The: How Technology Is Compromising Workplace Privacy NY: American Management Association. 2003.

Forester, T. Information Technology Revolution MA: MIT Press. 1985 Johnson, D. Computer Ethics, NJ: Prentice Hall Inc. 1985.

Kallman, E.A. and Grillo, J.P. Ethical Decision Making and Information Technology: An Introduction with Cases. NY: McGraw Hill. 1996.

Langford, D. Internet Ethics, London: Macmillan. 2000.

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Johnson , D.G. & Nissenbaum, H. Computers, Ethics & Social Values. NJ: Prentice Hall, 1995.

Websites: World website: http://www.isworld.org or go specifically to: Ethics page: http://www.is.cityu.edu.hk/research/resources/isworld/ethics/index.htm Faculty in the IS area have been working on resources to teach this topic for a number of years.

One of the best resources for readings, syllabi, and other teaching support can be found at the IS http://www.is.cityu.edu.hk/People/AcademicStaff/rd/icis00/icis.htm In addition, to supplement the IS research ethics panel at the 21st International Conference on Information Systems this December in Brisbane, Australia this website was created: http://www.cpsr.org/publications/publications.html The center for Computer Professionals for Social Responsibility has a terrific website with a number of resources. Some of their papers and publications will make good case studies. http://www.eos.ncsu.edu/eos/info/computer_ethics/ A comprehensive website with a number of links to issues and topics related to ethical use of information can be found at the Ethics in Computing center at NCSU: http://www.mines.edu/academic/computer/ethics/ A portal providing many resources on ethics and the use of information, particular attention is paid to the use of technology.

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Chapter 10: Funding IT Overview The purpose of this chapter is to introduce managerial students to using the language of business, financials and metrics, to manage IT. It is a new chapter for the second edition of the text, bringing together several sections from the first version, and adding significant material on funding methods, valuation, and measuring IT investments.

Key Points in Chapter This chapter begins with an example begins with an example of a CIO who used net present value (NPV) and internal rate of return (IRR) to support the business imperative of and IT project. Further, metrics such as a red-yellow-green dashboard was used to monitor IT projects, removing the typical complexity of communicating the status in “IT speak” and replacing it, again, with something simple, straightforward, and easily understood by any business person.

The key point is this: to be successful in the business, IT managers must speak the language of business, and that is a language based in accounting and finance.

This chapter provides some very basic discussion around three funding methods: chargeback, allocation and corporate budget. Chargeback is when IT costs are recovered by charging the users directly for their consumption of IT products and services. Costs are distributed based on a unit cost, making them the most equitable approach to funding IT. Business managers like this approach because it gives them the most control over their IT costs. If they want to lower IT costs, they clearly understand they must consume less, and likewise, if they plan to increase their consumption, they know they will pay more. But chargeback systems are highly complex and difficult to manage. The difficulty begins with questions such as “what is the correct unit?” and “what is the unit cost?”. And issuing a bill to users can be fraught with stress and complexity, depending on the answers to the unit and unit-cost questions. Some organizations produce highly detailed bills for their users, which in turn require audit and time for the users to understand.

The other two methods, allocation and corporate budget, alleviate the complexity of a chargeback system, but at the same time, do not distribute costs as equitably. Allocation simply lumps together all of the IT costs into a single charge, and based on a single unit of measure such as number of people in the organization, divides up the costs among the departments. Corporate budget, on the other hand, takes all the IT costs into a single budget item, usually at a managerial level distinct from any specific user. The tradeoffs of each method are summarized in figure 10.1 of the text.

While funding approaches dictate the cost recovery mechanism of IT, calculating the actual costs is a completely different story. Three common IT cost calculation approaches are summing up all the expenses, activity-based costing and totaling the cost of ownership. Each of these approaches has its place in the business discussion, and often all three are used depending on the accounting question to be answered by the cost calculation. It is important to thoroughly discuss TCO as more companies not only use TCO to determine IT investments, but many software and hardware vendors tout their TCO numbers in marketing. Figure 10.2 and 10.3 both deal with

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TCO. TCO also can help managers understand how infrastructure costs break down: It provides the fullest picture of where managers spend their IT dollars as TCO results can be evaluated over time against industry standards; and even without comparison data, the numbers that emerge from TCO studies assist in decisions about budgeting, resource allocation, and organizational structure. Students need to understand Total Cost of Ownership of any IT resource.

New to the fourth edition of the text is a section on Building a Business Case. A business case is similar to a legal case, and is a structured document where all relevant information needed to make a decision is laid out. It also provides a way to establish IT priorities and to determine which projects to invest in. Figure 10.4 lists the primary elements of a business case. It is critical to identify both costs and benefits (financial and non-financial).

Next, IT portfolio management is discussed. Managing the IT investment is similar to managing the financial investments. There are different types of IT investments and together their form a portfolio. Peter Weill and his colleagues have published extensively on this topic, and we share his framework for the IT portfolio in this section. In addition, in recent years, a class of IT tools to manage the IT function (including the IT portfolio) have emerged. In the text we call them project and portfolio management (PPM) suites, however in the industry, there is a competing term, IT-RP (which stands for Information Technology Resource Planning, a take off of MRP).

These tools include capabilities that assist the management of the IT organization with applications like demand management, governance, human capital management and IT project management. They are tools written expressly for the IT organization.

As every manager knows, the value of an investment is very different than either the cost or the funding approach. The next section of this chapter raises the issue of valuing IT investments.

Justifying costs by calculating potential revenue, payback or budget impacts of IS projects is now the norm for almost all IT investments. The challenge comes from the fact that most benefits of IT investments are intangibles. They are “soft numbers” such as the increased efficiency of a process or the new business to be gained with the new IS system. This section outlines valuation methods such as ROI, Net Present Value, Economic value added, and several others. General managers are encouraged to carefully balance the general need for calculating the “hard numbers” with the business objectives and strategic value of “infrastructure investments” such as those typified by many IS investments.

Monitoring IT investments is necessary to insure that benefits are obtained and that costs are controlled. Setting up appropriate metrics and understanding how those metrics affect the perception of the value of the IT investment is a critical skill for managers. (Note to instructors who used earlier editions of this text: this section has been completely rewritten for the 3rd edition of the text).

Communicating the metrics of IT’s performance is done through a balanced scorecard and an IT dashboard. The balanced scorecard, based on the concept by Kaplan and Norton (HBR, 1992) suggests that four perspectives (customer, internal business, innovation, and financial) are necessary to get a realistic picture of the IT organization. While scorecards offer a balanced picture of IT’s performance over a period of time, IT dashboards provide snapshots of the state

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of the IT function at a given time. Dashboards tend to be summarized using the familiar redyellow-green indicators and are often electronically available with real time information.

Options Pricing offers management the opportunity to take some future action in response to uncertainty about changes in the business and its environment. It offers a risk-hedging strategy to minimize the negative impact of risk when uncertainty can be resolved by waiting to see what happens. Like a stock option, which is priced based on a future value, the options method for IT suggests calculating the future value of an IT investment. This is appealing because it offers managers a method for considering future opportunity based on statistical calculations of uncertainty. Managers can hedge their future investment commitments until a time when they have more information to make the decision.

The food for thought section is on who pays for the Internet. Most students have a vague idea of how the Internet is paid for and who owns the infrastructure. The massive number of users on such a complex network, and the fact that it is largely unregulated, show how efficient systems can be when there is no monopoly or agency controlling an entire system. Even though there are telecommunication carriers, universities, and government agencies that own much of the backbone, everyone pays for the Internet through usage. Payment to an ISP, government funding through agencies like the National Science Foundation, etc. all make up the funding of the Internet.

Illustrative Answers to Discussion Questions 1. Under what conditions would you recommend using each of these funding methods: allocation, chargeback, and corporate budgeting?

Ans: The most astute students will identify that funding method should reflect the corporate culture and governance structures. If most costs are charged back, then IT will be expected to charge back. If most expenses are funded through the corporate budget process, then IT will be expected to be funded this way. Another way to think about these methods might be to consider the type of IT investment. Infrastructure investments, which are typically made to provide a foundation upon which other business applications will be built, might be funded through allocation (since everyone uses it and gains some benefits) or budget (since it is a ‘capital investment’ like the buildings, plants or overhead). Specific business applications might be funded by chargeback, since they benefit a specific group or department in the organization (for example, the sales force automation system is to increase productivity of the sales force). And investments in studying future technologies might be funded through budgeting since they are experimental, and not clearly of benefit to anyone yet.

2. Describe the conditions under which ROI, payback period, NPV, and EVA are most appropriately applied.

Ans: ROI is appropriate when there is a clear investment, a clear recipient of the benefits of that investment, and a clear set of metrics to measure that benefit. For example, if an application in an airline to automate the ticketing process will benefit the operations group by increasing throughput and decreasing agent and process costs, then an ROI calculation is appropriate

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(calculating the cost of the system, and the financial benefits to be gained). A payback period is appropriate when there are competing investments, both of which seem to have similar benefits.

Understanding which one will be ‘covered’ more quickly is a useful piece of information. NPV is appropriate when there is a stream of benefits, and sometimes costs, to be considered over a period of time. For example, an application may have an initial investment and an ongoing maintenance cost, while at the same time, benefits may not start to be seen for several years, but increase annually after that. Comparing investments with different costs and benefit streams is most easily done with an NPV analysis. EVA is particularly appropriate for capital-intensive investments.

3. A new inventory management system for ABC Company could be developed at a cost of $250,000. The estimated net operating costs and estimated net benefits over six years of operation would be: Year

Estimated Net Operating Costs

0 1 2 3 4 5 6 Total

$250,000 7,000 9,400 11,000 14,000 15,000 16,000 $322,400

Estimated Net Benefits

$

0 52,000 68,000 82,000 115,000 120,000 120,000 $557,000

Cumulative Costs

Cumulative Benefits

$250,000 257,000 266,400 277,400 291,400 306,400 322,400 -

$0 52,000 120,000 202,000 317,000 437,000 557,000 -

BenefitsCosts

-$250,000 45,000 58,600 71,000 101,000 105,000 104,000 $234,600

PV Factor

1.000 0.870 0.756 0.657 0.572 0.497 0.432 -

NPV

-$250,000 39,150 44,302 46,647 57,772 52,185 44,928 $34,984

a. What would the payback period be for this investment? Would it be a good or bad investment? Why? b. What is the ROI for this investment? c. Assuming a 15 percent discount rate, what is this investment’s NPV? Ans: Note: the formula to calculate the PV factor is 1/(1+discount rate)year . This is somewhat confusing in Figure 10.7 (in the text). You do not multiply (1 + discount rate) by year. Rather year is used as an exponent.

