an enterprise. Traditionally, information systems management direc- ted .the manner in which information technology was ap- plied throughout an enterprise.
THE INFORMATION ECONOMY: A NEW PERSPECTIVE FOR EFFECTIVE INFORMATION SYSTEMS MANAGEMENT by: Robert W. Zmud, Andrew C. Boynton, Gerry C. Jacobs
" T h e basic function of administration appears to be co-alignment, not merely of people in coalitions but of institutionalized action - - of technology and task environment into a viable domain, and of organizational design and structure appropriate to it. Administration, when it works well, keeps the organization at the nexus of several necessary streams of action" [13].
INTRODUCTION hat information technology is resulting in truly fun-
T damental changes in m a n y companys' operations and strategies is well documented [9, 11, 12]. What is not as
well recognized are the corresponding changes occurring in the management of information technologies. The driving force behind both of these changes is the rapid diffusion of information technology occurring throughout companies. Diffusion refers to much more than the growing role of information technologies within a company's day-to-day operations. Just as significant, perhaps even more so, is the transfer of both the ownership and control of information resources to work units throughout an enterprise. Traditionally, information systems management directed .the manner in which information technology was applied throughout an enterprise. Today, consistent with information technology diffusion, general managers and professionals are independently advocating and proactively adopting a wide range of information technology to further their business aims. In short, managers, work groups, and business units throughout an enterprise - not soley the information systems function - - are all involved with planning, building and running a wide variety of information systems. In the following examples, innovative uses of information technology are seen emerging from and being managed by line managers throughout an enterprise.
Robert Z m u d is a Professor in the School o f Business Administration at the University o f North Carofina, Chapel Hill, where he teaches and conducts research in the areas o f information systems and technology management. A n d r e w Boynton is a Ph.D. candidate in M I S in the School o f Business Administration at the University o f North Carolina, Chapel Hill. Gerry Jacobs is a consuiting market support representative at I B M in North Carolina.
In response to an increasingly competitive environment, senior management at General Motors has taken the lead to become a highly automated and uniquely networked manufacturer. In a strategic shift, GM plans to link customers on showroom floors directly with the manufacturing facilities to promote "custom" ordering of new automobiles. Their recent acquisition of both EDS, a large software services firm, and Hughes Aircraft Corporation, a leader in radar and satellite technology, are means to this end. Rather than rely on an established but centralized information systems function, proactive managers in a major financial services company have begun to independently acquire their own information resources. For example, the manager of a research department acquired his own minicomputer and programming staff to build a sophisticated environmental analysis system. In another instance, managers of different departments acquired and then managed their own data base resources to facilitate the sharing of critical information.
THE INFORMATION ECONOMY WITHIN A BUSINESS ork undertaken by Warren McFarlan, Jim McKen-
w ney, and Jim Cash at the Harvard Business School provided a clear picture of the diffusion of merging information technologies into business organizations, and of the IS management challenges facing companies [5, 6, 7, 11]. In particular, their insightful view of the information systems function as a "business within a b u s i n e s s . . . " [11] has been an innovative and useful contribution to information system management [1]. Today's information-intensive enterprise, however, might be thought of as an information economy within a business (see Figure 1). In this economy, an information business is defined as any business unit that produces a deliverable information product or service in which the unit itself owns and manages the information resources required to produce the product or service. The information systems department has traditionally been the sole information business within the enterprise. In many companies this still holds true. The widespread diffusion of information technologies, however, has begun to increase the number of information businesses within companies - - a trend we foresee as intensifying over time. In these environments the information systems department has little, if any, direct control over either the information resources used by these independent inforDATA BASE Fall 1986
17
tORGANIZATION'S
i
\
/
BOUNDARY
I
t-
i /
I RES AND A.C.
