An examination of the role of the information systems centre

Journal of Strategic Information Systems 7 (1998) 87–111

An examination of the role of the information systems centre Alan Fowler a ,*, Tony Wilkinson b a

School of Management, University of Newcastle, Newcastle-upon-Tyne NE1 7RS, UK b Rolls Royce Industrial Power Group, Newcastle-upon-Tyne, UK

Received 8 August 1996; revised paper accepted for publication by Professor R.D. Galliers 17 March 1998

Abstract This research examines the role of the corporate-centre in the formulation and implementation of an information systems strategy. The approach is inspired by recognition of an established parallel model, available for role prediction in general corporate management. Existing IS strategy models are evaluated for applicability against the role-prediction criterion but found to be inexplicit in this respect. A number of potential roles, for the IS centre, are therefore defined and evaluated in the light of literature sources and field research undertaken through interviews with senior IS managers in a small group of technologically oriented organisations. By this process the framework for a predictive model, suitable for discussion and analysis of IS roles at executive level, is derived and critically evaluated. q 1998 Elsevier Science B.V. All rights reserved. Keywords: Information systems centre; Centralization; Decentralization; Role selection model

1. Introduction Centralization and decentralization are recurring issues of concern both in general management and in information management. Peters and Waterman (1982) argued that the truly excellent companies are both centralized and decentralized. These observations, arising in the domain of general business management, may extend naturally to include the relative advantages and disadvantages of centralization within the context of strategic IS alignment. Clearly it would be useful to identify a model to guide senior managers when planning and implementing a role for the IS Centre within a given organisational framework. This

* Corresponding author. 0963-8687/98/$19.00 q 1998 Elsevier Science B.V. All rights reserved PII: S0963 -8 687(98)00021 -3

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has been identified as an area of significant concern by, for example, Walls and Turban (1990), who in a survey of 20 American organisations, placed lack of role-clarity as the major problem associated with the IS Centre, second only to resource limitations. Others have also addressed this issue in the context of the pressures facing both IS professionals and end-users in adapting to change (Forcht et al., 1987; Gauch, 1992). The research reported here seeks to generate a predictive model, explicitly capable of mapping key characteristics of the organisation to an appropriate set of roles for the IS centre. Alternatively the core research question could be inverted and stated as follows. Given a possible set of identifiable roles which the centre could perform, can a set of criteria be identified which would then allow optimal selection of an appropriate subset of IS roles for a particular organisation? An influential factor underpinning the research process was awareness of the existence of, and extensive familiarity with, Goold and Campbell’s (1987) generic model of strategic management styles. This was identified as a potential template for adaptation as an IS role predictor utility. Hence, the model which was subsequently developed during the research was intended for use in planning and implementing IS strategy, thereby paralleling the application of its progenitor in business strategy.

2. Research methodology and structure of the paper The paper outlines the principles in the original Goold and Campbell model and then briefly reviews the issues surrounding the long running debate on the respective strengths and weaknesses of centralization and decentralization. It then examines alternative, established IS strategy models and potential roles for the IS centre before moving into an empirical phase of iterative model development. This phase of the research, which is speculative in nature, is grounded in a pilot study using an iterative approach to identify which IS roles are typically exercised by the corporate centre and which organisational characteristics define those roles. The study was initiated with the objective of postulating, refining and evaluating a role-predictor grid-model, following the ‘blueprint’ of Goold and Campbell, taking into account key IS strategy concepts and centralization vs decentralization issues identified in the literature. Towards this end, semi-structured interviews were conducted with senior IT managers from the respective centres of four, large, technologically oriented organisations. The managers were selected on the basis that they had a direct responsibility for shaping the IS role within their respective organisations and were therefore in a position to answer questions authoritatively. The interviews followed a common pattern and covered a number of set topics but sought to avoid unduly constraining the range of issues arising. For instance, although provisional roles, previously identified from the literature, were introduced during the interviews, no attempt was made to limit discussion tightly within their context. Consequently, open discussion progressively released the understanding and expertise existing amongst the professionals consulted, leading to the identification of a number of additional roles not appearing in the original list. The research was thereby broadly underpinned by ‘Grounded Theory’ principles (Glaser and Strauss, 1973; Strauss and Corbin, 1990).

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Fig. 1. Iterative research process.

Finally, the emergent role predictor model was used as a basis for predicting and reviewing the IS roles enacted within the group of participating companies. 2.1. An iterative process of model development and application The evolving iterative, grounded research process described before may be illustrated schematically as shown in Fig. 1. Starting with a review of business and IS strategy literature, a number of provisional IS roles, and a template for a two-dimensional matrix grid model were postulated. The grid model and the roles are shown as the ‘Postulate-model’ and ‘Role-repository blocks’ respectively, in Fig. 1. Each of the respective organisations was then screened by the interview process to identify its organisational characteristics and IS roles. When new roles were encountered these were progressively added to the role repository, through the feedback loop 1 as shown. From the deduced organisational characteristics the appropriate cell in the predictor model was then located and hence, the associated predicted roles defined. These ‘idealised roles’, corresponding to that particular business type, were then compared with the roles observed to be enacted, in practice. Detection of any mismatch subsequently led to refinement to the model, through the second feedback loop 2.

3. Goold and Campbell’s predictive model for the role of the corporate centre The concept of the matrix or grid model, postulated before, was inspired in part by awareness of the existence of a parallel concept in the literature of corporate strategy. During their classic investigation into management styles amongst a group of corporate organisations, Goold and Campbell found that equally successful but highly contrasting styles emerged. Their research focused on identifying these different management styles and classifying the companies investigated according to established categories.

