Global Information Systems and the Associated Challenges - Report Example

? Global information systems and the associated challenges By: inserts his/her s Department’s name Dramatic changes in the field of information technology (IT) have spurred the dramatic growth of transnational corporations which has fuelled the need for integrated, global information systems. This has given birth to the concept of aligning the business goals with technology layouts in most firms today. Information systems have provided a decision making infrastructure for global businesses in the midst of a digital economy whereby communication is dependent on the internet, mobile and fiber optics cable. Information systems have, therefore, had a profound effect on the performance of global businesses by transforming their ability to deliver value to customers (Czinkota et al., 2005). However, the application of information system has unfortunately stemmed on the basis of companies’ internal operations with little focus of the global paradigm. This means that international requirements, including cross-cultural differences, have yet to be fully materialized into the information systems used by these global businesses. Most often global information systems are evaluated from the same perspective as their local counterparts; however, the former demands attention to some particular aspects. An integrated and holistic information systems approach has enabled organizations conduct business processes online (e-business), co ordinate upstream and downstream supply chain partners (e-commerce) and enable entrepreneurs streamline their innovative ideas and creativity (Pearlson & Saunders, 2009). The key to competitive advantage in today’s world, therefore, does not lie in traditional cost reduction or differentiation techniques but in rapidly adapting to changing customer tastes and implementing learning and innovation to product offerings in real-time (Phillips & Haag, 2009). As an extension to Porter’s resource based view, researchers explored the direct positive relationship between effective information management and company success by explaining how information used could enhance the organization’s learning, innovation and creative abilities. The virtual value chain is centered on the notion of seamless flow of information across all levels of the organization that enable it to deliver value to its customers. Therefore, information systems have been linked to the dramatic improvement of the value chain, marketing strategies, customer service and internal communications framework. However, “global” information systems go far beyond just that. Global businesses face a number of constraints on the number of locations in which they decide to operate internationally. Challenges such as those related to networking and communication, socio-economic and political risks, differences in culture as well as unfamiliarity with the market all limit organizations’ capacity to operate effectively in the global marketplace (Czinkota et al., 2005). It is here that information systems have truly transformed global businesses. Researchers who highlighted the strategic importance of IS demonstrated the relationship between IS and business strategy and went on to state that information systems were necessary in achieving a competitive edge for the firm (Peppard & Ward, 2004) (Pearlson & Saunders, 2009). There have been various studies examining the relationship between successful firms and effective use of information systems. However, it is not clear whether these systems have a direct relation with the firm’s success or whether they are merely a part of a portfolio of resources that enables firms achieve competitive advantage. Furthermore, most companies have now started to outsource IS in their organizations. This handing over of IS to third parties in itself contradicts the view that IS serve a strategic function in organizations. Despite increased popularity of outsourcing of IS in organizations, the slogan of keeping IS intact with the ‘core’ aspects of organizations has reverberated with firms who desire to stay intact with the core aspects of IS in order to achieve competitive advantage. This traditional perspective has been called into question by Mark and his peers in Harvard Business Review who state that outsourcing of IS has always projected the tactical (as opposed to strategic) nature of IS and that organizations need to focus on the strategic aspect of IS rather than using it for mere operational needs (Ang & Straub, 1998). According to them, organizations need to rethink their business strategy which includes the choice of whether or not to outsource the IS function. The conventional view was to divide IS into strategic and non-strategic uses and then allocate the non-strategic uses to outsourcing. This view has been discarded lately. For instance, the customer service function was considered a strategic function in organizations at one time since it involved establishing an interface with customers (Khosrow-pour, 2006). However, since this function can easily be replicated, other players in the industry can do this job in a cheaper and better manner. Hence, the focus has shifted from using IS in core or strategic functions to using it for functions that are rare and cannot easily be replicated. Keeping this view in mind, the authors have suggested