IS STRATEGY FRAMEWORK: ANALYSIS
IS STRATEGY FRAMEWORK:
ANALYSIS
Prepared for course of Information System Strategic Planning
Instantiation Aspect
12th Topic
Source:
1. John Ward & Joe Peppard, Strategic Planning for Information System, John Wiley & Sons,
Ltd, 3rd ed, 2003
2. Strategic Management of Information Systems, Keri Pearlson & Carol Saunders, John Wiley & Sons, Inc, 2010.
3. Husni S. Sastramihardja, Course Handout, 2014
1
DETERMINE THE BUSINESS-IS STRATEGY
• The accumulated business IS demand is turned into
recommendations for the deployment of IS/IT
• Conceptual information systems are consolidated and
mapped onto an applications portfolio
3
GENERIC STRATEGIES:
LOW-COST
• IS/IT implications:
• Deal with basic business information process efficiently
and link them together
• Flexibility system increases the cost of development and
operation=> simple systems, often standard packages
implemented w/o change
• Integration can reduce the opportunities to improve the
efficiency of any particular process
• Information is not seen as a key resource for exploitation,
but as an overhead cost to be processed efficiently with
minimum additional IS/IT overhead
4
GENERIC STRATEGIES:
DIFFERENTIATION STRATEGY
• IS/IT implications:
• Flexible systems to extract information from an integrated
database or comprehensive data warehouse
=>sophisticated systems and user tailoring rather than
standard solutions
• If mismanaged this can lead to unnecessary spending on
IS/IT=> ask the following issues:
• Find out more about customer requirements
• Monitor customer perception of service
• Enable rapid and accurate response to customer queries
• Provide a range of delivery options to meet customer needs
• Reduce new product introduction lead times
• Enable knowledge sharing across the organization to facilitate
innovation
5
GENERIC STRATEGIES:
NICHE/FOCUS STRATEGY
• IS/IT implications:
• Identifying the target market, and developing a unique
base of information about the selected market and its
needs
• Establishing a specialist process via system to produce a
clear cost advantage or distinctive customer value
proposition
• Linking the organization via systems into the business
processed of customers to increase switching costs and
establish potential barriers to re-entry from general
market servers
APPLICATION PORTFOLIO
6
4-7
OBJECTIVE IN DETERMINING IT
STRATEGY
• Identify required applications & their
priority
• Be able to deploy resources to achieve
them successfully
• One end product is the application
portfolio
4-8
PARTS OF THE
APPLICATION PORTFOLIO
• Existing applications
• in place or in development
• Required applications
• Necessary to achieve business objectives
& strategy within the planning horizon
• Potential applications
• Might prove valuable in the future if
feasible to deliver and can produce
demonstrated benefit
Copyright 2010 John Wiley & Sons, Inc.
IT PORTFOLIO MANAGEMENT
• IT investments should be managed as any other
investment would be managed by an
organization.
• IT Portfolio Management refers to the process of
evaluating and approving IT investments as they
relate to other current and potential IT
investments.
• Often involves picking the right mix of
investments.
• Goal is to invest in most valuable IT initiatives.
STRATEGIC HIGH POTENTIAL
KEY OPERATIONAL SUPPORT
WHY Do we want to do it in
strategic terms?
WHAT does the system need to
do to gain the advantage?
HOWbest to do it?
WHY? Not clear
WHAT? Not certain and/or
HOW? Not yet known
WHYto improve performance
and avoid disadvantage?
WHAT actually has to improve
and by how much?
HOWbest to do it?
WHY to reduce costs by
improving efficiency
WHAT of existing necessary
tasks?
HOWbest to do it?
