Business Aligning And Business Impact Information Technology Essay

There are many views on what constitutes business strategy. Definitions for business strategy and its features include the following. A business strategy …

• should encapsulate a statement of an organisation’s mission or vision so that there is a clear and consistent point of focus (King, 1978);

• provides a deliberate plan of action (Kaplan & Norton, 1996: Henderson & Venkatraman, 1993, King 1978);

2)Definition of IS/ IT Strategy

Figure 1: IS/IT Strategy. The figure describes the where, what and how of the planning

Source: Source: Edwards, Ward & Bytheway, 1991; Ward & Peppard, 2002, p.41

IS Strategy

IS strategy can be defined as a strategy to implement information systems that recognizes organizational requirements, in other words ‘demand’ for the information and systems to support the overall business strategy and its plan to gain or maintain the advantage (Rackoff, Wiseman & Ullrich, 1985; Ward & Peppard, 2002; Edwards, Ward & Bytheway, 1991). An IS strategy should include the business needs for the future aligned closely to the business strategy. It should also define and prioritize the investments needed to achieve the application portfolio.

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IT Strategy

IT strategy is the supply to the demand created by IS strategy. It “outlines the vision of how the organization’s demand for information and systems will be supported by technology” (Ward & Peppard, 2002). They further suggest that the IT strategy is concerned with the IT capabilities and services like “IT operations, systems development and user support”. Luftman (2003) refers to the IT strategy as “a set of decisions made by IT and functional business managers that either enable or drive the business strategy. It leads to the deployment of technology infrastructure and applications, and human competencies that will assist the organization in becoming more competitive.”

Figure2: Inputs and outputs of IS/ IT strategy

Source: Edwards, Ward & Bytheway, 1991

Literature on IS and IT Strategy

In view of Clarke (2005), “The role of Information Systems (IS) has developed during the years. The original formation was of automation of existing manual and precomputer mechanical processes. This (automation of existing manual processes) was quickly replaced by the rationalisation and integration of systems. In both of these forms, IS was regarded primarily as an operational support tool, and secondarily as a service to

Management”

Clarke (2005) further suggests, “Information Technology (IT) had been critical to the implementation of an organization’s strategy. The dominant sense in which the term is used is that a strategic information system (SIS) is an information system which supports an organization in fulfilling its business goals”.

Ward and Griffiths (1996, p1) say that it is essential for the organizations “to understand how the role of technology based information systems has evolved”. With time, organizations have realised that there is a need to approach IS/IT more tactically by understanding the role of IT in business, and making IT a part of business. As suggested by Ward and Peppard (2002, p1) the organizations are looking at the “application of technology not only to underpin existing business operations but also to create new opportunities that provide them with a source of competitive advantage” and propose a strategic approach for managing their systems. Kearns and Lederer (2003) have supported the critical and strategic role of IS/IT by stating that, “Recent surveys of CEOs (Chief Executive Officer) have shown that, despite numerous failed investments, information technology has assumed a critical and strategic role in their organization”.

If IS/IT is to fulfil its role, the CIOs (Chief Information Officer) need to adopt Strategic Information Systems Planning. SISP began during 1970s and organizations began using IS/IT in ways that changed the functioning of their businesses. Bruns and McFarlan (1987) thought that, Information Technology has done more than just enhancing the existing processes within the organization. IT has provided the spark that caused the managers to rethink their business strategies. The organizations that have changed their control systems and structures have seen a transformation in the effectiveness of the business processes. Bruns and McFarlan (1987) further suggest that, “they have found ways to channel the power of information to the muscles of their corporations.

IS/ IT- Business Alignment

For an organization to achieve competitive advantage it is important that the business use IS/IT to support the main business processes and become dependant on IS/IT. It is also important that there is IT participation in business planning (BP) and vice-versa. Chan and Huff (1993) say alignment of an IS plan and the business plan is very important and it leads to IS efficiency and value. A closer look at the aims for adopting a IS/IT strategy according to Ward and Peppard (2002) suggests that the SISP process is used for aligning IS/IT with business and gain competitive advantage from business opportunities created by using IS/IT.

However, not all IT projects are implemented and many factors have been identified that contribute to IT failures. One of the main failures that have been highlighted is that the 14 failure to implement is due to the planning process and its practices (Hartono et al.2003). Another major problem that has been seen in SISP is “failure to translate goals and objectives into action plans” (Teo & Ang, 2001 in Hartono et al., 2003) and lack of support for IT architecture and also the duration of SISP have been viewed as factors contributing to low rate of implementation.

