Preamble

Anyone can read this paper. Every attempt has been made to make it easy to comprehend. However this paper has been primarily written to assist senior executives in developing a deeper understanding of information technology within their business and to help establish policies and priorities to manage information technology in a large enterprise to obtain enhanced business outcomes. Each section of this paper is self-contained and can be read separately. For best results it is recommended that the reader peruses the sequence of sections from beginning to end.

 Information Technology and core business in a large enterprise such as a bank, a telco or a retailer are often looked upon as discrete entities. The gap between them is viewed as one which is challenging to bridge. The primary purpose of this paper is to close this gap once and for all, to establish that information technology is a critical factor which determines the operational success of a large business enterprise in terms of efficiency, competitiveness and manageability.

Today information technology is an established and maturing profession which requires a wide array of skills for obtaining a successful outcome. However detailed coverage of technology management processes, best practices and skills is outside the scope of the present publication.

This paper is the outcome of decades of consulting and professional services experience in the world of information technology solutions for commercial business enterprises but excludes from its vista the information technology within mission-critical operations such as defence and aerospace which require the highest grade of operational reliability and zero-defect quality assurance. Such mission-critical operations are very obviously technology-centric and normally there are no gaps between operations and information technology concepts.

My focus is upon the utilization of information technology within a commercial enterprise such as a financial institution, a utility services provider, a telecom services provider, a large retailer or a consumer goods manufacturer.  Since the advent of electronic commerce in the past decade, the trend toward information technology-centric business operation is an increasing one, growing faster than we sometimes realise. Supply chains, billing systems, financial statements, customer service desks, payroll and inventory are examples of enterprise business operations which are continually experiencing increasing levels of automation via information technology. It is essential therefore that the executives who govern such large commercial enterprises stay in tune with what information technology has to offer and how best it can be utilized.

Please read on. I wish you all the best in maximising the outcome of your business by optimal management and deployment of information technology within your enterprise.

 

Sydney                                                                                     Tirthankar RayChaudhuri

October 2014

 

 

 

Information Technology, a Business Device, not a Cost Centre

 

Information Technology within an Enterprise

 

It is well-known that the key to successful business operation lies in well-timed and correct decision-making and in implementing those decisions in a timely and appropriate manner. No matter what kind of business you are in charge of, decisions and actions are the main factors that determine your success or failure.  What is it that helps you make the correct decision and to take the right action? The answer is a single entity – Information.

We live in an age of so-called ‘Information Overflow’ where there are multiple sources of information available to most of us and insufficient time to peruse all of these sources and to obtain the key data that we need. Old-fashioned traditional sources of information like books, newspapers, radio and local television channels have today been appended by global satellite television and the internet. Today a Google search and the Wikipedia provide vast amounts of selective queried information literally at our fingertips. Advanced ERP, CRM and Business Intelligence software systems provide senior executives with much data and information about the operation of the enterprise they are governing. However for busy executives, especially those with P&L responsibilities who are in charge of running  large successful operations, very limited time is available to search and filter available data/information using these tools to support their decision-making. Therefore there is extensive reliance upon mid-level managers who are tasked with the responsibility of using advanced information tools and technologies for obtaining and reporting this information to executives.

Example – Two smaller Banks A and B both have a need to review their staff grades and salaries and to decide on a plan for additional hiring and/or retrenchment of personnel for the new financial year. This data needs to be presented in a week’s time to the board of directors in preparation for the next Annual General Meeting of each bank where major shareholders will be present.  Bank A does not have an ERP system in place and the managers and executives struggle hard and are unable to obtain and to accurately report the necessary information in the required time frame. Bank B on the other hand has implemented SAP as their ERP system and has no difficulty in retrieving the necessary data and presenting to their board of directors the required reports.  

Today information technology (IT) within an enterprise is therefore the single most important element that determines decisions and actions and thereby the successful operation of the business enterprise.  Information technology is a complex entity and is comprised of multiple equipment types/devices, networks and software systems, to say nothing of skilled personnel specializing in various areas. The rest of this paper provides insight and guidelines as to how best information technology itself can be deployed and managed to maximise the outcome of your business enterprise.

