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					        factsheet




strategies for
success –
how IT can underpin
business performance
                                   factsheet
Introduction                                                               AGILITY QUOTIENT FOR E-BUSINESS

 Today’s companies want to see demonstrable value and            Sensing          What systems do you have in place for
 return on investment for their IT purchases from the                             every employee, at every level, to spot
                                                                                  new market or product needs and get
 outset, as the recognition sets in that technology is not a
                                                                                  that information fast to the decision
 fashion accessory but an enabler of both immediate                               makers who can make it happen?
 bottom-line benefits and new ways of working that could
                                                                 Strategising     How effective are your problem solving
 also lead to returns.
                                                                                  and planning methods? Are they fast
                                                                                  (within 48 hours), practical and used
 There is much more experience now about how IT fits
                                                                                  daily at every meeting?
 into business, particularly when it comes to implementing
                                                                 Deciding         Is there a formal process in place for
 certain types of system. But there is much less evidence                         making good decisions? Does every
 of companies that have made a concerted attempt to link                          manager use it consistently? Can
 their overall business strategy to technology, rather than                       decisions be made at several levels
 the odd tactical development.                                                    without having to check with a
                                                                                  committee or getting group approval?
 The latest DTI International Benchmarking Study (for            Communicating Does everyone involved with a change,
 2004) – which covers information and communication                            decision or new strategy know about it
 technologies – provides evidence of encouraging trends                        (within 24 hours)? Is everyone in the
                                                                               company treated as a key partner in change?
 for UK businesses. The survey confirms that there has
                                                                 Acting           How fast can you bring a new product,
 been a significant increase in the proportion of
                                                                                  service or idea to market? And how can
 businesses that are measuring the benefits of IT using                           you do it even faster?
 core financial metrics such as return on investment,
                                                                                                            Source: Gartner
 internal rate of return and net present value. It also
 reports that UK businesses are among the most likely to
 have both written business plans and documented IT
 strategies.                                                    Aligning business and IT
                                                                 While 77% of businesses in the UK have a documented
 The most commonly cited reasons for UK businesses to
                                                                 business plan only 32% of businesses include IT as an
 adopt IT are to increase the efficiency of their processes,
                                                                 integral part of their business strategy, according to the
 improve communication with customers, and ‘keep up
                                                                 DTI’s 2004 International Benchmarking Study. Too many
 with progress’. In particular, the trends are:
                                                                 IT projects spring up at department level without a clear
     More functionality and information are available            idea of their benefit to the business.
     online to customers
                                                                 Every IT project regardless of size should have a clearly
     More businesses are searching for and buying                defined, documented set of deliverables. These should
     from suppliers online                                       include the benefits, but also the changes in processes
     The proportional value of online sales and                  required and the risks. Some key questions to ask:
     purchases has increased significantly.                          What other areas of the business will be impacted
                                                                     – not just from a positive aspect, but will any
 In concert, broadband adoption is accelerating – more
                                                                     department be adversely affected even for short time?
 than 60% of UK businesses have Internet connections
 with a bandwidth of over 1 megabit/s, and UK                        Do you have all the knowledge and skills that you
 businesses are early adopters of new technologies, such             need to implement the project successfully?
 as Internet telephony and desktop videoconferencing.
                                                                     What criteria will be used to measure the success
 As a first step, compare your firm with the Agility quotient        of the project?
 in the panel to give an indication of your e-business               How will you measure that the deliverables meet
 readiness.                                                          your expectations and over what period?
                                       factsheet
Make sure someone actually owns the project and takes
responsibility of managing the processes both internally and
                                                                Goals of an e-business
externally. This is often where an external project manager     system
or consultant is invaluable. They will be focused on the