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Fig. 2. Strategic management styles (Goold and Campbell, 1987).

A primary objective was to identify the role of the corporate centre in diversified companies. It was concluded that at the highest level this was characterized by mediation between the various business units and the financial markets. However, it was recognised that the setting of broad policies could prove damaging if applied too rigorously across every element of a diversified group. Their research therefore focused upon identifying management styles and associated roles which appeared most appropriate for a given contingency. The resulting matrix model comprised two dimensions, encapsulating structure and method of control respectively, as depicted in Fig. 2. Structure was reflected by planning influence which at the lower end of its scale is located at local business level. At the upper end of the structure scale, planning influence was strongly dominated by the corporate centre with top down involvement aiming to shape strategies, as they emerge, before decisions are taken at business unit level. By this means the centre promotes strategic themes, distinctive competency and strategic thrusts. Control influence reflects the targets that are set. In the case of the ‘flexible strategic control’ approach, broad targets such as return on sales and market share are set but as long as there is reasonable evidence of loyalty to corporate strategy, at business unit level, the use of sanctions is regarded as inappropriate and unworkable. ‘Tight strategic control’ also implies clear financial and strategic targets but rewards or penalties can now be expected depending on whether annual performance is satisfactory. Where ‘tight financial control’ is imposed budgets are seen as contractually significant and monthly reviews are typically used to rigorously track progress and ensure that annual targets are actually achieved. Having analysed the situation of each particular business in terms of these two dimensions the research postulated that eight styles of management, each with its own associated roles, could be identified and dispersed amongst the respective segments of the model as shown in Fig. 2. These categories are briefly summarized as follows: 1. Strategic planning: collaborative strategy setting between the centre and the business

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2.

3.

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7. 8.

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units with broad strategic targeting and controls focusing on long term objectives rather than annual financial targets. Strategic control: business units are given more initiative to develop plans. The centre reviews these plans and sets controls for targets which can only be missed if strategic objectives are at stake. Financial control: the centre leaves strategy formulation at unit level but imposes strict control based on annual budgets. It is notable that these first three categories form a dominant diagonal in the matrix model and are therefore highlighted in capitals in Fig. 1. Other categories may, in general, be regarded as variants upon these three, with the possible exception of the ‘holding company’ which may be seen as something of an outrunner. Centralized: strategies are developed at the centre and implemented at unit level with controls concentrating on ensuring that decisions are enacted rather than checking that results are actually achieved. Strategic programming: a variant on strategic planning with clearer and tighter performance targets. Strategic venturing: typical of venture-capital companies where strategy emerges at unit level and flexible controls apply. Results are monitored and may be used to allocate discretionary resources. Financial programming: a variant on financial control in which the centre emphasises or dictates which financial ratios are used in performance evaluation. Holding company: a virtually passive centre allows local reinvestment and imposes loose control unless sustained poor performance is evident.

4. Centralized vs decentralized roles for the IS centre Given the requirement of IS and business strategy alignment (Scott Morton, 1991; Willcocks, 1992; Henderson and Venkatraman, 1993) many of the general strategic management responsibilities of the centre, can be analogously mapped into responsibilities for Information Systems, hence, the interest in the Goold and Campbell model as a genesis for further work. Its conceptual approach was therefore identified as the potential basis from which an IS strategy model could be hypothesized and refined, during the course of the empirical phase of the research, as an aid to planning information services structure and location. The issue of IS structure and location of IS provision is in fact a recurring one. For example, Tapscott and Caston (1993), in discussing business process realignment and open-computing, emphasized the importance of appropriate selection of IS structure, while Sullivan-Trainor (1989) identified five such structural possibilities which they labelled service, partnership, vendor, expansion and strategic-advantage model, respectively. The service-model emphasizes the role of service-level agreements between user and the IS support agency. The Partnership model seeks closer, ‘defunctionalised’ alignment between IS and the user while the vendor model invokes an internal marketing role. The expansion model aims for a flexible IS architecture to accommodate expanding user requirements while finally, the strategic advantage model promotes joint development in a fully integrated user/supporter environment.

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Inevitably these considerations lead to a review of the respective merits and drawbacks of centralization and decentralization, tracing the surge of interest in this issue in the late 1980s and early 1990s (Ahituv et al., 1989; Bacon, 1990; Nonnenberg, 1990; von Simpson, 1990; Maglitta and Mehler, 1992). The purely centralized approach implies one single IS access provision for the entire organisation as contrasted to a decentralized structure with IS spread across a number of small single-site units. Conversely the distributed structure implies lateral linking of multi-service providers which may also involve considerable devolution of authority to end-users. Consequently a spectrum exists from centralization to devolution which has fostered a debate on appropriateness, spanning many years (e.g. King, 1983). This literature has been clearly and efficiently summarized by, for example, Robson (1997) (pp.309–324 and 338–340). Hence, it is argued that IS centralization is often seen as providing economy-of-scale benefits in both hardware and personnel, promoting the development of common systems and adding value by achieving synergies of integration. Conversely, it is argued that decentralization and end-user orientation, allows IS to meet different business unit needs and gives a much closer, more responsive and accountable, customer focus to IS development. After all, the end-user should understand the business issues better than the IS professional and is thereby better positioned to find new, innovative ways of exploiting IT. However, there are many examples of user led IS initiatives which have failed disastrously (Cheney et al., 1994). For example, failure to understand underlying issues, or to properly specify system requirements, can lead to serious downstream effects. This is the argument often presented in favour of placing IS professionals in charge of IS projects. Centralization appeared, to many, to be in decline by the late 1980s but some organisations have actually witnessed recentralization in the 1990s (Carlyle, 1990). Conversely the advantages of devolution, with its associated commitment to end-user focus, are strongly regarded in situations where there is a desire to loosen central control and release the creativity and energy which resides at business unit level. Such an emphasis is promoted by technology changes such as downsizing of processors and growth of networking and other standards. Parallel developments, in the organisational domain such as the need to provide autonomy, manage costs adjacently to associated benefits (at the production ‘coal face’) and an increasing IS awareness amongst business users, has created an environment in which such technological developments are more readily exploited (Dearden, 1987; Earl, 1989; Leitheiser and Wetherbe, 1991; Galletta and Hufnagel, 1992; Robson, 1997). Since advantages and disadvantages may be attributed to both approaches it appears likely that most organisations might select a balanced approach in which some roles are enacted centrally while others are devolved locally. For example, where economies of scale are available, a tight and/or a unified view is necessary, and when business responsiveness is non-problematic, a substantial degree of centralization may be appropriate. However, where speed, flexibility and uniqueness of service are high priorities and where resource costs are low and usage high, devolved IS is usually considered more appropriate. La Belle and Nyce (1987) in reviewing the centralization vs decentralization issue proposed that equilibrium should be sought depending on the degree of central, corporate