Information Technology – diverse and fast changing

Compared with other professions such as Accounting, Medicine, Engineering and Law, Information Technology is a much younger discipline and a relatively new profession which can be said to have commenced with the creation of the first electronic computer ENIAC at the University of Pennsylvania in 1946. Electronic mail first appeared in commercial environments in the early 1970s. The World Wide Web came into existence in 1995.

Today the diversity of information technology offerings, ranging from social media, interactive portals to webinars and internet videoconferencing have completely transformed the way busy professionals communicate with one another. The availability of SMS, email and the internet on portable hand-held devices like blackberries and i-phones has increased flexibility of human presence and enhanced people’s ability to respond faster to communication.

As we progress in time, IT systems, networks and devices become smaller in size, faster in response and have more capacity in terms of processing power, throughput and data storage. As a consequence there are constantly new systems/devices being invented, new versions of existing products with completely new features, new technology platforms, new standards, new concepts and new mantras.  Freshly-created products and vendors arise and flourish, existing products and vendors are constantly being acquired by others, integrated with other systems, rebranded and repackaged.

Hard to keep up with?

Too diverse and too fast changing?

All true.

However it should be borne in mind that IT is in many ways a completely different industry from others. It is an industry which thrives on change, originality, value-addition and innovation. It is also the single most important element that can reshape and completely transform the future of a business enterprise.

Example – Telecoms service provider X has older servers, workstations and application software supporting its call-centres in charge of billing and new account-related customer service.  Due to growth in customer base the load on the system has increased significantly without any capacity enhancement of the information system. Some of their new product information is not properly available online to their call centre staff.  Consequently the time taken to attend to each customer phone call is long, the system often freezes due to overload. Customer service staff  experience much frustration and encounter a great deal of customer unhappiness.  On the other hand Telecoms service provider Y has updated information systems in place which have additional capacity for several  years of projected  customer base growth. Their new accounts and billing call centre staff are quick and efficient in responding to client queries. Increasingly customers are migrating their accounts from service provider X to service provider Y. 

In a competitive and fast-changing world with increasing economies of scale and aggressive business growth targets, it is essential to upgrade and enhance information system within your enterprise to keep up with the demands placed upon it. Changes and diversity in offerings within the IT industry are phenomena that are caused and fuelled by these ongoing business challenges.

To keep abreast of Information Technology Change: Agility

Just as the value of an asset such as a motor car depreciates with time, just as a car model is superseded by newer models with more features for the same price paid earlier and with other models with many more characteristics, so also your information systems depreciate in value and are superseded by recent versions and by completely new products. It is worthy of note that tax depreciation claim guidelines for a business enterprise are very similar for motor cars and information technology assets. Every six to twelve months IT vendors release new servers (hardware), new versions of operating systems, databases, applications, server software and versions of networking protocols. New products are released regularly, sometimes ones that completely revolutionize the way in which people and businesses operate. Keeping up with this kind of change is absolutely essential for operating a successful business enterprise.

What is the best way to keep abreast of technology change within your enterprise?

Is the cost of information technology change an issue?

In answering the first question a two-way approach is recommended. First, hire expertise within your enterprise that can provide reliable advice on the status of ongoing happenings in the world of IT and the business impacts thereof. Secondly, periodically review and re-evaluate your organization’s information technology requirements in line with business changes and growth. Integrate the two streams of activity and your IT enhancement/change specifications will be defined. Implement these changes as soon as possible; in other words, be agile.

The answer is to the second question is – for every item of capital or operating expenditure within an enterprise there should be a well-defined business case. Return on investment, an evaluation of the consequences (pros and cons) of not making the change must be thoroughly assessed before deciding to make the change. When approached in this manner cost will be justified and will not therefore be an issue.

