Conflicting perspectives
- Business managers often view IT managers as technocrats interested in new
   features/technology without much relevance to real world business.
- IT executives often view business executives to be shortsighted, lacking the vision
   to exploit IT applications.

- IT can no longer be viewed as a tool to support “back office” transactions. It has
   become a strategic part of most businesses, redefining markets, industries,
   strategies, and organization structures.
- Information is a major asset/resource that must be managed well.
- MIPS/dollar trends have declined tremendously 8:1 in 1980 to 900:1 in 1996
- Past decade saw a boom in IT investments
- This century saw the IT bubble burst
- Physical and time barriers have disappeared.
- Global village and virtual organizations have become the playing field
- Pressure on IT executives to assume leadership positions in not only defining and
   executing IT strategy but also business strategy
- Pressure on business executives to lead transformational change in their

Key themes
• Market structure and industry dynamics
       • New technologies have emerged
       • Fundamental theories of how market, industries, and organizations are
          structured remain the same, i.e. organizations continue to operate as a
          network of suppliers, producers, distributors, partners etc.
       • However, there are many options for how to organize activities and
          manage relationships amongst multiple parties (move towards virtually
          integrated industries with organizations choosing to perform only what
          they do best)
• Evolving business models
       • Traditional brick and mortar companies to online portals and ASP
• IT impact
       • IT impact on core operations (Nasdaq versus Law firms)
       • IT impact on core strategy (American Express versus most other firms)
       • Implications for design, implementation, and management of IT initiatives
       • Support (IT specialists with end-user help), Factory (Business Unit
          executives in partnership with IT executives), Strategic (Top executives),
          Turnaround (Partnership between business development and emerging
          technologies group within organization or consultants from IT firms)
• Prioritizing IT investments
       • Must focus on delivering the benefits
       •    Type I benefits arise from improvements in IT infrastructure, including
            computers, networks, and databases
        • Type II benefits arise when organizations exploit new IT enabled business
               • Commerce (IT to improve internal and external operations)
               • Content (Using IT to harness info and knowledge to improve
                    internal and external individual and group performance as they
                    make decisions)
               • Community (Using IT to increase commitment and loyalty of
                    internal and external stakeholders)
•   Assimilation and organization learning
        • Opportunity identification and investment (grassroots experimentation)
        • Organization learning and adaptation
        • Rationalization and continuous evolution
        • Stagnation blocks may stifle efforts
•   Buy versus make
        • Focus on core competencies
        • Buy, rent, or subscribe
        • Managing outsourcing alliances
        • Outsourcing contracts in lieu of move towards, standard, modular, open
            access technology (.net)
        • Factors influencing outsourcing [table 1.2, pp. 15]
•   Partnership among key constituencies
        • Dealing with business executives, IT executives, users, IT
        • Conflicting goals, interests, and incentives
        • Different languages to describe IT related approaches
        • IT in different eras of evolution [figure 1.6. pp. 16]
•   Protecting IT assets and managing risks
        • Reliable, secure IT infrastructures
•   Pervasive computing
        • 350 million Internet users globally
        • i-mode phones to stay in touch anytime, anywhere
        • Executive use of PDAs increasing
        • Integration of voice, data, video, and services
        • Networked cars, planes, and trains

               Chapter 1: Creating Business Advantage with IT

   Technologies impacting business
              • Internet and broadband networks
                     • Transmission of multimedia digital information on a
                         common channel
              • WWW and high performance servers
                     • Creating storing information
              • URL and browser
                     • Common approaches for identifying and locating
                         information and displaying information
              • Multimedia digital services
                     • Portable Internet devices providing single point entry
              • Wireless networks and protocols
                     • Technology and supporting business infrastructure
              • Java, XML, and other OOPLs
                     • New approaches to developing information systems

•   Forces that shape business strategy
       – Value chain analysis
               • Core operating activities
               • Activities can be located inside firms or across boundaries
               • Information value chain to control and coordinate activities
               • Roles of market participants
               • Market power determined by economies of scale and scope

       –   Industry and competitive analysis
              • Bargaining power of suppliers
              • Bargaining power of buyers
              • Threat of new entrants
              • Threat of substitutes
              • Competitive intensity
              • Generic strategies for advantage (cost, differentiation, focus)