WHY = efficiency
KEY QUESTIONS ON THE APPLICATIONS
PORTFOLIO
WHAT = need to be improved HOW = to do that successfully
(cost-effective use of IT)
OITACIFITSUJ TNEMTSEVNI11N
STRATEGIC HIGH POTENTIAL
KEY OPERATIONAL SUPPORT
Enable the
achievement of
business objectives
via explicit critical
success factors
R&D project to
explore potential
value and cost-fund
from R&D budget
Risk money
Disadvantage/Risk
if it is not done
(critical failure
factors)
and/or quantified
performance
improvement
Net cost
reduction through
quantified
savings
12
SUPPORT APPLICATIONS
• Support application must show a good economic
return for the allocation of a scare resource.
• If the project can be carried out within the user
department’s control, then it is reasonable that the ‘go-
no go’ decision is made by local user management
13
KEY OPERATIONAL
APPLICATIONS
• Financial benefits are not the only driving force.
• Some benefits will be able to be related to CSFs, which
provide a clear link of the investment to the achievement of
business objectives.
• ‘What will happen to the business if we do not invest in
improving this key operational system?’
• ‘Can we afford the risk of not doing it?
• Monopoly works best for key operational applications =>
central control
• This enables a standard checklist of questions to be
considered in the evaluation of any new project
14
STRATEGIC
APPLICATIONS
• Not estimates suitable for a discounted cash-flow
calculation
• Expressed as the business opportunity that is being
created or the CSFs that the application
specifically addresses.
• Application will get the ‘go-no go’ decision based
on how directly it relates to the business objectives
and particular strategies.
• The benefits will drive from achieving those
objectives by enabling the required business
changes, not from the system alone.
15
HIGH POTENTIAL
APPLICATIONS
• It should be justified on the same basis an
any other type of R&D, and preferably from
a general R&D budget rather than IS/IT
funds.
• High potential ideas tend to arise
informally, based on individuals’ creative
thinking, rather than from formal planning.
• Many of ideas simply will not work and
some control is essential to avoid significant
waste of resources.
16
SETTING PRIORITIES FOR
APPLICATIONS
• The mechanisms used to decide whether or
not applications go ahead should also be
used to set priorities across applications
• Some priorities are logical, but many are
largely independent of one another
• Priorities need to be set in the short term to
enable the best use of resources within the
acquisition lead time for further resources
17
3 FACTORS FOR THE
ASSESSMENT OF PRIORITIES
• What is most important to do, based on the benefit
identified.
• What is capable of being done, based on the
resources available.
• What is likely to succeed, based on the risks of failure of
each investment
18
SETTING PRIORITIES IN THE
STRATEGIC SEGMENT
• Give priority to those applications that will contribute
most to achieving business objectives, and use the least
resources in the process.
19
SETTING PRIORITIES IN THE
SUPPORT SEGMENT
• Setting priorities in the support segment should not be
too difficult.
• Those with the greatest economic benefit that use the
least resources should get the highest priority.
Strategis Berpotensi Tinggi
Customer Relationship Management
Business Intelligence
Decision Support System
SI Perencanaan Strategis
SI Pengembangan Usaha
SI GCG & MR
Knowledge Management
GIS
Operasional Kunci Pendukung
SI SPI
SI Produksi
SI Sumber Daya Manusia
SI MSI
SI Keuangan dan Akuntansi
SI Pengadaaan Barang dan Jasa
Supply Chain Management
SI Pemasaran
Sistem Pelaporan
SI PKBL & CSR
SI Hukum dan Pertanahan
SI Umum
SI Teknik
SI Rumah Sakit
20
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
CENTRALLY PLANNED
• Management rationale
• Central coordination of all requirements will
produce better decision making
• Organizational requirements
• Knowledgeable and involved senior
management
• Integrated planning of IS/IT within the business
planning process
• IT role
• Provide services to match the business demands
by working closely with business managers
• Line managers and users role
• Identify the potential of IS/IT to meet business
needs at all levels of the organization
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
