HOW.DOES.THE ALIGNMENT OF IT TO BUSINESS STRATEGY AFFECT THE ORGANISATION OF THE IT FUNCTION

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Choosing the topic

The researcher’s choice of topic is one that is of interest to the researcher, of interest to external audience and of relevance to the program of study. From personal experience the researcher has witnessed IT departments act in isolation and distanced for the core of business activities and this inspired the interest in examining the concept of the organisation of the IT function within the organisation.

Research Model

Research can be carried out either on a qualitative or a quantitative basis. Studies are qualitative when the type of data that is collected cannot be translated into numbers; the data has to be analyzed with non-mathematical methods. Studies are quantitative when the collected material is expressed in numbers and the analysis is conducted with some kind of mathematical-statistical method. It is common to combine cross section study with the quantitative approach whereas the case study analysis largely uses qualitative data and analysis methods. (Fisher 2004). The next step involves choosing a method to collect the data that will be used and analyzed in the research, as well as the type of data: secondary data (data that already has been collected during a previous project) or primary data (where information is collected directly from the original source).

Chosen approach

This thesis is purely a theoretical study, with the use of the case study of Windham International as primary resource and secondary resources such as book and research papers.
Due to time constraints, an in-depth empirical study and empirical data could not be done. A case study was used and secondary data from research papers were used for the entire thesis. This is used to get an overall perspective of the problem area.

The History of Organizing the IT functions

For over 30 years the IT industry has been the ultimate growth business producing a series of breakthroughs that have created new jobs, spawned new companies and changed the way the world did business. In the 50’s, 60 and 70’s, i.e. the early days of IT , it was used primary as a tactical tool locked away in a server room located in one place and control by a centrally organized IT unit(Brown, 2002) . Prior to the 90’s IT had evolved from the mainframe era to the introduction of stand alone computers and client server networks came out in the 80’s. During this period researchers had a debate about the best form of organising IT (infrastructure and human resources). Two main schools of thoughts emerged i.e. centralization and decentralization schools. (Karake, 1994).
Up until the late 70’s there seemed to be an overwhelming favour for centralization of IT function and its resources even though stand alone personal computers had been introduced in the 70’s for the main reason that centralization was cost effective and referred to as ‘efficient’. Centralization refers to the to the organization of the IT function in one particular business unit that provides IT services to the whole firm (Gordon & Gordon, 2000). The main characteristics of a centralized approach include control, efficiency and economy. The main advantages of centralized systems are that they provide centralized control using established technology and vendors. This researcher would suggest that underlying this position is the fact that the primary technology at the time was the mainframe, which was a central processing system; it would be very costly to have several mainframes in branch offices of an organization. With a centralized system, there would be no confusion over responsibilities and duplication of effort, resources and expertise is reduced, saving cost and time. On the down side, the system is slower.
The era of client-server based computing in the 80’s ushered in the championing of the decentralization perspective as its proponents citing improved computing service and user satisfaction as a reason for it and this was referred to as ‘effectiveness’ (Karake, 1994). This is understandable because decentralization involves giving individual business units autonomy over their own IT resources without any major considerations over other units, unless it is essential to the overall organization policy (Gordon & Gordon, 2000). With IT staffs attached to departments’ individual needs were being met. Taking an example of a bank, with the new technological capability of the client server based network in each of their branch having their own servers to which their individual client systems were attached. IT staffs would now be able to be attached to the branch office, have the daily processing done at the location and attend to the needs of that branch location in a short time. For example printing of account balances could be done at the branch rather than having a paper based system or waiting for the head office to post a daily report.
The 90’s onwards ushered in the era of internet-worked based environment, wide area network, the internet and real time technologies. This internetworking era, observed Dr Eric Schmidt, Google’s chief executive officer (CEO) has made computers have the capability to interact with other distant computers as if they were only inches away (Applegate et al, 2007, pg 296). Transactions are communicated quickly and activities that were once sequential now happen simultaneously. Enterprise resource integration and enterprise software changed the way businesses performed yet again.
Concerning the organisation of the IT function, another form was becoming salient; outsourcing i.e., handing over parts of an organization’s IT services to one or more external service providers, who deliver these services to the company based on a contract . By 1995, more than half of midsized to large firms had outsourced or were considering outsourcing significant IT activities (Applegate et al, 2007, pg 440). Outsourcing is a step, which may be taken by an organization as it searches for an answer to unresponsive centralized IT or to cut costs. During the 1990’s many companies redirected focus to their core capabilities believing that competitive advantage came when ones does what he can do best. In the wake of this thinking, the IT function was regarded as a commodity and a subject for outsourcing (Willcocks, 1998). It is interesting to note that the internetworking age has created and brought to prominence the CIO function, more so outsourcing has highlighted the need for a strong and active CIO function as managing an alliance is the single most important aspect of successful outsourcing (Applegate et al, 2007, pg 450).