The Federal Government Role I"
m
"
DEVELOPMENT] "
Arrows indicate flow o f information
products and services
Figure 1. An Organization's Information Economy
mation businesses, or the products and services they offer. Within an enterprise's information economy, the information systems department is just one of m a n y information businesses. Any market advantage currently held by the information system department within this information economy is dependent on two main factors: (1) the technical and managerial expertise they hold regarding information processing technologies, and (2) the established line of information products and services they offer to other enterprise business units. However, other information businesses within the information economy are themselves becoming experts in newer technologies (e.g., electronic mail, C A D / C A M workstations). Increasingly, technical support for these newer technologies can best be provided by systems professionals positioned within the business unit. As a result, the information systems department, over time, is likely to find itself increasingly at a competitive disadvantage to other information businesses which tend to be closer to the consumer and better able to recognize and respond to their information needs and opportunities. t is through this view of the information economy with-
I in an enterprise that the paradox of successful IS man-
agement begins to emerge. In order to exploit the wide array of information technologies, an enterprise must: - - Ensure the integration of the information technologies deployed throughout the enterprise. Design new applications within the constraints that exist due to the current portfolio of application systems. Initiate new application systems that go beyond the current portfolio of existing applications. Plan for an influx of successive generations of new technologies.
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-
-
-
Despite these clear requirements for coordinated IS activities, general managers throughout many organizations are becoming increasingly reluctant to follow the lead of the information systems function. This reluctance is largely based on the early successes these general managers have experienced in first identifying innovative in18
DATA BASE Fall 1986
formation processing technology projects and then in implementing these projects in a self-sufficient manner. What, then, should be the nature of IS management in this information economy? Should each independent information business control its own destiny? Or should the information systems department strive to maintain its monopoly position within the enterprise? Either approach, in our view, is doomed to failure.
promising approach finds the information systems function serving a role similar to that of the federal government in a quasi-open market economy similar to that of the United States [4]. While the federal government does not dictate what private businesses do, it does influence their actions through national policies, regulations, legislation and standards. It also operates certain businesses - - for example, those affecting national security and social programs, as well as those that private business either cannot or desires not to operate. Finally, the federal govenment provides infrastructures (a federal banking system, a national highway system, etc.) that facilitate the numerous and intertwined market relationships among the businesses, both public and private, that make up the nation's economy. In carrying out a similar federal government role within the enterprise's information economy, the information systems department cannot dictate how business units are to handle their information processing activities. Still, they can and must influence the actions of these business units through policies, regulations and standards. Additionally, the information systems function will continue to operate certain information businesses critical to the survival of the enterprise, those that benefit from economies of scale, and those that, for whatever reason, are not performed elsewhere in the information economy. Finally, the IS department must provide and maintain the technical infrastructure that drives the full portfolio of information-related activities within the enterprise. This federal government role allows organizational actors to pursue information technology activities largely independent of enterprise controls or constraints, while simultaneously maintaining the coordination and technological support necessary for an effective, functioning information economy. O f course, too much centralized direction and support can be as dysfunctional as too little. As with the U.S. economic system, concern must be taken to insure that the IS department (the federal government) is not given excessive power, and that the business units do not abdicate their information technology responsibilities to the IS department. In short, this federal government role for the information systems function stresses both the desirability of entrepreneurial information-related behaviors by business units, as well as the need to insure that these behaviors are not detrimental to the enterprise's information technology posture in either the short or long run.
Co-Aligning the Strategic Activities O cope successfully with an enterprise's emerging in-
T formation economy, the IS management team must
concentrate on co-aligning those strategic activities that govern the enterprises's information economy. The central focus of management in an information economy revolves around managing this core set of strategic activities, so that all information-related efforts are channeled toward enterprise-wide interests. Management actions are commonly directed at three distinct organizational levels [10, 13]. At an institutional level, senior managers articulate enterprise-wide goals and address issues that arise in the enterprise's environment. At a technical level, managers insure the effective performance of operating business units by specifying tasks and coordinating task-related activities. At a managerial level, managers mediate between operations activities and the consumers of the services or products being produced. Here, also, managers procure resources for operations and otherwise buffer these operations activities from environmental disturbances. The effective management of an enterprise's information economy must be represented by IS initiatives within each of these enterprise levels (see Figure 2): - - The strategic activities at the institutional level include an information technology vision and a coalition structure. - - T h e strategic activities at the managerial level include a data architecture, a transportation architecture, and IS management processes and an investment architecture. - - The single strategic dimension at the technical level is an application map.