       –   Strategic grid analysis
               • IT impact on core operations [ITCO]
               • IT impact on core strategy [ITCS]
               • Factory [high ITCO and low ITCS]
               • Strategic [high ITCO and high ITCS]
               • Turnaround [low ITCO and high ITCS]
               • Support [Low ITCO and low ITCS]
               • Goals, leadership, project management
•   Analyzing IT impact on strategic decision making
       – Can IT reengineer core value activities?
              • AHSC and AA
       – Can IT change balance of power?
              • AHSC customers could order directly from suppliers like Johnson
                  & Johnson, Baxter, and Abbot.
       – Can IT build or reduce barriers to entry?
              • AA Sabre system built entry barriers
              • reduced entry barriers
       – Can IT increase or decrease switching costs?
              • Intuit (Quicken, TurboTax, and QuickBooks)
       – Can IT add value to existing products/services or create new ones?
              • Grocery stores selling information

                     Chapter 2: Crafting Business Models

•   Components of a business model [figure 2.1, pp 47]
      – Paradigm shift from “What business am I in” to “What is my business
            • Concept [defines strategy]
            • Capabilities [defines resources needed to execute strategy]
            • Value [measures outcomes to stakeholders]

•   Classifying business models
       – Two key value chain roles in traditional business models
               • Producers
               • Distributors
       – Network business models
               • Adopt same roles
               • Distinctions are made between business using Internet and
                   associated networks to do business and those that provide
                   networked infrastructure

•   Businesses built on networked infrastructure
       – Focused Distributors
              • Differentiated by whether [table 2.1, pp. 51]
                       • They assume control of inventory
                       • They sell online
                       • Bidding on price permitted or price set outside the market
                       • Physical distribution of product or service
              • Examples include: Retailers (,,
                  Marketplaces (E-Loan, InsWeb) Aggregators (AutoWeb),
                  Infomediaries (Internet Securities, Inc.), Exchanges (eBay,
       – Portals [doorways] (AOL, CompuServe)
               • Differentiated by [table 2.2, pp.54]
                     • Range of information and services
                     • Access to content, products, and services within a vertical
                         industry (finance, travel etc)
                     • Information and services to all types of users
              • Examples include: Horizontal portals (AOL, Yahoo), Vertical
                 portals (Covisint, WebMD), Affinity portals (,
       –   Producers
              • Differentiated by [table 2.3, pp. 57]
                     • Sell physical products and /or provide face-to-face services
                     • Sell information based products and/or services
                     • Provide customized products and/or services
              • Examples include: Manufacturers (Ford, Proctor & Gamble),
                 Service providers (American Express, Singapore Airlines),
                 Educators (Harvard, Duke), Advisers (McKinsey, Accenture),
                 Information and news services (Dow Jones, Euromoney), Producer
                 portals (Covisint, Global Healthcare Exchange)

•   Businesses that provide networked infrastructure [High Tech Industry]
       – Infrastructure Distributors
              • Differentiated by whether [table 2.4, pp 61]
                       • Business assumes control of inventory
                       • Business sells online
                       • Price set online (bidding and negotiation) or outside the
                       • Physical product/service must be distributed
              • Examples include: Infrastructure retailers (CompUSA, Egghead),
                   Infrastructure marketplaces (Ingram Micro, Tech Data),
                   Infrastructure aggregators (, ZDNet), Infrastructure
                   exchanges (Converge)
       – Infrastructure Portals
              • Differentiated by whether [table 2.5, pp. 63]
                       • The firm provides “gateway access” to networks, data
                           centers, or Web services
                       • The firm host, operate, and maintain networks, DCs, or
                       • The firm provide access to hosted application services
              • Examples include: Horizontal infrastructure portals (ISPs, AT&T,
                   British Telecom, IBM, EDS, Digex), Vertical infrastructure portals
                   (IBM’s E-Business Solutions, GE’s Global Exchange Services are
                   both ASPs)
       – Infrastructure Producers
              • Differentiated by whether [table2.6, pp. 64]
                       • Business manufactures computer, network components, or
                      • Business develop packaged software
                      • Business provides infrastructure services or consulting
              • Examples include: Equipment/component manufactures (IBM,
                  Sony, Lucent, Intel), Software firms (SAP, Siebel, Oracle,
                  Misrosoft), Custom software and integration service providers
       – Infrastructure Service Providers, Federal Express)
•   Evolving business models [network models are a combination of several business
       – Enhance
              • Add functionality/features to current product/service or improve
                  existing business performance
       – Extend
              • Enter new line of business and/or add new business models
       – Expand
              • Add new product/service or enter new geographic markets
       – Exit
              • Drop a product/service or exit a business/market

                   Chapter 3: Building Networked Businesses

    Popularity of “big-small” organization design concept
        o Efficiency, speed, control, empowerment