Newer more advanced delivery models and evolving standards

The new era of 'digital transformation' will lead to more cost-effective ways to maximise the outcome of your IT Transition and Transformation programs. Virtualization technology reduces the overall space, power and physical installation requirements within your data-centre and consequently the carbon footprint also. Service-oriented architectures (SOA) today make possible the reuse of legacy applications and data while developing new applications at a fraction of the cost of replacing these systems altogether. Latest 'service-on-demand' models of IT delivery called Cloud Services for the entire end-to-end gamut of infrastructures, software development platforms and business processes, are set to render outsourced customized IT services or 'strategic outsourcing', obsolete.  Big Data and Analytics is now one of the fastest areas of growth in IT, as realization as dawned that mining the plethora of unstructured data that is constantly being generated by modern operational devices and processes like card readers, logs, email, SMS, social media postings, etc, constitutes a veritable gold mine of knowledge that can drive the making of executive business decisions in a highly informed manner. Easy to use Mobile Applications upon smart phones and portable tablets  are creating a 'next generation' environment of flexible access to business process interfaces in a way that the world has never known before.  Social Media has led to the emergence of Social Commerce which has a powerful one to many and many to many business communications model which is poised to gain momentum in the same way as Electronic Commerce did 15 years ago.

Example – Ensure with Us are an Insurance Company. In their business operation there are daily problems with incorrect quotes, incorrect claims lodgement and incorrect billing. They realise that their IT systems are badly in need of being rectified and upgraded .Their executives embark on a ‘quick strategy’ to resolve this issue by deciding to emulate the IT systems of a competitor who are operating more effectively. Half way through the technology migration exercise it is realised that because a number of their product offerings are differently underwritten from those of their competitor, installing the same IT systems as the competitor will only partially resolve their business issues and will not justify the huge expenditure budget.

The maxims are therefore –

• Change as required by your business,
• Change on time (agility),
• Manage change,
• Have a business case/budget for every major change,
• Keep up with technology change,
• Hire change management expertise.

Information Technology Policies recommended for a successful Enterprise

We have now established that IT is a critical ingredient to the successful operation of a business enterprise. We have also discussed that IT industry offerings are dynamic, diverse and fast changing, far more than those of any other industry. Needed therefore are sound policies within an enterprise for managing the IT components within it and also the ongoing changes and upgrades to these components. 

The following policies are strongly recommended for managing IT within your business enterprise. These recommendations are based not merely upon industry best practices but are also the result of years of awareness of issues arising from the lack of sufficient sound policies for managing the information systems in an enterprise.

• Governance – Define and set up an IT governance model within your enterprise based on industry best practices.  Roles such as that of CIO, IT Manager, PMO Manager need to be clearly defined and assigned to competent individuals with appropriate backgrounds.
• Business-driven- Ensure that the key roles are held by business-driven individuals who will work closely with key stakeholders in the business to align your enterprise information systems with the needs of the business.
• Capacity Management and Planning – Ensure that your information systems have sufficient capacity to bear the loads of current high-volume business transactions and are set up in a manner that they can be enhanced and upgraded periodically to deal with increased loads and transaction demands.
• Change Management – Have well-defined change management procedures in place to deal with the need to upgrade and to migrate systems as necessary.
• Enterprise Architecture – Employ enterprise architect services to ensure that all the necessary building blocks of your information system are properly defined and planned for.  In the next Chapter enterprise architecture is discussed in more detail.
• Outsourcing – Outsourcing of IT services to less expensive offshore vendors is popular from a cost-management viewpoint. However this kind of policy, if not implemented with adequate thought and vendor capability evaluation, can have not-so-positive overall results. Outsource with care, therefore and ensure that you thoroughly evaluate the skills and background of your outsourcing vendor before you sign a services contract with them.
• Security – Ensure that your IT systems are secure at all levels. While the modus operandi for IT security is part of enterprise architecture, security policy is to be determined at the organizational governance level and needs to be aligned to be in compliance with international standards.

