SCMHRD

I.T. INFRASTRUCTURE
MANAGEMENT

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Submitted By:

ABHIMANYU NAIK
2008A55
1. CHAPTER 4 - ORGANIZATIONAL TRANSFORMATION WITH IT
IT’s Impact on Organizational Transformation

• IT enabled transformation can - Improve the effectiveness of the organization, Lead to new
organizational structures and relationships with other firms, Reduce overhead, Lead to high
levels of employee satisfaction

Metrics of the impact of IT on Organizational Transformation

• Market share, Sales per employee, Sales growth, Administrative costs, Employee
satisfaction, Employee turnover

Examples of Organizational Transformations in certain industries due to I.T.

Industry Fundamental Major changes Growing Impact

Restructuring
Electronic retail Expand self-directed Unbundling of More price
stock brokerage investor market services and trade convergence for
segment execution costs of a trade
Digital goods, Downloading music Search for a new Movies coming
music, movies, from the Internet; revenue model; legal soon
newspapers video next downloading
Travel Internet reservations, Yield management IT in all aspects of
ticketing and leverages CRS operations
boarding pass information
Manufacturing Outsourcing, IT for Going offshore Lower prices, U.S.
coordination job losses
A new marketplace eBay Online community From individual to
corporate
participants

Building T-Form Organizations with IT Design Variables

Five organizational forms created by using IT design variables in different ways are:

• Frito-Lay: hybrid

• Mrs. Fields: hierarchical and flat

• Verifone: blueberry pancake

• Calyx and Corolla: snap together

• Oticon: spaghetti

T-Form Organization Implementation

 • Electronic linking to tie production planning, order entry, and marketing

• Technological leveling to reduce layers of management and improve communication with

tools such as e-mail and groupware

• Automation of production, Electronic workflows in production

• Using E-mail and groupware for technological matrixing

• Electronic integration with customers and suppliers

LEARNINGS SUMMARISED

• IT interacts with organizations and can be used to change the structure of the organization
and its subunits. IT can contribute to organizational flexibility

• Older legacy systems often perform critical tasks for the firm. These systems usually run on
mainframe computers and are large and complex. One management problem is deciding if
and when to make massive investments to migrate these systems to up-to-date technology

• Some important considerations in studying the variety of organizational structures are

uncertainty, specialization, coordination and interdependence.

• IT enabled variables can be used to design organizations, to create the T-Form structure, or
produce a range of other structures including virtual organizations, negotiated
organizations, and vertically integrated conglomerates. These variables can also be used in
subunits of traditional firms.

• Organizations and people play important roles in the development and success of
technology
2. CHAPTER 5 – GLOBALIZATION AND IT IN INTERNATIONAL BUSINESS
IT can help a firm become global by - Enhancing global competitiveness, Reducing administrative
and coordination costs for global firms, Improving efficiencies, Making performance in local markets
more effective.

The Impact of Globalization on Business - Rationalized manufacturing, Worldwide purchasing,

Integrated customer service, Global economies of scale, Global products, Worldwide rollout of
products and services, Subsidizing markets, Managing risk across currencies, Growing irrelevance of
national borders

International Business Strategies

1. Multinational

• Focuses on local responsiveness, Subsidiaries operate autonomously or in a loose federation,

Firm can quickly respond to different local needs and opportunities, Reduces the need for
communications, Heavy reporting requirements are necessary for monitoring purposes

2. Global

• Stresses efficiency based on strong central control from headquarters, Economies from
standard product designs and global manufacturing, Requires an extensive communications
system for management

3. International

• Much like the multinational with autonomous subsidiaries, Subsidiaries depend on

headquarters for new processes and products

4. Transnational

• Seeks global efficiency while retaining local responsiveness Integrates global activities
through cooperation among headquarters and foreign subsidiaries, A difficult strategy to
implement

Key Issues in an International Environment

• Information Needs

– For coordination and control of diverse businesses, IT improves coordination and

control with tools such as E-mail, Groupware and Videoconferencing, IT provides
reporting and early warning systems to improve control

