Information Technology.
Global editionGlo
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this is a special edition of an established title widely used by colleges and universities throughout the world. Pearson published this exclusive edition for the benefit of students outside the United States and Canada. if you purchased this book within the United States or Canada you should be aware that it has been imported without the approval of the Publisher or author.
Pearson Global Edition
Global edition
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it Strategy:
Issues and Practices M
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Sm ith
it Strategy Issues and Practices tHiRd edition
James D. McKeen • Heather A. Smith
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IT STraTegy: ISSueS and PracTIceS
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IT STraTegy: ISSueS and PracTIceS
T h i r d E d i t i o n
G l o b a l E d i t i o n
James D. McKeen Queen’s University
Heather A. Smith Queen’s University
Boston Columbus Indianapolis New York San Francisco Hoboken Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto
Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
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Editor in Chief: Stephanie Wall Head of Learning Asset Acquisition, Global Edition: Laura Dent Acquisitions Editor: Nicole Sam Program Manager Team Lead: Ashley Santora Program Manager: Denise Vaughn Editorial Assistant: Kaylee Rotella Assistant Acquisitions Editor, Global Edition: Debapriya Mukherjee Associate Project Editor, Global Edition: Binita Roy Executive Marketing Manager: Anne K. Fahlgren Project Manager Team Lead: Judy Leale Project Manager: Thomas Benfatti Procurement Specialist: Diane Peirano Senior Manufacturing Controller, Production, Global Edition: Trudy Kimber Cover Image: © Toria/Shutterstock Cover Designer: Lumina Datamantics Full Service Project Management: Abinaya Rajendran at Integra Software Services, Pvt. Ltd.
Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text.
Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England
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© Pearson Education Limited 2015
The rights of James D. McKeen and Heather A. Smith to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
Authorized adaptation from the United States edition, entitled IT Strategy: Issues and Practices, 3rd edition, ISBN 978-0-13-354424-4, by James D. McKeen and Heather A. Smith, published by Pearson Education © 2015.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS.
All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.
ISBN 10: 1-292-08026-4 ISBN 13: 978-1-292-08026-0
British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library
10 9 8 7 6 5 4 3 2 1
Typeset in 10/12 Palatino LT Std by Integra Software Services, Pvt. Ltd.
Printed and bound in Great Britain by Clays Ltd, Bungay, Suffolk.
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ConTEnTS
Preface 13
About the Authors 21
Acknowledgments 22
Section I Delivering Value with IT 23
Chapter 1 The IT Value ProPoSITIon 24 Peeling the Onion: Understanding IT Value 25
What Is IT Value? 25
Where Is IT Value? 26
Who Delivers IT Value? 27
When Is IT Value Realized? 27
The Three Components of the IT Value Proposition 28 Identification of Potential Value 29 Effective Conversion 30 Realizing Value 31
Five Principles for Delivering Value 32 Principle 1. Have a Clearly Defined Portfolio Value Management
Process 33
Principle 2. Aim for Chunks of Value 33
Principle 3. Adopt a Holistic Orientation to Technology Value 33
Principle 4. Aim for Joint Ownership of Technology Initiatives 34
Principle 5. Experiment More Often 34 Conclusion 34 • References 35
Chapter 2 DelIVerIng BuSIneSS Value Through IT STraTegy 37 Business and IT Strategies: Past, Present, and Future 38
Four Critical Success Factors 40
The Many Dimensions of IT Strategy 42
Toward an IT Strategy-Development Process 44
Challenges for CIOs 45 Conclusion 47 • References 47
Chapter 3 MakIng IT CounT 49 Business Measurement: An Overview 50
Key Business Metrics for IT 52
5
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6 Contents
Designing Business Metrics for IT 53
Advice to Managers 57 Conclusion 58 • References 58
Chapter 4 effeCTIVe BuSIneSS–IT relaTIonShIPS 60 The Nature of the Business–IT Relationship 61
The Foundation of a Strong Business–IT Relationship 63
Building Block #1: Competence 64
Building Block #2: Credibility 65
Building Block #3: Interpersonal Interaction 66
Building Block #4: Trust 68 Conclusion 70 • References 70
Appendix A The Five IT Value Profiles 72
Appendix B Guidelines for Building a Strong Business–IT Relationship 73
Chapter 5 BuSIneSS–IT CoMMunICaTIon 74 Communication in the Business–IT Relationship 75
What Is “Good” Communication? 76
Obstacles to Effective Communication 78
“T-Level” Communication Skills for IT Staff 80
Improving Business–IT Communication 82 Conclusion 83 • References 83
Appendix A IT Communication Competencies 85
Chapter 6 effeCTIVe IT leaDerShIP 86 The Changing Role of the IT Leader 87
What Makes a Good IT Leader? 89
How to Build Better IT Leaders 92
Investing in Leadership Development: Articulating the Value Proposition 95
Conclusion 96 • References 97
MInI CaSeS Delivering Business Value with IT at Hefty Hardware 98
Investing in TUFS 102
IT Planning at ModMeters 104
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Contents 7
Section II IT governance 109
Chapter 7 effeCTIVe IT ShareD SerVICeS 110 IT Shared Services: An Overview 111
IT Shared Services: Pros and Cons 114
IT Shared Services: Key Organizational Success Factors 115
Identifying Candidate Services 116
An Integrated Model of IT Shared Services 117