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control and the degree of functional decentralization present. Attempting to simultaneously occupy upper extreme positions on both dimensions was identified as conflictual while simultaneous occupancy at the lower ends of these scales was seen as ineffective. Conversely high end-user orientation coupled with low central control, or high central control coupled with low functional decentralization appeared most feasible in terms of the espoused equilibrium. More recently, Hodgkinson (1996) examined the justification of corporate IT activity in the context of evolving business trends. He defined the concept of the federal IT organisation as a means of harnessing the advantages of both centralization and decentralization whilst simultaneously mitigating any respective weaknesses. Based on questionnaires and interviews with fifty major UK companies the author investigated, in some detail, the phenomenon of federal IT, with the aim of improving understanding of this phenomenon and combining the strengths of coordinated, corporate strategic planning and control, with autonomous, responsive operationalization of IS at divisional level. In common with the research presented here, Hodgkinson’s article also emphasized the contribution of Goold and Campbell on strategic management styles, linking their model with the issue of IT/IS governance. Alternative corporate IT management styles and roles featured prominently in the work, closely reflecting many of the issues addressed here, notably ‘the grey area between the two extremes of centralization and decentralization.’ Notably, this work identified the fit between the corporate management style and the preferred IT management style using terminology highly reminiscent of Goold and Campbell’s. In summary, having reviewed the literature it was concluded that the procurement of a model providing a framework in which the characteristics of centralization and decentralization, could be mapped onto a set of roles for the IS centre (analogously to the procedure used with Goold and Campbell’s model), would constitute a useful development. Such a model could provide a discussion facilitator and guideline for senior IS and business managers, during the IS alignment process.

5. IS strategy models In formulating and aligning information systems strategy, the role of the IS centre (if it exists) is clearly a prime consideration. In this context IS strategy is defined as ‘the alignment of information management to support strategic business aims’. This implies that IS strategy must be consistent with corporate plans, must accommodate business management’s view of the role of IS and must take account of the state of maturity and the use and management of IS within the organisation (Robson, 1997). The definition of IS strategy before is distinguished from that of IT strategy which it subtends. The latter is concerned with technicalities facilitating IS implementation including data policy, communications policy and architecture policy (Robson, 1997). Hence, in parallel with generic business-strategy models such as Goold and Campbell’s, a number of well established IS strategy models and related concepts have also evolved in recent years. A selection of these are briefly summarized later leading to collective assessment for role predictive properties.

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5.1. The strategic grid McFarlan and McKenney (1983) strategic grid model has been widely used to assess the criticality of IT in business. The categories are: Support: information systems impact little on overall performance at present or in the foreseeable future. IT functions at an operational level and does not require senior management involvement. Factory: information systems are fundamental to support the operation of the business but they are not a fundamental source of competitive advantage. IS requires careful management and service levels must be high but strategic planning of IT is not at the top of senior management’s agenda. Strategic: information systems are a critical success factor for the business and represent a major source of competitive edge. The role of Strategic Information Systems Planning (SISP) is thereby a board level activity on which future success may critically depend. Turnaround: information systems have, in the past, been regarded as either support or factory level activities but changes in the business environment mean that they must now be regarded as strategic. This implies companies undergoing radical change in their perception of IT and requires a skilled approach to the management of that change. 5.2. Strategic Information System Planning approaches (SISP) Earl (1993), in defining the way in which organisations approach the SISP process, identified five options as outlined later. Clearly the organisational centre has a significant say in which of these approaches will be adopted although Galliers (1994) has shown that organisations appear, in practice, to have some difficulty in implementing their plans: 5.2.1. Business led approach This approach, which is very common in practice, aims to ensure that IT remains subservient to business needs. However, there is a danger that business opportunities arising from IT itself will fail to be identified under these circumstances. Earl concludes that the pure business led approach often fails to reach an optimum strategy and, in the process, often alienates key stakeholders. 5.2.2. Method driven approach Focuses upon the use of a formal technique or ‘method’ for deriving IS requirements, often with support from external consultants familiar with the process. The proponents of such an approach believe that the adoption of a recognised ‘method’ will lead to an improved outcome but experience suggests that under-resourcing, which often occurs in practice, can lead to disappointing results. 5.2.3. Administrative approach In this case project submissions evolve at operational level and are subsequently evaluated by the centre for viability and fit with corporate strategy before being approved for

