Chapter -07

Summary

Different ways to structure IS activities in an organisation

Different organisations will organise or structure IS in different ways in an organisation. Centralised organisations will centralise the IS, decentralised organisations would give the responsibility of IS to individual departments or units. In both the cases the responsibility of IS activities will given to experienced IS managers.

All organisations must make sure it’s IS architecture is positioned or organised according to its culture or structure.

IS architecture means the way in which IS assets such as hardware, software, telecommunications are positioned and connected, or the ways they interact each other.

We can position/organise/structure IS in three different ways such as;

• Position IS activities centralised.• Position IS activities decentralised. • Federalise IS activities.

First, we shall examine the traditional IS architecture positioning.

Concentrating IS activities in one department or Using IS activities in a single department of the organisation

In early days, IS activities were part of one department of an organisation. In most of the cases, a department such as Finance & Accounting used IS in an organisation. This structure worked well, when most users are in one area of the organisation, however there used to be problems when other departments begin to use IS.

Traditional model of positioning is activities in an organisation

Operation

Marketing HR FINANCE&ACCOUNTING

IS

A. Centralising IS activities ( centralised IS architecture)

According to centralised IS activities or architecture, a central IS unit is responsible for most computing activities. Any request for a new or updated system comes through the central IS department.

Advantages

1. System integration ( all systems are connected in the organisation)

2. Accessibility

3. Concentrated expertise ( main IT experts in IS of a company handles the systems)

4. Centralised IS suits the organisation that taken decisions centrally.

5. It works well where there is little communication between departments or units.

6. It gives high control and security.

Disadvantages

1. Centralised IS is highly inflexible.

2. Centralised IS architecture will be remote from individual business departments.

3. Different departments will have different information needs, so having a centralised system will not satisfy all departments.

Centralised IS architecture or activities

Operation

Marketing HR Finance &

Accounting

IS

B. Decentralised IS activities (architecture)

When IS architecture is decentralised, different units or departments in an organisation would become independent. It means that managing development, acquisition, operations and maintenance by individual units or departments. This type of structure is possible only when different departments are independent with little communication between them. The main advantage of decentralised IS architecture is that full independence.

Decentralised IS activities model

Operation

Marketing

IS

HR

IS

Finance & Accounting

IS

Characteristics of centralised and decentralised IS architecture

CENTRALISED DECENTRALISED

Focus on central database and maintenance . Focus on individual unit needs and problems.

New IS must be compatible with existing systems .

Growth of new systems.

If needs an update , it requires justification. Can change systems with little evidence of benefits.

Standardisation is the main feature. Lack of standardisation.

Focus on control. Not focused on coordination.

Users dissatisfied. Users can make changes in the system according to the needs.

C. Federalising IS

Federalise or distributed IS means, mixing centralised and decentralised approach together. Here departments have independence in developing and using IS, and at the same time controlled by central system over data and communication.

While adopting federal model, the companies must decide as which IS activities to be centralised, decentralised and outsourced.

This position or structure is suitable for an organisation that requires high interdependence to share data.

Federalised IS architecture

OPERATION

MARKETING

IS

HR

IS

Finance &Accounting

IS

IS

Summary

• Using internet for e-commerce is an example for centralised approach.

• Using ERP systems is an example for centralised systems.

Which is the best IS architecture structure or position for an organisation?

The suitability of position or structure of IS architecture depends on the structure and culture of an organisation.

a. For example an organisation, having high interdependence to share data and information, may choose Federal model.

b. When different departments of an organisation is independent, with little communication, decentralised model can be considered.

c. For organisations that make decision centrally, centralised model of IS is a good choice to make.

Describe different approaches to information management, and their centre of control, according to Weill and Ross.

Or Explain the different ways of positioning IS activities and decision making in a

company, based on the theory of Weill and Ross.

Weill and Ross identified five approaches to information management and their centre of control. According to this theory positioning of IS activities in an organisation is a battle of power and different interests. The five approaches are as follows;

1. Technocratic Utopianism – This is a technological approach, with emphasis on emerging technologies. This approach will lead to centralised IT activities. Here IT experts are very powerful.