    The need for new capabilities
        o Organization and environment interaction [figure 3.1, pp. 229]
        o The need to be big and small
        o Need to be global and local
        o Need to be decentralized with centralized control
        o The matrix organization
        o Why did the matrix structure fail
    The rebirth of a networked organization [table 3.2, pp. 231]
    Blueprint for a networked organization [figure 3.3, pp 232]
        o A well conceived blueprint is necessary to design a successful company
        o Three categories of business design [figure 3.3, pp. 232]
        o Operating and innovating [partnership activities to build, design, market,
            sell, deliver, provide service]
                 Hierarchical operations
                          Rigid procedures grouped into functional units
                          Goals, strategies top-down
                          Focus on efficiency of operations
                 Entrepreneurial operations
                          No well-defined policies and procedures
                          Work defined, coordinated and controlled in real time
                          Employees perform multiple roles as business grows
                          Use small size, access to info, and customer contacts to
                             respond quickly
                 Networked operations [figure 3.4, pp. 234]
                          Must ensure precision execution and fast-cycled
                          Processes designed to exploit power of people and IT
                          IT and processes must be designed with change in mind
                          Modular design with interfaces between modules
                          Flexible, powerful ERP
                          Info access and analysis tools with real time info access
                          All stakeholders are considered business customers
        o Managing and learning [activities undertaken by customers, suppliers,
            partners, firm to plan strategy and its execution, allocate resources,
            organize people into groups and coordinate work, monitor and measure
            performance, make adjustments based upon learning]
                 Traditional management process
                          Top-down approach
                          Formal planning and budgeting systems form the basis for
                           performance monitoring and reporting
                        Hierarchies used to control operations
                        Decisions tied to accountability and authority
                Entrepreneurial management process
                        Process is informal and ad hoc
                        Real time info sharing and quick response
                        More structured approaches are required as the business
                Networked management process [figure 3.5, pp. 238]
                        High level of control and integration coupled with fast-
                           cycled “learning by doing” approach
                        Real time info sharing
                        Tools to support, analysis, interaction, collaboration, and
                           communication to “share” vision
       o Leading and engaging [defining a clear, compelling vision and ensuring its
           translation to strategies, attracting, motivating, energizing, retaining talent,
           developing a culture deeply ingrained and reflected in decisions]
                Hierarchical leadership
                        Overshadowed by the management process
                Entrepreneurial leadership
                        Energizing and inspiring others, shared goals, values,
                Networked leadership [figure 3.6, pp. 243]
                        All stakeholders define a clear and compelling vision for
                           change and necessary initiatives
                        Goals aligned with incentives and motivation that fosters
                        Focus only on CSF or CFF when monitoring the business
   Building value networks
       o Where should activities be performed [table 3.1, pp. 246]
                Vertical integrated
                Selective activities outsourced
                Virtually integrated through a highly specialized network
       o How should we relate to market participants
                Transaction
                Contract
                Partnership
                Basis of interaction and implications [table 3.2, pp. 247]
       o Evolving market structure and relationships
                Structure and relationships [figure 3.7]
                        Emergence of B2B and C2C markets
   Characteristics of Hierarchical, Entrepreneurial, and networked organizations
       o Process integration and synchronization
       o   Process cycle time
       o   Process complexity
       o   Management cycle time
       o   Scope and granularity of business understanding
       o   Information and business literacy
       o   Boundaries and values
       o   Units of work and chain of command
       o   Span of management
       o   Corporate headquarters
       o   Coordinating mechanism
       o   Roles
       o   Career progression

