The Enterprise Application Market, 2000

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615-352 Managing the IT Function
L2 The IT Function and Role of the Senior IS/IT
Executive (CIO)
References Ross and Feeny (1999) MIT Luftman
and McLean (2004), MISQE Weill (2004) MISQE
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SSLC needs you!!

• Why? The Staff-Student Liaison Committee needs
  you to
• represent this subjects students to the lecturer
• participate in 2 informative meetings
• (Week 5, Tues lunchtime Week 10 Tues 5.30 PM)
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• This will enhance your CV by
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• working towards having good reference letters
  from lecturers.
• Please consider volunteering!
• More information at
• www.dis.unimelb.edu.au/undergraduate/sslc.html

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Lecture Plan

• What does the IT Function do?
• Role of the Chief Information Officer
• Critical issues facing the IT Function
• IT Governance

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1. Traditional IT Organization
Luftman 2004, p.223
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Royal Caribbean, IT Org Chart(see Exhibit 7,
p.23)
CIO
Total IT headcount 2003 282
Finance, headcount 2003 8
Systems headcount 12349 172
Operations headcount 2003 102
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Planned IT hardware architecture
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Royal Caribbean, Org Chart(Exhibit 4, p.18)
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IT distributed by Function
Luftman 2004, p.229
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IT distributed by Division (each Division might
have Functional IT)
Luftman 2004, p.230
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What does the IT Function do?Traditional
organization
Note Purchasing but no Outsourcing
Luftman 2004, p.223
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Feeny Willcocks (1998) Nine Core IT
Capabilities of the Emerging IT Organization
BUSINESS and I.T. VISION
Note Project Management is assumed to be an
organization-wide capability. System development
and Operations is assumed to be outsourced. (If
so, someone still has to do it!)
Business Systems Thinking
Contract Facilitation
Relationship Building
Leadership
Informed Buying
Vendor Development
Making Technology Work
Architecture Planning
Contract Monitoring
DESIGN of I.T. ARCHITECTURE
DELIVERY of I.T. SERVICES
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IT Budget Five-year average expenditure ratios,
54 businesses, 27 companies, 7 countries (mid-90s
data)
Weill and Broadbent Leveraging the New
Infrastructure, HBSP 1998
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IT Infrastructure (Weill and Broadbent, 1998)
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IS Budget as an percent of revenue CSC Critical
Issues of IS Management Survey, USA, 2001
http//www.csc.com/aboutus/uploads/CI_Report.pdf
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2. Chief Information Officer (Definition
www.cio.com)

• CIOs are senior executives responsible for all
  aspects of their companies' information
  technology and systems.
• They direct the use of IT to support the
  company's goals.
• With knowledge of both technology and business
  process and a cross-functional perspective, they
  are usually the managers most capable of aligning
  the organization's technology deployment strategy
  with its business strategy.
• CIOs oversee technology purchases, implementation
  and various related services provided by the
  information systems department. However, at many
  leading-edge organizations, the CIO delegates
  many of the tactical and operational issues to a
  "trusted lieutenant" in order to focus on more
  strategic concerns.
• http//www.cio.com/research/executive/overview.
  html

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Evolution of CIO Role
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Underlying Technological Trends (Ross and Feeny
1999)
http//web.mit.edu/cisr/working20papers/cisrwp308
.pdf
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Evolution of CIO Role (Ross and Feeny 1999)
http//web.mit.edu/cisr/working20papers/cisrwp308
.pdf
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Top three CIO roles (Feeny 1997)

• Visionary with respect to the role that IT plays
  in the business
• Chief architect of information technology (IT)
  capabilities
• Partner with the business in major change
  initiatives

http//www.cscresearchservices.com/foundation/libr
ary/109/RP14.asp
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Top three reasons predecessor was removed from
position (Feeny 1997)

• Had a non-productive relationship with business
  management team
• Could not contribute to business strategy
• Was an ineffective change agent

CIO career is over!
http//www.cscresearchservices.com/foundation/libr
ary/109/RP14.asp
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Forces Influencing the CIO(Ross and Feeny 1999)
http//web.mit.edu/cisr/working20papers/cisrwp308
.pdf
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Gartner, 2003 Six Imperatives Define the CIOs
Role today

• LEAD Bridge business and technology.
• Anticipate Sense key trends.
• Strategize Shape demand and synchronize business
  and IT.
• Organize Orchestrate for IS Lite ( outsource)
• Deliver Provide cost-effective and timely
  services.
• Measure Know where you stand and why.