According to Reich and Benbasant (1996) is a process. It is unique to each organization and uses both the IT and business knowledge to support business objectives. Thus, it is important to bring IT into the main business stream and let IT function as an entity in the business. For this to happen, the senior executives in the companies must work together and define the business needs and frame an IS/IT and business strategy to support the business goals and objectives.

Thus, for an organization to achieve competitive advantage and improve business performance it is important to align its IS/IT plan with the business plan, and IS/IT systems should be used in accordance with the resources and the capabilities of the organization in times of environmental changes. SISP is a way to implement those IS/IT systems not only to achieve competitive advantage but also for proper functioning in the ever-changing business environment.

Business Aligning and Business Impact of IS & IT

Because of the complexity of the strategic information systems planning process and uniqueness of each organization, there is no one best way to tackle it. Vitale, et al.

(1986) classify SISP methodologies into two categories: impact and alignment. Impact methodologies help create and justify new uses of IT, while the methodologies in the “alignment” category align IS objectives with organizational goals.

1) Impact Methodologies

Value Chain Analysis: The concept of value chain is considered at length by Michael Porter (1984). According to him, ‘every firm is a collection of activities that are performed to design, produce, market, deliver, and support its product. All these activities can be represented using a value chain.’

Porter goes on to explain that information technology is one of the major support activities for the value chain. “Information systems technology is particularly pervasive in the value chain, since every value activity creates and uses information. A firm that can discover a better technology for performing an activity than its competitors thus gains competitive advantage” (Porter, 1985).

Thus value chain analysis:

(a) Is a form of business activity analysis which decomposes an enterprise into its parts. Information systems are derived from this analysis.

(b) Helps in devising information systems which increase the overall profit available to a firm.

(c) Helps in identifying the potential for mutual business advantages of component businesses, in the same or related industries, available from information interchange.

(d) Concentrates on value-adding business activities and is independent of organizational structure.

Strengths: The main strength of value chain analysis is that it concentrates on direct value adding activities of a firm and thus pitches information systems right into the realm of value adding rather than cost cutting.

Weaknesses: Value chain analysis suffers from a few weaknesses, namely,

(a) It only provides a higher level information model for a firm and fails to address the

development and implementation issues,

(b) Because of its focus on internal operations instead of data, it fails to define a data structure for the firm.

2) Alignment Methodologies

Business Systems Planning (BSP): The methodology focuses on business processes which in turn are derived from an organization’s business mission, objectives and goals. Business processes are analyzed to determine data needs and, then, data classes.

Similar data classes are combined to develop databases. The final BSP plan describes an overall information systems architecture as well as installation schedule of individual systems. Steps in a BSP study are: Barlow (1990) and Ledrer and Sethi (1988) have discussed strengths and weaknesses of BSP.

Strengths: Because BSP combines a top down business analysis approach with a bottom up implementation strategy, it represents an integrated methodology. In top down strategy, BSP develops an overall understanding of business plans and supporting IS needs through joint discussions.

Weaknesses: (a) BSP requires a firm commitment from the top management and their substantial involvement.

(b) It requires a high degree of IT experience within the BSP planning team.

((e) Major weakness of BSP is the considerable time and effort required for its successful implementation.

About the Assignment

The past few decades have witnessed major changes in the way we do business. Increased competition and the pursuit of ever-greater performance have forced businesses to focus on quality, efficiency, and productivity, while encouraging innovation and creativity. In addition, there have been significant changes in global economies and in the structure of the business worlds that exist in those economies.

As a result, a variety of disparate approaches and methodologies for evaluating and restructuring business enterprises has emerged. The terms “reengineering” and “business transformation” have taken on amazing significance. In many company like Dell, those terms mean the complete assessment, restructure and redesign of entire businesses, including information technology (IT) and Information System its Management (IS)

In Below assignment we are going to focus on Business strategies and Information strategies of Dell Company, we are also going to look into Advantage and Disadvantage of Business strategies, Information System and Information Technology in general.

