The content in this area is intrinsically linked to that in the Information Systems segment, but there are some critical differences between the two areas.
Before an IT Strategy can be defined, a full review and understanding of the Short, Medium and Long Term goals of the business is strongly recommended.
In reality, very few companies will be able to start with a complete blank canvass for its IT Strategy. Part of the Strategy will be to Integrate, Replace, Remove and Accommodate legacy systems and technology with historical investment in terms of Knowledge and Capital Investment.
The key determinants of Business Strategy which influence the IT Strategy are:-
- Scale & size
- Location
- Availability of technology
- Capital vs Labour intensiveness
- Global integration demands
- Acceptable levels of Resource & Investment
- Principal growth strategy - organic or acquisition
An IT Strategy is an evolution and should not be considered fixed ad infinitum. From the outset it may be quite reasonable to envisage the IT Strategy in terms a series of Steps / Phases in which there may be scope for wholesale changes as time progresses. In this respect the key strategic task is to manage the movement from one step to the next; optimising the Return on Investment during each Phase; whilst positioning the business to maximise the benefit from the next phase in the global strategy.
The decision to insource or outsource is a very topical question which is strategic in its nature and impact, but we would suggest should not be considered a strategy in itself .
It is impossible to unravel, here, the complete spectrum of potential IT Strategies across all business sizes, industries and derivatives whilst maintaining the attention of all readers. Consequently, our approach is to highlight a variety of issues within each of the determinants above, to prompt discussion and further exploration with, and within, your organisation.
The requirements of the use and proliferation of technology are largely dictated by the size of a business. Size, in this respect, is measured in terms volume of data traffic between entities; # of users and # of concurrent users; the degree of how much information is processed real-time vs batch processed; # of facilities.
In hardware terms this can be seen as an organisation progresses through the use of technology in approximately the following scheme:-
In terms of software applications this may take the form of:-
The type of information handling / sharing / processing and location parameters will often determine specific technology requirements in order for a business to operate satisfactorily. The specific locations of operations will also dictate what is available e.g. the availability and performance of communications in second / third world countries.
If a business is remote by its nature e.g. a logistics company processing vast amounts of information for the progress tracking of parcels the type of technology may be dictated if technology is to be used at all.
With regard to normal business processing applications, there is generally an adequate supply of more than adequate technology for current requirements. Ongoing developments of hardware and software tend to add speed, ease and convenience over time.
In terms of specifics such as medical and healthcare technology e.g. in MRI scanning equipment makes possible things which simply were not previously possible.
In other cases technology has to be dreamed or envisioned before it can be designed e.g. when digital telephone exchanges were being designed in the late 1980's the potential micro chip processing power had to be guessed for the next 5 years as the development period for the exchanges was approaching 5 years - it would be useless to design tomorrow's technology to work with today's components.
The degree to which a business utilises labour and / or capital in its processes will determine its need and appetite for the use of technology.
Depending where individual processes and applications are in the development lifecycle will determine how much an organisation will strive for future productivity and profitability gains.
The relative costs of both labour and capital resources will have a part to play, but over time, where a process will benefit from long term automation, or semi-automation, the cost of labour will tend to be of little interest.
Even where automation is possible the cost and relative return will dramatically influence the timing of the automation activity being actioned. A global strategy on process commonisation may be a key driver, and matters such as volume throughput or grouping of global supply may be a catalyst for an activity in such instances e.g. through mass manufacturing for global markets.
Integration of supply chains and business processes often demand that a minimum level of technology and functionality is deployed e.g. within the automotive industry certain minimum requirements are expected from just in time component suppliers which may include the following:-
- EDI (electronic data interchange) capabilities to send / receive production / demand schedules and incorporate them seamlessly with operational systems
- ASNs (electronically transmitted Advance Shipping Notes)
- Supplier Rating Portals
A further level of integration may be inherent, regardless of the product or service, where there is vertical integration in the supply chain within an organisation and the complete integration of steps in the production process is advisable. This may also be appropriate in linking the order taking in a retail environment to the manufacturing process. In such cases the communication systems or transfer protocols linking different systems are the hotspots for technology.
Both of the integration scenarios above relate to IT relationships external to the business. In addition, there is the desire / need to consolidate internal information which is very common within growing and global businesses. This may include one or more of the following scenarios:-
As with any resource associated funding is finite and, therefore, limited. Consequently, the investment in IT has to be justified. This may be that the business is uncompetitive or cannot survive without it or that it must achieve a minimum payback or Return on Investment.
Historically, some parties have looked at industry / sector ratios of IT investment to sales, but this should be considered a comparison only and not a definitive measure or justification for under or over investment with any degree of reasoning.
Some investment in IT may be mandatory as a result of an investment in another area of the business e.g. a new system needs maintenance, support and possibly communicating with other systems. In such cases, the justification should be considered as part of the business justification for the operational asset investment.
The two key aspects associated with accommodating chosen business growth strategies relate, primarily, to planning and can be very cumbersome if planning is not undertaken well in advance of strategic business decisions being made. The results of poor planning will be very overtly displayed in terms of control and performance.
Where the primary strategy is organic growth the solution is potentially much more clean cut:-
When the choice involves mergers and / or acquisitions the critical planning aspect is that of integration activities and the timing thereof:-