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implementation by the business units. The key disadvantage of this approach is that it lacks a strategic planning influence and is driven from the ‘bottom up’ rather than ‘top down’. This can lead to isolated and fragmented strategies with limited coherence. 5.2.4. Technological approach This emphasizes the derivation of a business model and an associated architecture for Information Systems. However, preparation and application of these rigorous techniques results in a lengthy process which in turn can prove frustrating to senior management. This often leads to premature abandonment. 5.2.5. The organisational approach The organisational approach involves a much closer relationship between users and IS specialists in an informal, often loosely defined, manner. Formal methods may be used to support the process but do not dominate it and are only used when appropriate. Multidiscipline, highly energised teams are used to formulate and drive IS projects with a strong focus on implementation. Systems are allowed to grow to meet needs, rather than being formally specified at the design stage. This philosophy of emerging-systems appears to have much in common with the organic business model described by Morgan (1986). The disadvantages of such an approach revolve around the absence of clear direction and the associated danger of strategic drift. 5.3. Contingency model Feeny et al. (1987) defined a contingency model which can be used to explain why the IS function of a particular company is configured in a particular way. Based on the seminal work of Lawrence and Lorsch (1967), it describes the factors which typically influence the ‘IT arrangements’ in a company. These are: • • • •

The host organisation characteristics including the structure of the business, the culture of the business and the management systems that are in place. The strategic impact of IT with reference to the McFarlan and McKenney Strategic Grid. The IT heritage of the company. Technology assimilation in terms of the organisation’s position on a set of multiple IT learning curves.

The model can be depicted schematically as shown in Fig. 3. From theses considerations the authors propose a set of alternative forms which the IT function might take as follows: Centralized: a single IT development and support department provides all IT services to business units. Business unit: the IT Department is set up as an independent business unit within the company, providing contracted services to the other functional business units. The department’s activities are only targeted at supporting internal customers. This arrangement differs from the centralized structure in that the unit is managed

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Fig. 3. Contingency model (Feeny et al., 1987).

independently from the rest of the company. Its relationship with customers is therefore contractual. Business venture: similar to the business unit but seeks to establish an external customer base to offset the costs of servicing the internal customer. This is relatively common practice in very large organisations. Decentralized: IT is devolved into each business unit, with no central control of development or support strategy. Federal: a number of decentralized business unit IT functions exist in parallel with a central IT team responsible for core-development, strategy formulation and standards setting. This is the most common structure for IT, in practice. A corresponding spectrum of roles and structures arises in conjunction with the categorisations presented before. These are respectively identified as follows: Steering group: concerned with shaping IT/IS strategy and therefore requiring topmanagement involvement and a business orientation. Policy group: concerned more with standards setting and IT/IS development. This requires considerable technical knowledge among committee members to shape IT/IS policy. IT board: concerned with achievement of results and operating in a similar manner to a business board of directors in situations where IT is run as a business unit or ‘venture.’ IT forum: provides for the exchange of ideas and identification of requirements for standards. This takes a more open or ‘soft’ form and requires a mixture of interested parties representing business units. 5.4. Role prediction deficiencies From the literature, summarized before, it appears that although a number of models exist, and were in fact subsequently used in this research to assist in the process of understanding the position of central IS, none is specifically designed as an explicit

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predictor of the IS centre’s role. In this specific context, shortcomings may be identified as follows: • •

• •

Goold and Campbell’s matrix has been proposed as a predictive model, allowing a mapping between organisational characteristics and the strategic management style of the company. However, it is not specifically targeted at IS strategy. The McFarlan grid illustrates how important IT is to the business and it may be postulated that requirements of the centre will be influenced by a particular company’s location upon the grid. However, this does not directly indicate what role the centre should play in managing information SISP defines the style of approach to Information Systems planning, within a particular organisation, but the concept is again of limited value in explicitly determining the role of the IS centre. The ‘Contingency model’ appears to come closest to the objectives espoused in this research. However, while it does provide for mapping between organisational characteristics and IS functions, it is not positioned specifically as a predictive tool. It is an analytical device that can be used to help explain why things are as they are but does not necessarily show how they should be.

6. The industrial case studies Linkage between the IS strategy models discussed before and the empirical component of the research is presented later. Characterization of the IS function, within the four participating industrial organisations, in terms of the factors bearing on centralization roles, is thereby summarized briefly in Table 1. This identifies the respective companies in the vertical columns and the key questions addressed in the horizontal rows. The choice of row-headings reflects the respective corporate strategy and IS strategy models outlined before, since these were used as a framework within which the interviews were originally conducted, in the respective companies. The intersecting cells show the salient features of the responses obtained in terms of these currently established models and associated issues. 6.1. General observations Notably all four case study organisations identified themselves as being either in, or moving from, the ‘factory-quadrant’, towards the ‘strategic-quadrant’ of McFarlan’s grid. Hence, the increasingly critical nature of IS is acknowledged not only with respect to those activities which focus on new developments aimed at providing competitive advantage (the ‘strategic’ applications) but also amongst ongoing business operations (the ‘factory’ applications). This highlights the continued need for businesses in all categories to focus on the effective exploitation of IS. Among the IS strategy models the strategic grid was the only one for which commonality was observed, across the respective respondent companies as a range of different

Small centre. Outsourced core provision.

Strategic control.

Large centralized system.

Highly centralized.

Small IT centre. Localised and autonomous IT focus at business unit level.