            Chapter 4: Making the Case for Networked Businesses

   Changing economies
       o Comparing industrial and network economies
                Economies of scale (produce and distribute products and services
                   faster, better, cheaper than competitors)
                Economies of scope (ability to leverage existing business
                   infrastructure to produce and distribute new products and launch
                   new businesses)
                Internal (specialized, proprietary) economies of scale and scope
                   versus external (networked, shared) economies of scale and scope
                Technical innovations enabling economies of scale and scope in
                   production versus technical innovations to improving economies of
                   distribution (coordination, communication, and information
                Network economies (scale and scope) are achieved when a
                   “community” uses a common infrastructure and capabilities to…
                Covisint example
                Critical mass to generate value
   Linking strategy to execution to results
       o Analyzing performance drivers
                Traditional financial measures have been unreliable
                Analysis of markets (business concept), business capabilities, and
                   value created
                Revenues, costs, and assets
                Analysis of markets (business concept) frames the assumptions
                   used to forecast revenues
                Analysis of organization capabilities frames the assumptions used
                   to forecast costs
                Value created drives financial and market performance
   Developing the business case for IT [prioritizing IT investments]
       o Benefits from investments in infrastructure [table 4.2, pp. 275]
                 Type I benefits (functionality and flexibility)
                 Benefits are derived from improvements in computers, databases,
                  data centers, Web hosting services, networks, IT professionals
       o Benefits from doing business on a networked infrastructure [table 4.2, pp.
               Type II benefits
                       Commerce (improve internal and external operations by
                          using IT to streamline, integrate, and synchronize
                          procurement, order fulfillment, customer service and other
                          key processes)
                       Content (help employees, customers, suppliers, business
                          partners work smatter by using IT to harness information
                          and knowledge inside or outside the organization)
                       Community (using network technologies to increase
                          commitment and loyalty of internal and external
   Analyzing business models
       o Analyzing the business concept
       o Analyzing capabilities
       o Analyzing value
   Analyzing financial performance
   Approaches to valuing public companies
       o Discounted cash flow
       o Comparable company valuation
       o Dealing with uncertainty

          Chapter 5: Understanding Internetworking Infrastructure

   Introduction
        o What is IT infrastructure?
                Hardware, software, systems, and media that deliver IT-based
        o 70% of all IT dollars go to infrastructure
        o Rise of internetworking technologies are bringing revolutionary changes
           to IT infrastructures (low-cast option to connect everyone on the same
        o Many benefits of infrastructure evolution (new business models, better
           delivery of old services, restructuring of industries etc.)
        o Many challenges to overcome (internetworking technologies create many
           more degrees of freedom in how components can be arranged and

   Drivers of change
       o Better chips, bigger pipes [figures 5.1 & 5.4]
       o Commercialization of the Internet, the Web, and underlying protocols
           (TCP/IP) to route messages between LANs
       o Shift from mainframe computing to internetwork-based computing (figure
           5.2, pp. 398)

   Basic components of internetworking infrastructures [Table 5.1, pp. 402]
       o Network [Medium and supporting technologies (HW & SW) that permit
           exchange of information between processing units and organizations]
                Technological elements
                       LANs [define the physical features of IT solutions to local
                         communication problems and needs and the protocols]
                       Hubs, switches, and network adapters [connect computers
                         in LANs]
                       WANs [define the physical features of IT solutions and
                         standards for conducting conversations between computers
                         and communication devices over long distances…includes
                         intranets and extranets]
                       Routers [devices that assist in relaying messages across
                         large distances]
                       Firewalls and other security devices [IDSs, VPNs]
                       Caching, content acceleration, and other specialized
                         network devices
       o Processing systems [HW and SW that provide the ability to handle
         Client devices and systems
               “Devices” are hardware and “systems” are software
               Clients perform front-end processing (interaction with
      Server devices and systems
               Perform back-end processing
               Specialized appliances for specific business functions
                  (database servers, web servers, application servers etc)
      Mainframe devices and systems
               Legacy mainframes can pose problems when interacting
                  with Internetworking technologies due specially if they still
                  perform batch processing
               Real-time processing mainframes are being developed
      Middleware
               Includes enabling utilities, message handling and queing
                  systems, protocols, standards, software tool kits etc that
                  help clients, servers, mainframes to coordinate activities in
                  time and across networks
      Infrastructure management systems
               Accomplish monitoring the performance of systems,
                  devices, and networks
               Systems that support the help desk and deliver new
                  software to computers
      Business applications
               Deliver actual business functionality
               Custom built or off-the-shelf packages
o Facilities [Physical systems that house and protect computing and network
      Building and physical spaces
               Size, physical features, ability to reconfigure, protection
                  from external disruptions
      Network conduits and connections
               Connection to wider networks
               Factors to consider include: amount of redundancy
                  required, number and selection of partners providing
                  “backbone” connectivity to external networks, capacity of
                  data lines leased from service providers
      Power
               Decisions involve trade-offs between cost and redundancy
               Power can be obtained from: multiple grids and utilities,
                  UPSs, backup generators, privately owned plants
      Environmental controls
               Variations in temperature, moisture
      Security
               Security guards, cages, locks
       o Operational characteristics of internetworks
             Open standards
                    TCP/IP is the primary common language of
                       Internetworking technologies and defines how computers
                       send and receive data packets
                    Not owned by anyone
             Asynchronous operations
                    No dedicated bidirectional connections between the sender
                       and receiver are required
             Inherent latency
                    Wait time in sending messages due to unpredictable traffic
                       volume must be within tolerance limits (capacity issues)
             Naturally decentralized
                    No central control authority governs administration of the
             Scalable
                    Easy expansion