prise is an essential first step in co-aligning the forces shaping this information economy [3]. A vision is not a plan. Rather, it is a consensual understanding among the enterprise's most influential managers of the desired impact of information technologies on the enterprise's future environment. This vision, then, establishes a c o m m o n understanding of the potential of information technology, and why the technology will be used, rather than how it will be used. The information processing technology vision thus becomes the driving force that shapes the information economy. In the late 1970s, IBM renewed its corporate strategy in response to changing competitive conditions. This new strategy relies extensively on information technology. Senior management defined the vision for information technology within the company by committing themselves to becoming the low cost, high volume, high quality producer of information processing products and services. This stated vision has required extensive revamping of IBM's manufacturing process via CIM (computer-integrated manufacturing) technologies.
Information Technology Vision
The Coalition Architecture
A clear vision of the feasible and desired future role of information processing technologies within an enter-
There is strong evidence that coalitions within an organization, each consisting of managers representing
Information systems senior management plays a crucial role in building this vision. As the enterprise's experts, information system managers (working through other senior managers) must be responsible for drafting, maintaining and communicating this vision. To accomplish this, information systems managers must educate senior management on the potential of information processing technology and begin to participate actively in enterprise strategy formulation.
Application Map
Investment Architecture
IS Management Process Architecture Coalition Architecture Information Technology Vision
Data Architecture
Transportation Architecture
Figure 2. Strategic Variables for Information System Mangement DATA BASE Fall 1986 19
specific interests, influence many, if not most, critical policy decisions. The influence of these coalitions also extend to policy decisions regarding the use of information technology. If an enterprise's influential managers representing key coalitions fail to " b u y into" the information technology vision, or if their perceptions of this vision are inconsistent, it is unlikely that the information economy will function to optimally benefit the enterprise's overall interests. It is through the coalition architecture that senior managers giving impetus to critical policy decisions are made aware of developments occurring within and outside the information economy.
The importance of sound data administration to successful information systems management is well recognized. Policies are established regarding data ownership and access rights, enterprise-wide data dictionairies are established, and procedures are implemented to insure data integrity. Even so, few companies have actually achieved a fully-functioning administration activity. Given the pervasive importance of data administration it becomes a federal government obligation. As a result, it becomes a responsibility of the information systems department.
The senior information systems executive in a large insurance company recognized the desirability of a major new product innovation based on information technology. Recognizing the politics that surround new product introductions, the executive was able to work closely with one of the company's more influential line managers - who recognized the flaws in the company's current product offerings - - to introduce the product innovation to other senior managers. Backed by the firm's key line managers, this product is now poised for introduction and is expected to contribute significantly to the company's turnaround.
The Transportation Architecture
Information systems managers must be aware of both the structure and dynamics of the enterprise's coalition processes. Building an effective coalition architecture requires the following IS management actions: - - Coalitions of managers and professionals most active in directing the strategic thrusts of the enterprise, as well as its key operating areas, must be identified. - - B o t h subtle and explicit " m a r k e t i n g " efforts directed at these coalitions throughout the enterprise are required to motivate and sustain proactive actions in furthering the appropriate use of information technologies. - - The IS manager must consciously pursue activities that will align himself/herself with the most powerful coalitions in order to effect the direction of critical policy decision.
Data Architecture
Information in the form of voice, data, text, or graphics is the medium on which all trade is based in this economy. If work units are unable to gain access to needed data, it is unlikely that the information economy will function effectively. Similarly, if work units are unable to share and interrelate their data, it is unlikely that the information economy will function efficiently. It is through the data architecture that the exchange of data throughout the information economy occurs. An east coast manufacturer was under great competitive pressure to develop and market new products. The firm, however, was repeatedly experiencing failures in its efforts to introduce new products. A task force discovered that each business function managed their data separately. As a result, cross-functional data critical to new product introductions were generally unavailable. 20
DATA BASE Fall 1986
The transportation architecture enables the collection, physical storage, and distribution of information products within an enterprise and between the enterprise and its environment. This architecture refers to the type and location of processor units, the content and location of data bases, and the communication networks that link processor, data bases and workstations together. The reshaping of Sears Roebuck & Co. into a financial products and services business has required a major investment in information technology to create the company's information transportation system. To provide a "one-stop shopping" environment for its financial-based products and services, Sears has developed a nationwide information transportation system linking its brokerage, insurance, real estate, banking, and consumer credit products and services to a Scar's retail store. This same system also supports the retail business in each store.