Moving from financial control to strategic planning.

Factory, migrating towards strategic.

Independent business units. Low on technology learning curves in some areas.

Business led.

Strategic management style: (Goold and Campbell, 1987)

Strategic grid location: (McFarlan’s grid, 1983)

Contingency model (Feeny et al., 1987)

SISP Approach:(Earl, 1989)

Organisational.

Low on technology learning curves.

High up technology learning curves.

Method driven.

Moving from factory to strategic.

Firmly strategic.

Regional water authority. Currently diversifying its interests

IT operations: (structure and relation to business)

Aero engine manufacturer.

Industrial power systems. Heavy- engineering. Export led.

Company 3

Company Profile

Company 2

Company 1

Issues

Summary of participant company categorisations

Table 1

Organisational.

Relatively high on technology learning curves.

Moving from factory to strategic.

Strategic programming. Part financial-control

Federal. Medium sized centre. Substantial systems in business units.

General engineering. company. Currently undergoing BPR.

Company 4

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responses emerged with respect to the others (strategic management style, contingency and SISP). With respect to the overarching issue of the IS centre’s general role within contemporary organisations some potentially counter-intuitive observations were made. Given the power of technological drivers, and the current business management trend toward decentralization, it would seem likely that the role of the IS centre should be in decline. However, the evidence amongst the companies explored here was somewhat contradictory. While the ‘central-computing-group’ in company 1 was reducing its central control, company 2, which was in the same corporate group, was actually seen to be increasing its responsibility and service provision. In company 3, central IS had, within the last 5 years, been subjected to drastic downsizing, culminating in the formation of a separate IS venture, only to be re-established as a central IS function at the present time. Company 4 was currently decentralizing IS and placing it under the control of multifunctional teams, and yet the representatives interviewed, admitted that the role of the centre was currently increasing in importance. Interestingly none of the four organisations studied had a document which formally defined the role of the IS centre. Nonetheless the roles performed appeared to be generally well understood by the IS professionals within this sample. Subsequently the roles identified during the course of the interviews were documented, rationalized and compiled as part of the iterative model-building process described earlier.

7. Roles of the IS centre From the research process discussed before, 14 possible roles for the centre were identified. These collectively comprise the ‘role-repository’ block in Fig. 1 and are briefly summarized as follows: 7.1. Central support service Provision of a ‘help desk’ acts as a focal point for registering problems, filtering the trivial and actioning the relevant support resources. It provides mechanisms for fault-tracking, response-management and performance-reporting against predefined service levels. Potential disadvantages include poor responsiveness at a local level and a propensity to superficially fix faults without necessarily delving deeply into the underlying root causes. 7.2. Central development pool Centralization of the core development resource can provide economies of scale where the nature of the business permits such commonality. The advantages of a consistent and integrated approach may also introduce a source of competitive advantage through reduced costs or improved quality in decision support information. Possible disadvantages include slow progress rate, over-elaborate solutions and missed opportunities. Also the danger of unrealistic ‘shoehorning’ of solutions should be recognised when operating in accordance with this role.

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7.3. Resource allocation Resource allocation is a major central influence and key control mechanism for supporting corporate IS Strategy. The way in which the resource allocation process works is dependent on the structure and nature of the relationship between the business units and the centre, and on the IS role that the centre fulfils. In an organisation where development is centralized, the role of resource allocation is much more closely allied to that of strategic planning. Decisions here will reflect the relative priorities of projects and hence, the manpower and material assigned to them. 7.4. Strategic planning A company which operates in either the strategic planning, strategic programming or centralized cells of the Goold and Campbell grid is more likely to be able to plan a rational IS group strategy in contrast to one in which the centre is only concerned with financial performance, leaving strategy to the business units. This role is, however, one of the most difficult to perform successfully since it involves the conversion of business plans into appropriate IS plans. The quality of the business plan is therefore critical to the quality of the IS plan and it’s weaknesses in this area that are often the cause of IS failure (Bowman et al., 1983). Conversely, the role of information systems planning can be highly influential in business portfolio planning. For example, readily transferable applications may enhance the competitiveness of an acquisition or alternatively, IS may be of value in changing a new business unit’s culture to that of the corporation. Similarly it may be found that an element of the IS portfolio, in an acquired business, may be of particular value to the parent company. However, corporations need to be careful about over-reliance on corporate systems amongst their business units, to the extent that they make them difficult to separate and sell-off, if required, at some later date. 7.5. Standards setting Increasingly, the importance of corporate IT standards is being recognised as a fundamental building block to support integrated ‘open’ applications. This demands that due to the current variety of hardware platforms, applications tools, packages and telecommunications facilities, organisations need to establish clear statements of direction. Documents and other information can then be readily transferred and related support and development costs can be minimized. However, deciding upon the level at which a standard application ceases to be standard and becomes business unit specific is a major area of debate. Applications such as payroll, financial ledgers, computer aided design and computer aided manufacture may well be applicable to all business units as a single package. Conversely, areas such as production scheduling, purchasing and project planning may require systems which more closely model the particular business environment. A further complication exists in that a diversified corporation is, in practice, likely to experience several types of business environment and it would be extremely difficult to find a single system to fit all requirements. 7.6. Auditing Auditing is a key mechanism by which the centre can ensure that business units carry out the intentions of a project proposal and ensure that they are implementing the plans as

