Strategic Management of Information Systems - Term Paper Example

Strategic Management of Information Systems Table of contents 0 Introduction 3 2.0 IS strategy and business strategy 4 2 Analysis of the company’s business strategy and IS strategy for competitive advantage and organisational transformation 4 2.2 Integration and alignment of IS strategy and business strategy 8 2.3 Critical evaluation of IS/IT investment 9 3.0 Recommendations for a risk management strategy 10 4.0 Conclusion 12 5.0 References 12 1.0 Introduction The evaluation of organizational performance is critical in order to understand the status of various organizational sectors and to identify issues that should be addressed with no delay. Such evaluation needs to be developed periodically so that the effectiveness of existing business strategy is checked and changes are made, when necessary, according to the organization’s goals and objectives. In practice, it has been proved that certain business sectors can affect business strategy at a higher level, compared to other sectors of the same organization. The Information Systems (IS) can be considered as an example of such sector. In fact, it seems that the interaction between IS strategy and business strategy is quite close. This means that the success of business strategy is highly depended on the effectiveness of IS strategy and vice versa. On the other hand, the intervention of IS strategy on business strategy is not standardized, as of its level; rather differences can be identified across businesses in different industries. The relationship between the IS strategy and the business strategy is explored in this paper by referring to a particular organization. The firm operates in the financial services industry; it is implied that the dependency of the firm on IS systems is strong. During the last 3 years the firm has managed to achieve a rapid growth, a fact that has been related to the effectiveness of its IS. However, failures, at operational level, have not been avoided, a problem that could affect the business performance in the long term. The presentation and analysis of the firm’s IS strategy and business strategy could help to realize the role of these strategies in the achievement of competitive advantage and the criteria that a successful investment on IS systems should meet. At the next level, recommendations are made for developing a risk management strategy so that the chances for severe organizational failures in the future are minimized. 2.0 IS strategy and business strategy 2.1 Analysis of the company’s business strategy and IS strategy for competitive advantage and organisational transformation Within each organization IS can have a different role. For example, there are IS systems that are developed for addressing specific business problems (Oz 2008). There are also IS systems that are introduced only for ‘creating opportunities’ (Oz 2008, p.42). These opportunities aim to help an organization to increase its competitiveness in its industry, either at local or international level (Oz 2008). The above IS systems are also known as ‘strategic information systems, SIS’ (Oz 2008, p.42). These IS systems are of critical importance for business growth, at higher level than the IS systems of the first category. Rainer and Cegielski (2010) supported that strategic IS are quite powerful in enhancing business competitiveness. It is explained that such target can be achieved by these systems by supporting the organization when trying ‘to implement its goals and to increase its performance’ (Rainer and Cegielski 2010, p.45). According to the above, when having to evaluate the IS strategy of an organization emphasis should be primarily given to the following task: the role of IS within the particular organization should be identified. Then, the interaction between IS and business strategy could be checked and described. Through a similar point of view, it has been supported that an IS strategy can be characterized as effective when it can help the business ‘to achieve its goals’ (Khosrowpour 2002, p.412). It is explained that such target can be achieved only if failures when managing the firm’s information systems are kept at low level, a task that can be quite challenging (Khosrowpour 2002). Indeed, it seems that IS are highly vulnerable to failures a phenomenon which is made more intensive in businesses that do not have the resources required for supporting the various functions of their information systems (Khosrowpour 2002). The above view highlights the following issue: IS can support business strategy only if they are offered the necessary resources so that their functions are fully supported. Thus, a business strategy can enhance business competitiveness only if it can secure the availability of resources for covering the needs of its functions/ sub-strategies, including the IS strategy. At this point, the following fact should be made clear: when a business strategy can result to the development of competitive advantage? Most commonly, such advantage is developed when business strategy includes the exact steps through which the potentials of the