Recommmendations for Creating Effective IT Shared Services 118
Conclusion 121 • References 121
Chapter 8 SuCCeSSful IT SourCIng: MaTurITy MoDel, SourCIng oPTIonS, anD DeCISIon CrITerIa 122 A Maturity Model for IT Functions 123
IT Sourcing Options: Theory Versus Practice 127
The “Real” Decision Criteria 131
Decision Criterion #1: Flexibility 131
Decision Criterion #2: Control 131
Decision Criterion #3: Knowledge Enhancement 132
Decision Criterion #4: Business Exigency 132
A Decision Framework for Sourcing IT Functions 133
Identify Your Core IT Functions 133
Create a “Function Sourcing” Profile 133
Evolve Full-Time IT Personnel 135
Encourage Exploration of the Whole Range of Sourcing Options 136
Combine Sourcing Options Strategically 136
A Management Framework for Successful Sourcing 137
Develop a Sourcing Strategy 137
Develop a Risk Mitigation Strategy 137
Develop a Governance Strategy 138
Understand the Cost Structures 138 Conclusion 139 • References 139
Chapter 9 BuDgeTIng: PlannIng’S eVIl TwIn 140 Key Concepts in IT Budgeting 141
The Importance of Budgets 143
The IT Planning and Budget Process 145
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8 Contents
Corporate Processes 145
IT Processes 147
Assess Actual IT Spending 148
IT Budgeting Practices That Deliver Value 149 Conclusion 150 • References 151
Chapter 10 rISk ManageMenT In IT 152 A Holistic View of IT-Based Risk 153
Holistic Risk Management: A Portrait 156
Developing a Risk Management Framework 157
Improving Risk Management Capabilities 160
Conclusion 161 • References 162
Appendix A A Selection of Risk Classification Schemes 163
Chapter 11 InforMaTIon ManageMenT: STageS anD ISSueS 164 Information Management: How Does IT Fit? 165
A Framework For IM 167
Stage One: Develop an IM Policy 167
Stage Two: Articulate the Operational Components 167
Stage Three: Establish Information Stewardship 168
Stage Four: Build Information Standards 169
Issues In IM 170
Culture and Behavior 170
Information Risk Management 171
Information Value 172
Privacy 172
Knowledge Management 173
The Knowing–Doing Gap 173
Getting Started in IM 173 Conclusion 175 • References 176
Appendix A Elements of IM Operations 177
MInI CaSeS Building Shared Services at RR Communications 178
Enterprise Architecture at Nationstate Insurance 182
IT Investment at North American Financial 187
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Contents 9
Section III IT-enabled Innovation 191
Chapter 12 TeChnology-DrIVen InnoVaTIon 192 The Need for Innovation: An Historical
Perspective 193
The Need for Innovation Now 193
Understanding Innovation 194
The Value of Innovation 196
Innovation Essentials: Motivation, Support, and Direction 197
Challenges for IT leaders 199
Facilitating Innovation 201 Conclusion 202 • References 203
Chapter 13 when BIg DaTa anD SoCIal CoMPuTIng MeeT 204 The Social Media/Big Data Opportunity 205
Delivering Business Value with Big Data 207
Innovating with Big Data 211
Pulling in Two Different Directions: The Challenge for IT Managers 212
First Steps for IT Leaders 214 Conclusion 215 • References 216
Chapter 14 effeCTIVe CuSToMer exPerIenCe 217 Customer Experience and Business value 218
Many Dimensions of Customer Experience 219
The Role of Technology in Customer Experience 221
Customer Experience Essentials for IT 222
First Steps to Improving Customer Experience 225 Conclusion 226 • References 226
Chapter 15 BuSIneSS InTellIgenCe: an oVerVIew 228 Understanding Business Intelligence 229
The Need for Business Intelligence 230
The Challenge of Business Intelligence 231
The Role of IT in Business Intelligence 233
Improving Business Intelligence 235 Conclusion 238 • References 238
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10 Contents
Chapter 16 TeChnology-enaBleD CollaBoraTIon 240 Why Collaborate? 241
Characteristics of Collaboration 244
Components of Successful Collaboration 247
The Role of IT in Collaboration 249
First Steps for Facilitating Effective Collaboration 251 Conclusion 253 • References 254
MInI CaSeS Innovation at International Foods 256
Consumerization of Technology at IFG 261
CRM at Minitrex 265
Customer Service at Datatronics 268
Section IV IT Portfolio Development and Management 273
Chapter 17 ManagIng The aPPlICaTIon PorTfolIo 274 The Applications Quagmire 275
The Benefits of a Portfolio Perspective 276
Making APM Happen 278
Capability 1: Strategy and Governance 280
Capability 2: Inventory Management 284
Capability 3: Reporting and Rationalization 285
Key Lessons Learned 286 Conclusion 287 • References 287
Appendix A Application Information 288
Chapter 18 IT DeManD ManageMenT: SuPPly ManageMenT IS noT enough 292 Understanding IT Demand 293
The Economics of Demand Management 295
Three Tools for Demand management 295
Key Organizational Enablers for Effective Demand Management 296
Strategic Initiative Management 297
Application Portfolio Management 298
Enterprise Architecture 298
Business–IT Partnership 299
Governance and Transparency 301 Conclusion 303 • References 303
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Contents 11
Chapter 19 TeChnology roaDMaP: BenefITS, eleMenTS, anD PraCTICal STePS 305 What is a Technology Roadmap? 306
The Benefits of a Technology Roadmap 307
External Benefits (Effectiveness) 307
Internal Benefits (Efficiency) 308
Elements of the Technology Roadmap 308
Activity #1: Guiding Principles 309
Activity #2: Assess Current Technology 310
Activity #3: Analyze Gaps 311
Activity #4: Evaluate Technology Landscape 312
Activity #5: Describe Future Technology 313
Activity #6: Outline Migration Strategy 314
Activity #7: Establish Governance 314
Practical Steps for Developing a Technology Roadmap 316
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