Supply Side Deliver Cost- Effective Services
Demand Side Shape and Manage Expectations
http//symposium.gartner.com/docs/symposium/2003/s
pr4/documentation/spr4_15a.pdf
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Boyles, 2004 Goals for the CIO
No mention of Bus. Strategy or Alignment??
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Deloitte-IDG, 2003 Achieving, Measuring and
Communicating IT Value

• CIOs are required to maintain a broad business
  perspective rather than a technology or
  process-centered view of the enterprise. More and
  more their individual success is linked to their
  ability to deliver, measure, and demonstrate the
  value of their companys IT investments.
• What we see in successful organisations is IT
  shaping the business strategy. There is a major
  difference between supporting and shaping. The
  new CIO needs to understand what business value
  can be created through technology investment.

http//www.deloitte.com/dtt/cda/doc/content/IT_Val
ue_Mgt_Framework.pdf
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3. Critical Issues of IS Management CSC Survey,
USA, 2001
http//www.csc.com/aboutus/uploads/CI_Report.pdf
Over 70 of respondents claimed to be the top IS
executive.
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CSC Critical Issues of IS Management Survey, USA,
2001

• Senior-most IS Executive reports to

http//www.csc.com/aboutus/uploads/CI_Report.pdf
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CSC Critical Issues of IS Management Survey, USA,
2001

• The greatest contributors to the success of the
  IS Organization

http//www.csc.com/aboutus/uploads/CI_Report.pdf
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CSC Critical Issues of IS Management Survey, USA,
2001

• The greatest obstacles for the IS Organization

http//www.csc.com/aboutus/uploads/CI_Report.pdf
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CSC Critical Issues of IS Management Survey, 2001
Deloitte-IDG IT Value Survey 2003

• Return on IT investment

http//www.csc.com/aboutus/uploads/CI_Report.pdf
http//www.deloitte.com/dtt/cda/doc/content/CIO20
IT20Value_Final.pdf
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Top Ten IT Management Concerns - by Importance,
2003, 301 respondents

• IT and business alignment
• IT strategic planning
• Security and privacy
• Attracting, developing, and retaining IT
  professionals
• Measuring the value of IT investments
• Measuring the performance of the IT organization
• Creating an information architecture
• Complexity reduction
• Speed and agility
• IT governance

Luftman and McLean (2004) Table 6
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Alignment between business and IT is a key to
success

• One of the most important missions for IT
  management in the 21st century is to be
  architects of alignment linking business and IT.
  .
• When these domains are alignedi.e., mutually
  supportinga companys ability to respond to
  increasingly uncertain and evolving markets (the
  external environment) is significantly enhanced
  sometimes to the level where companies can define
  entirely new markets or set the standard of
  excellence in their industry. (p.25)

Luftman, Managing the IT Resource, Pearson
Prentice-Hall, 2004
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4. IT Governance

• We define IT governance as specifying the
  framework for decision rights and
  accountabilities to encourage desirable behavior
  in the use of IT.
• Weill (2004)

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Centralized IT

• Single IT group allows for sharing expertise and
  learning
• Clear career paths and training programs
• Managed skill redundancy with capable staff
• Expert managers familiar with projects carry out
  employee evaluations
• Standards can be readily defined

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Drawbacks of Centralization

• Unresponsive to individual business unit needs
• No one in centralized area understands business
  area
• Centralized organization can become insular and
  unaware
• Tendency for IT org. to become ivory tower

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Decentralized IT

• Individual business areas own, fund, and
  determine priorities
• IT professionals are experts in business area
• Priorities set within business unit
• Funding provided by business unit
• Potential career path within business and out of
  IT

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Drawbacks of Decentralized IT

• May create huge redundancies
• Career path within IT is limited
• IT department will operate for local business
  area
• Integrations and adhered-to standards are hard
• Loyalties develop to business area and not firm

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Benefits of Federated IT Model

• Can deliver strategic alignment needed for most
  effective use
• Maintains close interaction with business
• Provides IT with large, talented peer group

Hence Willcocks et al.s Proposition 8 (you have
this in the Subject Notes) In large, complex
organizations, variants of the Federal IT model
are more effective.
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Willcocks Prop 8 In large, complex
organizations, variants of the Federal IT model
are more effective.
Hodgkinson, S.L. "The Role of the Corporate IT
Function in the Federal IT Organization," chapter
12 in M.J. Earl, ed. Information Management The
Organisational Dimension, Oxford University
Press, 1996, pp 247-270.
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IT Governance, 256 orgs., 23 countries (Weill
2004)

• Top-performing enterprises proactively seek value
  from IT in at least five ways
• they clarify business strategies and the role IT
  plays in achieving them,
• they measure and manage the amount spent and the
  value received from IT,
• they design organizational practices to fit IT to
  their business strategies,
• they assign accountability for the organizational
  changes required to benefit from new IT
  capabilities,
• they learn from each implementation, becoming
  more adept at sharing and reusing IT assets.

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Five Major IT Decisions Need to be Made
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IT Governance Archetypes
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Which groups make which decisions?Weill (2004)
MISQE, p.12
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Decisions with best business outcomes. Causal??
(Weill (2004) p.13)
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Summary of this lecture

• What does the IT Function do?
• Role of the Chief Information Officer
• Critical issues facing the IT function
• IT Governance