firm, in regard to one or more business operations, are maximized (Oz 2008). The above target can be easier achieved by using information systems (Oz 2008). For example, in the context of a business strategy the decrease of costs is set as a method for increasing competitiveness (Oz 2008). However, such target cannot be achieved unless certain working hours are reduced; this target can be achieved especially by employing IS, as possible, in daily business operations (Oz 2008). In addition, not all IS are able to secure the development of competitive advantage. Rather, such potential is feasible only to information systems that are carefully planned so that their exposure to threats, internal and external, is low (King 2009). In this context, it has been proved that strategic information systems (IS) have to meet specific requirements as of their structure: they need to include networks for supporting the transfer, storage and process of data of all types and they should guarantee the access of users in all organizational units, or at least in those units where a relevant authorization would be available (King 2009). Sousa and Oz (2014) have made clear that information systems can be strategic only if they are managed effectively and not if they just employ advanced technology, as in such case their performance cannot be secured. In any case, an organization can develop strategic IS even if it has no experience on such systems, i.e. even if it introduces these systems for the first time trying to secure its competitiveness (Sousa and Oz 2014). Based on the above, the business strategy of the company under examination could be characterized as effective in developing a competitive advantage since the following terms are met: a) the business strategy includes techniques for increasing the competitiveness of the organization. Reference is made specifically to the limitation of time required for assessing customer’s orders in regard to financial transactions of various types. Another technique of such kind is the following: the use of machines of specific technology is suggested for providing to customers the chance to access their account and to make financial transactions without contacting the customer services department of the organization. These machines are based on Internet banking and can be connected to the computers of the firm’s customers without particular requirements, like a common storage device. Through the above option the volume of work related to customers’ orders is reduced, a fact that allows employees in customer services units to focus on the management of customers’ complaints. As a result, solutions to customers’ problems can be retrieved quite rapidly, a fact that enhances the competitiveness of the firm; b) the business strategy includes provisions for securing the support of its sub-functions, including the IS strategy. Indeed, according to the business strategy a review of the firm’s IS takes place every 3 months, so that business software and hardware are updated according to the technological trends. In this way it is ensured that the orders and requests of the customers are processed rapidly and with no failure, as of the data exchanged/ transferred. In the same context, the IS strategy of the organization could be characterized as being able to contribute in organizational transformation and the achievement of competitive advantage due to the following reasons: a) IS networks have been developed for ensuring the availability of a high range of data to all business units, b) IS units are checked on a monthly basis as for their performance; updates are made, if necessary, for ensuring high speed in data processing and protection against threats, such as fraud or system failure, c) the firm’s employees are offered necessary training so that they are able to manage the IS appropriately; a 24/7 support center is available to employees for technical assistance in regard to their daily tasks. However, the following problem has been reported: the orders of customers are often categorized wrongly, i.e. without following an order according to the date when the order was placed. This phenomenon has led to delays in handling customers’ requests. A lack of effective communication between the central database and the sub-units/ computers of employees is clear. In addition, many customers have claimed that the devices provided to them for online banking are too slow; time for completing transactions through these devices can be long, a fact that significantly reduces the firm’s capabilities in regard to online banking. In other words, the IS strategy of the organization should be improved so that the effectiveness of the firm’s business strategy is not threatened. The relevant risks should be controlled by using the risk management strategy suggested in section three of this paper. 