The year in which costs will equal or exceed benefits is Year 4. To calculate the time of the year when the cumulative costs equal the cumulative benefits, use the formula: 277,400 +14,000x = 202,000 + 115,000x. This yields the equation 75.4 =101x, or x = .75. The payback period for this investment is 3.75 years, and it is a good investment from this perspective, if there is enough cash to fund it through this period. Of course, the desired payback period is normally set by the firm. If this firm had a payback period of 4 years or less, then this is a good investment. It is a good investment because the future benefits are significant. If the operating costs and net benefits both went to 0 after year 6, the ROI, before considering any discount rate, is $234,600 (i.e., benefits of $557,000 less costs of $322,400). If we assume a 15 percent discount rate, the NPV is $34,984.

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4. Would you suggest using options pricing on the investment described in Question 3? Why or why not?

Ans: Options pricing is not necessary on this investment because the operating costs and net benefits seem relatively certain. The options pricing is more useful when there are highly uncertain costs or benefits which might occur in the future and/or when a project is being developed in phases. For projects that are developed in phases, the decision to invest in later phases can be deferred until the costs and benefits of the first phase are realized. Options pricing is a good approach to adopt for investments in emerging technologies or prototypes --- neither of which are the case in this inventory management system.

5. Compare and contrast the IT scorecard and dashboard approaches.

Ans: The scorecard is a method for summarizing a balanced view of 4 key types of metrics: customer, financial, innovation, and internal business. This is typically a ‘report’ created based on results over a period of time (quarter, year, etc). The dashboard, on the other hand is a useful snapshot tool, something that can be used to monitor on a frequent basis the changes in key metrics. Most people think of the ‘dashboard’ like the dashboard of a car, which relays real time data such as speed and fuel level. For an IT organization, it might be uptime, throughput, daily expenses and costs, etc. Whereas a scorecard might have metrics such as budget, number of employees or projects, and customer profitability or satisfaction. Many metrics lend themselves to either type of reporting mechanism, but the span of time covered in the reported metric varies: dashboards typically report real-time changes, and scorecards report periodic results.

6. TCO is one way to account for costs associated with a specific infrastructure. This method does not include additional costs such as disposal costs—the cost to get rid of the system when it is no longer of use. What other additional costs might be of importance in making total cost calculations?

Ans: This is a difficult question given that TCO includes so many of the costs of the system.

The goal of this question is to get students thinking beyond the obvious costs of purchasing and maintaining the system. The text suggests that TCO costs include technical support, administration and training. Other costs might include integration costs, the cost to integrate with vendor or customer systems, space costs, costs that might be incurred preparing a space for the equipment (a new desk, new chair, or even a new room), disposal costs (as mentioned in the question itself) that might be incurred when getting rid of the system, storage costs which might be incurred to store and hold the system when it is no longer of use, and process redesign costs that might be incurred in redesigning processes to fit with the new system.

Further Discussion Questions 1. In economics the choice between the allocation of limited resources (such as a company’s capital) is discussed using the example of “guns or bread”. Imagine yourself the head of a country and you have two choices for national production: produce guns to defend your country or bread to feed your population. If you produce too little of one, in favor of a greater number of the other you country will either be invaded or your population will starve. How do you decide

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on resource allocation? In light of IT, Carr discusses the diminishing value of IT as its ubiquity grows it becomes a necessary commodity but not a strategic resource. If you assume that Carr’s argument is correct, where else would you allocate significant resources that might otherwise be deployed for IT? 2. With reference to the above question, if you take the counterpoint to Carr, that IT can be a strategic resource, from where would you choose to source these funds? In other words, what areas of the business can you take resources away (either because you efficiency expect gains from IT or because these business areas are less important) to fund IT? Make an argument for the allocation of scarce resources inside a firm toward IT expenditure.

Case Study 10-1: Troon Golf This is a short case study on the global automaker’s investment in a cost management system. It cost less than $1 million but has generated millions of dollars of ideas.

Discussion Questions 1. Why does the TCO approach allow Troon management to refresh its hardware at the optimal cost level?

Ans: It permits Troon to see what the actual costs are for the each piece of equipment that it purchases, instead of just the cost of the item. TCO accounts for support costs, productivity loss, and other costs that are not included in the price of the equipment. Troon can determine when the useful life of a piece of equipment has been reached due to all the factors that go into computing TCO. 2. Why, in your opinion, were IT expenses spiraling out of control before the TCO system? What are examples of the hidden costs of operating and maintaining the hardware?

Ans: Troon did not know what the real costs were. They did not take into account replacement costs, life of product costs, downtime costs, user support costs, etc.

3. If you were the head of marketing for Troon, what benefit would you receive from Mr. Westmark’s decision to implement TCO? Ans: I would know if equipment that we are using is not worth the investment. Also, as newer technologies are released, proper costing would enable the company to determine if the new technology was really worth implementing, or will be too costly. A number of potential answers are possible for this question.

Mini Case 10-2: Valuing IT Discussion Questions

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1. Do you agree with Carr that as information technology’s power and ubiquity grows, its strategic importance diminishes? Why or why not?

Ans: Interesting supposition posited by Carr. But, as many naysayers have stated over the years, more is yet to come. I do not believe that IT’s strategic importance diminishes. I do understand that as a technology that was once leading edge is embedded into the every day operations of the organization that it may not offer much competitive advantage as more and more competitors offer the same service (think of online banking for example). However, there is continuous need to implement new IT systems, and processes for strategic use (and competitive advantage). This is a good discussion question to spend time on in class.

2. Where do you think the next IT-based strategic advantage may occur? Give an example.

Ans: There is no right answer to this question. Students may discuss the need for greater customer service through innovative CRM systems, or perhaps the world of simulation (like Second-Life) where companies can sell products, offer services, etc. There are bound to be breakthroughs in AI and robotics.

3. Consider the IT portfolio management triangle presented in this chapter. Would Carr’s arguments hold for all types of IT investments or just for infrastructure investments? Explain.

Ans: Primarily infrastructure, but perhaps transactional as well. Since these systems are operationalized within an organization they do become standards for that sector and lose their strategic focus and competitive advantage. For strategic and informational this would not hold (as knowledge management, data mining, analytics, etc. are deployed).

4. The original article in Harvard Business Review raised a number of questions by senior business managers about their IT investment. As an IT manager, what questions would you anticipate you would have to respond to and what would be your response?

Ans: This is another question where there is no one right answer. Students should be encouraged to discuss this question and brainstorm possible questions. They could include; financial questions such as NPV and ROI; strategic questions such as how the system aligns with the organizations mission and vision; and others.

Supplemental Readings Cases Information Systems at FirstCaribbean: Choosing a Standard Operating Environment by Beaubien L & S.Mahon Ivey School of Business; 3/22/2005; (12 pages) The Canadian Imperial Bank of Commerce and Barclays Bank PLC were in advanced negotiations regarding the potential merger of their respective retail, corporate and offshore

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banking operations in the Caribbean. Currently there are four systems inoperation in the region.

All are carry-overs from the pre-merger operation of the bank. Each of the systems has different pros and cons consisting of degree of fit with the organization strategy, likely impact on organizational culture, and functionality.

An Experiential Case Study in IT Project Management Planning: The Petroleum Engineering Economics Evaluation Software Imperative by Davis, C. K.; Idea Group Publishing; 2005 The case covers key issues in information technology dealing with developing a full set of project plans, including milestones, tasks, schedules, staffing, deliverables, and projected costs, for a complex software development project.

UCB: Managing Information for Globalization and Innovation (A) by McFarlan, F. Warren; Brian & DeLacey; Harvard Business School Publishing; 02/12/2003; (47 pages) This case presents a complex total MIS strategy case for a $3 billion European pharmaceutical/chemicals company based in Brussels. It covers corporate strategy alignment of IT portfolio, IT operations issues, and global coordination of IT. Volkswagen of America: Managing IT Priorities by Austin, Robert D.; Ritchie, Warren; Garrett, Greggory; Harvard Business School Publishing 2005 (19 pages) Describes the efforts of Volkswagen of America, the U.S. subsidiary of Volkswagen AG, to arrive at a process for setting IT funding priorities so that they align with business priorities and the company's overall strategy.

ZS Associates by Compeau D; Qayyum A; Richard Ivey School of Business; 2002; (16 pages) ZS Associates is a consulting company whose scheduling system cannot keep up with the needs of the firm. The firm must decide whether to develop software in-house, have new software custom built externally or purchase off-the-shelf software.

Amazon.com: Exploiting the Value of Digital Business Infrastructure by L. Applegate and M. Collura HBS case number 800330 2000 Enables a thorough analysis of Amazon.com and the company's value proposition, in terms of its business concept, digital business capabilities, and community and shareholder value. Examines the company's complex set of business models and web of business relationships, as well as Amazon's plan to monetize (generate revenues and earnings through) its assets. Teaching Purpose: To enable students and executives to analyze firm performance and value in a highly uncertain, rapidly growing business environment.

Internet Customer Acquisition Strategy at Bankinter by F. Asis Martinez-Jerez, V.G. Narayanan, and Lisa Brem HBS case number 103021 2003

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Ann Peralta, director of the Internet network in Bankinter, needs to know whether the thousands of new customers pouring in from other portals are profitable for the bank. Bankinter, a relatively small Spanish bank, has a large presence as an Internet financial services provider.

Peralta uses tools such as customer relationship management, activity-based costing, customer profitability, and lifetime value computations to determine how valuable this cohort of new customers is for the bank and in doing so, can decide on future customer acquisition strategies.

Recognizing Runaway IS Projects When they Occur: The Bank Consortium Case by Joan Cheney Mann, Idea Publishing Group (IT5616), 8 pages, Setting: United States The case study describes a runaway project that occurred when several savings and loans formed a consortium to create a data center that would develop and operate basic transaction processing software for its members. The case highlights practical issues related to how runaways develop.