The transportation architecture must provide for the enterprise's current information traffic volumes and still be able to quickly adapt to changes in technology. The information systems function, as the provider of this transportation system, cannot afford to find itself unable to respond affirmatively to requests to add traffic. Delays or refusals in adding traffic to the system could have serious repercussions to IS management initiatives. As its role increasingly parallels that of the federal govenment, the information systems function will find its attention being directed toward building and maintaining this transportation infrastructure rather than providing information deliverables to consumers. The other business units assuming responsibilities for providing information deliverables will become increasingly dependent on this transportation systems. Thus, even though its responsibility to provide information deliverables will diminish, the information systems function will, in a sense, maintain "responsibility" for the enterprise's successful use of information technology in the eyes of managers at all levels in the enterprise. IS Management Process Architecture
Regardless of who " o w n s " an information processing activity, a number of generic management processes must be undertaken to successfully plan, develop, produce, and deliver information throughout an enterprise. As the ownership of information technologies disperses, assurring that these generic processes are accomplished, are accomplished well, and are coordinated becomes increasingly important.
A midwest manufacturer developed a strategic portfolio of systems to support a set of new products designed to capitalize on a market opportunity. When the products entered their development cycle, it was discovered that the computer capacity planning staff had been eliminated during a recent cutback. As a result, no update had been made to the company's computer hardware plan, and the information resources required for the systems to support these products had not been ordered. The products were late in being introduced and a window of opportunity was missed.
A suggested set of generic IS management processes is shown in Figure 3 [12]. This management process architecture is developed based on the management practices observed in effective information systems organizations. It is the responsibility of information systems management to insure that a full process exist within the enterprise. This does not infer that these processes are performed within the information systems department. Rather, the responsibility of information systems management is to insure that each process is performed somewhere within the enterprise's information economy, and performed well. Traditionally, information systems managers have assumed responsibility for most of these generic management processes. Over time, however, information systems
STRATEGIC LEVEL PROCESSES
managers will increasingly serve as consultants to those general managers assuming responsibility for managing their own information businesses. Investment Architecture
In most firms, economic value is attached to the expected benefit of a proposed plant expansion. A new line of products is introduced only after its impact on revenues and costs is closely scrutinized. Advertising campaigns are launched after careful determination of the expected increase in.sales volume. In these examples, the enterprise has a long tradition of investment and budgetary policies that guide the decisions that allocate resources among alternative projects. Costs are expensed today or funded over time, depending on the nature of the revenue streams associated with investment alternatives. Managers faced with information-related resource allocation decisions, however, typically face a far less robust scenario in attaching market value to information resources, products and services. A "value-added" increment for an information product or service is often based solely on cost considerations or is arbitrarily determined. A southeastern financial institution was a forerunner in incorporating information technologies within their business strategies. However, the costs for information tech-
STRATEGIC PLANNING AND CONTROL Business Strategic Planning Architecture Definition IS Strategic Planning and Control
TACTICAL LEVEL PROCESSES DEVELOPMENT PLANNING Application Planning Systems Planning Data Planning Project Planning
MANAGEMENT PLANNING Management System Planning Management System Monitoring
SERVICE PLANNING Service Market Planning Service Level Planning Recovery Planning Security Planning Audit Planning
RESOURCE PLANNING Capacity Planning Skills Planning Budget Planning Tactical Plan Management OPERATIONAL LEVEL PROCESSES DEV. & MAINTENANCE CONTROL Project Assignment Project Scheduling Project Controlling Project Requirement Contl. Project Evaluating
RESOURCE CONTROL Change Control Resource and Data Inventory Control
SERVICE CONTROL Production & Distribution Schedule Resource Data Performance Control Problem Control Service Evaluating
DEV. & MAINTENANCE Appl./Software Dev. & Upgrade Appl./Software Proc. & Upgrade Hardware/Facility Install & Upgrade Maintenance Tuning and System Balancing Mgmt. System Dev. & Upgrade
ADMINISTRATION SERVICES Financial Administration Staff Performance Education Training
INFORMATION SERVICES Production Distribution Customer Services Service Marketing
Reprint permission from IBM Corporation, copyright IBM Corporation 1981.
