McGraw-Hill/Irwin
12-1
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
Enterprise and Global
Management of Information
Technology
Chapter
12
Management of Information Technology
Outsourcing and Offshoring
Global Business/IT Strategy
McGraw-Hill/Irwin
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
1.
2.
3.
12-3
Identify each of the three components of
information technology management, and use
examples to illustrate how they might be
implemented in a business.
Explain how failures in IT management can be
reduced by the involvement of business managers
in IT planning and management.
Identify several cultural, political, and geoeconomic
challenges that confront managers in the
management of global information technologies.
Learning Objectives
Explain the effect on global business/IT strategy of
the trend toward a transnational business strategy
by international business organizations.
5. Identify several considerations that affect the choice
of IT applications, IT platforms, data access policies,
and systems development methods by a global
business enterprise.
6. Understand the fundamental concepts of
outsourcing and offshoring as well as the primary
reasons for selecting such an approach to IS/IT
management.
4.
12-4
Case 1: Some People Just Never
Learn
 IT
failures
 Show
up in earnings losses
 User companies often file lawsuits against vendors or
consultants
 Notorious failures are usually big and complex projects
 Companies
12-5
repeat the same mistakes
Case Study Questions
1.
2.
3.
12-6
What are some of the reasons projects such as those
discussed in the case end up as failures?
What key management decisions might help to
prevent IT failures?
Why are companies often too embarrassed to report
their IT failures?
Real World Internet Activity
1.
The IT failures reported in the case occurred prior
to 2000. Using the Internet,
See if you can find examples of more recent IT
failures.
 What caused them to occur?
 Have we learned anything to help prevent such
failures in the future?

12-7
Real World Group Activity
 As
we learned in Chapter 10, an IT project can fail as
a result of mistakes that occur even during the late
stages of implementation. In small groups,
 Discuss
how you would manage a project to ensure its
success.
 What are the key success factors that you would pay
close attention to in your project.
12-8
Components of IT
Management
12-9
Managing Information Technology
 Managing
the joint development and implementation
of business and IT strategies
 Use
IT to support the strategic business priorities
 Align IT with strategic business goals
 Managing
the development and implementation of
new business/IT applications and technologies
 Managing information systems
 Managing
the IT organization and IT infrastructure
 Hardware,
resources
12-10
development
software, database, networks and other
Business/IT Planning Process
12-11
Components of Business/IT
Planning
 Strategy
Development
 Developing
business strategies that support a
company’s business vision
 Resource
Management
 Developing
strategic plans for managing or
outsourcing a company’s IT resources
 Technology
 Making
Architecture
strategic IT choices that reflect an information
technology architecture designed to support a
company’s business/IT initiatives
12-12
Information Technology
Architecture
 Technology
Platform
 Networks,
computer systems, system software and
integrated enterprise application software
 Data
Resources
 Operational
and specialized databases
 Store and provide data and information for business
processes and decision support
12-13
Information Technology
Architecture
 Applications
Architecture
 Integrated architecture
of enterprise systems that
support strategic business initiatives as well as crossfunctional business processes
 IT
Organization
 Organizational structure
of the IS function within a
company and the distribution of IS specialists
12-14
Organizing IT
 Early
years: centralization of computing with large
mainframes
 Next: downsizing trend with a move back to
decentralization
 Current: centralized control over the management of
IT while serving strategic needs of business units
 Hybrid
of both centralized and decentralized
components
12-15
Organizational Components of
IT at Avnet Marshall
12-16
Application Development
Management
 Managing
 Systems
activities such as:
analysis and design, prototyping, applications
programming, project management, quality assurance,
and system maintenance for all major business/IT
development projects
12-17
IS Operations Management
 Use
of hardware, software, network, and personnel
resources in the corporate or business unit data
centers of an organization
 Includes computer systems operations, network
management, production control and production
support
 Data
centers are the computer centers of an
organization
12-18
System Performance Monitors
 Software
packages that
 Monitor
the processing of computer jobs,
 Help develop a planned schedule of computer
operations that can optimize computer system
performance, and
 Produce detailed statistics that are invaluable for
effective planning and control of computing capacity
12-19
Features of Systems Performance
Monitors
 Chargeback
Systems
 Allocate
costs to users based on the information
services rendered
 Process Control
 Systems
Capabilities
that not only monitor but automatically
control computer operations at large data centers
12-20
IT Staff Planning
 Recruiting,
training and retaining qualified IS
personnel
 Evaluate employee job performances and reward
outstanding performances with salary increases and
promotions
 Set salary and wage levels and design career paths so
individuals can move to new jobs through promotion
and transfer as they gain in seniority and expertise
12-21
IT Executives
 Chief
Information Officer (CIO)
 Oversees
all uses of information technology in many
companies, and brings them into alignment with
strategic business goals
 Chief
 In
Technology Officer (CTO)
charge of technology management: all information
technology planning and deployment
 Managing the IT platform
 Second in command
12-22
Managing User Services
 Business
units that support and manage end user and
workgroup computing
 Can be done with information centers staffed with
user liaison specialists
 Or with Web-enabled intranet help desks
12-23
Outsourcing
 The
purchase of goods or services from third-party
partners that were previously provided internally
12-24
Outsourcing’s Top Ten
12-25
Why outsource?