2. Monarchy

Here senior management of an organisation decides the structure of IS activities. This is close to a centralised model.

3. Feudalism

Here information systems are managed by individual departments. This is close to federal model, with emphasis on decentralisation.

4. Federalism – here IS activities are managed by agreement and negotiation with different departments in an organisation.

5. Anarchy – here, we find the absence of any information management policy. In this approach, individual departments obtain and manage their own information. This approach leads to decentralisation.

Outsourcing or In-house ISM

While positioning IS activities in an organisation, the companies will have to decide;

1. Centralise?

2. Decentralise?

3. Federalise?

To avoid this problem while decision making, modern technologies offer two options to choose from;

4. Outsource ISM

5. In-house ISM

A. In-House ISM

In-house ISM is an approach, where the organisation would manage the IS activities by it’s own. For example, organisations can make a resource pool, where IS expertise is concentrated. It would work as an independent unit with IS expertise. Different departments can hire the service of this department within an organisation. ( check diagram 7.6 page – 191)

B. Out-source ISM

This is another approach of ISM in an organisation, where a third party(supplier) manages IS in the organisation. Here, the organisation and the ISM supplier will make a contract for fixed period and the supplier transfers people, assets and resources from organisation to manage IS.

There are three types of outsourcing activities to consider as follows;

1. Offshoring

2. Multisourcing

3. Application Service Providers

4. Offshoring

Is the activity of transferring IS to another country. Here ISM is done by a supplier from another country.

2. Multisourcing

It is about large outsourcing agreements, where different parts of IS in a company is managed by different suppliers.

3. Application Service Providers

Another development in IS outsourcing is considering the application service providers. An ASP is a company that provides, IS applications to customers(companies) over the internet.

Outsourcing helps an organisation to focus on core business activities, and leave the responsibility of ISM to experts. This helps the organisation to pay only for the required IS. Again, the rapid changes in the technology and problems of hiring good IS staff are other reasons making companies to outsource.

(See the diagram – page – 191 )

Advantages of outsourcing ;

1. Access to highly qualified know-how(expertise) and consulting.

2. Lower personnel(staff) and fixed costs.

3. Greater freedom to focus on core business activities.

4. Legal contract between the organisation and the supplier.

5. Organisations can use outsourcing to deal with the development in technologies.

6. Faster development or production of a product with the IS provided by suppliers.

7. Standardising business process.

Outsourcing has got the following disadvantages/risks/problems too;

• Outsourcing creates loss of control and creates dependency on the supplier. • Outsourcing creates loss of experienced employees. • It makes a company pay too much for service.

Principles that managers consider, before deciding to outsource from a supplier;

1. Are the systems truly or strategic?

2. Are we sure that our IS requirements will not change?

3. Even if a system is commodity(goods), can it be broken off?

4. Could IT in this company provide better solution than an outside provider?

5. Do we have the knowledge to outsource an unfamiliar technology?

6. What are the dangers while negotiating a contract?

7. Is there a possibility of making a contract minimising the risks and maximising the control?

8. What in-house staff need to do to have strong contracts?

9. What in-house staff need to do to get most from the contract?

While making a decision on outsourcing an in-house manager got two options;

• All activities to be carried out in-house. Here company owns the value chain.

• All non-managerial activities are outsourced from service provider.

When a company decides to outsource, they also need to make a governance or control programme.

Charging or the cost for IS activities

There are four methods to control and charge for IS activities.

1. Service centered cost – in this method IS services are considered free and the users do not pay for IS resources. Here non-financial goals are more important.

2. Cost centered method – in this method the users are charged the cost of IS resources.

3. Profit centered method – here the users are charged cost-plus or market price. Here IS act as a business unit.

4. Hybrid centered method – this is a mixed method, where some services are paid and some receive a central subsidy.

The way an organisation manage the charging of IS is based on the following factors;

1. The stage of use of IS – service centre, cost centre, profit centre or hybrid centre.

2. Structure of organisation – decentralised organisation tend to profit/cost services, centralised organisations may choose cost/hybrid the IS activities.

3. culture, power, people issues – charging for IS services is a formal approach, but offering them free is better for small and internal organisations.

