Answer the questions at the end of the case study

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Answer the questions at the end of the case study applying the learning from the reading and lecture.

IT / Business Strategy AIT628 Week 6 Section 101/901 Dr. Joanne E. Shumaker 410-456-6808 1 Agenda • Review of Reading Assignments • Lecture – Building IT Leaders with professionalism – IT Share Services – IT Sourcing • Next Week’s Assignment 2 Reading Discussion  Do IT Investments create value or enable value creation? How? 3 Lecture 4 BUILDING IT LEADERSHIP 5 Building IT Leaders is… • Important to future IT effectiveness and to helping businesses achieve their goals • Fostering – Leadership skills at all levels – An environment of learning and support • Developing processes and procedures that can be repeatable • More than formal training – In fact formal training is expensive and generally the least effective aspect 6 DEVELOPING IT SKILLS AND CAPABILITIES 2014 7 Developing IT Capabilities • IT capabilities are directly linked to the organizational value and competitive positioning • IT organizations must support the organization’s strategic thrusts through: 1. 2. 3. 4. 5. 6. 7. 8. 9. 8 Leadership Business System thinking Relationship building Architecture planning Making technology work Informed buying Contract Facilitation Contract monitoring Vendor development 2014 Nine (9) Core IT Capabilities 1. Leadership Integrating IT effort with business purpose and activities 2. Business System Thinking Envisioning the business process that technology makes possible 3. Relationship Building Getting the business constructively engaged in IT issues 9 2014 Nine (9) Core IT Capabilities (cont’d) 4. Architecture Planning Creating a coherent technical blueprint to respond to current & future business needs 5. Making technology work Integrating IT effort with business purpose and activities 6. Informed buying Envisioning the business process that technology makes possible 10 2014 Nine (9) Core IT Capabilities (cont’d) 7. Contract facilitation Ensuring the success of existing IT service contracts 8. Contract monitoring Protecting the organization’s contractual position (current and future) 9. Vendor development Identifying the potential added value of IT service providers 11 2014 Developing Key IT Capabilities • Organizations need to build strategies for acquiring and enhancing IT capabilities • Vital to the business success is an IT organization’s ability to: – Identify capabilities and process that are essential – Develop those capabilities and processes to advanced maturity levels 12 2014 IT PROFESSIONALISM 13 IT Professionalism vs. Professional • IT Professional is a label which is characterized by: – a systematic body of theory; community sanctions, a regulated code of ethics and a culture of norms, value, and symbols. • Professionalism is difficult to teach but easy to catch through exposure to exemplars, corporate and team culture, values, and standards and an environment that appreciates and reward behavior. – IT Professionalism refers to a person’s attitude to, behavior on, and capabilities in the job. 14 Principles of Professionalism for IT workers • Principle 1: An IT’s worker’s professionalism is often judged by his or her dress and manner towards others • Principle 2: Professionalism means that others can trust what an IT worker says and does (…Being prepared and organized) • Principle 3: Good communications skills are essential to building professional relationships • Principle 4: Professionalism means making the right choices for the organization as a whole not just a specific areas • Principle 5: Professionalism means a positive attitude toward work, other people, and one’s employer 15 IT Sourcing - Strategy or a Tactical Decision for IT? 16 IT sourcing: • What is it? – Is contracting out of a business process to a third-party – Is the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes. 17 IT sourcing: • IT sourcing has been an integral part of most IT organizations • Originally a mechanism for reducing costs, IT sourcing has evolved into a strategic means of delivering IT value. • IT Sourcing can occur by: – – – – – – Contracting out Outsourcing Offshore contracting Nearshore contracting Strategic sourcing Managed services contracting 18 IT sourcing: • IT sourcing is a way for organizations to: Why– source Enable enterprises to reduce costs IT? – Avoid certain types of costs – Accelerate time to market – Take advantage of external expertise, assets and/or intellectual property – Supplement internal capabilities 19 Why choose IT sourcing? • Among the reasons companies elect include: – Opportunity for short-run profits, – Lower labor costs. – Lower regulatory costs • On comparative costs, a U.S. employer typically incurs higher defined benefit costs associated with taxes to account for social security, Medicare, safety protection (OSHA regulations) and FICA taxes etc. not required by other countries. – Seek internal savings to focus money and resources towards core business. 