LEADING EDGE
• Management rationale
• Technology can create business advantages and
risks are worth taking
• Organizational requirements
• Commitment of funds and resources
• Innovative IS/IT management
• Strong technical skills
• IT role
• Push forward boundaries of technology use on all
fronts
• Line managers and users role
• Use the technology and identify the advantages
it offers
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
FREE MARKET
• Management rationale
• Market makes the best decisions and users are
responsible for business results
• Integration is not critical
• Organizational requirements
• Knowledgeable users
• Accountability for IS/IT at business or functional
level
• Willingness to duplicate effort
• Loose IT budget control
• IT role
• Competitive and probably profit centre-
intended to achieve a return on its resources
• Line managers and users role
• Identify, source and control IS/IT developments
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
MONOPOLY
• Management rationale
• Information is a corporate good and an integrated
resource for users to employ
• Organizational requirements
• User acceptance of the philosophy
• Policies to force through single sourcing
• Good forecasting of resource usage
• IT role
• To satisfy user’s requirements as they arise, but non-
directive in terms of the uses of IS/IT
• Line managers and users role
• Understand needs and presents them to central
utility to obtain resources
IS ORGANIZATION
25
THE CONTEXT FOR IS/IT
STRATEGY
• Internal context
• External context
THE CONTEXT FOR IS/IT
STRATEGY: INTERNAL CONTEXT
• Infusion- the degree to which an organization becomes
dependent on IS/IT to carry out its core operations and
manage the business.
• Diffusion- the degree to which IT has become dispersed
throughout the organization and decisions concerning
its use are devolved.
4 ENVIRONMENTS OF IS/IT
STRATEGY: LOW
DIFFUSION/LOW INFUSION
• highly-centralized control of IT resources, and IS is not
critical to the business
• traditional environment typical of companies using IT to
improve efficiency on a system-by-system basis.
4 ENVIRONMENTS OF IS/IT
STRATEGY: LOW
DIFFUSION/HIGH INFUSION
• highly-centralized control, and IS is critical to business
operations and control.
• The business could be seriously disadvantaged if
systems fail.
• High-quality systems are needed with a high degree of
integration.
• The systems have become part of the ‘backbone’ of
the organization.
4 ENVIRONMENTS OF IS/IT
STRATEGY: HIGH DIFFUSION/
LOW INFUSION
• Largely-decentralized control, giving business
managers the ability to satisfy their local priorities.
• Any integration of system occurs due to user-user
cooperation, not by overall business or IT design
4 ENVIRONMENTS OF IS/IT
STRATEGY: HIGH DIFFUSION/
HIGH INFUSION
• Largely-decentralized control but the business depends
on the systems for success, both in avoiding
disadvantage and in achieving its overall business
objectives.
ENVIRONMENTS OF IS/IT STRATEGY
THE CONTEXT FOR IS/IT
STRATEGY: EXTERNAL CONTEXT
EIGHT CORE ACTIVITIES OF IS ORGANIZATION
• Anticipating new technologies.
• IT must keep an eye on emerging technologies.
• Work closely with management on decisions.
• Weigh risks and benefits of new technologies.
• Participating in setting strategic direction.
• IS can act as consultants to management.
• Educate managers about current
technologies/trends.
• Innovating current processes.
• Review business processes to innovate.
• Survey best practices.
• Developing and maintaining systems.
• Build or buy software.
EIGHT CORE ACTIVITIES OF IS ORGANIZATION
(CONTINUED)
• Supplier management.
• Carefully manage outsourced IT.
• Architecture and standards.
• Be aware of incompatibilities.
• Inconsistent data undermines integrity.
• Enterprise Security
• Important to all general managers.
• Much more than a technical problem.
• Business continuity planning
• Disaster recovery.
• “What if” scenarios.
CENTRALIZED VS. DECENTRALIZED
ORGANIZATIONAL STRUCTURES
• Centralized – bring together all staff,
hardware, software, data, and processing
into a single location.
• Decentralized – the components in the
centralized structure are scattered in
different locations to address local business
needs.
• Federalism – a combination of centralized
and decentralized structures.
