The Use of IT for Strategic Collaboration between Businesses - Research Paper Example

Business Information Systems: The use of IT for strategic collaboration between businesses Introduction Through the years, many technological products and services particularly Information Technology (IT) tools had and are currently having optimum applications and uses in maximum spheres of human lives. These technological products and importantly IT products and services are being used in many organizations or business. Organizations all over the world have incorporated IT in every aspect of their functioning. From carrying out simple operations to high level advanced operations, IT and its related products has become a ubiquitous entity in organizations. “It is largely discussed in the literature that IT role in organisations can vary from simple administrative support to a strategic position (Henderson and Venkatraman qtd in Laurindo and Moraes 2006). This is quite visible in pan-national organizations like World Bank. World Bank, as the name suggests, has operations throughout the world and to handle its extensive operations, Information technology has been incorporated in to its functioning, with the scope to integrate more. So, this paper will focus on World Bank , analyzing how IT is being used in World Bank for strategic collaboration between business (or branches) and will also recommend additional solutions to the problems faced by World Bank. Background World Bank was owned, financed and run by 184 member countries. It is the world’s largest provider of financial assistance for many developmental activities that are being carried out throughout the world, specifically in Third World countries. “…Bank supported efforts including building schools and health centers, providing water and electricity, helping to create a better investment climate and more efficient public sector” (Applegate et. al 2003). Through these initiatives, World Bank has become a significant partner with member countries, to eradicate poverty, by helping people to help themselves. That is, by providing resources, sharing knowledge and through other steps, it tries to elevate the standard of living of the people. When it comes to low-income countries, World Bank gives them interest-free loans and importantly gives them around 35-40 years to repay the loans, with a 10 year grace period as well. Under the aegis of World Bank, there are many specialized agencies focusing on specific aspects of developmental assistance like IBRD, IDA, etc. The term,”World Bank Group” encompasses five institutions. The term “World Bank” refers specifically to two: IBRD and IDA. Apart from developmental assistance, World Bank’s ‘radar’ covered many social problems like the AIDS problem. And to combat it, the Bank has provided more than $1.6 billion in the last few years. So, with this much functionality, World Bank has to have a sound, foolproof and efficient operations management, to avoid any problems. That is, World Bank is an omnipresent organization with branches all over the world and importantly the Bank is funding all the above mentioned projects from building schools to combating AIDS. So, as its operations are very extensive, it has to collaborate with all its branches and interests to achieve success. This is where IT comes into the scenario, as it helps to achieve certain issues or problems faced by World Bank. IT implementation Issues and Problems In the early part of 2000’s, World Bank and particularly its President James Wolfensohn set two main objectives to optimize its performance. The two objectives, which it wants to achieve, are decentralization and creation of a knowledge Bank. To achieve these objectives, World Bank has to incorporate Information technology into its functioning and so Wolfensohn put the responsibility on the Chief Information Officer, Mohamed Muhsin. “Wolfensohn turned to his newly appointed CIO, Muhsin and told him to revamp the information systems and build a global network.” (Applegate et. al 2003). Muhsin only oversaw the development and implementation of IT based strategies and services in World Bank’s operations. So, he was asked to formulate and implement strategies based on Information technology to decentralize the operations in a more effective way and to create a useful knowledge bank. That is, to achieve the objective of decentralization and knowledge bank, an alignment between business and IT has to take place and to aid that alignment, strategies has to be first formulated. According to Henderson and Venkatraman theory, strategic integration or alignment has to take place first, before business and IT integration is actualized or takes place. For the strategies and the operations to integrate and align, the basic business strategies related to the organization have to be formulated first. That is, after formulating the business strategy only, the IT strategy can be associated with it. Henderson and Venkatraman focused on this aspect of strategy formulation by formulating the “Strategic Alignment Model” (SAM), which analyses IT’s strategic importance in the companies. According to this model, in order to plan or associate IT based