project with no other day-to-day worries to distract them.       The goals of any commercial IT worth its salt can be
                                                                 summed up as reducing costs, enabling revenue growth and
See the panel ‘Steps for alignment’ for a core checklist of      providing effective management information. The prevalent IT
tips for success.                                                strategy in the SME sector has been one of piecemeal
                                                                 purchases of ‘best of breed’ applications using different
                                                                 technologies, from different vendors. These are ‘glued’
                  STEPS FOR ALIGNMENT                            together by interfaces and supplemented by spreadsheets
    The first principle of aligning IT with the business is a    and manual systems. Such an arrangement reflects an
    crystal clear understanding of the business itself           absence of IT strategy and is symptomatic of a tactical
    The most frequently overlooked aspect of IT strategy         approach by individual departments in response to their
    definition is the cultural analysis of the organisation      specific needs. This ‘patchwork quilt’ of systems is usually
                                                                 inefficient to run and costly to maintain, and consequently
    Understanding value chains is paramount because
    these represent the relationships and touch-points           affects the business’s performance and potential.
    between the business functions and the IT estate
                                                                 E-business reduces costs by automating as many
    You need to know what pressures will shape and               processes as possible, preferably from start to end. All
    influence your business, perhaps imposing change
                                                                 processes are undertaken within one integrated system, with
    when you least welcome it
                                                                 workflow controlling and managing the process according to
    Gather intelligence from a number of sources, both           business-defined rules. This eliminates interfaces and
    internal and external, to determine how any change
                                                                 provides the most efficient route from A to B. Data about
    may affect existing business functions, culture, IT
                                                                 customers, suppliers, products, etc. is held once within the
    estate and value chains
                                                                 e-business system, and is shared and validated
    Successfully balancing sometimes disparate needs is
                                                                 automatically, which means optimal efficiency and accuracy.
    at the core of IT and business strategy alignment
    Where necessary adjust schedules to accommodate              A good example is the sales order-to-cash process. An
    proper alignment with established resource cycles            order is priced, validated and accepted electronically from
    Business units need to move at different speeds – so         multiple sources within the integrated e-business system,
    each business unit should have its own, dedicated            such as a web storefront, an agent using customer
    programme of IT work, showing when, where and                relationship management, a salesperson using a mobile
    why activity will be taking place                            facility from the field and a traditional order entry office.
    The golden rule is never to over-commit beyond               The booked order is processed automatically by the
    actual capacity to deliver. If there are insufficient        order-processing module and controlled by workflow,
    resources, or time available within the capacity             according to business rules.
    horizon, either the task must be re-formulated, or the
    resource pattern altered                                     Improving collaboration and communications is also a key
    Continually review all work in progress to see if            driver of e-business take-up – Internet technology is all
    current plans have been impacted unexpectedly by             about easier and cheaper communication internally within
    changing circumstances – vigilance is just as                the company and externally with suppliers and customers.
    important as vision                                          A modular design – one that lets you add additional
    The essence of successful alignment between IT and           functionality, such as an online web storefront, a mobile
    the business strategy is based on effective                  sales or service capability or an interaction centre, while
    understanding, communication, collaboration and              sharing existing processes and data – should be the aim.
    mutual trust.
From Aligning IT with Business Strategy, published by the        Finally, a consistent IT solution across the organisation can
National Computing Centre (www.ncc.co.uk).                       greatly improve management information. Many companies
                                                                 often spend a lot of administration effort preparing monthly
                                   factsheet
 reports, say, by amalgamating information offline in              To help you get the most out of your investment in IT and
 spreadsheets, because the underlying systems cannot               to deliver ROI you need to:
 produce it. With an integrated set of applications the
                                                                        Carry out an ROI calculation but be practical about it
 process of producing information is streamlined because it
 is produced directly and automatically from the one system.            Ensure you set achievement targets and also set a
                                                                        timetable. Remember you need to ‘plan to achieve’ ROI
 To find out more about Oracle and e-business visit
                                                                        Ensure you monitor progress towards the targets
 www.oracle/start and enter keyword: success
                                                                        and ensure you achieve what you set out to achieve