that companies ought to analyze every activity in their value chain and decide if the company can do it best or if that activity needs to be outsourced (Khosrow-pour, 2006). The notion of ‘dynamic sourcing’ (as termed by the authors) would allow companies greater ability to deal with multiple IT vendors when they outsource it (Khosrow-pour, 2006). According to a study which analyzes IS in the context of Porter’s five forces, IS comes out as a strategic tool by which companies can effectively engage customers, monitor their external environment and respond to changes in real-time. However, the extent to which this competitive advantage delivered by these information systems is sustainable is questionable. Furthermore, in a study by Peppard and Ward it was pointed out that the focus ought to be shifted from seeing information systems from a strategic perspective towards the notion of “IS capability” (Peppard & Ward, 2004). Thus, information systems have taken a step further on the spectrum, moving from mere operational uses to managerial and strategic uses to a capability based use of IS. In an empirical study Kettinger et al. discovered that the benefits gained by organizations from strategic use of IS are debatable (Peppard & Ward, 2004). These payoffs were realized in the short term and were generally not long lived. Although strategic uses of IS lead to the first-mover advantage, this advantage is usually replicated and is therefore not sustainable. This is aggravated by the fact that IS applications lack patent protection and that the IS ‘recipes’ or software cannot be kept secret considering that they are shared amongst a large, complex stream of supply chain partners (Peppard & Ward, 2004). Also, since technology is freely available to all participants in the industry, the extent to which firms innovate and then adapt their technology determines their continued success. Thus, in order to generate continuous value from IS investments; organizations must control their information systems in a way that they are positioned differently from competitors. IS capability is therefore a tacit force that manifests itself in overall business performance. Too much focus on the strategic use of IS has led researchers to overshadow the instruments and methods to be used for developing IS capability in order to realize its full potential. The new model encompasses three levels namely the resource, organizing and enterprise level (Peppard & Ward, 2004). The first level encompasses the resources required to realize IS competencies (Peppard & Ward, 2004). The organizing level encompasses the structure, processes and roles required to realize the former (Peppard & Ward, 2004). Finally, the enterprise level recognized that capability is manifested in business performance (Peppard & Ward, 2004). The extent to which information systems are used as a strategic resource ultimately depends on the organizational strategy and decisions pertaining to investment in IS. Therefore, many firms have been able to realize strategic benefits from IS but few have been able to sustain these gains. Hence, organizations have now entered a fourth generation in IS development in which companies’ success is greatly dependent on IS capability. This is in contrast to the previous era of strategic information systems whereby decisions pertaining to the most profitable set of IS investments had to be made in order to achieve business strategy. These decisions have now become more complex since the range of IS applications has increased manifold and, therefore, demand innovative approach to drive business changes in order to generate value (Peppard & Ward, 2004). The strategic information systems era further assumed that any organization that could effectively assess and align its IS strategy would be able to achieve competitive advantage. This is no longer true in the current era as it is not believed that firms will not be able to achieve a sustained business edge unless they have a history of effective IS implementation through which they have developed the necessary competencies. Therefore, focus has now shifted on the procedure by which organizations constantly learn and evolve from their past experiences in IS management rather than focusing on what technology can deliver or what alignment needs to be made (Peppard & Ward, 2004). Nevertheless, the strategic information systems paradigm has not yet become redundant; rather, it has become a subset of the fourth paradigm (Peppard & Ward, 2004). Much too often management is led to believe erroneously that mere possession of the latest information systems will lead to magical benefits. It is now believed that organizations must possess inherent potential and inert capabilities in order to effectively exploit the gains from use of information systems. This process involves developing competencies that enable companies exploit the information systems to their maximum potential. The strategic management of global information systems, therefore, requires companies to evaluate not just the relative gains from different information systems options but also their capabilities to generate those benefits (Peppard & Ward, 2004). Given the mounting significance of these systems, it is surprising how companies remain ineffective in exploiting their benefits fully. Research indicates that the improvement of