Other cases: -

-

-

-

-

SinoSecurities.com (HBS case 302-072, Dec. 10, 2001, setting: China) Government E-Procurement: Electronic Tendering System in the Hong Kong SAR (UHK case HKU238, June 25, 2002, setting: Hong Kong) The Free Internet Initiative in LaGrange, Georgia (HBS case 302-041, Feb 14, 2002, setting: US) Administrative Data Project (A) (HBS case 803-051, Feb. 19, 2003, setting: Boston) The Perils of Ignoring "Systems 101": Recovering from Mishaps at Two Small Companies, Communications of AIS, April, 2002, Volume 8 Article 24 http://cais.aisnet.org/articles/default.asp?vol=8&art=24 (setting: USA) DxR Case Study, Communications of AIS, March 2000, Volume 3 Article 5 http://cais.aisnet.org/articles/3-5/default.asp?View=html&x=31&y=9 (setting: small town Illinois) Network Implementation Project in the State Sector in Scotland: The Influence of Social and Organizational Factors, Ann McCready and Andrew Doswell, Idea Publishing Group, 15 pages, IT5506, (setting: International - Scotland) The Application of IT for Competitive Advantage at Keane, Inc., Mark R. Andrews and Raymond Papp, Idea Publishing Group, 19 pages, IT5509, (setting: International - Scotland) Managing the NICS Project at the Royal Canadian University, Charalambos L. Iacovou, Idea Publishing Group, 12 pages, IT5550, (setting: International - Canada) Systems Requirements and Prototyping, Vincent Yen, Idea Publishing Group, 14 pages, IT5559, (setting: U.S.) Recognizing Runaway IS Projects When They Occur: The Bank Consortium Case, J. C. Mann, Idea Group Publishing, 8 pages, IT 5616, (setting: U.S.) The T1-Auto Inc. Production Part Testing Process: A Workflow Automation Success Story, Charles Cain, Thomas W. Lauer and Eileen Peacock, Idea Publishing Group, 14 pages, IT5658, (setting: Australia) A Dream Project Turns into a Nightmare: How Flawless Software Never Got Implemented, V. Roy and B.A. Aubert, Idea Group Publishing, 8 pages, IT 5660, (setting: Canada)

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Large-Scale Sustainable Information Systems Development in a Developing country: The Making of an Islamic Banking Package, Adekunle Okunoye, Idea Publishing Group, 16 pages, IT5680, (setting: International) Zhou Jianglin, Project Manager, Michael Parent and Ken Mark, Ivey Publishing, 9B02E010, 4 pages, 2001 (setting: China)

Readings/Articles Gold, R.S. “Follow the Money: IT Finance and Strategic Alignment” Balanced Scorecard Report Harvard Business School Publishing 2004 Gold offers a prescription for overcoming the widespread mismatch between IT's responsibilities and IT funding practices to achieve strategic alignment between IT and the enterprise.

Rangan, V. K. “Lofty Missions, Down-to-Earth Plans” Harvard Business Review; 82(1) Most nonprofits make program decisions based on a mission rather than a strategy. This article outlines for nonprofits a four-step process for developing strategy.

Russell, R.H. “The State of IT and Business Alignment—2003” Balanced Scorecard Report Harvard Business School Publishing 2004 Alignment between IT and business strategy is generally improving. However, initiative/budget mismatch persists. This article examines: "How Does IT Funding Affect Alignment?"

Seeing the Forest and the Trees: ABC and BSC at Finnforest U.K. HBR Publishing: Balanced Scorecard Report Article, March 15, 2001, article B0103B When Finnforest Ltd., Europe's largest manufacturer and supplier of timber products, acquired Stantons in 1995, the latter enjoyed a large customer base and strong wholesale and retail relationships. The firm's then finance and information technology director chronicles Finnforest U.K.'s woes and its path to sound management and profitability. The remedy: a combination of activity-based costing and the Balanced Scorecard. Together, the two systems provided muchneeded measurability and accountability.

Emigh, J. “Total Cost of Ownership”, Computerworld December 20, 1999 Gartenberg, M. “Myths behind TCO”, Computerworld October 30, 2000 Liebmann, L. “TCO is a bad measurement tool; use this instead” Computerworld February 08, 1999 Billington, J. “The ABCs of ABC: Activity-Based Costing and Management.” Harvard Management Update 4 (5) 1999.

Kaplan, R. “Introduction to Activity-Based-Costing.” HBS Technical Note 9-197-076 2001.

Kumar, R.L. “Managing Risks in IT Projects: An Options Perspective,” Information & Management, 40(1): 63-74. 2002

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Benaroch, M & Kauffman, RJ “A Case for Using Real Options Pricing Analysis to Evaluate Information Technology Project Investments,” Information Systems Research, Volume 10, Number 1, 1999, 70-86.

Ross, J., Michael Vitale, and Cynthia Beath “The Untapped Potential of IT Chargeback.”

MIS Quarterly, June 1999, Pg. 215-237.

Beath, C. and J. Ross “Beyond the Business Case: New Approaches to IT Investment” Sloan Management Review, 43(2) 2002, Pg. 51-59.

Books: Weill, Peter and Broadbent, Marianne. Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology, HBS Press, June 1998.

This book has a great model for thinking about IT as an investment portfolio, with infrastructure, transactional, strategic and informational types of IT investments.

Harvard Business Review on the Business Value of IT. HBS Press, Feb. 1999.

This book is a compilation of a number of HBR articles related to managing the costs of IT, including outsourcing, planning, and strategic potential.

Websites www.brint.com This site has many interesting links to sites on the web that relate to this topic.:. www.infoweek.com, www.computerworld.com These magazines have frequent articles on MIS organizations, CIOs in the news, and strategic business decisions made by information systems executives. www.CIO.com This magazine is devoted to issues of interest to CIOs and senior IS managers. It is a good site for finding current case studies and in-depth interviews with CIOs. www.hbr.harvard.edu This is the website for all Harvard Business School publications, including articles and case studies. www.gartner.com This is the website for Gartner Research. They have an extensive library of TCO, measuring business value, and IT investment portfolio reports.

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Chapter 11: Project Management Overview Most MIS textbooks spend little or no time on this topic. However, for management students, it seems that most of their time will be spent either managing projects or as a member of a project management team. Further, most projects in businesses today involve building, using, altering or locating an information system. Therefore, we felt it was important to have a chapter dedicated to project management. This chapter is about project management in general, and also about issues such as prototyping, JAD, RAD and agile development, which are specific to managing IT projects.

The instructor interested in covering these IT specific topics are encouraged to supplement this chapter with reading that give more detail on systems development methodologies (some of which are suggested in this Instructor’s Manual). The goal is to help management students understand how to be knowledgeable participants and leaders of projects.

Key Points in Chapter This chapter opens up with a brief discussion of a failed IT project in the UK. The Rural Payments Agency (RPA) implemented a new system without proper testing which resulted in late payments to the tune of ₤1.5bn. Only 15% were paid out by the end of 2006. The RPA had to make substantial changes to the system post implementation. The system had not been properly managed, with costs at 122 million pounds that were originally estimated at 46.5 million. The importance of this case is the problems that can occur when proper project management is not implemented.

Standish Group found that 67 percent of all software projects are challenged and are late, over budget or fail to meet performance criteria. Managing a business project means managing an information systems project.

Projects are defined as the work done as a "temporary endeavor". This is distinguished from operations, where work is ongoing and tasks are frequently repeated. A project manager is responsible for the organization of the project, as well as the ongoing activities necessary to make sure the project is successful.

Project management, therefore is the "application of knowledge, skills, tools, and techniques to project activities." There are a number of tradeoffs that must be made by the project manager and the "owners" of the project itself including scope and time, cost and quality, needs and expectations, and conflicting needs of different stakeholders.

Project management requires tradeoffs. To illustrate these tradeoffs, the project triangle is referred to (figure 11.2) with its three elements: time, cost, and scope. Any two of these elements can be maximized, but at the expense of the third element. A successful balance of these elements yields a high-quality project.

Four elements are essential for any project: common vocabulary, team work, a project cycle plan and management. Project management, on the other hand, requires the following skills:

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requirements identification, organizing, project team management, planning, risk and opportunity management, project control, visibility, status, corrective action and leadership. Each of these skills is discussed in some detail.

Most projects these days are IT projects, involving some use of information systems. There is little difference from a pure project management perspective. However, IT projects tend to follow one of a very few number of processes. One common IT process is the Systems Development Life Cycle, or SDLC. There are 7 phases to a typical SDLC: Initiation and feasibility, Requirements definition, Functional design, technical design and construction, verification, implementation and maintenance and review.

Four other commonly used methods for developing IT systems are prototyping, Rapid Applications Development (RAD), Joint Applications Development (JAD), and agile development. Prototyping, or evolutionary development, is the method of building systems where a version of the system is quickly built and shared with users. RAD is a more structured process for developing systems quickly, and in some ways is similar to prototyping in some ways, where the user interface is quickly developed using specialized tools, reusable code, code generation systems, etc. RAD often refers to the process, prototyping often refers simply to the part of the process where a version of the system is shared with the users. JAD is a version of RAD or prototyping which is built around the involvement of a group of end-users. Agile development comes in various varieties including Extreme Programming (XP) and Dynamic System Development Method (DSDM). These methodologies are dynamic and tend to be more people-oriented than project-oriented. The objectoriented approach is also introduced.

Managerial issues for IT projects include technical, organizational, and socioeconomic influences.

Technical issues arising in IT projects have the potential to make general managers uncomfortable, and therefore often these issues are either ignored or delegated inappropriately.

Many IT projects are built using computer aided software engineering tools. Software development libraries help control the collection of software, documentation, test data and other associated tools for IT projects. And an automated audit trail allows the team to track each change made to an IT system, facilitating both the location of problems later on, and the maintenance and repair of systems.

Putting it all together and then dealing with the associated risks is the manager's job. The project's complexity, clarity and size determine the risk factor. The level of risk determines how formal the project management system and planning detail should be. Managing the complexity aspects of project risk can include leveraging the technical skills of the team, relying on consultants and vendors, and integrating within the organization. Organizational factors must be managed such as managing project stakeholders, sustaining commitment to projects, and managing cultural, structural and systemic influences. These organizational factors help improve the clarity of the project.

In some projects the risk is too great or the payoffs are too little. The plug needs to be pulled on these projects.

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We often ask our students when they are doing projects, "how will you know if your project has been successful?", or "what are the measures of success?" There are four dimensions of success: resource constraints, impact on customers, business success, and preparation for the future.

Next, the text discusses the PMO (Project Management Office). Some companies create to boost efficiency, gather expertise, etc. Some of the drivers for creating a PMO are: Sarbanes-Oxley; may lead to cost savings in the long run; etc. PMOs can be expected to function in seven areas: Project support; Project management process and methodology; Training; Project Manager home base; Internal consulting and mentoring; Project management software tools and support; Portfolio management.

The food for thought section deals with a new approach to development: open sourcing. Open sourcing is addressed from the perspective of the manager selecting a development approach. Some key issues in this decision are preservation of intellectual property, updating and maintaining open source code, competitive advantage, tech support, and maintaining standards.