ANALYSIS
Prepared for course of Information System Strategic Planning
Instantiation Aspect
12th Topic
Source:
1. John Ward & Joe Peppard, Strategic Planning for Information System, John Wiley & Sons,
Ltd, 3rd ed, 2003
2. Strategic Management of Information Systems, Keri Pearlson & Carol Saunders, John Wiley & Sons, Inc, 2010.
3. Husni S. Sastramihardja, Course Handout, 2014
1
DETERMINE THE BUSINESS-IS STRATEGY
• The accumulated business IS demand is turned into
recommendations for the deployment of IS/IT
• Conceptual information systems are consolidated and
mapped onto an applications portfolio
3
GENERIC STRATEGIES:
LOW-COST
• IS/IT implications:
• Deal with basic business information process efficiently
and link them together
• Flexibility system increases the cost of development and
operation=> simple systems, often standard packages
implemented w/o change
• Integration can reduce the opportunities to improve the
efficiency of any particular process
• Information is not seen as a key resource for exploitation,
but as an overhead cost to be processed efficiently with
minimum additional IS/IT overhead
4
GENERIC STRATEGIES:
DIFFERENTIATION STRATEGY
• IS/IT implications:
• Flexible systems to extract information from an integrated
database or comprehensive data warehouse
=>sophisticated systems and user tailoring rather than
standard solutions
• If mismanaged this can lead to unnecessary spending on
IS/IT=> ask the following issues:
• Find out more about customer requirements
• Monitor customer perception of service
• Enable rapid and accurate response to customer queries
• Provide a range of delivery options to meet customer needs
• Reduce new product introduction lead times
• Enable knowledge sharing across the organization to facilitate
innovation
5
GENERIC STRATEGIES:
NICHE/FOCUS STRATEGY
• IS/IT implications:
• Identifying the target market, and developing a unique
base of information about the selected market and its
needs
• Establishing a specialist process via system to produce a
clear cost advantage or distinctive customer value
proposition
• Linking the organization via systems into the business
processed of customers to increase switching costs and
establish potential barriers to re-entry from general
market servers
APPLICATION PORTFOLIO
6
4-7
OBJECTIVE IN DETERMINING IT
STRATEGY
• Identify required applications & their
priority
• Be able to deploy resources to achieve
them successfully
• One end product is the application
portfolio
4-8
PARTS OF THE
APPLICATION PORTFOLIO
• Existing applications
• in place or in development
• Required applications
• Necessary to achieve business objectives
& strategy within the planning horizon
• Potential applications
• Might prove valuable in the future if
feasible to deliver and can produce
demonstrated benefit
Copyright 2010 John Wiley & Sons, Inc.
IT PORTFOLIO MANAGEMENT
• IT investments should be managed as any other
investment would be managed by an
organization.
• IT Portfolio Management refers to the process of
evaluating and approving IT investments as they
relate to other current and potential IT
investments.
• Often involves picking the right mix of
investments.
• Goal is to invest in most valuable IT initiatives.
STRATEGIC HIGH POTENTIAL
KEY OPERATIONAL SUPPORT
WHY Do we want to do it in
strategic terms?
WHAT does the system need to
do to gain the advantage?
HOWbest to do it?
WHY? Not clear
WHAT? Not certain and/or
HOW? Not yet known
WHYto improve performance
and avoid disadvantage?
WHAT actually has to improve
and by how much?
HOWbest to do it?
WHY to reduce costs by
improving efficiency
WHAT of existing necessary
tasks?
HOWbest to do it?