Company Overview

Dell, a Delaware corporation, was founded in 1984 by Michael Dell on a simple concept: by selling computer systems directly to customers, Dell could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. Dell is based in Round Rock, Texas, and conducts operations worldwide through its subsidiaries. Unless otherwise specified, references to Dell include its consolidated subsidiaries. Dell operates principally in one industry and is managed in three geographic segments: the Americas, Europe, and Asia Pacific-Japan regions.

Vision Statement:

It’s the way we (Dell) do business. It’s the way we (Dell) interact with the community. It’s the way we interpret the world around us-ours customers needs, the future of technology, and the global business climate. Whatever changes the future may bring our vision — Dell Vision –will be our guiding force.

Dell needs full customer satisfaction. In order to become the most successful computer company, they need the newest technology and loyal customers.

Mission Statement:

Dell’s mission is to be the most successful Computer Company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet customer expectations of:

• Highest quality

• Leading technology

• Competitive pricing

• Individual and company accountability

• Best-in-class service and support

• Flexible customization capability

• Superior corporate citizenship

• Financial stability

http://retailindustry.about.com/od/topusretailcompanies/p/dellincprofile.htm

Business Strategy of Dell

Dell’s business strategy combines its direct customer model with a highly efficient manufacturing and supply chain management organization and an emphasis on standards-based technologies. This strategy enables Dell to provide customers with superior value; high-quality, relevant technology; customized systems; superior service and support; and products and services that are easy to buy and use. The key tenets of Dell’s business strategy are:

A direct relationship is the most efficient path to the customer. A direct customer relationship, also referred to as Dell’s “direct business model,” eliminates wholesale and retail dealers that add unnecessary time and cost or diminish Dell’s understanding of customer expectations. At www.dell.com, customers may review, configure and price systems within Dell’s entire product line; order systems online; and track orders from manufacturing through shipping.

Customers can purchase custom-built products and custom-tailored services. Dell’s flexible, build-to-order manufacturing process enables Dell to turn over inventory every four days on average, and reduce inventory levels.

Dell is the low-cost leader. Dell maintains the lowest cost structure among its major competitors, and to pass those savings to its customers.

Non-proprietary standards-based technologies deliver the best value to customers. Dell believes that non-proprietary standards-based technologies are critical to providing customers with relevant, high-value products and services. Focusing on standards gives customers the benefit of extensive research and development from

http://www.sec.gov/Archives/edgar/data/826083/000095013405004423/d22995e10vk.htm

Information Systems Strategy of Dell

Information systems were critical to Dell. The information systems supported the Dell

Direct business model by providing a range of tools from order entry to production integration.

Information systems provided the means for delivery of instant information to employees through e-mail or over the intranet. And information systems were a way to connect suppliers to the business, to collect and analyze information collected from the marketplace, and to support decisions on everything from hiring practices to product offerings to pricing. “IT is an enabler to make the business model work,” The backbone of the information system was an architecture called “G2” (See Exhibit 3).

Data Engine

Message Broker

Application Server

Wed Based Client Application

G2 Model

The G2 architecture was an object-based infrastructure, with a web browser front end

interface. It had a single point of connection and was built in small pieces. There was local control of functionality but a global view of the business. The primary components of the G2 architecture were commonly available applications such as Microsoft office, database engines, and Internet servers.

The G2 architecture was similar in design to the Dell organization structure, which was also built in small pieces, with local control but a global view of the business.

The Dell business model resulted in a different production profile than other business

models. The direct model implied that every production run is unique in some way, and hence every lot was of quantity one.

http://www.kppartners.com/documents/zerotime-dell_case_study.pdf

Analysing Business Aligning in Dell

To show Business aligning in Dell we will use value chains analysis

The value chain in place at most firms assumes a make-to-forecast strategy. That is, standard products are produced from long-term forecasts of customer demand.

And in the case of Dell Computer corporation “Michael Dell” made business model, which allows the company to build each product to order. Dell is well-known for its ability to mass-produce computers that are customized to a customer’s order. This production and operations process is known as mass-customization or, in a value-chain context, a build-to-order (BTO) strategy. In its build-to-order strategy, Dell assembles the product only after the customer has placed the order,

.

At Dell, this process depends on computer systems that link customer order information to production, assembly, and delivery operations.

BTO frequently requires a change in organizational culture, managerial thinking, and supplier interactions and support. Inevitably, the process begins by acquiring a better understanding of customer demand; then improvements in information flow will produce the ability to increase responsiveness in all areas of the value chain.

http://www.calstatela.edu/faculty/msabet/c12_Turban_0471705225.pdf

Advantage and Disadvantage Of Business Strategies

There are numerous advantages you can extract from the marketplace if you know how. And the marketing plan is an excellent tool for identifying and developing Business strategies for extracting these advantages.