Illustrative Answers to Discussion Questions 1. What are the trade-offs between cost, quality, and time when designing a project plan? What criteria should managers use to manage this trade-off?

Ans: The key point here is that cost, quality and time are the key categories of objectives for a project. Often projects seek to be low cost, high quality and short time frame. But while important to a client, these objectives are often in conflict with each other. It is often impossible to be successful in the project if all three of these are inappropriately specified. For example, given a restrictive, low-cost budget, a goal of high quality (things like zero defects, high level of functionality, etc) and short timeframe, a project is most likely set up for failure. On the other hand, it is possible to design a project where cost, quality and time objectives are all met. If they are all very generous, it may be possible to achieve all three. A manager must be clear which of these objectives is of most importance to the client/project owner. Once identifying the most important objective (getting it done quickly, staying within a restrictive budget or producing hi quality) a manager must then negotiate a reasonable level for the other objectives (for example, if time is the most important, is there a new budget that makes the quality level achievable, or is there a reduced scope/lower quality that is acceptable that makes the restrictive budget achievable.

2. Why does it often take a long time before troubled projects are abandoned or brought under control?

Ans: This is a very open ended question. I believe troubled projects are slowly abandoned or brought under control because of the human nature to try to fix problems before abandoning them.

People often thing that if they just do one more thing or one thing differently, they will get it right and make their objectives. Further, people are hesitant to admit failure, making it difficult to honestly address the failing project objectively.

3. What are the critical success factors for a project manager? What skills should managers look for when hiring someone would be successful in this job?

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Ans: Critical success factors for a project manager are somewhat subjective. This chapter does not specifically list CSFs. The chapter covers “10 elements” of project management, and many students will list these as the critical success factors (the 10 are: Requirements definition, organizing, project team management, planning, risk and opportunity management, project control, visibility, status management, corrective action, and leadership). The more astute students will take some subset of these and give explanations as to why they are the most critical. Managers should look for skills such as ability to get along with people, organization, knowledge of managing projects, ability to negotiate through seemingly contradictory customer/owner demands, budgeting, schedule and risk management capabilities, agility and flexibility to change as necessary to meet dynamic project conditions and ability to see the big picture.

4. What determines the level of technical risk associated with a project? What determines the level of organizational risk? How can a general manager assist in minimizing these risk components?

Ans: Technical risk is determined by how new the technology is to the world (is it mature or likely to have significant bugs), how new it is to the organization (is there experience in the organization with it or not) and complexity (is it a simple technology or a very complex system?).

Organizational risk is determined by similar factors: How new is the idea to the organization (do they have to make a big change or a small change from the current organization)? How complex is the change the organization must make (is it very complex or simple? How widespread must the change take place? A single individual or group or across the wider organization)? How adaptable is the organization to change (do people make change often or not)? And how much time is there to make the change (must people change immediately or is there time for education and communication)? A general manager can assist in minimizing these components by careful planning, alternative scenario planning, careful monitoring the progress of the project, and by continually assessing metrics which reflect these risk factors.

5. Lego’s Mindstorms Robotics Invention System. a. What are the advantages of Lego’s approach to open sourcing?

Ans: Lego’s customers are clearly excited about generating code and this excitement is translating into increased sales. Further, the robots are being programmed to perform additional tasks, thanks to open sourcing. b. What are the disadvantages of Lego’s approach to open sourcing?

Ans: This question is designed to help students consider the downside of open sourcing for Lego.

Some of these negative effects may result in damaged robots that don’t live up to Lego’s reputation, difficulty in maintaining the code, difficulty in producing advanced versions of the robots, physical harm to customers from the programmed robots, etc. c. How should Lego manage the open-source movement?

Ans: have the students focus on some of the issues discussed in the chapter: preservation of intellectual property, maintaining open source code, setting standards, and offering tech support.

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Further Discussion Questions 1. What are some risks that a project might encounter that are non-technical? How might the following impact successful project management: a.) a project occurs during a downsizing operation b.) a project occurs with a strategic partner based in another country (with a different culture)? c.) a project occurs with another division of your company based in another country (with a different culture)? d.) the project champion leaves the corporation midway through the project How can these challenges be addressed?

How might one plan for such contingencies?

Case Study 11-1: Sabre Holdings Discussion Questions 1. In what ways do you think this project was managed differently than the 1988 overhaul project?

What are the advantages of agile programming in this situation?

Ans: The new system was designed in small steps that could be easily changed or completely overhauled without major interruption. The original system was designed using the traditional systems development and project management plan, which makes it more difficult to make sudden and drastic changes. The agile programming approach made change easier to a very complex and large system.

2. What were the risks Sabre Holdings faced when they decided to redesign their reservation systems? What actions did they take to minimize the risks?

Ans: There is potential for a variety of answers to this question. Students need to be encouraged to think of all of the possible risks that they can. The actions they took were to break the system up into a series of small steps that enabled tweaking and redesign as needed. They were also able to test the system after each step to make sure that it worked and met user’s needs.

3. How did the Sabre project managers insure that the system met user’s needs?

Ans: Sabre was able to go live with each iteration of the system before beginning the next step.

This made it possible for the end user’s to see the system and provide input before moving on the next step, and before it was too late or too costly to make changes to the system.

Case Study 11-2: Dealing with Traffic Jams in London Discussion Questions

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1. Assess the risks of this project. Given your assessment of the project complexity,, clarity, and size, what management strategies would you recommend? What if, in an, of these strategies were adopted in this project?

Ans: The transportation project was very complex. There were many technological factors that the system developers needed to decide: what type of camera technology to use, the image store component that collected images and converted them into license numbers, the telecommunication links between the cameras and the image store, the customer service infrastructure, where to situate the cameras, and upon an extensive network of retail outlets, kiosks, and gas stations where people could pay the toll. They also had to deal with a tight implementation timetable, there was no preexisting model to follow, and they were under a new transit authority. Not typically considered an aspect of technology, but certainly important to the success of the project were the hundred year old, convoluted streets.

To handle the complexity, the project was outsourced to a team with the expertise to handle the complexity. An elaborate approach was taken to determine the expertise of the consultants by having the two finalists draw up a technical design that could be compared to one another. Further, a second firm (first PricewaterhouseCoopers and then Deloitte & Touche) was hired to handle the critical project management elements. To reduce the technical risks associated with complexity, the technologies selected for the five packages were the best available.

Luckily, the project was of high clarity. They knew what they wanted and this did not change frequently throughout the project. According to the article, they vigorously guarded against scope creep by limiting changes to the requirements. Little other management strategies were needed to deal with clarity.

This was definitely a large project. They were going to be placing 699 cameras at 203 sites in an 8 square mile target for traffic congestion control. It was estimated to cost $11.6 billion. It was also estimated that this project to translate into total revenues of $2.2 billion dollars within 10 years. To handle the risks from size, the project was subdivided into five parts. All parts were subject to strict project management controls. There were clear milestones with penalties for Capita for not meeting the deadlines.

2. Describe the development methodology that was applied to this project. Was this the most appropriate approach? Provide a rationale for your response.

Ans: Not much information was given about the methodology, so it is important to explore the student responses. On one hand, the development methodology applied to this project seemed to have been the Systems Development Life Cycle. First, an initial Feasibility Analysis was done, in order to determine what kind of solution was possible to implement. This came up with the idea for the toll system. Secondly, Project Requirements were established in order to decide on an appropriate course of action. After all these requirements were identified, bids were taken. After discarding most of the bids, two companies were left. These 2 companies were provided with the Functional requirements for the project, and both of them were paid to and presented their Technical Designs for the implementation. One of the companies was selected, and another contractor was hired to revise and supervise their work. When they were ready, they Implemented

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the system. After the system was in place, they monitored the system for any Maintenance and correction needed.

Some students may say that an RAD approach was used because of the rapidity with which the system was developed. Point out that RAD usually is associated with prototyping, as opposed to the production system that was implemented. Further, RAD usually relies upon GUI and other development tools that were not mentioned in this case.

3. When a project is outsourced who should manage the project --- the internal group or the outsourcer? Why? Ans: The internal group should not abrogate all responsibility for the project. However, for very complex projects they may not have the expertise to manage the project. In this case, Transport of London hired a consultant (first PricewaterhouseCooper and then Deloitte & Touche) to manage the project for them.

Some additional questions that may be asked about the case include: 4. Describe the steps taken in this project to limit outsourcing pitfalls (from Chapter 9) Ans: The project was assigned to the vendor with the best product for each sub-project. The project team was made up of experts in the fields and the vendor pulled them all together in a central location. This avoids the pitfall of employee slight of hand, and insured that the best people continued to work on the project. By hiring a consulting firm to consider the bids, it was possible to thoroughly evaluate the outsourcers’ capabilities. Further, the two finalists each prepared a technical design. This allowed Transport of London to assess the capabilities of the two finalists and to compare the two plans for innovativeness and attention to technical details. It also appeared that security and privacy were at least considered. This also helped avoid issues with the customer privacy that could have been brought up. By having such a tight schedule and stringent requirements, the key players remained in the loop and did not appear to encounter any loss of control. The contracts were set and confidentiality agreements were signed to control the possibility of high switching costs. This also addressed the possibility of the cost savings evaporating. The reliance on the vendor would have been an issue no matter who won the contract, so the contract was written in a way that the vendor had to support and standby the process or they would face heavy liquidated damages. Finally, the contract was for a short period of time, about 2 years.

5. Define return on investment, net present value, and payback period. Discuss the extent to which each of these three valuation methods would have been appropriate in determining whether or not to implement the system described above. (Chapter 10) Ans: Return on Investment – a percentage which is found by using the formula: (all future benefits – all future costs)/all future costs.

Net Present Value – Finding out what future monies are worth in today’s economy using a NPV table that takes into consideration the interest that could be earned on today’s dollar and the inflation that will be estimated making tomorrow’s dollar worth less than today’s dollar. It is

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calculated by discounting the costs and benefits for each year of the system’s lifetime using the present value factor calculated each year as 1/(1+discount rate)year Payback Period – How long it will take to recover the investment put into a project. This is calculated by taking the expected revenues of each year and subtracting out the investment costs.

When it becomes positive then that is when the project will payback the invested monies.

This project was driven not so much by the city’s need for additional revenues as much as it was by the need for a solution to traffic congestion in London. Net revenues from the project would be used to further improve upon the public transportation system within the city, but this did not appear to be the primary concern. The mayor was motivated by his desire to alleviate the public’s frustration over the traffic woes as well as win reelection. Since the time factor was most important in this project, the payback period is a quick and dirty valuation method for determining feasibility of this project. This was used to determine that it would only take a year and a half to recover the amount spent on the design and development of this project – evidence enough that this was a project worth a try.

