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Answer each of following questions (min of 250 words on each): (Describe in your
words…)
1- What is a strategy?
2- What is information technology?
3- What is core and enabling technology for an organization?
Text (required)
• Austin, R. D., Nolan, R.L. & O’Donnell, S.O,
(2009) The Adventures of an IT Leader;
hereafter referenced as: “ANO”
• McKeen J. D., & Smith, H. A, (2014), IT Strategy;
Issues and Practices; hereafter referenced as
“MS”
• Other (suggested)
– CIO.com
1
Why is IT / Business Necessary?
IT-enabled Business Strategy
• Competitive advantage
• Process Innovation
• Operational Excellence
• New Market & Channels
Enables
IT Capability must
enable innovation
And competitive
business strategies, and
delivery business
efficiencies
Business
Strategic Alignment
Information
Technology
Source: http://www.itbits.com.au/business-strategy-and-transformation-solutions/
Business Strategies and
business concerns must
drive the decisions and
priorities for
IT investments
Drives
IT Strategy
•Technology
•Applications
•Capabilities
•Governance
•People
2
• “The level of thinking that got you where you
are today, cannot be the level of thinking that
will propel your business into the future.” ~
Einstein
3
Managing IT as a business
4
Relationship between IT and the
Business
• Why is this important?
– The fundamental purpose of IT is to improve how an
organization performs
– IT is an integral part of the organization’s operation
– IT is cost to the Organization’s business
5
So, what should a business do?
• Control spending and maximize impact on the
bottom line
– Allocating and spending resources on IT that directly
supports the business’ strategy and is operationally
effective.
– Selecting IT investments alternatives
– Eliminating under performing current IT activities
– Improving the performance of the existing IT resources
– Creating and implementing the right investment and
performance improvements
– Control IT cost growth
6
IT is Expensive
• IT costs need to be categorized as two separate
line items within the budget
– “Lights-on” Budget – on-going IT operational
activities
– “Projects” Budget – development and
enhancements
• Total IT spend can be as little as 2% to as much
as 10%-15% of revenue
– Of which 70% -80% is connected to on-going
operational costs
7
Current Practices
• Management spend a great deal of time evaluating
and prioritizing new IT projects and investments
– 20%-30% of overall IT spend
• Very little attention is paid to “lights-on” IT
activities
– 70%-80% of overall IT spend
– Assumption is “lights-on” IT activities will continue to be
funded
• ‘Entitlement’ mentality
– Affects prioritization schema
– Difficult to control costs growth
8
Current Practices
• Budget focus is not balanced. It is aimed at
reducing costs and improving bottom-line impact.
– Lower ‘lights-on’ costs and reduced bottom-line impact
• Typical Result = an outsourcing scenario
– Higher lights-on costs combined with no improvement
in bottom-line impact
• Typical Result = Entitlement scenario
– Higher light-on costs and higher bottom line impact.
• Typical Result = Business is in a rapid growth scenario, so
controlling IT costs is not a priority.
9
What Change is Needed?
• Control spending
– Controlling the total spend which is the aggregate of all
IT spend for the business
• Operational costs and project costs
• Expenses and Capital investments
• Depreciation and amortization.
– Management need to understand what is being spent
and ask how does this fit with the business planning
• Making the Right Decisions/Choices
– Focusing the IT spend on activities that that contribution
to bottom-line improvements
The right decisions /The right results = proactively managing costs and evaluating bottom line impact
10
How can IT impact the bottom-line?
Bottom-line impact can be realized from
• Cost reductions
• Quality improvements
• Increase performance measures
…that IT enables throughout the organization
 Depending on the organization’s position, there are three possible
objectives to pursue
• A “reduced cost” objective
• IT costs are reduced, but bottom-line impact remains the same
• A “stable cost” objective
• IT costs remain current, but IT may increase its support to the business and its impact
on the bottom-line
• A “sweet spot” objective
• IT lowers costs and improves performance impacting the bottom-line
11
So, what does it take to control IT cost
and improve bottom-line impact
• Strategy-to-Bottom-Line Value Chain
– Effective Planning Processes
– Appropriate Resources Decisions
– Workable Budgets and Plans
Corporate Strategic Plan
Operations
Planning
Management
Processes
Business
Processes
Resource
Planning
IT
Planning
12
So, what does it take to control IT
cost and improve bottom-line impact
• Strategy-to-Bottom-Line Value Chain
– Effective Planning Processes
– Appropriate Resources Decisions
– Workable Budgets and Plans
Effective Planning Processes
Business
Strategies
Appropriate Resource
Decisions
Budin
IT
Actions
Bottom-line
Results
Workable Budgets, Projects, and
Operational Plans
Performance Measurement Metrics
13
So, what does it take to control IT cost
and improve bottom-line impact
• Strategy-to-Bottom-Line Value Chain
– Effective Planning Processes
– Appropriate Resources Decisions
– Workable Budgets and Plans
Effective Planning Processes
Business
Strategies
Appropriate Resource
Decisions
Budin
IT
Actions
Bottom-line
Results
Workable Budgets, Projects, and
Operational Plans
Performance Measurement Metrics
14
Connecting to and improving the
bottom-line requires…
– Strategic IT vision must:
– Clear and simple enough for leadership at all levels within
the corporation to understand
– Easy for leadership to remember and repeat
– Must be based on a good understanding of the
organization’s underlying business strategies
Source: (Lutchen, 2004)
15
Effective IT
• Ensuring that IT is used effectively
– Facilitates the decision process by making sure inappropriate
and wrong IT decision are not made
– IT spending must be appropriate for the project
– Requirements must be defined and aligned with business
objectives
Source: (Lutchen, 2004)
16
IT strategy is a process…

Not an event
– It is a logical set of steps that leads to and contributes to achieving the
organization’s objectives and outcomes
• Six Steps to IT strategy development process
1. Understanding the business strategy
• Corporate Leadership team responsibility with input from the
CIO
2.
3.
4.
5.
6.
Identifying the IT Vision
Determining IT strategic objectives
Analyzing the portfolio of IT initiatives
Preparing the IT strategic plan
Regularly refreshing the IT vision
Responsibility of the CIO and
the IT leadership Team
• Periodic process which should occur when needed but at least
annually
Source: (Lutchen, 2004)
17
How do we connect IT …?
 Understand the performance and detail costs aspects of the total IT
expenses
 In terms of technology, architecture, quality, and service level.
 Assess the performance of the lights-on IT
 Predict /Forecast the performance efficiencies
18
Next Week’s Assignment
19
Assignments – Week 2
– Answer each of following questions (min of 250
words on each): (Describe in your words…)
• What is a strategy?
• What is information technology?
• What is core and enabling technology for an
organization?
20
References
Austin, R. D., Nolan, R.L., & O’Donnell, S.O. (2009) , The Adventures of an IT
Leader.
Benson, R., Bugnitz T., & Walton, W. (2004) From Business Strategy to IT
Action, John Wiley & Sons, Inc.
McKeen J. D., & Smith, H. A. (2014), IT Strategy; Issues and Practices
21

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