   Rise of internetworking: Business implications
       o Emergence of real-time infrastructures [as compared to batch]
                 Better data, better decisions (consistency in data across locations)
                 Improved process visibility (viewing progress of transactions
                   across system boundaries….ERP)
                 Improved process efficiency (improved ROI due to process
                 From make-and-sell to sense-and-respond (actual demand rather
                   than forecasted demand)
                 Crisis acceleration
       o Broader exposure to operational threats
                 The 1987 Dow Jones plunge
                 Initiating transactions without human intervention
                 Computerized chain reactions can produce unanticipated benefits
                 Effective disaster recovery is required
                 Allow access through intervention versus disallow access through
       o New models of service delivery
                 ASPs
                 Standardization and technology advances permit specialization by
                   individual firms in the value chain resulting in higher economies of
                   scale and higher service levels
                 Reliability of services is as good as the weakest link in the service
                   provider chain
       o Managing legacies
                 Systems, processes, organizations, and cultures
                 Infrastructure driven versus cultural/process driven change
   The future of internetworking infrastructure
       o Security is still an issue
       o Wide-scale bandwidth availability is not possible

             Chapter 6: Assuring Reliable and Secure IT Services
   Introduction
        o Internet is capable of transmitting information reliably and securely
        o Redundancy is the key to reliability
        o Messages can be transmitted along many paths in a network
        o Internal components of firm’s infrastructure are not that reliable (often
           they are not redundant…no backup systems… because of associated cost)
        o Redundancy increases complexity
        o Security of internal infrastructure is a key issue
   Availability math
        o Reliability is often discussed in terms of availability
                Infrastructure availability is expressed in terms of number of
                IT services are delivered by a number of components
                Each component has its own individual availability
        o The availability of components in series [figure 6.1, pp. 426]
                Overall availability is computed by multiplying availability of
                   individual components
        o The effect of redundancy on availability [figure 6.3, pp. 427]
                Components connected in parallel can improve availability
                Availability is determined by multiplying probabilities of failure of
                   each component
        o High availability facilities
                Uninterruptible electric power delivery
                        Redundant power supply
                        Primary power from on-site plants, first-level backup from
                           local utility power grids, second-level from generators
                Physical security
                        Security guards, closed circuit television, photo IDs for
                           access, biometric scanning, motion sensors, perimeter
                Climate control and fire suppression
                        Redundant heating, ventilating, air-conditioning, mobile
                           cooling units, smoke detection, alarms, gas-based fire
                Network connectivity
                        At least two backbone providers
                        Network monitoring engineers
                Help desk and incident response procedures
                        Automated problem-tracking systems integrated with
                           systems at service delivery sites
       o N+1 and N+N redundancy
                One additional unit(component) versus twice as many components
                Some components have built in redundancy
   Securing infrastructure against malicious threats
       o Research findings
                Average budget spending on information security is very low
                91% of the organizations have detected security breaches in the
                   last year
                64% acknowledged security-related financial losses
       o Classification of threats
                External attacks
                        DoS attacks [figure 6.6, pp. 434]
                        DDoS attacks [figures 6.7, pp. 434]
                        Spoofing [figure 6.8, pp. 435]
                Intrusion
                        Gaining access to internal IT infrastructure
                        Access to user passwords (user names, social engineering,
                           network eavesdropping)
                Viruses and worms
                        Replicating programs
                        Require assistance from users to propagate (open
                           attachments, e-mail etc)
                        Automate other kinds of attacks (DoS)
       o Defensive measures
                Security policies
                        Addresses: passwords, accounts, security features, network
                           service operations allowed, downloads, policy enforcement
                Firewalls
                        Hardware and software designed to prevent unauthorized
                           access to internal computer resources
                        Located between internal and external network connections
                        Operate by filtering packets from external networks
                        Sentry computers relaying information without allowing
                           external packets direct entry
                        Used between segments of internal networks (regions) to
                           prevent total penetration
                Authentication
                        Techniques and software used to control who accesses the
                           computing infrastructure
                        Host and network authentication
                        Strong authentication requires regularly expiring passwords
                Encryption
                        Renders contents of transmission unreadable to interceptor
                        Uses public and private keys
                Patching and change management
                      Caused by administrative failures of IT staff to fix existing
              Intrusion detection and network monitoring
                    Goal is to help network administrators recognize
                       infrastructure attacks
                    Activity logs
       o Security management framework
              Deliberate security decisions
              Security as a moving target
              Disciplined change management
              User education
              Multilevel technical measures
       o Risk management of availability and security [figure 6.9, pp. 445]
              Mapping the probability and consequences of infrastructure
                availability and security threats
                    Critical threats, minor threats, prioritizing threats
                    Difficulties in estimating costs and probabilities
       o Incident management and disaster recovery
              Managing incidents before they occur
                    Sound infrastructure design
                    Disciplined execution of operating procedures
                    Careful documentation
                    Established crisis management
                    Rehearsing incident response
              Managing during an incident
                    Avoid emotional responses [including confusion, denial,
                       fear, panic]
                    Avoid wishful thinking and groupthink
                    Avoid political maneuvering
                    Avoid leaping to conclusions
                    Communications to customers and partners
              Managing after an incident
                    Rebuild infrastructure
                    Consult documentation/records
                    Communicate nature of failure to business partners to
                       determine flow of consequences