strategies, four important factors should be considered (i) business strategy; (ii) IT Strategy; (iii) organizational infrastructure and processes; (iv) infrastructure of information systems and processes. The basic premise of the Strategic Alignment Model is that an effective IT requires a balance between the decisions in all these four factors (Laurindo and Moraes). Among these factors, business strategies have to be firstly formulated and in the case of World Bank, its main business strategy is to decentralize its operations and strengthen its knowledge bank. Decentralization in the sense, the World Bank wants its business operations to be made little closer to the clients. For that, it wants the decision making process to be decentralized or given to the branch offices in more than 100 client countries. If the branch offices are decentralized and provided the collaborative tools, it would help the far-flung Bank staff and other stakeholders work more closely and effectively. Even while decentralizing its operations; World Bank needs constant communication with those branches offices and its staff, to ensure smooth flow of instructions and completion of given work. This is the main business strategy World Bank and James Wolfensohn wanted to implement and to effectively implement this strategy, the IT based products or services has to aligned or incorporated with it. “Efficiency is associated to the use of resources, while effectiveness is associated to achieving goals and objectives and with requirements satisfaction” (Laurindo and Moraes). So, as espoused by Henderson and Venkatraman’s SAM model, the first two factors of Business strategy and IT strategy can be aligned. The World Bank also formulated another business strategy relating to the creation of a knowledge bank. That is, the Bank wanted to integrate the various solutions or plans that may be formulated by the Banks’ staffs or management at different countries, for a specific problem. If different and successful ‘assembled’ solutions or plans are integrated in the form of a knowledge bank and made easily accessible, it can be accessed by the branches or staffs any where. These branches and staffs can use those solutions for their problems, which may happen in their country or in their locality. So, this business strategy of forming a knowledge Bank by collecting, integrating, consulting, collaborating, etc, will aid World Bank to actualize many successful projects all over the world. But, all the successful solutions and plans in both the written or in digital form cannot be accessed by the people, who may need it, without a channel. So, here again, IT functions has the channel and can be used to collect and integrate all the solutions and plans, as form of knowledge bank. Then can also be used to help the people to access it, without traveling any physical distances. Thus, IT strategy aligns with the business strategy of knowledge bank. That is, as mentioned before, the SAM model mainly focuses on the alignment of business strategy and IT strategy and in the case of World Bank, this model gets clearly fulfilled because both its business strategies needs IT products and services. “… according to Henderson & Venkatraman (1993), IS alignment is the internal fit and functional integration between business strategy and IS/IT strategy and how this integration is important to gain a competitive advantage” (Azab 2005). As decentralization and creation of knowledge bank needs IT, it can be clearly assumed that an alignment has successfully taken place between business and IT. Then, according to Henderson and Venkataraman’s SAM model, the third factor which accentuates Business and IT alignment is the organizational infrastructure and processes. That is, only if the organizational infrastructure is tuned according to the objective, it can help in implementing the business strategy successfully. In the case of World Bank, its objective of decentralization and knowledge bank creation can be achieved by slightly modifying its processes particularly in relation to its hierarchy. That is, World Bank has to reorganize its hierarchical structure or processes, so that the top level managements’ powers are reduced and the staffs working in branches are organized primarily around regional geography. It that is done, a matrix of networks and regions will be formed, which will aid in achieving the objective of decentralization and knowledge creation (and also sharing). Importantly, the alignment of IT to business can be effectively actualized, if the infrastructure of information systems and processes is developed and optimized. That is, all the IT products have to develop a sound physical as well as virtual infrastructure. In the case of World Bank, this aspect was being taken care and thereby aiding in the achievement of the two objectives. That is, as mentioned above decentralization and knowledge bank can be actualized only if IT is incorporated into its functioning. To incorporate IT, IT related products have to be used to create a structure. Robust information management architecture was created to provide a solid foundation for the next generation of web services and portal applications (Applegate et. al 2003). Then as part of changing IT infrastructure, World Bank was able to provide videoconferencing services to country staff and clients from 110 country offices and other centers. Along with this service, World Bank also used geostationary satellites to optimize its IT infrastructure and thereby aid in the achievement of the two objectives. World Bank to achieve this objective even more optimally has to align IT into its functioning in a even more optimal manner. So according to Henderson and Venkatraman model or theories, this alignment can take place with the formulation of business strategy, followed by changes in the organizations and IT infrastructure. So, World Bank was able to achieve that alignment by making the necessary changes to its infrastructures. But, even while achieving its alignment and the resultant objectives, World Bank can improve further and for that Muhsin challenged himself to think of new and innovative ways, the Bank could increase the leverage of IT. Recommendations “The dynamic evolution of enterprises’ business, driven by new technologies, competitive pressures, regulatory changes and other factors, demand immediate IT support” (Plazaola et. al 2007). Among the many IT tools that can be implemented in the effective management of World Bank’s communication structure and thereby achieve its two objectives, VoIP and MPLS can be optimally useful. VoIP or Voice over Internet Protocol is a method which can be used to make long-distance phone calls with internet as the connecting and transferring medium. . “…is a technology that allows you to make voice calls using a broadband Internet connection instead of a regular (or analog) phone line” (Federal Communications Commission). MPLS or Multi protocol Label Switching is another IT based technology which has the ability to speed up the ‘traffic flow’ in the complicated maze of computer networks. That is, with the World Banks’ operations having a widespread presence, the IT product of VoIP can be incorporated into the business strategy and to provide voice based communication through internet. Henderson and Venkatraman (1999) state, that inability to realise value from IT investments is in part due to lack of alignment between business and IT strategies of organisations (Bricknall et. al. 2007). Transfer of combined format including voice signals and also data can also be done through VoIP. “…network configuration will benefit if the voice traffic is compressed as a result of the low bandwidth available for this access application” (International Engineering Consortium). So, effective voice and data transfer with optimized video conferencing facility between World Bank’s headquarters or head offices and the branch offices will be possible, thereby actualizing good communication and decentralization at lower costs. Likewise, MPLS technology can help by providing the setup for the safe and fast transfers. Although MPLS networks work integrating with internet, they are of ‘privatized’ nature with a private IP address, thereby providing security. “While these circuits usually ride the same backbone as the carriers Internet traffic, they arent public circuits, and they have a private IP address” (Davis, 2006). “IT is still critically important in today’s business world in terms of organisational efficiency and effectiveness and business competitiveness. Today’s businesses could not survive, let alone compete without appropriately well designed and well implemented IT systems” (Marshall et. al 2007). So, these two technologies are viable options that can be implemented in World Bank’s operations along with the existing IT structures to further optimize its two objectives of decentralization (thereby improving further collaboration) and knowledge bank. Reference: Applegate, LM, Austin, RD and McFarlan, FW 2003, Corporate information, strategy and management,. McGraw-Hill Irwin, New York. Azab, NA 2005, Investigating IT-Business Alignment in an Egyptian Medium-Sized Enterprise, European and Mediterranean Conference on Information Systems, Egypt, Cairo Bricknall et. al 2007, Aligning IT Strategy with Business Strategy through the Balanced Scorecard, Proceedings of the 40th Annual Hawaii International Conference on System Sciences, p.235b. Davis, D 2006, Learn the pros and cons of MPLS, viewed on December 7 http://articles.techrepublic.com.com/5100-1035_11-6058602.html Federal Communications Commission, IP Enabled Services, viewed on December 7 http://www.fcc.gov/voip/ Laurindo, FB. and Moraes, RO 2006, Processes for Ex-ante Evaluation of IT Projects case Studies in Brazilian Companies, Cited in Issues in Informing Science and Information Technology. Volume 3. International Engineering Consortium, Voice and Fax over Internet Protocol (V/FoIP): VoIP Applications, viewed on December 7 http://www.iec.org/online/tutorials/vfoip/topic01.html Marshall, P, McKay, J and Prananto, A 2004, A Process Model of Business Value Creation from IT investments, ACIS. Plazaola, L et. al 2006, Strategic Business and IT Alignment Assessment: A Case Study Applying an Enterprise Architecture-based Metamodel, 41st Hawaii International Conference on System Sciences Read More