                                                                        Manage your IT procurement, and once you have
Return on investment                                                    invested your money ensure that you manage your IT
                                                                        staffing and support and your IT training.
 Calculating the return on investment (ROI) for IT projects is
                                                                     (ROI source: Hawsons Chartered Accountants: www.hawsons.co.uk)
 the same as for other investments. ROI is the net increase
 in gains/benefits divided by the cost of investment and
 expressed as a percentage. The net gains/benefits are
 the savings and improvements relating to the investment         IT contracts tips
 as a result of carrying out the project. Because ROI in IT             Make sure that you know exactly what you want
 will be obtained over a number of years then ROI cannot                and what is achievable because if you do not
 be measured over just one year. ROI is therefore often                 know then you are not going to get the contract right.
 measured over say three or five years depending upon
 the project. You should include all costs that are directly            If a particular point is important to you make sure that
 attributable to the project and a relevant proportion of               you get it in writing from the supplier. It may well be
 those partially attributable to the project.                           that one aspect that is critical to you is not dealt with
                                                                        in the supplier's draft contract at all. If so, you must
 Certain benefits are easy to measure because they are                  get it in writing. An ordinary letter from the supplier is
 tangible. For example, staff cost savings through more                 sufficient provided that it is either cross-referred to in
 efficient order entry or through eliminating duplicated work           the main contract or included as a schedule.
 in re-keying data into spreadsheets. There are also the
                                                                        Make sure that you get the supplier to agree to
 intangible benefits such as increased customer
                                                                        supply support and maintenance for the products
 satisfaction, reduced delivery times or indirect benefits
                                                                        purchased for a sensible length of time. You do not
 such as the increase in spend per customer as a result
                                                                        have to commit to take the support and maintenance
 of having a feature in the software that reminds
                                                                        – ideally your commitment should be on a year by
 salespeople that a customer can also be offered a
                                                                        year basis.
 complementary product.
                                                                        Make sure that you order enough training. One of the
 The way to resolve this is to make estimates of the cost               most common reasons for the failure of a computer
 savings and to be as prudent and practical as possible.                project is inadequate training. As a rule of thumb,
 Remember that because the calculation includes                         roughly 20% of a project’s cost should be spent on
 estimates then it can only ever be a guide to help you                 training. If it is substantially less than that you should
 make your decision. In addition, ROI takes no account of               ask why.
 the risk of the investment and, depending on how many
 years you calculate it over, you will get a different answer.          Make sure that you can get access to the source
 Other measures that are used include payback period –                  code of the software programs supplied if the
 the time taken for the investment to pay for itself,                   supplier either goes into liquidation or stops
 discounted cash flow (DCF), net present value (NPV) and                supporting the software. Ideally, this source code
 total cost of ownership (TCO). Each has its advantages                 should be deposited with an independent third party
 and disadvantages but the key thing to remember is that                and kept updated by the supplier as each new
 you are in effect trying to predict the future, which means            version comes out.
 you have to use estimates and judgement.                         (Contract tips from Clark Holt Commercial Solicitors: www.clarkholt.com)
RESOURCES

Business Application Software Developers Association (BASDA)
W www.basda.org



Business Link
W www.businesslink.gov.uk



BuyIT
W www.buyIT.org



CIO Connect
W www.cio-connect.com



DTI Best Practice
W www.dti.gov.uk/bestpractice



Independent Association of Accountants Information Technology
Consultants (IAAITC).
 W www.iaaitc.org



IT Governance
 W www.itgovernance.co.uk



National Computing Centre (NCC)
W www.ncc.co.uk




Written by Marc Beishon.
Published by Director Publications Ltd for the Institute of Directors.
Published in association with Oracle.

For a copy of the Director’s Guide Strategies for Success: How IT really can
underpin your business performance, also published by the IoD in association
with Oracle, call 020 7766 8866.

For further information on IT solutions from Oracle call 0870 876 8773 or visit
www.oracle/start and enter keyword: Success

				
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