global information systems is one of the most pressing issues for management in global businesses. Amongst the most commonly sighted challenges faced by companies are the non-alignment of the company’s strategy with IT strategy, technical as well as social barriers, insufficient management support, and inadequate user involvement in the stages of definition and planning of IT projects. The complexity of problems faced by firms in the global world particularly increases due to cross-cultural differences (Turban & Volonino, 2012). In most cases, the individual managing the IT project is not sufficiently familiarized with the language, customs, market size, rules and regulations, culture and local vendor support in foreign land. Even the simplest of projects that are successfully accomplished in the local setting fail to materialize globally due to the complexities involved. According to a research, the support of top management during implementation of international information systems is cited as one of the most crucial success factors for firms using international information systems (Turban & Volonino, 2012). This is followed by competent business processes that are thoroughly understood, the deployment of cross-functional teams and the maintenance of coordination and communication across various functional areas. Research suggests that even though the top management had indicated the significance of forming cross-functional teams to handle global IS projects, implementation never took place according to the plans (Flynn, 1994). Training and development of employees is cited another success factor. Having moved from mere international information systems to global systems, the complexities extend far beyond the ones stated. These shall now be explored in greater depth. Even the most simplistic analysis of the role of information systems today shall reveal that the role of information systems in the global context is not that of automation but of unleashing the business’s potential. Information systems have moved beyond their predecessor- information technology as the environment has grown more complex. According to a study conducted by Dussauge et al, managers at the top level in Fortune 1000 companies recognized the blooming strategic significance of information systems (Dussauge et al., 1992). However, according to the same study, there was a strong divide between the ‘accepted’ importance of information systems and the attention it got from the top management (Dussauge et al., 1992). In several cases the top management envisaged information technology as necessary but difficult to administer. Owing to this perceived difficulty, top management often delegates decisions pertaining to information systems to those down the organizational hierarchy. This prevents the ‘strategic’ use of technology since employees at the operational and tactical level were not typically involved in forming strategies pertaining to global business decisions. Therefore, the alignment of information systems with business strategy becomes difficult in this case. Another significant issue in the management of global information systems is the cross-cultural differences that exist across borders. Workers at all levels of organizations are bound to come across the use of information systems on a regular basis for one task or the other. Therefore, their contentment with the information systems is said to impact the contentment of workers with the firm as a whole. Based on Hofstede’s understanding of the five parameters of culture, research has suggested a strong link between national culture and information technology (Johnson & Turner, 2003). A research conducted by Peter, Kim and Kim depicted the varying perceptions of US and South Korean IS professionals regarding the objectives of these systems (Peterson et al., 2003). The time-orientation parameter of Hofstede led the researchers to hypothesize that US professionals would give priority to long term objectives than their South Korean counterparts. Information systems developers in South Korea pay much more importance to monitoring and control of the project’s leader than their U.S counterparts owing to high power distance in the former culture (Peterson et al., 2003). Thus, culture can cause variations in perceptions about IS objectives and critical success factors. According to research by Leidner et al., cultures where uncertainty avoidance was high had lesser confidence in information derived from Executive Information Systems (EIS) than otherwise (Leidner et al., 1999). Furthermore, information obtained from EIS had more worth in low-context societies than their high-context counterparts. Thus, the managerial mindset must be conducive to successful implementation of information systems. Leidner’s study also predicted that economic and political conditions were important determinants of the effectiveness with which IS was used by firms (Leidner et al., 1999). It has been discovered that economies where the level of information systems penetration is low and the concept of these systems is new experience greater satisfaction than those cultures where the rate of technology adoption is already high (Simon, 2001). Another issue is the dearth of experienced IT professionals and technicians in some countries. For instance, Netherlands experienced serious shortage of IT technicians in