IT Architecture: Evolution and Alternatives

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IT Architecture Evolution and Alternatives

• Potential for IT to create a new business
  environment
• Lots of hype, but none the less, IT in the form
  of technologies such as the PC, Internet, Web,
  Wireless, etc have had a huge impact that
  promises to extend well into the future.
• Need for new standards
• Challenge of integrating new technology into
  systems with hodgepodge of existing computers and
  networks

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30 Years of Impact

• If the auto industry had kept up with technology
  like the computer industry, we would all be
  driving 25 cars that get 1,000 miles to the
  gallon
• CEO of a Fortune 1000 S/W Firm, 1998

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30 Years of Impact

• True but
• Your car would crash twice a day
• When they repainted the lines on the road, you
  would have to buy a new car
• The air bag would ask Are you sure? before
  going off
• When your car died on the freeway for no reason,
  you would just accept this, restart, and drive on
• Executing a maneuver would cause your car to
  strop and you would have to reinstall the engine.
  For some strange reason, you would accept this
  too.

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30 Years of Impact

• IT
• Promises remarkable power
• Has frustrating limitations
• Managers and users in general, long for a
  computer as easy to use as the telephone.
• Isolating the user from complexity
• The Network Computer
• The Information Appliance

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Evolution of IT Architecture

• IT architecture
• Defines the platforms for
• Technical computing
• Information management
• Communications
• Provides overall picture of technical options
  available to the firm
• Implies the range of business options

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Evolution of IT Architecture

• Decisions made in building the IT architecture
• Must be linked to decisions made in building the
  IT org. that will manage it.
• Must be linked to the strategy and organizational
  design of the firm itself
• The organizational strategy, structure,
  incentives, and processes strongly influence how
  the technology will be designed, deployed and
  used within the firm
• Current IT architectures represent a mixture of
  old and new technologies

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Era I The Mainframe (50s to 70s)

• Central computer
• Dumb terminal access
• Batch processing
• Rigid systems
• Example Report writing
• Used to automate existing back-office processes
• Budgeted as an expense (ROI obvious)
• Under direct control of the IT department

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Era II The PC (Late 70s to 80s)

• Commercialization of the microprocessor
• Usable by those with little training
• Spreadsheet was the Killer App
• Islands of automation

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Era II The PC (Late 70s to 80s)

• Not controlled by IT department
• Individual productivity gains better measure of
  value than ROI
• Difficult to link infrastructure expenses to
  business benefits achieved by using that
  infrastructure.
• Role of centrally managed mainframe began to
  erode
• The PC did not replace the mainframe

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Era III Network Computing (90 to Present)

• Improved networks for sharing information
• Managers began to see opportunities to use IT to
  shift the balance of power and competitive
  position of their firms

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Era III Network Computing (90 to Present)

• Distributed information processing and management
• Client / Server
• Users able to access and communicate information
  through powerful workstation and portable
  technologies (clients) linked to shared
  information (servers) through high-speed local
  and global networks
• Role of Mainframe
• The Enterprise Computer
• Sits alongside a variety of other servers

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Era III Network Computing (90 to Present)

• Great concept, implementation has not been as
  impressive
• Cost of a typical smart workstation
• 10,000 / year
• Many components beyond the H/W
• The Network Computer
• 6,500 / year
• Thin client
• Lower H/W costs
• Lower maintenance costs

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Value Creation in a Networked Environment

• Confusion concerning business value of IT
• Some still use budgeted expense model
• Value based model
• Think of IT as a string of value-creating
  investments that deliver value today and in the
  future
• Two Broad Categories
• Reusable, value-enabling technologies that
  comprise the information and communication
  infrastructure
• The IT-enabled, value-creating business solutions
  that are developed and deployed on that platform

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Value-enabling Infrastructure

• Benefits from investments in value-enabling
  infrastructure
• Category I Platform improvements
• Organizational Benefits
• Improve ability to share information,
  communicate, coordinate, and control activities
  inside the organization
• Market / Industry Benefits
• Improve ability to share information,
  communicate, coordinate, and control activities
  with customers, suppliers, and business partners

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Value-enabling Infrastructure

• Category II Options value
• Organizational Benefits
• Increase the functionality, flexibility, and
  useful life of the internal IT infrastructure
• Market / Industry Benefits
• Increase the functionality, flexibility, and
  useful life of the industry IT infrastructure
• Sample Metrics
• Lower operating and maintenance costs
• Improve app dev process
• Increase the useful life of the platform
• Increase range of options