• Implementing International IT

– Locally driven development may lead to duplicate efforts or poorly conceived and
designed systems, Common systems take advantage of economies of scale but may be
impossible to implement across countries with different laws and regulations,In
designing applications, real and perceived unique features are important in each
country
 • Language, culture, and time differences

• Government regulations that can impede the development of global information

systems

– A requirement to purchase specific equipment in the foreign country that may not be
compatible with the equipment in other places the global firm operates, A requirement
to do certain kinds of processing in the host country before data can be sent
electronically to another country, Restrictions on the use of satellites and special
requirements for building private networks, Limited access to flat-rate leased lines or
a requirement that all transmission be made on variable cost lines, Restrictions on
Internet access and efforts to censor Web sites

• Barriers to trans-border data flows

– Restrictive regulations on the processing of data, Exorbitant pricing of communication

services, Security issues

Strategies for Managing Global IT

• Concentrate on inter-organizational linkages, Establish global systems development skills,

Build an infrastructure, Take advantage of liberalized telecommunications, Strive for uniform
data, Develop guidelines for shared versus local systems

IT Management Approaches

• Independent operations, Headquarters driven, Intellectual synergy, Integrated global IT

LEARNINGS SUMMARISED

• Four main international business strategies include the multinational, global, international,
and transnational organizations. Corresponding IT management approaches include
independent operations, headquarters driven, intellectual synergy, and integrated global IT.

• IT can be used to facilitate international business, especially IT organizational design

variables that stress communication, knowledge sharing, and co-ordination. Headquarters-
subsidiary co-ordination is one of the most significant challenges of managing an
international business. Implementing international applications of technology can be
difficult

• Many international firms find they need a global network, a technology infrastructure that
ties together far-flung components of the firm. The internet and the intranets help in
providing connectivity, information sharing and co-ordination worldwide.

• Firms building technology must trade off the advantage of local flexibility and freedom
against the benefits and efficiency of common systems.

• IT challenges in an international environment include standards, uniform data, government

regulations, and quality of telecommunications, among others

• The liberalization of trade and emerging economies in Eastern Europe suggest that
international business will continue to be of major importance in the future.
 • Developing countries with strong central governments face a conflict between the need to
participate in the growth of technology, especially the internet, and their desire to control
the economy and information

3. CHAPTER 6 – ASSESSING THE VALUE OF INVESTING IN IT: THE

PRODUCTIVITY PARADOX

It is important to estimate the return from any investment , and investments in IT present
particular challenges for capital budgeting. Different kinds of investments in technology provide
returns in a variety of ways. You will have to make estimates with little information to go on , for
example , the possible indirect returns from and an application that you expect to increase
customer loyalty. One way to approach these estimates is to do several analyses, the one you expect
, a worst case and a best case scenario.

A review of the evidence supports a conclusion that the total impact of investments in technology is
more than the sum of their individual contributions applications of IT interact with each other,
creating new benefits and opportunities. a medium sized brokerage company is an early innovator
with a website, it uses this experience to build an intranet for all its research output.

Suddenly, all research in the firm is available to any professional, and the firm dramatically reduces
its publication costs. Management turns the intranet into an extranet by allowing key customers to
have access to it through this vehicle the company provides its research to its customers and
establishes a closer relationship with them. Soon the broker offers online trading over the internet.
The firm gradually finds its structure changing as more employees have direct links to clients,
reducing the need for hierarchy of management and for support staff. Applications of technology
enhance each other and become woven into the fabric of the organization. It may even be difficult to
identify specific applications as technological innovation becomes a part of doing business.