WHY = efficiency
KEY QUESTIONS ON THE APPLICATIONS
PORTFOLIO
WHAT = need to be improved HOW = to do that successfully
(cost-effective use of IT)
OITACIFITSUJ TNEMTSEVNI11N
STRATEGIC HIGH POTENTIAL
KEY OPERATIONAL SUPPORT
Enable the
achievement of
business objectives
via explicit critical
success factors
R&D project to
explore potential
value and cost-fund
from R&D budget
Risk money
Disadvantage/Risk
if it is not done
(critical failure
factors)
and/or quantified
performance
improvement
Net cost
reduction through
quantified
savings
12
SUPPORT APPLICATIONS
• Support application must show a good economic
return for the allocation of a scare resource.
• If the project can be carried out within the user
department’s control, then it is reasonable that the ‘go-
no go’ decision is made by local user management
13
KEY OPERATIONAL
APPLICATIONS
• Financial benefits are not the only driving force.
• Some benefits will be able to be related to CSFs, which
provide a clear link of the investment to the achievement of
business objectives.
• ‘What will happen to the business if we do not invest in
improving this key operational system?’
• ‘Can we afford the risk of not doing it?
• Monopoly works best for key operational applications =>
central control
• This enables a standard checklist of questions to be
considered in the evaluation of any new project
14
STRATEGIC
APPLICATIONS
• Not estimates suitable for a discounted cash-flow
calculation
• Expressed as the business opportunity that is being
created or the CSFs that the application
specifically addresses.
• Application will get the ‘go-no go’ decision based
on how directly it relates to the business objectives
and particular strategies.
• The benefits will drive from achieving those
objectives by enabling the required business
changes, not from the system alone.
15
HIGH POTENTIAL
APPLICATIONS
• It should be justified on the same basis an
any other type of R&D, and preferably from
a general R&D budget rather than IS/IT
funds.
• High potential ideas tend to arise
informally, based on individuals’ creative
thinking, rather than from formal planning.
• Many of ideas simply will not work and
some control is essential to avoid significant
waste of resources.
16
SETTING PRIORITIES FOR
APPLICATIONS
• The mechanisms used to decide whether or
not applications go ahead should also be
used to set priorities across applications
• Some priorities are logical, but many are
largely independent of one another
• Priorities need to be set in the short term to
enable the best use of resources within the
acquisition lead time for further resources
17
3 FACTORS FOR THE
ASSESSMENT OF PRIORITIES
• What is most important to do, based on the benefit
identified.
• What is capable of being done, based on the
resources available.
• What is likely to succeed, based on the risks of failure of
each investment
18
SETTING PRIORITIES IN THE
STRATEGIC SEGMENT
• Give priority to those applications that will contribute
most to achieving business objectives, and use the least
resources in the process.
19
SETTING PRIORITIES IN THE
SUPPORT SEGMENT
• Setting priorities in the support segment should not be
too difficult.
• Those with the greatest economic benefit that use the
least resources should get the highest priority.
Strategis Berpotensi Tinggi
Customer Relationship Management
Business Intelligence
Decision Support System
SI Perencanaan Strategis
SI Pengembangan Usaha
SI GCG & MR
Knowledge Management
GIS
Operasional Kunci Pendukung
SI SPI
SI Produksi
SI Sumber Daya Manusia
SI MSI
SI Keuangan dan Akuntansi
SI Pengadaaan Barang dan Jasa
Supply Chain Management
SI Pemasaran
Sistem Pelaporan
SI PKBL & CSR
SI Hukum dan Pertanahan
SI Umum
SI Teknik
SI Rumah Sakit
20
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
CENTRALLY PLANNED
• Management rationale
• Central coordination of all requirements will
produce better decision making
• Organizational requirements
• Knowledgeable and involved senior
management
• Integrated planning of IS/IT within the business
planning process
• IT role
• Provide services to match the business demands
by working closely with business managers
• Line managers and users role
• Identify the potential of IS/IT to meet business
needs at all levels of the organization
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
LEADING EDGE