               Chapter 7: Managing Diverse IT Infrastructures
   Introduction
        o Expensive and unsatisfactory approaches of using proprietary technologies
           to build infrastructures
                Multiple technologies, massive duplication, confusion amongst
                   business partners
                Incompatible systems
               High switching costs to change vendors
               Performance and reliability issues when using multiple vendors
      o Advantages of Internet-based approaches to building infrastructures
               Common communication infrastructures for all market participants
               TCP/IP eliminates incompatibility (bridging software is
               Less dependency on specific vendor technologies
      o Implications
               Less dependency on internal IT functions
               Smaller increments of services can be acquired in real time from
                  service providers
               Trends towards provider specialization in IT service delivery and
                  collaboration with providers to deliver services
               Relationship management between service providers collaborating
                  to deliver services is critical
   New service models
      o Companies own little of the infrastructure involved in service delivery
      o Monthly fees are paid for s service bundle
      o Companies can rent space in vendor-owned hosting facility
      o Emergence of the IT service chain [figure 7.2, pp. 456]
               Main players (ISVs, Hosting firms, aggregators, retailers,
               Supporting players (network providers, back-office outsourcing
                  partners, communication carrier providers)
      o Incremental outsourcing is becoming popular
               Benefits include
                       Managing the shortage of skilled IT workers
                       Reduced time to market by using hosting companies
                       Vendors can afford reliability and availability to provide 24
                          X 7 operations
                       Favorable cask flow profiles [figure 7.1, pp. 455]
                       Cost reduction in IT service chains due to centralized
                          delivery, no distribution of software, no physical inventory
                       Making applications globally accessible without moving IT
   Managing risk through incremental outsourcing
      o Evaluating the competitive advantage offered by IT services [figure 7.3,
          pp. 459]
      o Hosting
               Decision involves where systems should be located
               Benefits of outsourcing hosting [Research findings]
                       Reduced downtime by average of 87%
                       ROI can reach 300%
                       Payback on investment of 120 days
                       Reduce costs by 80-90%
               Incremental service levels in hosting [table 7.1, pp. 461]
                 Hosting models
                       Collocation hosting [customers rent space, connectivity,
                         and power]
                       Shared hosting [customers purchase space on servers]
                       Dedicated hosting [servers dedicated to individual
                         customers, other infrastructure components shared]
                             o Simple dedicated hosting [Web server]
                             o Complex dedicated hosting [Web, application,
                                  database servers using standard configurations]
                             o Custom dedicated hosting [custom functionality and
   Managing relationships with service providers
      o Selecting service provider partners
               Submitting a RFP and comparing providers [table 7.2, pp. 465]
                       Descriptive information
                       Financial information
                       Proposed plan for meeting service requirements
                       Mitigation of critical risks
                       Service guarantees
                       Pricing
      o Relationship management
               Processes in place to share information and problems between
               Procedures and technical interfaces between partner systems must
                  be properly designed and maintained
               Incentives amongst partners must be aligned
               Shared objectives and reasonable return for all partners
               Service-Level Agreement
                       Level of service, penalties, data ownership rights etc.
               Managing a Web of SLAs
   Managing legacies
      o Difficulties from legacy systems
               Technology problems (incompatibilities of older technologies)
               Residual process complexity (address problems that no longer
               Local adaptation (systems developed to solve a narrow problem)
               Nonstandard data definitions 915 character part number versus 12
                  character part number in different departments of the same firm)
      o Adding interfaces (EAI)
      o Key questions in managing legacies (table 7.5, pp. 471)
   Managing IT infrastructure assets
      o Variety in asset configuration (centralized, decentralized, distributed, new
          service delivery models) make asset deployment questions harder to
      o Cost benefits analysis
               TCO and utilization information