Figure 3. Information Systems Management Processes DATA BASE Fall 1986 21
nology had been allocated as an expense item in a single cost center and budget. For a variety of reasons, the company has recently had to pare its operating expenses. The information systems budget, as it represented a nonrevenue-generating cost center, was a major casualty of these cutbacks. Recently, the firm has realized the need to develop a number of new information systems that respond to strategic thrusts. The existing w and "pared-down" technology infrastructure, however, is unable to support this new strategic direction.
The investment architecture present in many enterprises today often acts to inhibit business units from pursuing innovative, large-scale, and cooperative informationrelated activities. Such monetary policies seemingly contradict statements being voiced in these same enterprises regarding the critical role of information technology. Without an appropriate investment architecture in place, it is unlikely that individuals thr.oughout the enterprise will be motivated to explore the full potential of information technology or that adequate data or transportation architectures will exist to support the company's future information needs. Without mechanisms that appropriately account for the market value of the information products and services acquired or exchanged it is unlikely that the information economy will function efficiently. The existance of an appropriate investment architecture is vital to the capitalization of both the data and transportation architectures. It is the responsibility of the information systems department to ensure that an appropriate investment architecture is in place. However, it is not necessary that the information systems department manage this investment architecture. Rather, they must develop and then review the investment architecture within an enterprise, focusing on the appropriateness and consistency of investment and budgetary processes. Application Map
Without an adequate flow of market information, it is unlikely that consumers or producers of information deliverables will be able to make efficient market decisions. Redundant or inferior information products may be provided. Consumers may pay too high a price for information products when less expensive and substitutable products or services are available elsewhere within the information economy. Simply put, consumers cannot acquire high quality, necessary products or services if they are not aware of their availability. Five divisions of a large manufacturer acquired five separate employee payroll packages at a total cost to the firm of over two million dollars. After the five packages had been acquired and installed, a task force determined that a single, integrated system would have better served the payroll needs of the entire organization.
The application map provides consumers with market information by identifying the information resources, products and services in use throughout the enterprise. Thus, the application map portrays the components of an information economy that are vital to consumers of information resources: 22
D A T A B A S E Fall 1986
Descriptions of an enterprise's application systems, enabling consumers to avoid "reinventing the wheel" when seeking new system solutions to business problems. - - T h e nature of all available information services within the enterprise, such as end-user computing facilities, hardware maintenance programs, and training opportunities. The location of and access paths to data repositories both internal and external to the enterprise. Without such an application map, it is unlikely the enterprise will be able to exploit the full potential of its investment in information technology. It is the responsibility of information systems management to document and disseminate this application map. To accomplish this, information systems managers must maintain an awareness of the information-related activities occuring in all business units. --
MAINTAINANCE OF A HEALTHY INFORMATION ECONOMY n summary, the widespread diffusion of information