• Management rationale
• Technology can create business advantages and
risks are worth taking
• Organizational requirements
• Commitment of funds and resources
• Innovative IS/IT management
• Strong technical skills
• IT role
• Push forward boundaries of technology use on all
fronts
• Line managers and users role
• Use the technology and identify the advantages
it offers
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
FREE MARKET
• Management rationale
• Market makes the best decisions and users are
responsible for business results
• Integration is not critical
• Organizational requirements
• Knowledgeable users
• Accountability for IS/IT at business or functional
level
• Willingness to duplicate effort
• Loose IT budget control
• IT role
• Competitive and probably profit centre-
intended to achieve a return on its resources
• Line managers and users role
• Identify, source and control IS/IT developments
GENERIC APPLICATION
MANAGEMENT STRATEGIES:
MONOPOLY
• Management rationale
• Information is a corporate good and an integrated
resource for users to employ
• Organizational requirements
• User acceptance of the philosophy
• Policies to force through single sourcing
• Good forecasting of resource usage
• IT role
• To satisfy user’s requirements as they arise, but non-
directive in terms of the uses of IS/IT
• Line managers and users role
• Understand needs and presents them to central
utility to obtain resources
IS ORGANIZATION
25
THE CONTEXT FOR IS/IT
STRATEGY
• Internal context
• External context
THE CONTEXT FOR IS/IT
STRATEGY: INTERNAL CONTEXT
• Infusion- the degree to which an organization becomes
dependent on IS/IT to carry out its core operations and
manage the business.
• Diffusion- the degree to which IT has become dispersed
throughout the organization and decisions concerning
its use are devolved.
4 ENVIRONMENTS OF IS/IT
STRATEGY: LOW
DIFFUSION/LOW INFUSION
• highly-centralized control of IT resources, and IS is not
critical to the business
• traditional environment typical of companies using IT to
improve efficiency on a system-by-system basis.
4 ENVIRONMENTS OF IS/IT
STRATEGY: LOW
DIFFUSION/HIGH INFUSION
• highly-centralized control, and IS is critical to business
operations and control.
• The business could be seriously disadvantaged if
systems fail.
• High-quality systems are needed with a high degree of
integration.
• The systems have become part of the ‘backbone’ of
the organization.
4 ENVIRONMENTS OF IS/IT
STRATEGY: HIGH DIFFUSION/
LOW INFUSION
• Largely-decentralized control, giving business
managers the ability to satisfy their local priorities.
• Any integration of system occurs due to user-user
cooperation, not by overall business or IT design
4 ENVIRONMENTS OF IS/IT
STRATEGY: HIGH DIFFUSION/
HIGH INFUSION
• Largely-decentralized control but the business depends
on the systems for success, both in avoiding
disadvantage and in achieving its overall business
objectives.
ENVIRONMENTS OF IS/IT STRATEGY
THE CONTEXT FOR IS/IT
STRATEGY: EXTERNAL CONTEXT
EIGHT CORE ACTIVITIES OF IS ORGANIZATION
• Anticipating new technologies.
• IT must keep an eye on emerging technologies.
• Work closely with management on decisions.
• Weigh risks and benefits of new technologies.
• Participating in setting strategic direction.
• IS can act as consultants to management.
• Educate managers about current
technologies/trends.
• Innovating current processes.
• Review business processes to innovate.
• Survey best practices.
• Developing and maintaining systems.
• Build or buy software.
EIGHT CORE ACTIVITIES OF IS ORGANIZATION
(CONTINUED)
• Supplier management.
• Carefully manage outsourced IT.
• Architecture and standards.
• Be aware of incompatibilities.
• Inconsistent data undermines integrity.
• Enterprise Security
• Important to all general managers.
• Much more than a technical problem.
• Business continuity planning
• Disaster recovery.
• “What if” scenarios.
CENTRALIZED VS. DECENTRALIZED
ORGANIZATIONAL STRUCTURES
• Centralized – bring together all staff,
hardware, software, data, and processing
into a single location.
• Decentralized – the components in the
centralized structure are scattered in
different locations to address local business
needs.
• Federalism – a combination of centralized
and decentralized structures.
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