2.2 Integration and alignment of IS strategy and business strategy As explained earlier, the IS strategy in each organization can highly support business strategy, especially in regard to the achievement of competitive advantage. However, IS strategy could not play such role unless it is aligned with business strategy. At this point, the following question appears: when the IS strategy of firm is considered as being aligned with business strategy? Such case exists if ‘the goals and mission of the firm’s IS promote and are promoted by the goals and mission of the organization’ (Akpan 2007, p.23). In other words, IS strategy and business strategy need to have a mutual dependency in regard to their goals and mission. The specific view should be criticized as of the following point: IS strategy does not have the same power/ effects with the business strategy. Therefore, the two strategies cannot be considered as fully depended on each other; rather, IS strategy is more depended on business strategy. This view is verified through the literature developed in this field. For example, Venkatraman et al. (1993) have noted that IS strategy has a specific role in each organization: it has to support the business strategy in all its aspects, as possible; for responding to the demands of such role a business strategy needs to have a particular structure and content (Venkatraman et al. 1993, in Clarke 2012, p.81). In any case, IS strategy should not be viewed as an autonomous strategy but rather as a ‘functional strategy’ (Venkatraman et al. 1993, in Clarke 2012, p.81). Another fact that verifies the supportive role of IS strategy, as analyzed above, is the following: the IS strategy focuses on the effective management of information within each organization (Clarke 2012). However, information management is a critical part of business strategy. In this way, the role of IS strategy, as a framework that supports the achievement of business objectives, as included in business strategy, is made clear. In any case, integration between IS strategy and business strategy should be checked at an early stage, i.e. before proceeding to the acquisition of the IT systems of the organization; otherwise, it is possible for these systems to be proved as non-compatible with business existing resources and needs while the replacement of these systems could be quite costly (Misra 2013). In the above context, the integration of the IS strategy and the business strategy in regard to the firm under examination could be characterized as being at high level. This view is based on the following facts: a) provisions exist in the business strategy for securing the availability of resources for the update/ maintenance of the firm’s IS, b) the goals of the firm’s IS strategy are based on the same criteria as the goals of the business and c) the functions of the firm’s IS strategy cover all needs of the firm, according to the demands of its industry. 2.3 Critical evaluation of IS/IT investment In each organization IS investment needs to be decided taking into consideration the business objectives (Van Grembergen 2002). If no such practice is used then it is quite possible for the relevant investment to be proved as of no value, i.e. as having no chance to be paid back (Van Grembergen 2002). A similar problem can result when the chosen information system is not proved effective, i.e. if failures are reported while using this system in practice (Van Grembergen 2002). The functional failures of an IS are also considered as resulted to the loss of the relevant investment (Van Grembergen 2002). On the other hand, Barry et al. (2008) supported that the evaluation of an IS investment cannot be based only on technical criteria, but also on cultural criteria, such as the potentials of the relevant system to reflect the organizational culture, the alignment of the system’s use/ functions with ethics and so on. At the same time, it is suggested that such evaluation is not made shortly after the system’s implementation; rather a period should pass during which the system’s characteristics and performance would be monitored so that the assumptions made are not premature (Barry et al. 2008). In the firm under examination the evaluation of IS system should not be developed at this point of time, since the current IS system of the business has been established just 6 months ago. So far, failures have been reported in regard to two system’s functions: the orders/ requests of customers are not categorized appropriately while the devices aiming to help the customers to log in to the firm’s online banking service are too slow. These two failures could be possibly faced by making appropriate adjustments/ tuning to the systems’ software; in this way, the IS investment of the business could be characterized as rather successful – under the condition that the improvements required will be made the earliest possible. 