the past because of which it had to provide incentives to recruit retired programmers (Edberga et al., 2001). Furthermore, certain software is preferred more in some countries than others. For instance, a company was taken by surprise when it discovered that Sybase was considered very popular in Europe as a database development system than Oracle (Edberga et al., 2001). This required a tough decision of whether or not to give up on Oracle which had already been standardized on by the company. The decision involved heavy opportunity costs. In order to continue to use Oracle in Europe, the company would have to expensive Oracle programmers (who would be scarce) and train them. Another way would be to use Sybase in Europe (Edberga et al., 2001). This decision would involve no training and the cost of programmers would be far less; however, the integration of systems would be a strenuous task (Edberga et al., 2001). Closely related to this is the uneven pattern of IS education across the globe. U.K, for instance, lacks skilled IS technicians because of increasing attention paid to computer literacy or IT than IS education in higher schools (Flynn, 1994). Ireland, on the other hand, boasts an economy which is heavily dependent on IS and offers degrees in the field of IS (Flynn, 1994). Therefore, it has an educated and trained IS workforce which translates to low training costs for MNCs. Global information systems need to strike a balance between standardized processes and customized policies based on the region in question. These paradoxical objectives need to be addressed in the light of local policies regarding taxation, accounting practices, customs and language that differ from one region to another. For instance, laws pertaining to data privacy hugely impact cross border flow of data. France, for example, has laws that restrict government and private decisions made on the basis of automated data (Flynn, 1994). Likewise, in Sweden, laws exist that prevent firms from releasing data relating to the Swedish citizens across its borders (Flynn, 1994). Thus, law enforcement pertaining to protection of data may vary from mere self-compliance to stringent regulatory requirements. Similarly, language inhibits complete standardization of global information systems. For instance, software programs cannot be based on the English language for all regions. The ASCII language, for example, does not take into account some ‘characters’ of British language, including the pound symbol (Flynn, 1994). Therefore, global information system management requires determining which activities and tasks demand global IS solutions and which ones require customization to local needs. Determining the extent to which information systems would be standardized as opposed to customized would require rigorous communication between various corporate units across the globe. Most companies these days prefer to standardize their global information systems to a large extent, and then implement these using local teams (Dean & Karwan, 1994). Rigorous communication across the globe requires virtual meetings and teleconferencing today. Therefore, IS are improving the efficiency and productivity of MNCs today (Elliot, 2004). Also, global businesses find it difficult to set up a coherent, uniform IS architecture since the technical specifications of hardware differs from country to country depending on the vendor (Elliot, 2004). To conclude, in the light of the volatile external environment that exists today, planning of global information systems requires incorporating flexibility and resilience into these integrated systems. In order to maintain their business edge, organizations must rapidly adapt to changing customer tastes and trends which requires real-time adjustments to global information systems. Global businesses do not generally produce standardized products; there is always some customization based on regional characteristics. Thus, IT resources cannot be standardized to accommodate for such customization. Furthermore, as companies conduct business across borders, their attention is increasingly drawn towards strengthening their local existence. The flow of information across various supply chain partners in different locations therefore increases. Another issue is that of elimination of time from business processes. The firm’s information systems must transcend the time barrier so that the company is able to respond in real-time to its partners. References Ang, S. & Straub, D.W., 1998. Production and Transaction Economies and IS Outsourcing: A Study of the U.S. Banking Industry. MIS Quarterly, 22(4), p.535. Czinkota, M., Czinkota, M. & Moffett, M.H., 2005. International Business. New Jersey: John Wiley & Sons. Dean, P.C. & Karwan, K.R., 1994. Global Information Systems and Technology: Focus on the Organization and Its Functional Areas. London: Idea Group Publishing. Dussauge, Pierre, Hart, S.L. & Ramanantsoa, B., 1992. Strategic Technology Management. Chichester: John Wiley & Sons. Edberga, D., Grupeb, F.H. & Kuechler, W., 2001. Practical Issues in Global it Management: Many Problems, A Few Solutions. Information Systems Management, 18(1), pp.34-46. Elliot, 2004. Global Business Information Technology: An Integrated Systems Approach. 1st ed. Essex: Pearson Education Limited. Flynn, J.A., 1994. 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