 Save
money – achieve greater ROI
 Focus on core competencies – organization can focus
on the business that they are in
 Achieve flexible staffing levels
 Gain access to global resources
 Decrease time to market
12-26
Offshoring
 Relocation
of an organization’s business processes
 To a lower-cost location, usually overseas
12-27
IT Management Failures
 IT
not used effectively
 Computerize
traditional business processes
 Instead of developing innovative e-business processes
 IT
not used efficiently
 Poor
response times and frequent downtimes
 Poorly managed application development projects
12-28
Management Involvement and
Governance
 Managerial
and end user involvement
 Key
ingredient to high-quality information systems
performance
 Involve
managers in the management of IT
 Governance
12-29
structures such as steering committees
Senior management’s involvement
in business/IT decisions
12-30
Case 2: CIOs Need to Think Globally
and Act Locally
 Enterprises
globalize for different reasons
 Examples:
global customers, seeking growth
opportunities, cost efficiencies
 CIO’s
IT globalization decisions should
 Determine the
balance of global integration versus local
responsiveness
 Align IT’s major processes with the enterprise’s
governance orientation
 Assign staff, roles, and competencies appropriately
12-31
Case Study Questions
1.
2.
3.
12-32
What are some of the forces driving IT
organizations to globalize?
What are some of the local forces and challenges
facing modern IT organizations?
How does a CIO manage the requirements to both
globalize and localize the IT function?
Real World Internet Activity
1.
One of the issues facing the CIO is the assessment
of IT maturity in the countries they operate in.
Using the Internet,
See if you can find examples of countries where the IT
maturity is still low and, thus presents a greater
challenge.
 What are the characteristics of a low IT maturity
country?

12-33
Real World Group Activity
 One
of the prescriptions offered in the case was to
“align IT’s major processes with the enterprise’s
governance orientation.” In small groups,
 Discuss
the meaning of this prescription.
 What is meant by “governance orientation?”
 How can IT become better aligned with the
organization in this regard?
 Is there one right way to govern IT?
12-34
Global IT Management
 Develop
appropriate business and IT strategies for
the global marketplace
 Develop the portfolio of business applications
needed to support business/IT strategies
 Determine the technology platform needed
 Determine the systems development projects that
will produce the required global information systems
12-35
Global IT Management
Dimensions
12-36
Global IT Management
Challenges
 Political
 Geoeconomic
– effects of geography on the economic
realities of international business activities
 Cultural
12-37
Political Challenges
 Rules
regulating or prohibiting transfer of data across
national boundaries
 Severely restricted, taxed, or prohibited imports of
hardware and software
 Local content laws that specify the portion of the
value of a product that must be added in that country
if it is to be sold there
 Reciprocal trade agreements that require a business
to spend part of the revenue they earn in a country in
that nation’s economy
12-38
Geoeconomic Challenges
 Sheer
physical distances
 Difficult to get good-quality telephone and
telecommunications services
 Differences in the cost of living and labor costs
12-39
Cultural Differences
 Languages
 Cultural
Interests
 Religions
 Customs
 Social Attitudes
 Political Philosophies
12-40
Transnational Strategies
 Business
depends heavily on its information systems
and Internet technologies to help integrate global
business activities
 Develop an integrated and cooperative worldwide IT
platform
12-41
Transnational Business/IT
strategies
12-42
Global Business Drivers
 Business
requirements caused by the nature of the
industry and its competitive or environmental forces
 Examples of drivers:
 Global
Customers
 Global Products
 Global Operations
 Global Resources
 Global Collaboration
12-43
Global IT Platform
 Managing
the hardware, software, data resources,
telecommunications networks, and computing
facilities that support global business operations
 Technically complex with major political and cultural
implications
12-44
International Data
Communications Top 10 Issues
12-45
Internet as a Global IT Platform
 Technology
platform free of many traditional
international boundaries and limits
 Expand markets, reduce communications and
distribution costs, and improve profit margins
without massive cost outlays for telecommunications
12-46
Key Questions for Global
Websites
 Will
you have to develop a new navigational logic to
accommodate cultural preferences?