                Chapter 8: Organizing and Leading the IT Function

1] Organizational issues in the control of IT activities
        From centralized, IT driven innovation to decentralized, user-driven
        User-driven innovation over IT department protests
        From decentralized, user-driven innovation to centralized IT management
        From decentralized, user-driven innovation to unexpected centralized
        Implications
              - Impossible to foresee full range of consequences of introducing IT
              - Excessive initial control and focus on quick results can hinder learning
                   and development of useful applications
              - Since users and IT staff cannot foresee IT impact on organizations,
                   general management must help in IT assimilation

2] Drivers toward user dominance
        Pent-up user demand
              - Backlog of IT applications
        Need for staff flexibility
              - Unresponsiveness of IT staff leads users to undertake development
                  using their own staff or outside software houses
        Growth in the IT services industry
              - Availability of prewritten software package is appealing and there are
                  no requirements for project proposals
        Users’ desire to control their own destiny
              - Control over development [increased computer literacy skills]
              - Control over maintenance [often ignored initially]
        Fit with the organization
              - Distributed development functions better fit decentralized

3] Drivers toward a centralized IT structure
        Staff professionalism
              - Easier to recruit and train centralized IT staff
              - Easier to modernize centralized IT units [new staff can recharge older
              - Easier to enforce standards for IT management in centralized units
        Standard setting and ensuring system maintainability
        Envisioning possibilities and determining feasibility
              - User-driven feasibility usually contain major technical mistakes
              - User-driven studies are more susceptible to acquiring products from
                  unstable vendors
              -   User developed systems can create long-term maintenance problems
                  due to the specific nature of the application

          Corporate data management
              - Central coordination of physically distributed databases is critical
              - Central IT departments can cost-effectively develop and distribute
              - Corporate data standards can be better enforced by centralized units

          Cost estimation and analysis
              - Centralized IT group can produce more realistic development and
                  deployment estimates
              - Confusion about costs due to charge-back structures

4] Coordination and location of IT Policy
        IT responsibilities
              - Develop and manage long-tern architectural plan
              - Establish procedures compare internal development versus purchase
              - Maintain inventory of planned and installed IT services
              - Set standards for telecommunication, languages, systems
                  documentation, data dictionaries, systems development, and
              - Identify career paths for IT development staff
              - Internally market for IT support
              - Prepare and maintain checklist for acquisition of hardware and
              - Maintain relationships with system suppliers
              - Establish education programs for users
              - Periodically review systems for obsolescence
        User responsibilities
              - Understand scope of IT activities supporting users
              - Provide realistic appraisal of personal investment to develop and
                  operate systems
              - Ensure comprehensive input for IT projects
              - Ensure IT-user interface consistent with IT’s strategic relevance
              - Periodically audit system reliability standards, security, performance
              - Participate in development of IT plan

          General management support and policy overview
              - Balance between IT and user inputs
              - Development of comprehensive IT strategy
              - Manage inventory of resources and policies for relationships with
              - Facilitate creation and evolution of standards
              - Facilitate technology transfers between organizational units
              - Actively encourage technical experimentation
               -   Develop planning and control systems to link IT to firm’s goal

5] IT Leadership and the Management of Budgets
        Budgets are important for control
        Budgets are generally split between users and IT departments

                         Chapter 9: Managing IT Outsourcing

1] Why outsourcing alliances are so difficult
       Lengthy period of outsourcing contract
       Timing of benefits
             - Customers usually benefit right from the start by getting a huge cash
             - Vendors have to take on new responsibilities so benefits may not be
             - Few oursourcers have the critical mass and access to capital markets to
                 undertake large contracts

2] Outsourcing in retrospect
        Origin of outsourcing dates back to the 1950s
        Originally only small firms outsourced
        Kodak outsourcing in 1990 popularized IT outsourcing

3] Outsourcing in the 21st century [More than half of mid to large size firms outsource
some aspect of IT function]
        Acceptance of strategic alliances
              - Strong partner complements area of IT weakness
              - Key part of the value chain [IT] can be leveraged by bringing in a
                   strong partner
              - Alliances must provide synergistic effects to be successful
        IT’s changing environment
              - Focus of IT [internal transactions to interorganization systems]
              - Majority of code is developed externally
              - IT staff’s inability to keep up with technological trends and changes