3.0 Recommendations for a risk management strategy According to Stair and Reynolds (2011) the survival of the business in its industry can be achieved by taking into consideration the forces in its external environment; however, the competitiveness of the business requires, in addition, ‘the alignment of the firm’s IS strategy with the business objectives’ (Stair and Reynolds 2011, p.64). However, IS strategy may not have only a supportive role but also a controlling role; this function can be based on the provision of information required for checking the performance of critical points of business strategy, such as the terms of locating funds for supporting business operations (Galliers and Currie 2011). In this context, the risks related to IS strategy, as related to business strategy, can be many. For example, failure in employing the appropriate software can lead to severe damages in the process of daily business transactions. In general, when referring to a risk management strategy in regard to a particular information system emphasis is given to the ‘inherent risks of the system’ (Hingarh and Ahmed, 2013, p.112). These are the risks that are involved in the daily use of the system’s components/ parts, i.e. to the functionality of the system according to its technical standards (Hingarh and Ahmed 2013). The risk management strategy choosing for managing such risks can vary, depending on the systems’ structure and the characteristics of the industry involved (Hingarh and Ahmed 2013). The security of data processed and stored in a particular information system is the most common criterion when developing a risk management strategy for such system (Straubk et al. 2008). The firm under examination could use the risk management strategy suggested below. The strategy is presented in the graph in Figure 1; arrows have been used for showing the order of the strategy’s phases. The structure of the strategy has been based on the risk management strategy plan included in the study of Hingarh and Ahmed (2013, p.112-113). Ignore [The firm’s IT Managers should ignore minor failures of the system since their impact on the system’s overall performance is low] Transfer [Insurance could be secured for covering critical functions of the system, such as the loss of important parts of the system as a result of criminal activity] Replace [An alternative software framework could be developed which would be ready to use immediately in case of a severe failure/ collapse of the system] 4.0 Conclusion The involvement of IS in the enhancement of business competitiveness cannot be denied. In fact, it seems that information systems have a critical role in securing the achievement of business goals; in this way, the competitiveness of a business can be effectively supported. Schwalbe (2013) noted that IS can promote business competitiveness in different ways, according to the nature of its activities. For example, business competitiveness can be secured by offering ‘either low cost production or unique products’ (Schwalbe 2013, p.147). The literature review developed for this paper leads to a similar assumption. This means that the evaluation of the relationship between IS strategy and business strategy can be made on different criteria, depending on the characteristics of the industry involved. In the case under examination, the IS strategy of the firm has been aligned with the business strategy but without limiting the power of the latter, in the context described above. In addition, the business strategy addresses the needs of IS strategy at the level that other business needs are not threatened. As a result, the firm under examination has managed to keep its IS strategy and business strategy integrated. Moreover, the use of the risk management strategy suggested above could help to eliminate, or else to minimize, the risks involved, a fact that can secure the competitiveness of the firm in the long term. 5.0 References Akpan, E. (2007). Strategic Alignment: The Business Imperative for Leading Organizations. Mustang: Tate Publishing. Barry, C., Conboy, K., Lang, M. and Wojtkowski, G. (2008). Information Systems Development: Challenges in Practice, Theory, and Education. New York: Springer. Clarke, S. (2012) Information Systems Strategic Management: An Integrated Approach. London: Routledge. Galliers, R. and Currie, W. (2011). The Oxford Handbook of Management Information Systems: Critical Perspectives and New Directions. Oxford: Oxford University Press. Hingarh, V. and Ahmed, A. (2013) Understanding and Conducting Information Systems Auditing. Hoboken: John Wiley & Sons. Khosrowpour, M. (2002) Issues & Trends of Information Technology Management in Contemporary Organizations. London: Idea Group Inc (IGI). King, W. (2009) Planning for Information Systems. New York: M.E. Sharpe. Misra, H. (2013). INFORMATION SYSTEMS MANAGEMENT IN BUSINESS AND DEVELOPMENT ORGANIZATIONS: (Text and Cases). New Delhi: PHI Learning Pvt. Ltd. Oz, E. (2008) Management Information Systems. Belmont: Cengage Learning. Rainer, K. and Cegielski, C. (2010) Introduction to Information Systems: Enabling and Transforming Business. Hoboken: John Wiley & Sons. Schwalbe, K. (2013) Information Technology Project Management. Belmont: Cengage Learning. Sousa, K. and Oz, E. (2014) Management Information Systems. Belmont: Cengage Learning. Stair, R. and Reynolds, G. (2011) Principles of Information Systems. Belmont: Cengage Learning. Straubk, D., Goodman, S. and Baskerville, R. (2008). Information Security: Policy, Processes, and Practices. New York: M.E. Sharpe Van Grembergen, W. (2002). Information Systems Evaluation Management. London: Idea Group Inc (IGI). Read More