1) Advantages of Business Strategies of Dell:

Identifies needs and wants of consumers

Determines demand for product

Aids in design of products that fulfil consumers needs

Dell’s inventory turnover rate of 60 times per year compares to 12-15 times for most indirect vendor.

Dell can develop direct customer relationship.

Dell knows who the end user is, what equipment it has bought from Dell, where it was shipped, and how much the customer has spent with Dell. Dell uses that information to offer add-on products and services, to coordinate maintenance and technical support, and to help the customer plan its PC replacement and upgrade cycle.

2) Disadvantages of Business Strategies of Dell:

Leads to faulty marketing decisions based on improperly analyzed data

Creates unrealistic financial projections if information is interpreted incorrectly

Identifies weaknesses in overall business plan

http://inventors.about.com/od/licensingmarketing/a/advantages_mark.htm

Advantage and Disadvantage of IS and IT

1) Advantages of information technology and Information System Dell Inc

Dell Inc company realizes Internet-associated efficiencies throughout its business, including procurement, customer support and relationship management.

At www.dell.com, customers may review, configure and price systems within Dell’s entire product line; order systems online; and track orders from manufacturing through shipping. At valuechain.dell.com,

Dell shares information with its suppliers on a range of topics, including product quality and inventory.

Dell also uses the Internet to deliver industry-leading customer services. For instance, thousands of business and institutional customers worldwide use Dell’s Premier Dell.com Web pages to do business with the company online.

http://e-learning.dmst.aueb.gr/mis/Cases/Dell/index.htm

2) Disadvantages of information technology and Information System for Dell Inc

The Internet has also created entirely new markets and formed the basis for thousands of new businesses and that is biggest disadvantage for Dell Inc.

Internet technology is based on universal standards that any company can use, making it easy for rivals to compete on price alone, due to which profits have gone down.

Information is available to everyone on internet, due which it raises the bargaining power of customers, who can quickly find the lowest-cost provider

http://www.prenhall.com/behindthebook/0132304619/pdf/Laudon%20Feature%203.pdf

Barriers in implementation of IS and IT in Dell Company

Dell Co business model was unique in it’s way and the company did not had time to think differently because the company was growing by about $1 billion every 9 weeks.

Dell had a limited time for classroom training of new Information systems to employees.

The Dell business model resulted in a different production profile than other business models. The direct model implied that every production run is unique in some way, and hence every lot was of quantity one.

Dell was not able to have a centralized structure, because the local business units had to have their own IT people. As such, the information systems were highly decentralized. No programmers reported directly to the CIO. Instead, each division and business had some IT people.

http://www.kppartners.com/documents/zerotime-dell_case_study.pdf

Conclusion

Dell has increased the opportunity for revenue and the increased access to information, which potentially translates into new product and service offerings. The advantage to the customer is the traditional one-stop-shopping arrangement for products and services, offloading these tasks from information systems organizations, and freeing the IS management up to concentrate on core business issues rather than procurement and services.

http://i.dell.com/sites/content/corporate/secure/en/Documents/FY10_Form10K_Final.pdf

Recommendations

To get a successful IS and IT Strategy program will rely on

(1) Senior management’s commitment;

(2) The full support and participation of the IT & IS team

(3) The competence of the IS and IT team, which must have the expertise to apply the

specific site and system, identify mission risks, and provide cost-effective safeguards that meet the needs of the organization;

(4) The awareness and cooperation of members of the user community, who must follow procedures and comply with the implemented controls to Safeguard the mission of their organization

(5) An ongoing evaluation and assessment of the IS & IT-related mission risks.

http://csrc.nist.gov/publications/nistpubs/800-30/sp800-30.pdf

Authors Reference

Barlow, J.F., “Putting Information Systems Planning Methodologies Into Perspective,” Journal of Systems Management, July, 1990, pp. 6-9.

Bruns Jr., W. J., & McFarlan, F. W. (1987). Information technology puts power in

control systems. Harvard Business Review, 65(5), 89-94.

Chan, Y. E., & Huff, S. L. (1993). Strategic information systems alignment. Business

Quarterly, 58(1), 51-55.