All three of these approaches tend to look at the tangible costs and benefits of the system. From a financial perspective, although the project pays for itself in 1 and ½ years, it only brings in revenues of 2.2 million over 10 years, and that doesn’t include the cost of maintaining the system!

That’s not a great investment from a financial perspective alone. Students often pick ROI, without working it out. Have them calculate ROI. In this case, the ROI over a 10 years period was anticipated to be: Revenue(2.2 Billions) - Initial Cost(11.6) /Cost = - 0.81, Based on ROI alone, this project should not be undertaken.

Supplemental Readings Cases: (on website) Canadian Airlines International Ltd This case describes the situation Canadian Airlines found itself in during the early 1990s when they desperately needed to successfully implement the American Airlines SABRE system in their operations. Only by implementing this system would Canadian Airlines obtain the cash infusion they desperately needed to remain an independent airline. The primary focus of this case is on project management – not on the low-level, day-to-day details, but on the high-level questions of how to bring two very different organizations together and how to organize one of the largest systems transitions projects in history.

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Rock-Solid Life Insurance This two-part case describes the process that a major insurance company, Rock-Solid, when through to assure Year 2000 compliance in their various systems.

Complicating this process was the decentralized nature of their firm, including major operations in multiple countries. While this case is specific to Y2K preparations, it presents a useful framework for discussing how to assure compliance in a firm to any type of mandate – whether from a firm’s board of directors, new governmental regulations, etc. (useful for this chapter or chapter 8, MIS organization) The Puerto Rico Education Project This case describes a large-scale development project undertaken by a Washington D.C.-based consulting firm. The development was conducted in Puerto Rico, and the issues presented in the case evolve from this location. The project was beset with a number of different issues, from cultural differences to language problems, from poor planning to upset family members. Students will see in this case problems involved with systems development in “foreign” countries and problems that can arise when specifications for a systems project are not specified up front.

Integrated Systems in State Government This case describes the process that the State of Louisiana went through in implementing SAP R/3. They were the first state government to make this transition, and the process was not always a smooth one. This case describes the interactions between the State and their consultants. It also stresses the importance of planning for the changes inherent in any systems development effort of this magnitude. (useful for this chapter or chapters 2 – Organizational Impacts of Information Systems Use, chapter 3 – Information Technology and the Design of Work, or chapter 5 – IT and Business Transformation) Other Cases: Volkswagen of America: Managing IT Priorities by Robert D Austin, Warren Ritchie & Greggory Garrett. Harvard Business School Publishing. 2005. (19 pages) Describes the efforts of Volkswagen of America, the U.S. subsidiary of Volkswagen AG, to arrive at a process for setting IT funding priorities so that they align with business priorities and the company's overall strategy.

Offshoring at EDC by HW Lane & DTA Wesley. Richard Ivey School of Business 2005 (19 pages) Education Development Center (EDC), a non-governmental organization, is an example of offshoring best practice and will help identify factors for successful implementation of an outsourcing project.

IBM: Ordering Midrange Computers in Europe by Andrew McAfee & Michael Otten. Harvard Business School Publishing 2004 (15 pages) IBM Europe is trying to expand business-to-business (B2B) efforts with its large distributors of midrange systems. These efforts aim to automate many transactions and business processes,

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removing the need for human involvement. The leaders of the IBM effort face two principal challenges: accelerating the pace of subsequent efforts and convincing more distributors to take part.

The PCNet Project (A) Project Risk Management in an IT Integration Project, by Christoph Loch INSEAD. 2005 (20 pages) The case illustrates competent project risk management, including risk identification, assessment, and management.

Network Implementation Project in the State Sector in Scotland: The Influence of Social and Organizational Factors, Ann McCready and Andrew Doswell, Idea Publishing Group, 15 pages, IT5506, (setting: International - Scotland) This case study is about the introduction of networked PCs in a local government office in Perth, Scotland. The case focuses on the importance of organizational and social factors during the implementation process.

The Application of IT for Competitive Advantage at Keane, Inc., Mark R. Andrews and Raymond Papp, Idea Publishing Group, 19 pages, IT5509, (setting: International - Scotland) This case will focus on Keane Company’s approach to Project Management and how they provide this service to their clients.

Managing the NICS Project at the Royal Canadian University, Charalambos L. Iacovou, Idea Publishing Group, 12 pages, IT5550, (setting: International - Canada) This case describes the installation of an IBM mainframe computer at the Royal Canadian University. The goal of the described project was to establish a Numerically Intensive Computing Service (NICS) in order to provide “first-class” computing facilities to the researchers.

Systems Requirements and Prototyping, Vincent Yen, Idea Publishing Group, 14 pages, IT5559, (setting: U.S.) This case study is based on a multi-year information systems plan for a marketing firm. The case describes the critical components of the enterprise system, including the software and hardware architectures.

Recognizing Runaway IS Projects When They Occur: The Bank Consortium Case, J. C. Mann, Idea Group Publishing, 8 pages, IT 5616, (setting: U.S.) The case study describes a runaway project that occurred when several savings and loans formed a consortium to create a data center that would develop and operate basic transaction processing software for its members. The case highlights practical issues related to how runaways develop.

The T1-Auto Inc. Production Part Testing Process: A Workflow Automation Success Story, Charles Cain, Thomas W. Lauer and Eileen Peacock, Idea Publishing Group, 14 pages, IT5658, (setting: Australia) This case describes the development, design, and implementation of a workflow automation system at a tier one automotive supplier, T-1 Auto. In 1994, Lotus Notes was installed as the corporate standard e-mail and workflow platform. The case goes on to describe the design and development

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of the Lotus Notes workflow management system. The case concludes with a discussion of project success factors and planned future enhancements.

A Dream Project Turns into a Nightmare: How Flawless Software Never Got Implemented, V. Roy and B.A. Aubert, Idea Group Publishing, 8 pages, IT 5660, (setting: Canada) This case details the experience of Integra, a large Canadian life insurance institution and its partner Intex Consulting, the Canadian subsidiary of a large international information system (IS) integration firm’s launch of its Banking and Loan Insurance Software System (BLISS) development project. After 1.3 million dollars of investment from each partner and twelve months of intensive efforts, the project came to an abrupt stop. Specifically, this case looks as the ramifications of introducing a new and unproven IS product and how to avoid and recover from and IS project failure.

Large-Scale Sustainable Information Systems Development in a Developing country: The Making of an Islamic Banking Package, Adekunle Okunoye, Idea Publishing Group, 16 pages, IT5680, (setting: International) This case study explores the difficulties encountered in technology transfer to developing countries, specifically examining a company offering IT services to an Islamic bank. The case highlights the circumstances that led to the bank’s decision to develop the systems locally. The case looks at the outsourcing decisions, project management issues, and systems development problems as they relate to developing countries’ successful IS projects.

Colorado Benefits Management System: Decision Time Donald J. McCubbrey and Cynthia V. Fukami , Communications of AIS, Volume 16 Article 34 (setting: public agency, US) In a sense, this is a failure story where a decision must be made whether the project should be continued or abandoned. Such stories are hard to come by from private firms since the PR people and the management will always try to bury the failure. Thus, this case,like many failure cases, comes out of the public sector where transparency is higher.

Additional cases: - Zhou Jianglin, Project Manager, Michael Parent and Ken Mark, Ivey Publishing, 9B02E010, 4 pages, 2001 (setting: China) - SinoSecurities.com (HBS case 302-072, Dec. 10, 2001, setting: China) - Government E-Procurement: Electronic Tendering System in the Hong Kong SAR (UHK case HKU238, June 25, 2002, setting: Hong Kong) - The Free Internet Initiative in LaGrange, Georgia (HBS case 302-041, Feb 14, 2002, setting: US) - Administrative Data Project (A) (HBS case 803-051, Feb. 19, 2003, setting: Boston) - The Perils of Ignoring "Systems 101": Recovering from Mishaps at Two Small Companies, Communications of AIS, April, 2002, Volume 8 Article 24 http://cais.aisnet.org/articles/default.asp?vol=8&art=24 (setting: USA) - DxR Case Study, Communications of AIS, March 2000, Volume 3 Article 5 http://cais.aisnet.org/articles/3-5/default.asp?View=html&x=31&y=9 (setting: small town Illinois) - IntellectExchange, Inc. (HBS case 802-113, Dec. 7, 2001, setting Boston, MA) - Siemens ShareNet: Building a Knowledge Network (HBS case 603-036, Nov. 5, 2002)

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The PricewaterhouseCoopers KnowledgeCurve and the Spinning off of PwC Consulting (HKU case HKU221, Sept. 30, 2002, setting: Asia-Pacific) Knowledge Management at Ernst & Young by Miklos Saryary and Ann Marie Chard, Stanford University, Available at HBS Press: http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?M291 Buckman Laboratories (A) by William Fulmer, Harvard Business School Case number 800160, available at HBS Press: http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?800160 Knowledge Management at Andersen Consulting by Morten Hansen and Tom Davenport, Harvard Business School Press case 499032, July 1999 Available at: http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?499032 SAFECO: Leveraging the Web in a Knowledge-Based Service Industry, Debabroto Chatterjee and Leonard M. Jessup, Idea Publishing Group, 17 pages, IT5578, (setting: U.S.) Enterprise Information Portal Implementation: Knowledge Sharing Efforts of a Pharmaceutical Company, Allison Manning and Suprateek Sarker, Idea Publishing Group, 17 pages, IT5632, (setting: U.S.) Spreadsheets as Knowledge Management Documents: Knowledge Transfer for Small Business Web Site Decisions, Stephen Burgess and Don Schauder, Idea Publishing Group, 17 pages, IT5686, (setting: Australia) Implementation of a Knowledge Management System at Hi-Tech Solutions, Sindhu Ravindran, T. A. Pai Management Institute (TAPMI), Manipal, India, 1999-2001-13, 2001, www.asiacase.com, 18 pages (setting: India)

Readings/Articles: Fichman, R.G., Keil, Mark;, Amrit ,T. “Beyond Valuation: "Options Thinking" in IT Project Management” California Management Review 2005 Iacovou, C.L. & Dexter, A.S. “Turning Around Runaway Information Technology Projects” California Management Review 2004 Lam, W. and Alton Chua Knowledge Management Project Abandonment: An Exploratory Examination of Root Causes Communications of AIS, 16(35) 2005 This article studies the abandonment of Knowledge Management systems in Singapore. Lam and Chua use root cause analysis to identify the causes of KM project abandonment in five welldocumented cases of KM drawn from the literature.