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Value-enabling Infrastructure

• Category III Commerce
• Organizational Opportunities
• Improve core operating activities inside the firm
  (procurement, sales, customer service)
• Market / Industry Opportunities
• Improve existing supply/distribution channels
  that link the firm to customers, suppliers and
  business partners, or create new ones
• Category IV Content
• Organizational Opportunities
• Improve decision making, enhance organizational
  learning
• Market / Industry Opportunities
• Exploit the economic value of information by
  adding value to existing products and services
  and creating new ones

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Value-enabling Infrastructure

• Category V Community
• Organizational Opportunities
• Enhance collaboration and coordination of work
  and commitment and loyalty of individuals and
  teams
• Market / Industry Opportunities
• Establish a position at the center of an
  electronic market and maintain that position by
  ensuring loyalty of all members

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More Metrics

• Process Performance Improvements
• Savings
• Reduce paper and communication costs
• Reduce headcount
• Reduce cost of supplies
• Reduce transaction and admin costs
• Speed
• Reduce cycle time
• Reduce process bottlenecks
• Eliminate process steps
• Quality
• Decrease product defect of service failure rate
• Decrease waste
• Reduce process errors

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More Metrics

• Increase Stakeholder Loyalty
• Increased satisfaction and retention
• Customers
• Suppliers
• Partners
• Employees

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More Metrics

• Increase Revenues, Profits and VA
• Increase sales in existing markets
• Increase revenue from sales in new markets
• Decrease prices yet sustain margins
• Improve profitability
• Revenues per employee
• Profits per employee
• Operating margins
• Increase cash flow
• Improve competitive position
• Increase market share
• Improve analysts assessment/rating
• Increase stock price

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Example

• Fortune 100 global manufacturing firm in 1994
• Project to consolidate numerous incompatible
  networks into a single Internet based network
• Initial project 1 million
• Sparked by a call from CEO to CIO about inability
  to send email to Tokyo

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Example

• Immediate Benefits
• Category I
• 50 savings in the cost of network management
• Category II
• Expanded network by 25
• Category III
• Provided an open platform allowing employees,
  customers, partners to communicate and share
  information

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Example

• Longer Term Benefits
• Category II
• Deploying a variety of web based apps across the
  globe
• Category III
• Improved margins from consulting business by 400
• Category IV
• Able to share best practices across globe

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Implementation Issues

• Maintaining a reliable and secure environment for
  doing business
• Assimilating emerging information technologies
• Managing the IT legacy
• Merging islands of automation

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Reliable and Secure Environment

• Era I Centralized system
• Maintained and controlled from a single central
  location
• Security issues easier to deal with
• Maintenance issues centered on a single machine
  and a small group of hands-on users
• Eras II III
• Decentralized
• Increased issues involving security, control,
  determination of responsibility, and maintenance

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Internet Security Issues

• Authorization
• Does a user have permission to access a specific
  computer of collection of information?
• User name and password system including newer
  physical colocation devices

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Internet Security Issues

• Authentication
• IS the user truly who they purport to be?
• Digital certificates and other technologies

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Internet Security Issues

• Integrity
• Did the person sending the message actually send
  it? Can the receiver be sure that the message has
  not been changed?
• Digital signature

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Internet Security Issues

• Privacy
• Is my conversation or business transaction
  private? Is someone spying or eavesdropping
• Public/private key encryption

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Internet Security Issues

• Fraud / theft
• Is anyone stealing from me?
• Log, audit, systems management policies and
  procedures
• Sabotage
• Can someone enter my internal information system
  and/or networks and access private information or
  destroy/alter information?
• Firewalls and Firebreaks

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Assimilating Emerging IT

• Phase 1 Technology Identification
• Phase 2 Technology Learning and Adapting
• Phase 3 Rationalization/Management Control
• Phase 4 Maturity/Widespread Technology Transfer

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Managing the IT Legacy

• Two major tasks
• Maintaining current and previous (legacy) systems
• Building new strategic systems
• Outsourcing legacy maintenance
• Updating internal skills while maintaining a pool
  of skills in current and older technologies

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Merging the Islands of Automation

• Modern trends
• Merging and centralizing data
• 7/24 availability with disaster backup
• Business processing distributed
• Client / Server
• Range of technologies maintained within one
  functional area
• Data
• Voice
• Video
• S/W H/W