Clarke, R. (2005). The path of development of strategic information systems theory.

Retrieved 24/04/2011, from http://www.anu.edu.au/people/Roger.Clarke/SOS/StratISTh.html

Edwards, C., Ward, J., & Bytheway, A. (1991). The essence of information systems.

London: Prentice Hall. Retrieved from 24/06/2011

http://www.coda.ac.nz/cgi/viewcontent.cgi?article=1000&context=unitec_scit_di

Hartono, E., Lederer, A. L., Sethi, V., & Zhuang, Y. (2003). Key predictors of the

implementation of strategic information systems plans. ACM SIGMIS Database,

34(3), 41-53.

Henderson, J.C. & Venkatraman, N. (1993) Strategic alignment: Leveraging information technology for transforming organisations, IBM Systems Journal, Vol 32 No 1, pp 472-484.

King, W.R. (1978) Strategic planning for management information systems, MIS Quarterly, Vol 2 No 1, pp 27-37

Kaplan, R.S. & Norton, D.P. (1996) Translating strategy into action – The Balanced scorecard, Harvard Business School Press, Boston, MA

Kearns, G. S., & Lederer, A. L. (2003). A resource-based view of strategic IT alignment: How knowledge sharing creates competitive advantage. Decision Sciences, 34(1), 1-29.

Ledrer, Albert L., and Sethi, Vijay, “The Implementation of Strategic Information Systems Planning Methodologies,” MIS Quarterly, Vol. 12, No. 3, September 1988, pp. 445-460.

Luftman, J. N. (2003). Competing in the information age align in the sand (2nd ed.). New York: Oxford University Press.

Porter, M.E., Competitive Advantage, Free Press, 1984. Retrieved on 30/04/2011 http://viu.eng.rpi.edu/publications/strpaper.pdf

Porter, M.E. and Millar, V.E., “How Information Gives You Competitive Advantage,” Harvard Business Review, July-August, 1985. Retrieved on 30/04/2011 http://viu.eng.rpi.edu/publications/strpaper.pdf

Rackoff, N., Wiseman, C., & Ullrich, W. A. (1985). Information systems for competitive advantage: implementation of a planning process. MIS Quartery, 9(4), 285-294.

Reich, B. H., & Benbasat, I. (1996). Measuring the linkage between business and

information technology objectives. MIS Quarterly, 20(1), 55-81.

Teo, T. S. H., & Ang, J. S. K. (2001). An examination of major IS problems.

International Journal of Information Management, 21(6), 457-470.

Vitale, M., Ives, B. and Beath, C., “Identifying Strategic Information Systems,” Proc. 7th Int’l Conf. Inf. Sys., San Diego, December 1986, pp. 265-276.

Ward, J., & Peppard, J. (2002). Strategic planning for information systems (3rd ed.).

Chichester: John Wiley. Retrieved on 25/04/2011 http://www.coda.ac.nz/cgi/viewcontent.cgi?article=1000&context=unitec_scit_di

Ward, J., & Griffiths, P. (1996). Strategic planning for information systems (2nd ed.).

Chichester: John Wiley. Retrieved on 25/04/2011 http://www.coda.ac.nz/cgi/viewcontent.cgi?article=1000&context=unitec_scit_di

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http://retailindustry.about.com/od/topusretailcompanies/p/dellincprofile.htm

Retrieved on 30/04/2011

http://www.sec.gov/Archives/edgar/data/826083/000095013405004423/d22995e10vk.htm . Retrieved on 01/05/2011

http://www.kppartners.com/documents/zerotime-dell_case_study.pdf Retrieved on 02/05/2011

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http://www.kppartners.com/documents/zerotime-dell_case_study.pdf Retrieved on 02/05/2011

http://i.dell.com/sites/content/corporate/secure/en/Documents/FY10_Form10K_Final.pdf Retrieved on 04/05/2011

http://csrc.nist.gov/publications/nistpubs/800-30/sp800-30.pdf Retrieved on 04/05/2011

http://www.calstatela.edu/faculty/msabet/c12_Turban_0471705225.pdf Retrieved on 04/05/2011

http://www.prenhall.com/behindthebook/0132304619/pdf/Laudon%20Feature%203.pdf Retrieved on 04/05/2011

http://e-learning.dmst.aueb.gr/mis/Cases/Dell/index.htm Retrieved on 04/05/2011