AlMarzouq, M. , Li Zheng, Guang Rong, Varun Grover, “Open Source: Concepts, Benefits, and Challenges” Communications of AIS, 16 (37) 2005, This article represents a tutorial on free and open source software F/OSS that tries objectively to identify and present open source software’s concepts, benefits, and challenges. It also describes approaches to benefiting from F/OSS. King, J. “Post-Y2K: Project management” Computerworld, (January 18, 1999) http://www.computerworld.com/cwi/story/0,1199,NAV47_STO33557,00.html Now that year 2000 work is winding down at Clark Refining & Marketing in St. Louis, CIO Jeff Chasney finally has the time and money to start in on the backlog of IT projects that earlier were forced to the back burner.

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Melymuka, K. “Born to Lead Projects” Computerworld, (March 27, 2000) http://www.computerworld.com/cwi/story/0,1199,NAV47_STO44218,00.html You can train somebody to be a good project manager, but great project managers seem to be born, not made. Excellence depends on certain innate characteristics: Some of us got 'em, and some of us don't. "Project management requires competencies in three subject areas: technology, business and behavior," says Linda Pittinger, CEO of People3, a human resources consultancy in Somerset, N.J. Ideally, project managers should have all three, she says, but if you had to choose only one to focus on, it should be behavior. "People can go to school to learn the technical things, and they can learn the business over time," she says. "The behavioral competencies are the ones people are least able to learn. They're intuitive."

Blackburn, J., Gary Scudder and Luk N. Van Wassenhove “Concurrent software development” Communications of the ACM 43(11). 2000.

Agarwal, R. J. Prasad, M. Tanniru & J. Lynch “Risks of rapid application development” Communications of the ACM 43(11). 2000.

Millman, H. “Project Management On the Lite Side” Computerworld, (June 26, 2000), http://www.computerworld.com/cwi/story/0,1199,NAV47_STO46311,00.html Article about an entirely Web-based, free and independently hosted, project management tool called eProject Barki, H. S. Rivard & J. Talbot “An Integrative Contingency Model of Software Project Risk Management” Journal of Management Information Systems, 17(4) 1999 Article builds model of software project risk management based on a profile deviation perspective of fit between the project’s risk and how the project is managed. Model is tested with longitudinal data obtained from leaders of 75 software projects.

Schmidt, R., K. Lyytinen, M. Keil and P. Cule “Identifying Software Project Risks: An International Delphi Study” Journal of Management Information Systems, 17(4) 1999 International Delphi study to obtain listing of project risks.

Books: Wysocki R.K. Effective Project Management: Traditional, Adaptive, & Extreme NY: Wiley and Sons 2003 Forsberg, K., H. Cotterman, & H Mooz Visualizing Project Management : A Model for Business and Technical Success NY: John Wiley & Sons 2000 Rather than offering a full inventory of management techniques, they decompose them into 10 essential elements to provide an innovative approach to project management using a universal project cycle. Excellent graphic charts and 3D models help readers understand the project cycle, enabling them to visualize how each element fits into the overall project picture

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A Guide to the Project Management Body of Knowledge Upper Darby, Pa.: Project Management Institute (January 2001) This book describes a generic project management model, suitable across many disciplines. It is written to be a standard. While it is authoritative and something you should definitely read, it is tough reading for beginners. The book does not proceed in the same sequence as project phases.

Available at Amazon.com and other bookstores, and from the PMI, www.pmi.org.

McConnell, S.C. Software Project Survival Guide Redmond, WA: Microsft 1997 Provides a short overview of a successful software project and details a plan for software development for medium-sized client/server projects using such modern development practices as object-oriented design and programming. (Can also be adapted for projects using traditional development practices and mainframe computers.) Designed for commercial applications and business systems Fleming, Q.W. and Joel M. Koppelman Earned Value Project Management Upper Darby, Pa.:Project Management Institute 2000 Most project managers with formal project management training know earned value is what you get for what you spend. It's a three-dimensional ``early warning'' signal for management. Instead of the conventional actual cost vs. budget comparisons, it includes the dimension of relating the project's scope to the schedule and to the cost performance. It's the ``budgeted cost of work performed,'' known affectionately as BCWP. Gilbert, S. 90 Days to Launch : Internet Projects on Time and on Budget. NY: John Wiley & Sons.

2000.

The first in its genre, 90 Days to Launch shows business managers and decision makers how to plan and deliver successful Internet projects, giving step-by-step instructions that will enable a company to efficiently launch a site.

Ferry, D.D. & N.F. Ferry. 77 Sure-Fire Ways to Kill a Software Project: Destructive Tactics That Cause Budget Overruns, Late Deliveries, and Massive Personnel Turnover. iUniverse.com. 2000.

This book is a lighthearted, black sheep guide to managing software projects. Is a on a doomed project? Do you really believe that spiffy SEI rating or the latest software engineering fad will save someone from working long nights, missing deadlines, or having a nervous breakdown? We've got news: the project didn't get that way by accident. It took a lot of careful planning, and this book will describe how things get out of hand for projects. A fun read.

Websites: www.pmi.org the website for the project management institute. This is a great resource for this topic. The website is for general projects, but they have the latest research, publications, communities of practice, etc. on project management. You can also get the Project Management Body of Knowledge book at this site, and it used to be a free .pdf file (or you can buy the book from them or Amazon.com). www.4pm.com/

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a website for project managers, with a lot of good references for the general project manager, and a whole sub-website on managing IT projects. www.ipma.ch/ A United Kingdom based project management website for international perspective on project management. Has some good information for "young project managers". http://www.gnu.org/philosophy/free-sw.html Free software definition

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Chapter 12: Managing Business Knowledge Overview Knowledge management, in some form or another, has been around for a number of years.

Archeologists suggest that texts found in the ancient city Ebla in Syria from 4000 years ago illustrate attempts to record and organize information. Today, however, managers continue to struggle with how to make sure their knowledge assets are not depleted when employees leave the organization. Managers struggle with how to secure knowledge assets to make sure they are not stolen by competitors. Managers struggle with how to disseminate knowledge assets to make sure the organization learns from past experiences and to minimize reinvention. This chapter explores the basics of knowledge management as a foundation for discussion in the classroom about current technologies and issues in this ever-important field.

Key Points in Chapter The introductory case in this chapter is on Harrah’s, the largest gaming company in the world.

Harrah’s found a way to double revenues by collecting and then analyzing customer data. The did this through mining their customer data completely. They use loyalty cards to track customer behavior and to determine high revenue customers. They determined that these customers were motivated by reduced hotel room rates, and wanted quick service and were then able to reduce lines and wait time. This enabled Harrah’s to keep customers coming back. This case shows how important information can be to an organization, but the organization must be able to collect and properly interpret and apply this data to make it useful knowledge.

Knowledge management is the collection, organization and distribution of knowledge assets.

Knowledge management is related to information systems in 3 ways: IT makes up the infrastructure for knowledge management systems, knowledge management systems make up the data infrastructure for many IS applications, and third, knowledge management itself is widely regarded as a stand alone application, much like a spreadsheet or word processor. Information technology provides an infrastructure for capturing and transferring knowledge, but does not create knowledge and cannot guarantee its sharing or use.

Data, information and knowledge are often used interchangeably, but have significant and discrete meanings within the knowledge management domain. Figure 12.1 nicely summarizes these differences. Figure 12.2 focuses on three types of knowledge. At the most basic level is knowingwhat, which encompasses the facts without fully understanding these facts. Knowing-how is learned through experience and incorporates an understanding of how to do something. Through reasoning it is possible to have the most complete type of knowledge, knowing-why. Knowingwhy involves both knowing-what and knowing-how.

We often speak of two types of knowledge: Tacit knowledge is personal, context-specific and hard to formalize while explicit knowledge is easily collected, organized and transferred through digital means. Most information systems focus on this later type of knowledge, although more current systems are beginning to acknowledge and incorporate facilities to support social interactions and information sharing among individuals as a key component of the system. Harry M. Collins (in

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“humans, machines, and the structure of knowledge”) describes different types of knowledge and talks about how much of human knowledge can be codified and transferred by machines. He argues that there is a difference between ‘tacit’ knowledge that appears to be located in society, and ‘formal’ knowledge that can be transferred in symbolic form and encoded into machines and other artifacts.

Paul Cule uses the following window to distinguish between different types of knowledge in his classes.

We know what we know (Explicit knowledge)

We don’t know what we know (Tacit knowledge)

We know what we don’t know

We don’t know what we don’t know

Information and knowledge have become the basis for competition in many fields. Several trends highlight the need for effective management of knowledge. First, companies are increasingly interested in sharing best practice instead of reinventing new practice. Second, globalization has increased the reach of knowledge-based businesses. Third, rapid change has made existing knowledge obsolete faster than previous generations experienced. Fourth, downsizing has eliminated employees and therefore removed knowledge from organizations. Fifth, the accelerating rate of information creation has created information overload for many individuals and organizations. Sixth, products and services are increasingly complex due to the embedded knowledge in the products and services themselves. And seventh, creating sustainable competitive advantages is difficult at best and managing knowledge seems to be one way leading organizations are able to succeed.

There is a four-core process to knowledge management. The knowledge generation process includes all activities that uncover knowledge. The knowledge codification process includes all the activities that capture and organize knowledge. The knowledge capture process includes scanning, organizing, and designing knowledge maps. And the knowledge transfer process includes all the activities that allow the knowledge to be used in future applications.

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Because students typically have a difficult time applying the knowledge transfer process, a short exercise (15-20 minutes) may be helpful. Break them into small groups and ask them to focus on one organization, preferably an organization where one of the students works. Ask them to identify different experts in this organization. For one of these types of experts describe 1. tacit knowledge they have 2. explicit knowledge related to their jobs and places where this knowledge can be found 3. benefits derived from capturing their tacit knowledge and making it explicit 4. problems in capturing their tacit knowledge 5. suggestions on how to capture their tacit knowledge Business intelligence is discussed in the context of moving from knowledge management to BI. Remember, managing knowledge is not a new concept, but one reinvigorated by IT, and KM is still an emerging discipline. Business Intelligence (BI) term used to describe the set of technologies and processes used to describe business performance. BI is therefore a component of KM. Business Analytics are the use of quantitative and predictive models, and fact based mgmt to drive decisions.

It is important to stress that an organization’s only sustainable competitive advantage lies with how its employees apply knowledge to business problems. But, also students need to understand that KM is not a magic bullet.