20 Why choose IT sourcing? • Operating efficiency – Most well-established approach to sourcing – Most common approach – Where utility functions (non-core functions) are transfer to a third-party provider, often along with the organization’s staff • Tactical Support – Used to achieve flexibility and responsiveness – A way to manage IT surge requirements • Strategic impact – Used as a tool to achieve strategic objectives as well as driving down costs and adding capacity 21 Sourcing ‘Real’ Decisions • Flexibility – response time and capability • Control – Delivery, security, and knowledge enablement • Knowledge Enhancement • Business Exigency – unforeseen urgency 22 Which approach is best for my company? • Three Complementary Approaches to IT Sourcing Approach Driver Mode Activities Relationships Operational Efficiencies Cost Reduction Utility Infrastructure, operations, support Fee-for-service Tactical Support Capacity, flexibility Service delivery Mature technology, new technology Strategic Impact Focus, business Toolkit value Partnership Processes, Strategic transformation, alliances innovation 23 Which approach is best for my company? • Moving from a single supplier managed service to a layered approach with a Service Integrator, managing a small cluster of vendors. • Moving toward multi-sourced models with: – Shorter contract durations, – Increased flexibility – Outcome focused commercial models. • Others are transitioning from best of breed supplier mixes toward "Tower-Sourcing"; "Layered-Source" or "Guardian Vendor" approaches. 24 Trends in IT Outsourcing • Recent sourcing trends have spawned fashionable titles including: – – – – "Competitive Ecosystems“ "Smart-sourcing“ "Right-Sourcing" "Back-Sourcing". • Whatever the fad, like it or not, sourcing continues to thrive, albeit through an increasingly complex and fragmented marketplace. 25 Trends in IT Outsourcing • "Given the rate of technological change, the traditional 10-year monolithic ITO deals are simply unsustainable. • Our clients are looking at alternate mechanisms to deliver cost savings, performance improvement and innovation. • However, moving toward multi-sourced models carries an additional integration risk and therefore requires careful planning and execution." 26 Trends in IT Outsourcing • Historically, single source mega-deal offered competitive advantage through huge economies of scale, operational simplicity and stability. • Single sourced IT allowed companies to focus on their core business and hand over complicated IT services to 'one-stop-shops' often transferring risk, accountability and even redundant staff 27 Trends in IT Outsourcing • The single-sourced approach was well suited to end-to-end providers. – reliability – resilience – availability – performance improvements – cost savings in return for long term stable revenues 28 Over time IT Sourcing arrangements can have challenges • Over time, the alignment between the business and IT are unworkable. • Contracts become increasingly irrelevant leading to a breakdown of trust and increasingly tense relationships. • Macroeconomic factors including: – The rate of technology change is a clear driving force. • Virtualization, • Cloud computing • Innovations in mobility – extended delivery models – reducing cost of electronics …make long term deals more and more out of touch. 29 Sourcing Decision Framework • Identify your core IT functions • Create a functional sourcing profile – Identify what functions need to be in-house, insource, can be outsourced, or could be delivered through an industry partner • Evolve full-time IT personnel • Encourage the exploration of the whole range of sourcing options – Combine sourcing options strategically 30 Choosing a sourcing approach • Before the decision to source is made, the organization needs to consider the potential risks • Once the decision to source made: – Need to consider which model is the best fit. – Prioritize and align the sourcing approach to your organizational objectives – Understand the additional vendor management overhead costs – Understanding increased integration risk Source: Dave Tansley, head of Technology Effectiveness at Deloitte 31 IT sourcing must consider risk … • Hidden costs – Monitoring, bargaining, and negotiating changes • Reduced control – Focus needs to shift to measuring outcomes • Legal and political uncertainties • Culture differences • Social justices – public perception 32 Management Framework for Sourcing • • • • • Develop a sourcing strategy Develop a risk mitigation strategy Develop a governance strategy Understand the cost structure Understand how the role of in-house IT might change 33 When sourcing…the changing role of IT • Guide the organization into making the right decision and to ensure that the anticipated value is obtains from vendor relationships • This involves: – Developing IT skills that incorporate an understanding of technology with strong business knowledge and analytic capabilities – Shifting from performing tactical roles to strategic roles • Developing systems thinking, architectural understanding and strategic awareness • Establishing and maintaining relationships 34 IT’s job when sourcing… – Shifting from performing tactical roles to strategic roles: • • • • • • • • • Solution delivery Task decomposition Task costing analysis Right-sourcing decision making Designing for collaboration and connectivity Supplier relationship management Contract management and monitoring Sourcing marketplace analysis Technology forecasting 35 Questions? 36 Assignments Due 8 October 2018 37 Assignments due on 8 Oct 2018 • Reading Assignments: – Up through and including Chapter(s) 8 & 9 (MS) – Up through and including Chapter 5 (ANO) • Case Study Section 1: Hefty Hardware – Due 8 October 2018 by 7:30 pm – Email it to 38 References Austin, R. D., Nolan, R. L & O’Donnell, S. O (2009), The Adventurers of an IT Leaders. Benson, R., Bugnitz T., & Walton, W., From Business Strategy to IT Action, John Wiley & Sons, Inc., 2004. ISBN: 0-471-4919108. McKeen J. D., & Smith, H. A. (2009), IT Strategy; Issues and Practices 39

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