4. Financial resources – according to the IT expenses organisations may decide the charging criteria.

5. Technology choices – according to the type of technologies used. ( please follow the diagram carefully – 7.8 Page 198)

What the different advantages and disadvantages of managing the cost of IS as Service centre, cost centre, profit centre and Hybrid centre?

(Page 199 - table 7.4, please learn minimum 3 advantages are 3 disadvantages for each type of costing)

Management of IS as a partnership of three interest groups

There are three interest groups while managing information systems in any organisation. The three interest groups are as follows;

1. General management

2. Users (employees)

3. IS staff

A cultural gap between these three groups can damage relations. These groups have different expectations, tasks and responsibilities in relation to I.S

For example ;

The IS staff have to respond to the needs and requirements of users. Again, IS staff have to act according to the guidelines of the management and limited resources. Users expect a high level of IS support to do what management expects of them. Management has to decide IS strategy in coordination with other parties. There could be following situations:

1. IS staff do not understand what users do and need. 2. Users and managers do not understand what IS staff do and need.

Why management of IS fails between the three interest groups?

1. General Management Failings

a. No clear business plan

b. Failure to identify strategic use of IS

c. Poor communication with IS staff

d. Concentration on cost factor

2. Users Failings

e. Failure to express or report needs and expectations of IS.

f. Focusing only on strategic support and having no strategic vision.

g. Failure in understanding the technical problems.

h. Failure in contributing to the planning of IS

3.IS staff failings

a. Failure in providing IS to business needs.

b. Focus mainly on technical aspects of IS.

c. Poor understanding about the business environment.

d. Failure in marketing the business success of IS.

The main challenge for the management is to deal with these problems and to develop a more productive organisational arrangement. There are 4 main measures to manage IS effectively as follows;

1. To improve good communications between the parties.

IS managers focus on IS challenges and problems with high priority. Forming a steering group with representatives from the three groups will help to improve the communication and understanding between these groups.

2.To improve understanding in IS matters

To make better understanding about IS, organisation can arrange;• Educational programs • Information meetings • Distribution of publications on IS.

3. To position the IS function at the right place in an organisation

It is also important to have a proper structure for IS in the organisation. A federal model will improve communication and responsibilities.

Assignment – Please complete the assignment – 7.4 on page 201

4. Technochange managers

Another solution is to employ Technochange managers in the organisation. Technochange managers have both IT skills and business knowledge. Technochange managers can help the organisation to use the right IS for the business.

The IS department structure

IS staff need;• Technical skills • Communication skills • Understanding or knowledge about the business of their respective

organisations. • Team working skills

An internal IS department has four responsibilities such as IS strategy, Operations, acquisition/development, and support.

Activities of a typical IS department

CIO

IS strategy

IS management

Operations

Computer facilities

Data entry

Network

Web maintenance

Acquisition/development

Software selection

Software modification

Programming

Web development

Support

Help desk

User training

Communications

IT Governance

IT governance means the specification of decision rights and accountability framework to encourage desirable behaviors in the use of IT. According to ITGI( IT GIVERNANCE INSTITUTE). IT Governance includes;

a. Aligning IT strategy with business strategy

b. Framing IT strategy and goals for the organisation( from top to bottom)

c. Giving organisational structure to implement IT strategies.

d. Emphasis on IT control.

e. Measuring IT performance

ISACA(Information Systems Audit and Control Association) created a system with measures, indications and best practices in the use of IT, it is known as COBIT( Control Objectives for Information and related technology) According to COBIT there are four areas for the IT governance;

1. Plan and Organise

2. Acquire and Implement

3. Deliver and Support

4. Monitor and Evaluate

5. Plan and Organise – the plan and organise area of IT governance is responsible for the use of information and technology and making strategic plans to use IT to achieve the company’s goals and objectives.

6. Acquire and Implement – this area of IT governance is about identifying the IT requirements of the company, acquiring the technology and implementing the same.

3. Deliver and support

The deliver and support area of IT governance is about delivery aspects of IT. It is focusing on performing the job related to applications within the IT systems.

4. Monitor and Evaluate

the monitor and evaluate area of IT governance is about dealing with company strategy and assessing whether the IT systems meet the objectives of the organisation.