Example – Quality Holidays are a travel agency business. Except for an IT Manager they have no IT professionals on their payroll. All of their information systems supply and management is outsourced to different vendors. The vendor in charge of managing their IT infrastructure does no capacity planning or management. The servers and networks have not been upgraded for a while and the infrastructure management vendor blames the application software vendors every time system performance issues arise. As a result application software vendors are reluctant to undertake further work for Quality Holidays. Business analysts within Quality Holidays have thorough business knowledge but no background in IT. Consequently when any of their IT systems are enhanced and upgraded by a vendor, there are gaps between the delivered outcome and the actual business requirements. Recently they have introduced a new software system to automate a number of business processes which were earlier being performed manually by staff. Consequently a number of their operational staff have been made redundant and this has improved their immediate profitability. However there are increasing issues with system downtime and client dissatisfaction which is a cause of great concern for their senior executives who do not know how to address the issue. The IT Manager has been blamed and has resigned his position.

It is thus worthwhile defining, communicating and institutionalizing such policies as stated earlier within your enterprise as early as possible. The lack of any of the above can lead to major issues in managing your information systems and thereby will negatively impact the outcome of your business operation.

Information Technology is a Business Device to be used Efficiently 

Information technology has often been viewed as an additional support component to the daily operation of a large business enterprise, regarded as a cost centre and an overhead.  This is no longer true. Today the information systems in an enterprise play a significantly more important role than merely supporting business operations. In fact, in most cases information systems are the key devices used to successfully transact business operations. The majority of large business operations today would cease to operate if their information systems were to shut down. IT is therefore a business device, in fact a business device that is omnipresent in all large enterprises and critical to successful day-to-day operation.

Such a device must be used efficiently.

Example –  FoneNow are a mobile communications service provider who have a number of retail  outlets in Springtown city. These retail outlets are primarily meant for signing up new clients. New accounts are processed by FoneNow staff who fill an account application online on their terminals for their clients which are processed automatically by the company’s information systems and new accounts are created in a few minutes. The online terminals are networked with backend servers which process all the transactions. Yesterday afternoon the servers in FoneNow’s data-centre crashed and the systems were unavailable for 5 hours to all the retail outlets. FoneNow do not have a business continuity alternative for their data centre, nor do they have a well-defined manual process for receiving new account applications. As a result for an entire afternoon no new FoneNow accounts were created for clients in Springtown city.

In the vast majority of enterprises today IT is a critical business device that is virtually the life and blood of the business operation. Lack of efficiency, gaps in processes, lack of alternatives when problems occur are therefore suicidal risks to the successful operation of a major business.

In calling IT a ‘device’, we are referring nonetheless to a complex architecture of networked equipment and sophisticated software, data and skilled personnel. Managing such an entity efficiently needs specialized skills, deep knowledge and appropriate perspectives and policies to be in place within an enterprise.  Some of these policies have been recommended in previous sections of this paper.   

References

[1] Allen, T., and M.S. Morton, eds. 1994. Information Technology and the Corporation of the 1990s. New York: Oxford University Press.

[2] Hill, Joyce (2006), Capacity Requirements Planning.

[3] Lazowska, Edward D (1984), Quantitative System Performance, Prentice-Hall, ISBN 0-13-746975-6

[4] Rajlich, V. (1999). Software Change and Evolution. In Pavelka, J., Tel, G. & Bartošek, M. (Eds.), SOFSEM'99, Lecture Notes in Computer Science 1725, 189-202.

[5] Hinley, D.S. (1996). Software evolution management: a process-oriented perspective. Information and Software Technology, 38, 723-730

[6] Crnkovic I., Asklund, U. & Persson-Dahlqvist, A. (2003). Implementing and Integrating Product Data Management and Software Configuration Management. London: Artech House.

[7] Nolan, R. and F. W. McFarlan (2005). “Information Technology and the Board of Directors.” Harvard Business Review (October 2005)

[8] Weill, P. & Ross, J. W., 2004, IT Governance: How Top Performers Manage IT Decision Rights for Superior Results", Harvard Business School Press, Boston

[9] Lutchen, M. (2004). Managing IT as a business : a survival guide for CEOs. Hoboken, N.J., J. Wiley., ISBN 0-471-47104-6