The text then discusses the why’s of knowledge management. Trends for managing knowledge include; Sharing Best Practices; the issue of Globalization and Rapid Change; Downsizing; Managing Information and Communication Overload; the Knowledge that is Embedded in Products; and maintaining a Sustainable Competitive Advantage. Figure 12.4 summarizes these trends. Each trend is covered in some detail and can help the student more clearly understand why knowledge management is so widely used and studied.

Next, KM processes are covered. The four main processes are: Generation – all activities that discover “new” knowledge; Capture – all continuous processes of scanning, organizing, and packaging knowledge after it has been generated; Codification – the representation of knowledge in a manner that can be easily accessed and transferred; Transfer – transmitting knowledge from one person or group to another, and the absorption of that knowledge. Students should clearly understand that all of these processes are critical to the success of KM. Each topic is covered in detail with various methods of how each process is performed. The word folksonomies will provide for an interesting discussion about organizing data. Also, knowledge maps and communities of practice are covered.

The chapter concludes with sections on competing with business analytics, the components of business analytics, and caveats for managing knowledge. Companies find success through better use of analytics. Many companies offer similar products and user comparable technologies and business processes are among the last remaining points of differentiation. Davenport and Harris suggest that companies who are successful competing with business analytics have these five capabilities: Hard to duplicate; Uniqueness; Adaptability; Better than competition; Renewability.

Figure 12.8 show the components of business analytics.

The food for thought section of this chapter is about business experimentation. Thomke discusses business experimentation as a means of innovation. Products and services are created and

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improved using analytics through a process of experimentation. Companies who excel are able to create new products and services at a fraction of the cost of others. Capital One is built around this methodology and they ran 1,000s of experiments on their bank’s customer database to test and develop new ideas. Experimentation has enabled Capital One to leverage the wealth of data that they have about their clients to offer and market new products and services in a much more intelligent manner. Business experimentation is a concept of test and learn. All projects are managed as experiments, and designed with a series of rapid iterations. Both Harrah’s and Capital One have built a core competency in business experimentation and analytics.

Illustrative Answers to Discussion Questions 1. The terms data, information and knowledge are often used interchangeably. But as this chapter has discussed, they can be seen as three points on a continuum. What, in your opinion, comes after knowledge on this continuum?

Ans: Some students will say that knowledge is the furthest point on that continuum, as knowledge is the understanding needed to make sense of information. But others may say that wisdom is even further out on the continuum, where wisdom is the extrapolated learning of a number of experiences and a large quantity of knowledge. Note: the continuum was first introduced in the Introduction chapter. We thought is was so basic that we repeated it in this chapter.

2. What is the difference between tacit and explicit knowledge? From your own experience, describe an example of each. How might an organization manage tacit knowledge?

Ans: Tacit is the knowledge we each, individually know from our experiences and our thinking. It may not be easily communicated because it may not be something we have ever expressed in words, pictures, or numbers ever before. Explicit knowledge, on the other hand, is the stuff we can point to, write about, or otherwise communicate easily. The trick, of course, is to make tacit knowledge explicit so we can communicate it to others. Each student should have examples of both types of knowledge. Tacit knowledge might be how to throw a baseball, hit a tennis ball, run a marathon, solve a homework problem, etc. Explicit knowledge examples might be the formula for a chemistry project or financial calculation or the statistics of your favorite sports team, etc. An organization might manage tacit knowledge explicitly, that is by trying to get individuals to make their tacit knowledge explicit then record it in a database, or by acknowledging the difficulty and by creating communities of practice, gurus, and other people-based systems that facilitate discussions and interactions as a means of transferring knowledge. (See Figure 12.7 for Nonaka and Takeuchi’s four modes of knowledge conversion.)

3. What does it take to be a successful competitor using business analytics? What is IT’s role in helping build this competence for the enterprise?

Ans: Good data is at the core of business analytics. Organizations must have high quality data that can be accessed and examined very carefully and methodically. Data mining is key to finding the “gems” of information. Organizations must be able to quickly turn their data into valuable information that can be used for competitive advantage. The corporate culture need to be aligned to an analytics environment that includes: an incentive system; metrics need to be used to measure

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the success of initiatives; and appropriate processes for using analytics. Also, a skilled work force (experts) is needed. To be truly successful the managers must set the example (CEO-level sponsorship) and the organization must require that decisions be made using analytics. IT is key to providing the infrastructure to enable and support such a movement.

4. How do knowledge maps aid an organization?

Ans: knowledge maps are guides to knowledge within the organization. They provide a link to where the information is, and an inventory of the available knowledge assets.

5. Do you think that the Digital Millennium Copyright Act is the type of legislation that should be enacted to protect intellectual property? Why or why not?

Ans: Students are usually strongly opposed to the DMCA. Be sure they understand what is meant by intellectual property. Urge them to look at the DMCA from multiple perspectives: the record companies, the musical artists and the people who want to hear the music (not always customers).

Move from the music industry to the software industry. For those who are planning on becoming software developers, ask them how they would feel about people using their code without paying for it (There may be a discussion of open sourcing here. Open sourcing is discussed at the end of the preceding chapter).

6. PriceWaterhouse Coopers. Why do you think the Knowledge Curve is underutilized?

Ans: There could be many reasons. Some include: the knowledge is not stored in an easily retrievable form (i.e., people may use different terms), experts may be unwilling to place the knowledge that distinguishes them from others in a repository that can be accessed by anyone in the company (i.e., the reward system may not compensate them adequately for sharing their knowledge), or people may prefer talking with a colleague to retrieving the information from a computer-based system.

7. How do analytics support business experimentation? Give an example of how a company might use business experimentation to create a new product or service.

Ans: Further Discussion Questions 1. The terms data, information and knowledge are often discussed as a progression. Ask students to identify a number written as such: 4018651000. They will likely have many guesses such as a social security number. Then, ask them to identify the same number if you write it out as follows: (401)865-1000. They will know it is a phone number. The point being the new that this aspect of data (the raw number) ‘became’ information when it was seen displayed in the proper context.

However, students only knew this because they had a priori knowledge of what a North American phone number would look like. Engage them in this discussion and then pose the following discussion questions:

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a.) does this mean we can only gather data if we know what to look for? If so where does knowledge come from? b.) what implications does this thought have for actual data collection (marketing data) for instance – how much a priori knowledge must we have to make data gathering useful?

Case Study 12-1: GSD&M Virtual Crowd uses Analytics Discussion Questions 1. What is the benefit to GSD&M and their clients of using a simulation to predict customer behavior?

Ans: They save time and money by “trying” out their ideas before actually going to “market”.

Simulation can be used in a variety of ways and almost every field has embraced some type of simulation model. An interesting experiment would be to have your students create an account in Second Life and then to hold a class discussion. The students could give feedback on their “simulated” experience and what they saw as the pros and cons of using simulation.

2. What other scenarios can you think of that might benefit from this type of simulation?

Ans: There should be lots of possibilities for this answer. Since almost every organization uses some type of modeling and/or simulation it could be applied to almost any scenario. This type of simulation could be used for any type of application where you needed to predict customer behavior (sales, new products, service, medical care, amusement park attractions, etc.).

3. Describe the culture necessary to support GSD&M’s use of simulation as a means of experimenting with marketing scenarios.

Ans: The corporation must be aligned to support and use business analytics and simulation. There should be incentives to use this technology, metrics to measure the success of the system, and processes in place to support their use (help desk for example). The management of the company must set the example by fully embracing and using the technology, and they must set up requirements to use the simulation for decision making.

Mini Case 12-2: The Brain Behind the Big Bad Burger Discussion Questions 1. Why is data mining important to CKE’s CPR? Ans: CKE’s CPR analyses a great amount of information: 44 factors from each of its stores. The massive amounts of data would be difficult to analyze without data mining. By analyzing some of these factors in juxtaposition, data mining uncovers previously unknown relationships related to buying habits and potential new products such as Monster Thickburger.

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2. What are some tips for developing and using the knowledge management system described in the case?

Ans: The designers of CPR focused on providing managers with insights, not just “mountains of data”. CPR provides a context meaningful for managers for analyzing the information generated by the system. The designers of the system started with decision-making processes to understand how executives made decisions and the information that they needed for these decisions. Then the designers studied the preferred formats of these decision makers. They found that different decision makers wanted different information in different formats. For instance, the COOs wanted help in exposing business opportunities, while the CEO wanted to know what caused changes in sales. The system was designed to be flexible in providing different types of information. The designers of the system focused on what information could be provided, not what information was currently provided.

3. Was the introduction of the Monster Thickburger a good idea or an example of information leading to a wrong decision?

Ans: All indications are that this was a good decision, at least for the short term. Sales clearly are up and the Monster Thickburger is received well by Hardee’s customers. CKE’s CPR provided enough information to ensure that the burger is priced to make a good profit. Given the focus on health consciousness in the US, the decision to sell the Monster Thickburger may be viewed as counterintuitive. Yet, CKE’s CPR helped management realize the potential of selling Monster Thickburgers. In the long run, Monster Thickburger may lead to a negative image of Hardee’s as a fast food provider that ignores the health of its customers, similar to that experienced by McDonald’s.

Supplemental Readings Cases: McKinsey and the Globalization of Consultancy by Geoffrey Jones & Alexis Lefort. Harvard Business School Publishing 2005 (15 pages) Considers McKinsey's strategy during the first stage of the globalization of the management consultancy industry IDEO: Service Design by Manuel Sosa. INSEAD. 2005; (25 pages) This case describes how IDEO adapt its famed innovation process (developed to design new products) to the particularities of services and their design. The case series describes four service design projects to show how IDEO has developed and codified a series of design methods, which constitute a toolbox from which teams can pick and choose depending on the innovation project.

Intelliseek by Luc Wathieu & Allan Friedman Harvard Business School Publishing 2005; (22 pages)

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This "marketing intelligence" company has been successful selling its reports to the car industry, but finds it difficult to achieve client retention. New initiatives are suggested: (1) to arrange data in problem-specific templates so that it is more "actionable" and (2) to develop industry benchmark metrics against which the metrics can be compared in a more informative manner.

BestDoctors, Inc. by Regina Herzlinger & Seth Bokser. Harvard Business School Publishing; 2001 (28 pages) This case, which begins in a venture capitalist firm's conference room, details the business plan of a company that sought to meet consumers' urgent demand for personalized information that will lead them to quality medical care.