 What content will you translate, and what content
will you create from scratch to address regional
competitors or products that differ from those in the
U.S.?
 Should your multilingual effort be an adjunct to your
main site, or will you make it a separate site, perhaps
with a country-specific domain?
12-47
Key Questions for Global
Websites
 What
kinds of traditional and new media advertising
will you have to do in each country to draw traffic to
your site?
 Will your site get so many hits that you’ll need to set
up a server in a local country?
 What are the legal ramifications of having your
website targeted at a particular country, such as laws
on competitive behavior, treatment of children, or
privacy?
12-48
Internet Users by World Region
12-49
Global Data Access Issues
 Transborder
 Business
Data Flows
data flow across international borders over
the telecommunications networks of global information
systems
 May be viewed as violating a nation’s sovereignty
because avoids custom duties
 Or violating their laws to protect local IT industry from
competition or their labor regulations for protecting
local jobs
12-50
U.S.-E.U Data Privacy Requirements
 Notice
of purpose and use of data collected
 Ability to opt out of third-party distribution of data
 Access for consumers to their information
 Adequate security, data integrity and enforcement
provisions
12-51
Internet Access Issues in Most
Restrictive Countries
 High
Government Access Fees
 Government Monitored Access
 Government Filtered Access
 No Public Access Allowed
12-52
Global Systems Development
 Conflicts
over local versus global system
requirements
 Difficulties in agreeing on common system features
 Disturbances caused by systems implementation and
maintenance activities
 Global standardization of data definitions
12-53
Systems Development
Strategies
 Transform
an application used by the home office
into a global application
 System used by a subsidiary that has the best version
of an application will be chosen for global use
 Set up a multinational development team with key
people from several subsidiaries to ensure that the
system design meets the needs of local sites as well as
corporate headquarters
12-54
Systems Development
Strategies
 Parallel
Development – parts of the system are
assigned to different subsidiaries and the home office
to develop at the same times based on the expertise
and experience at each site
 Centers of Excellence – an entire system may be
assigned for development to a particular subsidiary
based on their expertise in the business or technical
dimensions needed for successful development
 Offshore Development – outsource the development
work to a global development company
12-55
Internet-enabled Collaboration in IT
Development
Source: Adapted from Jon Udell, “Leveraging a Global Advantage,” Infoworld, April 21, 2003, p. 35.
12-56
Case 3: The Hard Road to
Outsourcing
 Can
cut the cost of IT work by 39 percent by
outsourcing it abroad
 But it carries privacy risks
 And threatens US jobs
12-57
Case Study Questions
1.
2.
3.
12-58
The law does not provide for companies to disclose
to their customers the fact that they have
outsourced or offshored access to their data. Is this
a potential problem for either the company or the
customer? Why or why not?
What is meant by the term “best-of-breed model?”
Why has this approach worked for Boeing?
GE wants to outsource its entire ERP system based,
in part, on its successes with other outsourcing
projects. Is it possible to outsource too much?
Real World Internet Activity
1.
Each of the companies in the case shares a common
goal, but from a different perspective. As we
learned in the chapter, there are a variety of reasons
why a company may choose to outsource. Using
the Internet and Figure 12.8 as your guide,
See if you can find examples of companies who have
chosen to outsource for reasons different from the
three outlined in the case.
 What were their reasons?

12-59
Real World Group Activity
 Outsourcing
and offshoring are controversial issues –
particularly when it comes to jobs. In small groups,
 Discuss
the pros and cons of this issue.
 Should we curtail outsourcing and offshoring to protect
jobs?
 Are new jobs being created to replace the ones lost?
12-60
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