I technology within an enterprise has created an information economy where many business units both own and manage their own information resources. The information systems department no longer has sole responsibility to plan, build, and run information systems. Rather, these activities are now present throughout the business units that make up an enterprise's information economy. We believe that the key to building and maintaining a healthy information economy is for the information systems department to serve a federal government role in this economy, focusing their attention on seven strategic activities. 1. I n f o r m a t i o n P r o c e s s i n g T e c h n o l o g y Vision ~ Identifies the future role of information processing technology within the enterprise, thereby shaping the decisions taken by managers of an enterprise's various information businesses. 2. C o a l i t i o n A r c h i t e c t u r e ~ Provides a forum by which an enterprise's influential managers and professionals address critical issues concerning the use of information technologies. 3. D a t a A r c h i t e c t u r e - - Insures the free exchange and guarantees the integrity of the data owned by the various information businesses within the enterprise's information economy. 4. T r a n s p o r t a t i o n A r c h i t e c t u r e - - Maintains sufficient information processing, data storage, and communications capacities to meet today's and tomorrow's enterprise-wide information processing activities. 5. I S M a n a g e m e n t P r o c e s s A r c h i t e c t u r e ~ Defines a complete set of generic management activities that must occur for the potential of information technology to be realized. Architecture ~ Establishes market mechanisms that facilitate enterprise-wide infor-
6. I n v e s t m e n t
mation technology decisions that are consistent with the information technology vision. 7. Application Map -- Creates an awareness of available application systems, information services, and data repositories throughout the information economy. Together, these seven strategic activities form the technical and managerial infrastructure that support and direct the information economy. Changes to any one activity necessitate changes in the other activities, and neglect of any one activity is likely to impede initiatives taken regarding the others. In a healthy information economy: - - M a r k e t forces exist to ensure that individuals and business units throughout the enterprise will be able to have their information needs met in an effective and efficient manner. --Incentives exist that induce individuals and busi-
ness units throughout the enterprise to proactively seek and deploy new information technologies in innovative, yet appropriate ways. - - A common understanding exists among management and professionals regarding the full potential of the current and future role of information technologies within the enterprise. --Technological barriers (e.g., insufficient processing resources, reliability or security concerns, staffing limitations, data availability) preventing the appropriate use of information technologies do not arise. Building and maintaining a healthy information economy, not the production of information deliverables, must now become the central focus of information system management. As the examples throughout this article show, an enterprise that fails to achieve and sustain a healthy information economy is unlikely to be successful in using information technologies to gain or maintain a competitive position in today's marketplace.
References [1] Cash, J.I., McFarlan, F.W. and McKenney, J.L. Corporate Information Systems Management: Text and Cases, Richard Irwin, Inc., Homewood, Illinois, 1983. [2] IBM Corporation, A Management System for the Information Business: Volume 1-4, IBM Corporation, White Plains, New York, 1982. [3] Keen, P. "Highways and Traffic: Building the Telecommunications Infrastructure," Managers, Micros, and Mainframes: Integrating Systems for End Users, M. Jarke (ed.), John Wiley & Sons, New York, New York, 1985. [4] Keen, P. "Computers and Managerial Choice," Organizational Dynamics, Autumn 1985, pp. 35-49. [5] McKenney, J.L. and McFarlan, F.W. " T h e Information Archipelago - - Maps and Bridges," Harvard Business Review, Volume 60, Number 5, SeptemberOctober 1982, pp. 109-119. [6] McKenney, J.L. and McFarlan, F.W. " T h e Information Archipelago - - Plotting A Course," Harvard Business Review, Volume 61, Number 1, JanuaryFebruary 1983, pp. 145-156. [7] McKenney, J.L. and McFarlan, F.W. " T h e Information Archipelago - - Governing the New World," Harvard Business Review, Volume 61, Number 4, July-August 1983, pp. 91-99. [8] Nolan, R.L. "Managing the Crises in Data Processing," Harvard Business Review, Volume 57, Number 2, March-April 1979, pp. 115-126. [9] Parsons, G.L. "Information Technology: A New Competitive W e a p o n , " Sloan Management Review, Volume 25, Number 1, 1983, pp. 3-15. [10] Parsons, T. Structure and Process in Modern Societies, The Free Press, Glencoe, New York, 1960. [11] Porter, M.E. and Millar, V.E. " H o w Information Gives You Competitive Advantage," Harvard Business Review, Volume 63, Number 4, July-August 1985, pp. 149-160. [12] Rockart, J.F. and Scott Morton, M.S. "Implications of Changes in Information Technology for Corporate Strategy," Interfaces, Volume 14, January-February 1984, pp. 84-95. [13] Thompson, J.D. Organizations in Action, McGrawHill Book Company, New York, New York, 1967.
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