IBM's Knowledge Management Proposal for the Ontario Ministry of Education by D. Meister & K. Mark Richard Ivey School of Business 2005 (14 pages) The knowledge management consultant for IBM Canada's Ltd. business consulting service was preparing for a meeting with the Ontario's Deputy Minister of Education. The purpose of the meeting was to secure top-level support for an early-stage Knowledge Management program at the ministry Knowledge Management at Ernst & Young by Miklos Saryary and Ann Marie Chard, Stanford University, This case reviews a six year effort to build a firm-wide KM system. The case raises for discussion: the definition of KM, the impact of KM on the consulting industry, use of KM to build competitive advantage, criteria used to evaluate a KM, and the process for building a KM system.

Buckman Laboratories (A) by William Fulmer, Harvard Business School Case number 800160, This case explores the implementation of a cutting-edge knowledge management system in a midsize, specialty chemical company. This case also examines the challenge of building virtual trust in a global organization. The case has a video available showing the President of Buckman Laboratories talking with an Executive Education class at Harvard. The case can stand alone, without the video.

Knowledge Management at Andersen Consulting by Morten Hansen and Tom Davenport, Harvard Business School Press case 499032, July 1999 This case details the use of the knowledge management system at Anderson Consulting. The case challenges students to view the system from the perspective of the two partners responsible for the system and consider how to improve usability of the knowledge sharing.

SAFECO: Leveraging the Web in a Knowledge-Based Service Industry, Debabroto Chatterjee and Leonard M. Jessup, Idea Publishing Group, 17 pages, IT5578, (setting: U.S.)

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This case examines how SAFECO, a large corporation in the insurance and financial services industry, is strategizing for and implementing technologies to exploit the Web. Enterprise Information Portal Implementation: Knowledge Sharing Efforts of a Pharmaceutical Company, Allison Manning and Suprateek Sarker, Idea Publishing Group, 17 pages, IT5632, (setting: U.S.) This case study provides a detailed account of a portal implementation initiative fore enabling knowledge sharing in a pharmaceutical company. Specific issues discussed include selection of a portal, justification for this selection, challenges in organizing and linking documents, as well as the social and behavioral issues influencing the implementation.

Spreadsheets as Knowledge Management Documents: Knowledge Transfer for Small Business Web Site Decisions, Stephen Burgess and Don Schauder, Idea Publishing Group, 17 pages, IT5686, (setting: Australia) This case describes the creation of a practical decision support tool (using a spreadsheet) for the initiation and development of small business Websites. Using selected literature from structuration theory, information management and knowledge management, decision support tools are characterized as knowledge documents (communication agents for explicit knowledge).

Understanding decision support tools as knowledge documents sheds light on their potentialities and limitations.

Additional cases: -

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-

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AOL, Cisco, Yahoo!: Building the Internet Commons (HBS case 302-088, Mar. 26, 2002, setting: USA) Digital Certificates and Signatures: Microsoft Corporation (UHK case HKU203, Jul 12, 2002, setting: global) Lotus Marketplace: Households... managing information privacy concerns. Culnan, M. J., & Smith, H. J. (1995). In Johnson, D. G. & Nissenbaum, H. (Eds.). Computers, Ethics, and Social Values. Englewood Cliffs, NJ: Prentice-Hall, 269-278.

The Lessons of the Lotus MarketPlace: Implications for Consumer Privacy in the 1990's by Mary Culnan, available at the CPSR website: http://www.cpsr.org/conferences/cfp91/culnan.html Incident at Waco Manufacturing, by John Sviolka, HBS Publishing, Case Number 189142 (March 1990) Competitive Information Policy at Pratt and Whitney by Lynn Sharpe Paine, HBS Publishing, Case Number 394154 (July 1994) The Free Internet Initiative in LaGrange, Georgia (HBS case 302-041, Feb 14, 2002, setting: US) Microsoft Security Response Center (A) (Ivey case study 901E19, Jul 25, 2001, setting: USA) Implementation of a Knowledge Management System at Hi-Tech Solutions, Sindhu Ravindran, T. A. Pai Management Institute (TAPMI), Manipal, India, 1999-2001-13, 2001, www.asiacase.com, 18 pages (setting: India) IntellectExchange, Inc. (HBS case 802-113, Dec. 7, 2001, setting Boston, MA)

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Siemens ShareNet: Building a Knowledge Network, HBS case 603-036, Nov. 5, 2002 The PricewaterhouseCoopers KnowledgeCurve and the Spinning off of PwC Consulting, HKU case HKU221, Sept. 30, 2002, (setting: Asia-Pacific) Knowledge Management at Ernst & Young by Miklos Saryary and Ann Marie Chard, Stanford University, Available at HBS Press: http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?M291 Buckman Laboratories (A) by William Fulmer, Harvard Business School Case number 800160, available at HBS Press: http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?800160 Knowledge Management at Andersen Consulting by Morten Hansen and Tom Davenport, Harvard Business School Press case 499032, July 1999 Available at: http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?499032 SAFECO: Leveraging the Web in a Knowledge-Based Service Industry, Debabroto Chatterjee and Leonard M. Jessup, Idea Publishing Group, 17 pages, IT5578, (setting: U.S.) Enterprise Information Portal Implementation: Knowledge Sharing Efforts of a Pharmaceutical Company, Allison Manning and Suprateek Sarker, Idea Publishing Group, 17 pages, IT5632, (setting: U.S.) Spreadsheets as Knowledge Management Documents: Knowledge Transfer for Small Business Web Site Decisions, Stephen Burgess and Don Schauder, Idea Publishing Group, 17 pages, IT5686, (setting: Australia) Knowledge Management at Accenture, Ivey case 9B05E018, 2004, 19 pages (setting: large organization, US) IBM’s Knowledge Management Proposal for the Ontario Ministry of Education, Ivey case 9B05E007, 2001, 14 pages (setting: large organization, Canada) Enron-What Went Wrong? Ivey case 9B04C001, 2001, 17 pages (setting: large organization, US) Hill & Knowlton: Knowledge Management, Ivey case 9B04E003, 2003, 17 pages (setting: large organization, Canada) Agilent Technologies, Ivey case 9B04004, 2003, 29 pages (setting: large organization, US)

Readings/Articles: Michelman, Paul “Methodology: Making Idea Sharing Pay Off” Harvard Business Review 83(1) 2005.

Reich, R. B. “Plenty of Knowledge Work to Go Around” Harvard Business Review 83(2) 2005 Ruggles, R. “The State of the Notion: Knowledge Management in Practice” California Management Review. 40(3) 1998.

Reports survey results about how firms are actually managing knowledge, what they think they could or should be doing, and what they feel are the greatest barriers they face in their efforts.

Alavi D. & D.E. Leidner “Review: Knowledge Management and Knowledge Management Systems: Conceptual Foundations and Research Issues” MIS Quarterly, 25 (1) 2002 Provides a review and integration of knowledge management literature.

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Colins, H.M. “Humans, machines, and the structure of knowledge” SEHR, July, 4(2) 1995 http://www.stanford.edu/group/SHR/4-2/text/collins.html Discusses different types of knowledge and what can and can not be transferred by machines.

Deckmyn, D. “U.K. Firm Hopes to Cash In On Knowledge Management” Computerworld June 28, 1999.

Article about British energy company BG PLC's knowledge management project, which started as a homegrown system, but is now marketed to others. http://www.computerworld.com/cwi/Printer_Friendly_Version/0,1212,NAV47_STO36184,00.html Garner, R. “Please Don't Call it Knowledge Management!” Computerworld August 09, 1999 Five years ago, a ballroom full of pioneers and enthusiasts flocked to Boston to discuss the hot new concept of knowledge management. Today, those disillusioned pioneers have a pointed message. http://www.computerworld.com/cwi/story/0,1199,NAV47_STO36610,00.html Ambrosino, J. “Knowledge Management Mistakes” Computerworld, July 3, 2000 http://www.computerworld.com/cwi/story/0,1199,NAV47_STO46693,00.html.

Experts reveal five pitfalls to avoid when starting down the knowledge management path Anthes, G. “Charting a Knowledge Management Course” Computerworld August 21, 2000 http://www.computerworld.com/cwi/story/0,1199,NAV47_STO48722,00.html Great article about the knowledge management activities in the US Navy.

Fickel, L. “Know-It-Alls” CIO Magazine, November 1, 2001 http://www.cio.com/archive/110101/knowitall.html To streamline customer service, Marconi employed a system to facilitate knowledge sharing among its tech support personnel. In the process, the roles of tech agents changed dramatically.

Books: There are literally hundreds of books in this area on the market. Here are a few that are either in my library or which probably ought to be: Davenport, T. & J. C. Beck The Attention Economy: Understanding the New Currency of Business, MA: Harvard Business School Press; 2001.

Sutton R. & J. Pfeffer. The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action, MA: Harvard Business School 2000 Von Krogh, G. Kazuo Ichijo, & Ikujiro Nonaka Enabling Knowledge Creation : How to Unlock the Mystery of Tacit Knowledge and Release the Power of Innovation London: Oxford University Press 2000 Davenport, T. & L. Prusak, Working Knowledge, MA: Harvard Business School 2000

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Liebowitz, J. Building Organizational Intelligence : A Knowledge Management Primer NY: CRC Press 1999 Tiwana, A. Knowledge Management Toolkit, The: Practical Techniques for Building a Knowledge Management System NJ: Prentice Hall 1999 Koulopoulos, T.M. & Richard Spinello (Contributor), Wayne D. Toms Corporate Instinct: Building a Knowing Enterprise for the 21st Century NY: John Wiley & Sons; 1997 Nonaka, I., Hirotaka Takeuchi, & Hiro Takeuchi The Knowledge-Creating Company : How Japanese Companies Create the Dynamics of Innovation. London: Oxford Univ. 1995 Websites: http://www.brint.com/km/ Knowledge Management Portal at Brint.com, The BizTech Network This portal is a virtual library on KM. The library has links to forums, articles, events, white papers, recent news, resources, job postings, and more. www.cio.com/research/knowledge/ Knowledge Management Resource Center at CIO.com This site contains well-written, detailed cases of companies that are implementing KM systems.

There are also links to articles, white papers, book reviews, resources, radio interviews, and events. http://www.cio.com/forums/knowledge/ Cases, Q & A, Book Reviews, etc. www.kmresource.com KMWorld.com www.systems-thinking.org/kmgmt/kmgmt.htm An introduction to key concepts in the field. Features annotated links to related resources. By Gene Bellinger.

Note that both Computerworld (www.computerworld.com) and Information Week (www.infoweek.com) have extensive libraries on this topic. Do a search at either website on knowledge management to find the latest articles.