Role of IT Function in an organization

As stated earlier, IT function refers to the department or organization for handling IT issues within a company. According to Hedman & Kalling, the IT function involves the development of long-term plans for the technological architecture such as mainframes, mini-computers, personal computers, networks and software (Hedman & Kalling, 2002, pg 255).
The IT function involves the definition of standards for issues such as telecommunication, security documentation, file-maintenance and database administration. In some organisations the IT function also includes a helpdesk, where users can call and receive remote help via the telephone. Staff training on IT issues as well as updating their skills to provide the best advantage to the organization is part of the IT function. If there are technology changes such as new development methods, evolving technology and availability of outside suppliers, the IT department will have to adapt to these changes and organize themselves to leverage advantage from the changes. According to Applegate et al (2007, pg 429) the following constitute the central core responsibilities of the IT function in an organization. They include.
The development and management of architectural long term plans of the organization, making sure that all projects fits within this plan which will be constantly reviewed with all stakeholders concerned to ensure to ensure its in line with set objectives.
The development of processes that guide telecommunications, client devices, servers, programming and configurations, documentation procedures, backup storage and information security. These standards must be done in a way that they accommodate innovation and experimentation so that learning can be achieved.
Establishment of outsourcing procedure options that take into consideration the organisational standards and objectives.
Identification of career paths & organisation of training for the IT staff. Maintenance of relationships with vendors and suppliers

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Size of IT function

The very size of the IT function will also affect how it is set up and operates. Taking two extremes, in large IT functions (e.g. more than 800 employees) it is possible to have dedicated resources to strategic functions, e.g. strategic planning, company architecture, technology research and vendor management. In small IT functions (e.g. less than 60 employees) these roles will typically be shared or even not required and the IT function will focus more on day-to-day activities (Forrester, 2005). In the first situation there is risk that the IT function will be forced into complex structures and also become more bureaucratic and isolated from their clients. Realizing expected synergies can then be tough. Although, having dedicated resources means that the IT function can apply more sophisticated management techniques and influence the company’s management team to a great extent. In the latter example the advantage is that small IT functions could change direction and respond to customers needs much easier.

IT function key stakeholders

IT involves many stakeholders, which all have different kinds of demands depending on the company’s’ specific situation. If management is to ensure that the exploitation of IT meets its needs, the stakeholders must be managed. (Earl, 1989; Rau, 2004). From the IT function perspective, Hedman & Kalling (2002, pg 256) identify their key stakeholders in the organisation as senior management, who have to have good communication with the IT staff in order to ensure that both business and technology perspectives are involved in understanding business opportunities and users, the employees who use the technology and are usually involved when designing systems and changing work routines.
Tensions however are present and can be attributed to differences in knowledge, power, and culture. Managers, often powerful in allocating money, may find themselves lacking knowledge while there are the IT staff who are technically knowledgeable but without financial power in allocating resources as an example. Nowadays, those differences are diminishing mostly due to reduction in the knowledge gaps as users and managers know more about IT and its no longer seen as alien (Hedman & Kalling, 2002, pg 257). A major external stakeholder would be the IT suppliers.
Increasingly as IT is used as a strategic weapon, businesses are linked up with their suppliers by networking. A supplier could in this case also be interpreted as a service provider or a “vendor”, executing parts of the organizations value chain and processes. The demands on the IT function have increased a lot during past decades and systems delivery now includes procurement and integration. Firms are increasingly recognizing that they do not have the time, money and expertise to develop large integrated systems. They are instead purchasing software and sub-contracting development to third parties who have access to the latest tools and techniques.