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originally set out for the centre’s approval. Auditing may be randomly targeted across business units and company projects to reduce the cost of the process, on the assumption that business units cannot take the risk of not conforming. Standards auditing and issues associated with quality procedures may also be included within this role category. 7.7. Purchasing agency This role relates strongly to standards setting but has been singled out as an alternative to auditing as a means of ensuring compliance with the centre’s plans. Standards enforcement is readily facilitated if hardware and software must be purchased through an agency that will only specify to the approved standards. Moreover, central purchasing puts the business in a much stronger position when negotiating with suppliers, thereby harnessing significant economies of scale associated with bulk purchasing of hardware and software. This is especially true for software where there is a negligible product manufacturing cost. 7.8. Project management In keeping with the Federal approach to IT described by Feeny et al. (1987) it is common for development initiatives to be passed on to the business units and shared out. In this type of role the centre acts as a coordinator and project manager for the development, ensuring that a consistent approach is taken, standards are adhered to and deadlines met. The centre also deals with obstacles which need clearing using senior management involvement either to force a decision or to drive through political or administrative issues. The centre may also act as a liaison-agent with external contractors or third-party software suppliers. 7.9. Specialist services The provision of a central pool of specialist technical expertise and facilities, for use by business units, presents a means of reducing costs through economies of scope. Services provided typically include network support, applications support and operations support for business units. 7.10. Technical services Technical Services are those facilities which are important to the overall business, but would not normally be seen by any individual business unit as their unique responsibility. They are not to be confused with specialist services which are concerned with providing a central pool of technical expertise and facilities. The technical services role would include provision of wide-area-network facilities, external gateways and connections to the outside world. It also provides access to central processing resources such as MRPII, 3Dmodelling and disaster–recovery backup. 7.11. Communications facilitator The central IS Department can act as a hub for communications between business units, passing on useful information and sharing new ideas. It can perform this facility in a number of ways. First is ‘the IT forum’ role. In this case the centre takes responsibility

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for establishing and running Steering committees and user-groups. Secondly is the ‘information–repository’ role whereby the centre can act as a library holding information, applications and documents generated by individual business units, but which may also be of more general use elsewhere in the organisation. Finally there is the ‘personnel– exchange’ role. In this case the centre can maintain up-to-date knowledge defining which business units possess which particular application and technological expertise. The centre can then facilitate the exchange of this expertise through secondments or training. 7.12. Provision of IT for the centre Irrespective of its size, the central management function will require some form of IT service itself. Even a small central executive function may place significant demands on IS for services and specialist applications such as an Executive Information System (EIS). The provision of these services is therefore likely to demand a dedicated IS operation. In a more centralized organisation this IS function may be of significant size and may therefore be split off from other IS operations serving the respective business units. 7.13. Research and development It is unlikely that individual business units would be able to sustain their own dedicated R&D function to investigate new technologies and possible applications. This role is therefore well suited to a small, dedicated team, based in the centre, possibly operating with close ties into academic research institutions. 7.14. Consultancy Although similar in some respects this role has been separated out from the technically orientated specialist services role described before. It is also differentiated from strategic planning since the centre is now offering a service to be called upon by the business units but is not in a position to impose any of its recommendations. This service may be of particular value during the critical phases of a project; for example, when a system specification is being formulated, a new application is to be released or a technical decision is to be made. The key feature of this arrangement is that the business unit manager remains accountable for the outcome and therefore he/she makes the decision, not the centre. 8. A predictive model The list of roles presented before provides a pool of options from which individual organisations can make selections (an expansion of the ‘role repository’ block in Fig. 1) according to requirements. However, it would be useful to have available a model to assist in the selection process. Fig. 4 depicts such a model which evolved from the research process discussed previously. This is based on Goold and Campbell’s original structure but takes into account concepts appearing in the IS literature, the proposed theoretical roles of the centre, and observations arising from the industrial case studies. The model is an expansion of the ‘postulate-model’ block originally appearing in the methodology schematic, Fig. 1. The axes, or dimensions, are degree of business

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Fig. 4. Organisational type role prediction model for central IS.

diversification and degree of centralization respectively. These, in turn, locate the coordinates of the 7 core IS organisational classes identified in the research. Each of the 7 classes is now considered in turn to define the process by which specific IS centre roles, selected from the list presented before, will typically be allocated. Justification of the reasoning behind the configuration, together with other salient observations on the particular category, is also presented in each case. The results of this analysis are summarized later in Table 2. 8.1. Central development and support agency In this segment of the model business management is closely controlled from the centre. It makes sense to control the IS function in the same manner since IS strategy is likely to be closely allied to the business strategy. Also, where there is minimal business diversification, Table 2 Role repository matrix Role repository entry 1 Central support service 2 Central development pool 7 Purchasing agency 13 Research and development 4 Strategic planning 6 Auditing 11 Communication facilitator 12 Provision of IT for centre 8 Project management 3 Resource allocation 9 Specialist services 5 Standards setting 10 Technical Services 14 Consultancy

Predictor model role location and applicability Cell 1 Cell 4 Cell 7 Cell 2 Cell 3

Cell 5

Cell 6

Core Core Likely Likely Likely Likely Likely Likely Likely Likely Likely Likely Likely

Core Likely Likely Likely

Core Core

Core Likely Likely Likely Likely Likely Likely Likely Likely Likely Likely Likely