4] What drives outsourcing
       Concerns about cost and quality
              - Faster and cheaper development at acceptable quality
       Breakdown in IT performance
              - Lack of control in the IT function
              - Network failures
       Intense vendor pressures
              - Vendor push to increase declining or maturing sales
       Simplified general management agenda
              - Delegating IT problems to outsourcer and focusing on other
          Financial factors
              - Opportunity to liquidate intangible assets
              - Avoid sporadic future capital investments
              - Fixed costs can be converted to variable costs depending upon services
              - Divestitures are more attractive to the acquirer
          Corporate culture
              - Decentralized firms may prevent centralized IT functions leaving
                  outsourcing to be the only option
          Eliminating an internal irritant
              - Friction between IT staff and users can sometimes be eliminated only
                  through outsourcing
          Other factors
              - Inability of low tech. firm to attract and retain high technology staff

5] When to outsource IT
       Position on the strategic grid
              - Support quadrant -- yes, turnaround -- mixed, strategic -- mixed,
                 factory -- yes
       Development portfolio mix
              - High structured projects are easy to outsource
       Organizational learning
       Market position of the firms as it relates to IT
              - Further away from the network era, more useful to outsource
       Current IT organization
              - Easier to outsource when IT development and operations are

6] Structuring the alliance
         Contract flexibility
                - Evolving technology, changing business environments, and emerging
                   services require flexibility
         Standards and control
                - System performance criteria and disruption of services must be
         Areas to outsource
                - Datacenter operations, telecommunications, PC
                   acquisition/maintenance, systems development… ..One or all of the
                   above functions
         Cost savings
                - Get unbiased opinion on whether and what to outsource
         Supplier stability and quality
                - Financial stability, ability to modernize using emerging technologies,
                   and staff retention of the outsourcer are critical
         Management fit
               - Shared approach to problem solving, similar values among key staff
                 people are critical for long-term success
          Conversion problems
              - Staff career issues, outplacement processes, and separation pay must
                 be resolved quickly

7] Managing the alliance
       The CIO function
              - Partnership/contract management
              - Architecture planning
              - Emerging technologies
              - Continuous learning
       Performance measurements
       Mix and coordination of tasks
       Customer-vendor interface
              - Interfaces should exist at several levels
              - Senior level interfaces must deal with policy and restructuring issues
              - Lower level interfaces must establish mechanism for identifying and
                  handling tactical issues
              - Important to have relationship managers and integrators at lower levels

                   Chapter 10: A Portfolio Approach to IT Projects

1] Sources of implementation risk
        Ignoring project risks leads to: failure to obtain anticipated benefits due to
           implementation difficulties, much higher implementation time and costs than
           expected, delivering systems with technical performance below estimates,
           system incompatibility with selected hardware and software
        Project dimensions influencing risk include: size, experience with technology,
           and project structure

2] Project categories and degree of risk
     Assessing risk for individual projects [figure 10.3, pp. 583]
     Portfolio risk [table 10.1, pp. 586]

3] Project management: A contingency approach
         No single approach to project management
              - Contribution of management tools to project management varies
              - User involvement in project management also varies
         Management tools
              - External integration
              - Internal integration
              - Formal planning
              - Formal results-control
   Influences on tool selection
        - High-structure-low-technology projects
               - Low risk and easiest to manage
               - No extensive administrative processes required to get diverse
                   use involvement
               - Training users to operate systems is important
               - Project leader does not need high IT skills
        - High-structure-high-technology projects
               - More complex that high-structure-low-tech projects
               - Liaison with users is important for coordination and systems
               - Technical leadership and internal integration are critical
        - Low-structure-low technology projects
               - Key to managing risk involves effective efforts to involve users
               - Close management of external integration supplemented by
                   formal planning and control tools are critical
        - Low structure-high-technology projects
               - Leaders require technical expertise and the ability to
                   communicate with users
               - Total user commitment to design specifications is essential
               - Internal and external integration tools are critical
   Relative contribution of management tools [table 10.3, pp. 592]
   Emergence of adaptive project management methods
        - Results control and planning tools do not work well under uncertainty
        - Experimentation is sometimes useful
        - Software development life cycles
               - Analysis and design requirements determined by users, IT
               specialists, and vendors
               - Construction involves selecting computer equipment, creating,
               buying, adapting programs to meet requirements, and testing
               (alpha and beta)
               - Implementation is organization-wide efforts, joint effort, and
               emphasis is on training
               - Operation and maintenance are planned in advance during
               design phase.
        - Adaptive methodologies
           - Iterative
           - Fast cycles and frequent delivery
           - Early delivery of limited functionality to end users
           - Skilled project staff capable of making midcourse adjustments
           - Resist use of ROI for investment decisions
        - Adaptive methods and change management

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