Aligning IT Function to Business

There is a consensus today among researchers, business and IT managers that IT should align with the company’s overall strategy (Namchul shin, 2003; Karake, 1994, Gartner, 2006) and this involves the IT department ensuring its resources (hardware, software, networks and human resources) are organised in a way it meets not only IT objectives but also the overall objectives of the organisation. According to a survey by Computer Science Corp (CSC), the top concern for senior IT executives is the alignment of the IT function with their business operations (Sid, 1994). This alignment means fitting the IT function with the business’ goals, needs, programs and operating style. It means that the activities of both the IT and business operations are united in one common business purpose (Sid, 1994). No longer a tool for the back-office, in recent times IT, has become an important tool for defining new strategic opportunities and building the capabilities needed to execute them (Applegate et al, 2007 pg 35).
The importance of the need for IT to be aligned with the organizations overall strategy cannot be overemphasised and this underscores the need to organize the function in order to gain both effective business systems and efficient use of information technology. Two sets of tensions are identified that arise concerning IT activities; innovation and control (Applegate et al 2007). On the one hand innovation; a firm’s ability to innovate using IT depends on management’s willingness to take risks and its view of the strategic impact of IT on the organisations success. However, if IT is viewed as just being a helpful support function and management is not willing to take risks then there will be less investment in IT innovation.
The second tension is that of control between IT staff and business users, with both groups having different priorities in terms of how resources should be spent on IT. This leads to tensions within the organisation. Business users are usually focused on short term need fulfilments which is directed at solving immediate problems and IT staff focused on more long term objectives such as architectural concerns and need for maintenance. These tensions can be attributed to differences in knowledge, power, and culture (Hedman &Kalling 2002). Managers often powerful in allocating money may find themselves lacking knowledge and IT staff being technically knowledgeable without financial power in allocating resources as an example.

Table of contents :

1. INTRODUCTION
1.1 PROBLEM STATEMENT
1.2 PURPOSE
1.3 DELIMITATION
1.4 TARGET GROUP
1.5 DEFINITIONS
2. METHODOLOGY
2.1 CHOOSING THE TOPIC
2.2 RESEARCH MODEL
2.2.1 Chosen approach
2.2.1.1 Literature Review
2.3 CRITICISM OF METHOD
3. THE IT FUNCTION
3.1 THE. HISTORY OF. ORGANIZING THE. IT FUNCTIONS
3.2 ROLE OF IT FUNCTION IN AN ORGANIZATION
3.2.1 Size of IT function
3.2.2 IT function key stakeholders
3.3 ALIGNING IT FUNCTION TO BUSINESS
3.3.1 The Strategic Grid
3.3.2 IT & Business Capability
3.4 ORGANIZING THE IT FUNCTION (CENTRALIZATION VS. DECENTRALIZATION)
3.4.1 Hybrid System/Shared services
3.4.2 organising IT for Innovation
4. WYNDHAM INTERNATIONAL
4.1 IT AT WYNDHAM
5. ANALYSIS
5.1 HOW.DOES.THE ALIGNMENT OF IT TO BUSINESS STRATEGY AFFECT THE ORGANISATION OF THE IT FUNCTION
6. CONCLUSION
6.1 RECOMMENDATION
REFERENCES

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