Obtaining value and ROI from IT investments is critical to organizations because:

• An estimated 50% of U.S. capital investment today is for IT, For some firms, annual IT budgets
approach or exceed $1 billion

It is difficult to determine the value of IT investments because such value can come from

• traditional (measurable) monetary return, indirect returns that may be hard to measure,
prevention of negative return from not investing in IT (such as loss of market share)

The Productivity Paradox

Organizational IT investments have not shown a significant impact on national productivity

statistics. Possible explanations are:
 • Results of IT spending occur locally and cannot be expected to show up in national statistics ,
Many firms may yet have to undergo significant restructuring or cost cutting for the benefits
of IT to become evident, The measurements showing the lack of such a relationship may be
flawed

The Search for Value from IT Investments

• Not all investments in IT should be expected to show a measurable return, Investments can
have value to an organization even without measurable returns, With some IT investments
you cannot expect to obtain a measurable financial return

LEARNINGS SUMMARISED:

• IT investments range from competitive necessities to infrastructure. Each of the different

type of application has the probability of providing different type of return to the firm.
These returns have to be analyzed in various ways – using best case and worst case
scenarios etc

• First mover returns from competitive applications are likely to be higher than the returns
for responses to competition

• The total impact of IT investments is greater than the sum of the individual contributions

• Applications of IT interact with each other creating new opportunities and benefits

• Applications of technology enhance each other and become interwoven into the fabric of the
organization

•
4. CHAPTER 7 – MAKING THE IT INVESTMENT DECISION

A Garbage Can Model of IT Value: Portrays the factors most organizations confront when investing
in IT, Helps understand why not all IT investments are successful

The Investment Decision

Decisions about investments in Information technology are too important to be left to

technologists. For major commitments to new IT initiatives, senior management of the firm needs
to be involved in the decision. These managers should follow and monitor the progress of projects,
providing advice and resources when problems arise. The kinds of applications discussed so far are
critical to the firm; they have the potential to return enormous value and the potential to fail
miserable. Some of these initiatives protect or even expand market share while others become inter
wined with corporate strategy. By joining discussions of IT initiatives, the CEO communicates that
these investments are important, encouraging users and managers at all levels to contribute to a
project’s success.

The chapter explains the Two methods for making the investment decisions –

• Net present value analysis (NPV)

• The Real Options Pricing Framework

In particular, it is difficult to come up with credible quantitative evaluations of infrastructure,

initiatives with in direct returns, strategic applications, and investments that may transform the
organization. Every proposal should be evaluated, but decision makers must use criteria that are
appropriate for the type of investment proposed.

The four components of conversion effectiveness are:

• top management commitment, experience with IT, user satisfaction, turbulence of the firm’s
political environment

Other Success Factors for IT Investments

• Size and scope of the project, Amount of unknown technology involved, Project management,
Support and encouragement of managers, sponsorship, The urgency of the
problem/opportunity addressed by the technology, Norms in the organization, User
commitment and involvement, Technical development environment, Quality of the IT staff,
Strength of the project team, Level of expertise of participants

• Type of technology employed, Type of application, Amount of custom code written, Nature of
packaged software included, Use of external consultants, Degree of understanding between
users and developers, Presence of a project champion, Senior management involvement,
 Amount of organizational change required, Threat to existing personnel, vested interests,
User’s views of the quality of the system

The IT Value Equation

Expected Return = Estimated Return * P(Return) x P(Conversion Success)

The Investment Decision

• Traditional Net Present Value Analysis can be done

• The Real Options Pricing Framework can also be used

• Making a decision solely based on these approaches is not recommended because: estimates
of costs and future returns to be made, neither approach is particularly suited for IT
investment decisions

LEARNINGS SUMMARISED:

• Senior management support is necessary for new IT initiatives

• IT investments have the potential to return tremendous value or fail miserably

• Decision makers can use either quantitative or qualitative analysis to approve projects
depending on the type of the investment proposed. This is depending on the situation and
managers must use their discretion as to which approach is best suited on a case to case
basis.

• Quantitative analysis alone (NPV or OPM) of the infrastructure, initiatives with indirect
returns, strategic applications are difficult to come up with and may not provide a complete
picture to the decision maker. Every proposal should be evaluated, but decision makers
must use criteria that are appropriate for the type of investment proposed.