Governance Styles in Use at Richter - Essay Example

? Business Table of Contents Value if IT to Richter 3 Governance styles in use at Richter 4 Szucs’ future strategies 5 Present IT structure against growing demands of the organization 5 Degree of central control over IT affiliates 6 Reference 8 Value if IT to Richter The major transformation of the company Richter can be attributed to the contribution of information and technology. Beginning from a very decentralized and incoherent structure, the evolution of IT has shaped the way it has made progress towards emerging as one of the leading pharmaceutical companies in the world. While evaluating the value of IT that the company holds, comparison is made with regards to large organizations and how they garner value from information and technology. It is important to mention that large firm considers information technology to have strategic value and is used for attaining or realizing long term strategies of firms. The case of Richter also reflects the same. The aim to privatize the organization was realized through the implementation of the SAP financial module of an enterprise wide system. The success of the strategy to privatize the organization depended largely on the accuracy of financial information collected. The decision to implement SAP depicts the true value of IT that Richter held in realizing its long term goal to privatize. One of the strategic objectives of Richter was to increase revenues and reduce costs of the company. This required greater focus on materials management and production planning processes. It is seen that the major large organizations are able to increase efficiencies of their production processes and materials management processes through the implementation of IT infrastructure. Similarly, the installation of MM module or the materials management module and the PP module or the production planning module was intended to bring about efficiency enhancement and productivity improvement in the organization. This was complimented with the establishment of a decision support system consisting of two production experts through whom doubts could be clarified, regarding data, definitions, procedures or information retrieval. The role of IT in improving revenues and costs also shows its value in Richter in meeting long term goals. Although installing the two production modules involved a cost of $2.12 million which comprised of an investment of $775,000 in equipments and $1.35 million on labour expenses. However, the employment of the internal IT staff saved the organization an amount of $525,000. Governance styles in use at Richter The case of Richter reflects the use of value based style of IT governance. The operational approach to IT governance describes governance as being intentional activity having its own artifacts and lifestyles. The value based IT governance style is based on the approach that desired outcomes can only be achieved through value based decisions. It tries to reject unnecessary activities and focuses more on high value projects. The value based style of IT governance begins from Richter’s decision making process regarding all the governance issues with beginning of the strategic plan of the company (CGI, “CGI’s approach to driving business value within managed services engagements”). The plan was aimed to involve all IT specialists within the organization as well as the IT mangers. The plan was primarily meant to focus on how IT could provide support to the business processes in the pharmaceutical company by stipulating the maintenance projects, investments along with changes in the staffing requirements and IT infrastructures. The IT governance includes the four stages of planning, implementing, managing and assessing. The planning stage necessarily involves identifying the governance requirement needs such as the meeting of compliance needs, adherence to policies, enhancing business values and meeting the service levels. The planning process in Richter begins with communication with the IT leaders about the infrastructural issues in the forthcoming years. The planning process could include the affiliates on decisions to determine the level of staffing for the coming year. The implementation phase included determining the policies and measures to be applied, specifying the automation and support tools, rolling out solutions towards the organization in stages, monitoring and measuring and finally determining whether targets are met and making adjustments accordingly. In this case the business needs were identified across all departments in the organization. For example it was the responsibility of the owners of data to submit their proposals for the potential IT projects. Decisions were provided weight age in terms of costs, savings, process improvements etc. this was followed by the number of staff and skills required for implementing the plans. In certain cases, people were reallocated to different job responsibilities as per requirements to meet targets. The phase of assessing is executed through identifying the changes in revenues through sales after implementing the change programs. Te sales figures measured against the budgets allocated depicted a good reflection of the success of the programs (IBM, “The governance lifecycle”). Szucs’ future strategies Present IT structure against growing demands of the organization The present IT structure in Richter seems inadequate for meeting the growing demand in the organization. The situation is described elaborately to bring out the shortcomings of its present structure. Firstly the organization was completely linked with infrastructure and every year the number of employees was also increasing. Thus the demands for systems have also been increasing. This is complemented with increase in service volumes. This has called for the need for outsourcing help desks. At the same time it is also felt that the organization needs to design and implement applications and new technologies. The shortage was realized in terms of meeting the growing demands for services. According to Szucs this shortage could be met by outsourcing the new technologies. In this context an example can be stated. For example, the internet protocol phones were set at the new research centre of the company. The option which Scuzs sought was to employ a third party to manage the rollout of remaining IP phones with the aim to remove pressure on the IT structures. Thus it is apparent that the present IT infrastructure in the organization remained short of the growing needs for services. This called for the outsourcing of activities and employing of third parties in sharing activities. Degree of central control over IT affiliates The case of Richter reflects the fact the affiliates must largely brought under central control. Although it is apparent that affiliates do not have any issue regarding reporting to the management, it is felt that they must also be brought under central control and directly report to the Hungarian head. With the increase in the number of staffs and rising of profiles of then international SAP staffs, the need for greater IT governance and systems have increased. However one drawback has been identified with regards to centralizing the system completely. It would become extremely costly in human resource and financial terms in managing all operations centrally. Moreover the fact that a number of retail pharmacies have been set up in Romania, the number of sites have increased which would increase the costs of central control even further. However it must be realized that with the increase in the number of sites the need for integrating the system would be increased further. It is important for the central office to attain greater control, integration and efficiency of the cross company processes and systems. Moreover central control of affiliates is also supported by the fact that it would lower costs associated with current systems and it would also help the organization to support innovative and new activities. In addition to this the centralized infrastructure would also provide the system security benefits. With the ever increasing IT departments and multiplication of the accompanying standards greater risk management could be attained through a centralized infrastructure. Reference CGI. CGI’s approach to driving business value within managed services engagements. No Date. IT Governance. October 11, 2011. . IBM. The governance lifecycle. 2007. Operational IT governance. October 11, 2011. < http://www.ibm.com/developerworks/rational/library/may07/cantor_sanders/>. Read More