Likely Core Likely Potential Potential Likely Core Likely Likely Likely Core

Likely Likely Likely Likely Core Core Likely Likely Likely

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it is likely that the business will benefit from the use of common systems and this further supports the centralization of the development and support functions. The potential weakness identified with this arrangement is a perceived loss of control over their IS destiny, amongst the business unit user-community, leading to distancing from the centre and possible disenchantment with the service received. The centre must, in this case, be proactive in adopting a strong customer orientation which implies committing significant effort to continuously and effectively communicating with the business units. In this organisational type all of the fourteen roles, with the exception of Consultancy, would be centrally provided, as illustrated in Table 2. 8.2. Core development pool In an organisation which has diversified its operations in related areas there will be situations where some business units will benefit from the use of common systems while others will have different requirements from any predominant group. This degree of diversification, coupled with a centralized approach to business management, points to a small core-development team at the centre delivering core-business applications, with each business unit retaining its own local IS capability to supply business specific applications. In this segment most of the identified roles are enacted with the exception of central support services and consultancy. 8.3. Strategic control unit In this type of operation the business has low diversification and is therefore suited to the use of common applications. However, since business units now enjoy a greater degree of autonomy in managing their own strategies a large, centralized support and development IS function is usually inappropriate. Conversely, leaving IS strategy decisions completely to the business units also appears inappropriate since the low level of business diversification suggests that economies of scale, achievable through the use of common systems, may be missed. In this type of operation, development and support should therefore be performed by business units but coordinated, planned and controlled through a small central IS department whose accountability would be to business unit management but with a ‘chain-dotted’, matrix-management responsibility to the Central IS function. Most of the listed roles are therefore enacted excepting central support, central development pool, purchasing agency, R&D and consultancy. 8.4. Strategic planning unit The business units are now diversified into related industries giving a core set of common IS requirements coupled with some business unit specific needs. The management style is neither highly centralized nor highly decentralized and the centre, while involved in strategic planning, is small and influential but not dictatorial in its relationship with the business units. The central IS department is also likely to be relatively small. Functions such as central development and central support will not generally be centrally provided but the centre will provide standards setting and strategy planning, and may well provide specialist services, project management, resource allocation, auditing, research and development and technical services

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functions. Roles of communications facilitator and provision of IS for the centre are also listed as ‘potentials’. 8.5. Administrative centre In this type of organisation the business is diversified into unrelated areas but there is still a degree of centralization of business management. In this case there is limited scope for the use of common systems across the company since the nature of the businesses, and therefore their IS demands, is significantly different. In each case the role of the central IS function is likely to be administrative in that the centre still wishes to have some involvement and control over business unit IS strategies but is not actively involved in their formulation or implementation. The key role of the centre, in this type of operation, is resource allocation although it may also provide some standards setting, specialist services, auditing and technical services functions. 8.6. Standards board In a firm which has diversified into related industries and which operates a highly decentralizedapproachtoitsbusinessmanagementthe scopeforcentrallyprovidedISservicesisvery limited since the business units are run almost autonomously and operate in a number of business sectors. Each will therefore manage the provision of its own IS services and will develop its strategies independently. However, even though the business units operate in diversified industries, there may well be benefits to the overall business in the adoption of commongroup standardstofacilitate communicationbetweenthe unitsand to providea limited number of central services such as wide-area-networking. The centre’s role will therefore be contained to include standards setting and the provision of skeleton technical services. 8.7. IS consultancy In this final classification the central IS function is of very limited value. The high degree of diversification reduces the opportunity for using common systems and the degree of decentralization of business management reduces the value of any central control over IS direction. Business units will develop and implement their own strategies independently. Inter-company communications will be negligible, so even the adoption of common standards is of dubious benefit. The only service which the centre may offer, that could be of value, would be in the form of consultancy including assistance in the strategy formulation process, selection of packages, subcontracting of development and preparation of project plans. 8.8. Model application and review The model represented in Fig. 4 may be basically characterized by a dominant diagonal running from top left to bottom right, comprising organisational type ‘predictor cells’ which represent a continuum with respect to the model dimensions of diversification and centralization. These are respectively numbered: 1. Central development and support agency. 4. Planning unit. 7. Consultancy.

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It is suggested that the four remaining predictor cells may be regarded as variants of these three diagonalized identities. This follows the logic and structure of the original Goold and Campbell model which was the progenitor of the current proposal. Having identified the situation of a particular organisation, with respect to the diversification and centralization axes on Fig. 4, the appropriate role identification cell is thereby located. When mapping from the predictor model to the expanded ‘role repository’ descriptor list, reference should firstly be made to the role repository matrix presented in Table 2. This shows the entries for the three dominant diagonal cells in the first three columns which are distinguished from the off diagonal cells in the remaining four columns. The strongest roles are denoted by the caption ‘core’, those which are very likely to appear are depicted by the caption ‘likely’ and those which are less likely but not improbable are denoted ‘potential’. The table shows a progressive numerical strengthening of the number of roles enacted, moving from the bottom right to the top left of the matrix. It also identifies those roles which are most closely identified with the highly centralized, minimally diversified segment (e.g. Central development and support identity), as contrasted with the decentralized, heavily diversified companies as characterized by the consultancy identity. The proposed predictive model thereby offers the advantage of simplicity in use although the process of reaching a consensus, when locating an organisation’s position upon the two respective axes of Fig. 4, may present a complex and debatable, but nonetheless informative exercise. In fact, it is suggested that the process of reaching agreement on this issue is, in itself, a valuable strategic activity for senior management to undertake. It should also be noted that while the model does provide an indication of the key features and roles that the centre might perform, it is not intended to be prescriptive in nature. Indeed, its main value may be as a tool for framing discussions when reviewing existing structures and functions, and identifying anomalies that may have arisen for historical, ‘real-politique’ or technological reasons. Indeed, there is an implicit assumption (that some may justifiably question) in research of the type reported here, that managers are actively searching for ‘clinically scientific’ rationally structured models to assist them in shaping their IS organisational arrangements. In practice of course, it must be acknowledged that many other factors of a behavioural nature inevitably impact upon the decision making process that determines actual strategies (Simon, 1978, 1987). However, as a research outcome, the production of a tool to assist in the process of creating mutually accessible mental models (Senge, 1990) of the relationship between the IS location issue and corporate structure, still appears worthy of attainment. However, it must also be recognised that it is often the case that those who are in a position to recognise the need for role changes may not always perceive their best interests to be served by proposing such change. In this sense, an independent appraisal may also be required. Hence, the behavioural implications associated with these considerations, although clearly of great significance, extend well beyond the scope of the research presented here. Either way it is proposed that the model presents a potentially useful medium through which the process of reviewing the centralization issue can proceed.

Company 3

Moving towards planned decentralization.

Emphasis on customer facing applications.

Regional water authority. Currently diversifying its interests. Strategic planning unit (Cell 4). Central development and Strategic control unit, moving support agency (Cell 1). towards central devpt. and supt (Cell 3 → 1). Full roles: 3,4,6,11,12. Part Full roles: 1,2,3,4,5,6,7,8,9,12. Full roles: 1,2,9. Part roles: Roles: 5,7,10. Part roles, 10,11,13. 5,8,10.

Company 2

Industrial power systems. Aero engine manufacturer. Heavy-engineering. Export led.

Changing role and IT structure Moving towards central services role.

Roles of the centre (identified by number)

Location on role prediction grid (Fig. 4)

Company profile

Company 1

Summary of roles enacted in participant companies

Table 3

Moving towards user orientation.

Strategic planning-unit, moving towards standards board (Cell 4 → 6). Full roles: 4,5,7,10. Part roles: 1,2,3,11.

General engineering company. Currently undergoing BPR.

Company 4

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9. Categorisation of roles in the case study companies Characterization of the respective companies featured in the case studies is shown as an illustration of the model’s application in Table 3 which relates in structure to, and may be seen as an extension of, Table 1. Location with respect to the dimensions of the predictor model is identified in the second row of Table 3. This shows the corresponding cell number predicted in Fig. 4. The key roles enacted within each respective organisation, corresponding to the role repository list, is presented in the third row of Table 3 while general observations of trends within the companies appear in row 4. These observations are briefly expanded as follows. Company 1: with respect to the grid axes this company displays related diversification together with a moderate degree of centralization. The company is therefore located in the strategic planning cell. There is no central development or IS support but there is a strong emphasis on strategic planning as evidenced by the existence of a hierarchical, company-wide methodology known colloquially as the ‘rocket-ship’. Central resource allocation and auditing are used to ensure business unit adherence with corporate strategy and there is a degree of standards setting. Company 2: this company shows low diversification and is highly centralized, thereby placing it in the central development and support cell. Development and support is centralized on a cluster of mainframes in a single computing hall at the company’s headquarters. Central standards setting is supported by a single purchasing agency which buys to standard. A central internal auditing group ensures conformance and a central IS group performs most of the functions in the column headed ‘Cell 1’ in Table 2. Company 3: the company displays low diversification and moderately high, but increasing centralization. This suggests location towards the top of the Strategic control cell but possibly moving into the Central development and support cell. Currently central development and central support roles are featured but these are subcontracted out. Roles of project management, standards setting and technical services are also partially enacted. Company 4: this company follows related diversification and moderate, but decreasing, centralization. This locates it at the bottom of the strategic planning cell and possibly moving towards the standards board identity. There is limited central development and support although there is a significant role in coordinating developments within the respective business units. Key roles of standards setting, strategic planning, resource allocation and standards setting are also enacted.

10. Conclusions The IS literature indicates that there does not appear to exist an accepted formula for predicting the role of the centre in information systems management. The case studies confirm this observation and the organisations visited displayed a wide variety of

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characteristics and styles, it being apparent that no single, common IS approach was appropriate to them all. However, two key determining factors were identified, these being the degree of centralization of business management style and the degree and type of business diversification within the business unit portfolio. The degree of centralization is influential in determining the control that is applied to business units in terms of standards, applications used and infrastructure. The degree of diversification is influential in determining the value accruing through common systems, platforms and standards. Based on these determinants seven organisational types have been proposed in terms of central role identity. These have been presented in a matrix model whose cells may, in turn, be mapped to a role repository matrix. From here it is possible to identify those roles that are considered most apposite for a particular set of organisational characteristics. The role repository matrix entries may, in turn, be mapped to an expanded role descriptor list containing 14 different options. A strong recurring theme in the case studies was the impact that technological changes in the computing industry are having in terms of demands placed on the IS centre. Correspondingly the advent of distributed computing is clearly acting as a major driver towards decentralization. The increasing number of end-user tools allowing local application development, local data management and processing of corporate data at a local level were generally seen as reducing the demand for centrally provided services. However, this occurs at the expense of increasing complexity in the management of the overall environment and it appears that there may still remain a significant role for the centre in managing the integrity and performance of the distributed services. For many businesses whose IS applications carry a strategic dimension the centre’s role needs to be clearly identified as an important component of corporate vision and a key factor in the alignment of IS with corporate strategy. Gaining a better understanding of that role and seeing how it fits the business needs is a fundamental prerequisite for effective operation of the central function. Within this context it is intended that the issues surfaced by this research, and the proposed models subsequently arising, will provide a useful framework for discussion, analysis and structuring thereby assisting and enabling those IS professionals who are charged with undertaking this complex strategic process.

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