Developing an information systems strategy

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Long Range Planning, Vol. 20, No. 2, pp. 100 to 113, 1987 Printed in Great Britain

0024-6301/87 $3.00 + .OO Pergamon Journal Ltd.

Developing an Information System.s Strategy Richard G. Hayward

The pervasiveness of information technology and the development of information economies has been heralded as an ‘information’ revolution. Few organizations can avoid the implications of this revolution and, with the falling cost of hardware and the increased scope of applications, the number of firms needing a strategy for information systems has increased by an order of magnitude. An awareness of the benefits of planning, the dangers of technology which can trap the unwary, and the general characteristics of the DP development cycle, should all convince management of the need for a strategy for information systems. However, while information systems literature has many references to information systems strategy, definitions are elusive. This article describes a basic planning model for developing an information systems strategy. The model is specifically structured to ensure that the necessary strategic issues have been examined, before information systems management are asked to draw up detailed tactical and operational plans.

(1) Introduction Information systems are essential to most organizations and a strategy for information systems should be an integral part of corporate strategy. The strategic importance of information systems and their competitive application is becoming increasingly recognized’ as is their importance to the organization as a whole. 2 Almost all publications dealing with information systems assume some form of strategy yet rarely is this strategy or its development explicitly stated. In view of the need to develop a strategy that takes into account an organization’s goals in terms of a current external environment, this is not surprising. An information system strategy is likely to be specific to a particular organization at a particular time. However with few exceptions, which tend to deal with specific aspects of strategy formulation, the literature has few references to how a strategy The author is Senior Lecturer in Computer Science at Massey University, Palmerston North, New Zealand. Previously he was managing consultant for Hays Allan (Chartered Accountants).

should be developed. 3,4In view of the importance of information systems and misunderstandings between top management and data processing technologists, this is perhaps surprising. A planning model for information systems should not only include a systematic review of the technology, the applications and the management of information systems, but should provide a mechanism and procedures to help overcome the communication gap between top management and Data Processing (DP). The need for a strategy and a model for developing that strategy is underlined by the fact that Diebold reported that only 15 per cent of the Fortune 500 firms had a strategy that extended beyond the application backlog and that only 25 per cent of those companies had a strategy for telecommunications. A recent survey of European multinational corporations revealed that only five of the 30 companies polled had a long-term strategy for information systems in place.6 At a time when the importance of computers in business is a much-discussed topic, the survey results are indeed surprising. Either few business leaders are convinced of the need for planning information systems or they are unsure of how to obtain a satisfactory information systems strategy.

(2) The Need For an Information Systems Strategy Why a strategy for information systems should be developed is examined in Section 2. The need for planning, the general characteristics of DP development, technology which is both complex and evolving, problems of organization and control, to gether with the increasing investment in information systems provide persuasive arguments. Section 3 introduces a planning model for information systems and explores key issues concerning the management, applications and technology strategies that need to be developed and aligned with

Developing overall corporate objectives. The application of the planning model is described in Section 4, while Section 5 draws some broad conclusions regarding the general scope and application of the model. Planning

Winston Churchill once said ‘Don’t worry, think and make plans.’ Like other successful leaders, he placed a deserved emphasis on the need for planning. Today, long-range planning is part and parcel of business activity. In the information systems area, the timespan of commitment is quite as long as in other corporate activities; the adoption of new technology, the pervasiveness of that technology and the complexity of integrated systems, all suggest a planning horizon of 5-10 years. Although a quote from Churchill on the importance of information is not available, one can be sure that his success depended on it. Information is, after all, a strategic resource--the lifeblood of an organization. Recent information systems literature now recognizes the concept of information resource management.7-9 It is the computer’s ability to provide more, better, and faster information that has highlighted the importance of data as a strategic resource. Computers can significantly increase productivity, not only in payroll, order-entry and inventory control, but in areas such as process control, computer-aided design, the electronic office and decision support. The three ideas mentioned above-the need for planning (and its long timescale in the context of information systems), the importance of information, and the importance of computers in information handling-lead naturally to the conclusion that a strategy, or plan, for implementing computerized information systems is mandatory in today’s enterprise. These facts alone should be sufficient to convert the thinking of the 25 out of 30 companies that had no information systems strategy in place.h Nolan’s

Stage Hypothesis

Research conducted by Nolan’O has shed considerable light (in terms of the need for improved planning, organization and control) on the impact of computer-based information systems upon the business. Although Nolan’s work has been criticized,“*12 many practioners feel that the hypothesis does describe, in broad terms, what has occurred in many organizations.’ Even the critics suggest that the model may describe the development of data processing in evolutionist rather than evolutionary terms.‘* Whether or not the hypothesis is totally valid, it may provide a useful guideline for an organization, to see where it stands and where it may be headed in terms of computerization. Nolan contends that the IS function of an organization typically undergoes six stages of growth in the quest for automated

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solutions to information processing problems. These six stages of growth are described below. Stage 1: Initiation. During this stage, the computer is first introduced into the organization. Although the participation of users is encouraged, their unfamiliarity with computers means that user involvement is minimal. The applications developed in this stage tend to serve the operational needs of the enterprise in such areas as accounting, payroll, order entry and invoicing. Little overall control of the computer systems is apparent. Stage 2: Contagion. Contagion sees the users becoming enthusiastic and demanding new applications as they overcome their initial apprehension of the computer. Consequently, there is a sharp rise in computer services expenditure, a rise that is exacerbated by costs not being borne directly by the users but carried as a business overhead. Management of the computer services, although possibly centralized, is ineffective with very little overall planning. Applications development is performed in isolation, with a consequent proliferation of incompatible and redundant data. Stage 3: Control. In stage 3, user demands for information are frustrated, while the ever-expanding budget and marginally increasing benefits of computer services draw the attention of upper management. Not surprisingly, budget expansion is either sharply reduced or held constant. The focus is now on providing the IS function with the type of professional management found elsewhere in the business; planning and control systems are initiated, with chargeout systems forcing users to pay for their computer usage. Emphasis is placed on documenting existing applications and moving them towards middle management, away from a focus on operational systems. As this restructuring takes place, however, the applications backlog lengthens and maintenance costs soar. Stage 4: Integration. According to Nolan, a significant transition point in the organization’s computer use is reached by this stage, that is a transition from management of the computer to management of the data resource. This shift, although hampered by data redundancies and inconsistencies, not to mention the lack of an organization-wide information analysis, is reflected in attempts to integrate existing systems using data base technology. Stage 5: Data Administration. By stage 5, data base technology is in place and a corresponding data administration function is being used to plan and control the organization’s use of data. The emphasis is on common, integrated systems, with shared data use among the various functions of the organization. Stage 6: Maturity. Very few organizations have reached this stage, but the attainment of maturity represents the true integration of the computer with

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managerial processes. The information resource is meshed with the stragegic planning of the organization. The applications reflect overall corporate policies. The importance of Nolan’s stage hypothesis should be clear. An organization is now able to see where it stands and where it is headed in terms of computerization. Perhaps the most important insight that can be gained from Nolan’s work, however, is an understanding of how not to computerize. The business must work to establish a different cycle, one that avoids the teething problems of initiation, contagion, control and integration. The answer is to move the whole business, or the lagging functional areas, straight into the latter stages of both the Nolan cycle and the 1980s. By doing this, the organization will be able to maximize the efficiency and effectiveness of its investment in computers and avoid the difficulties of attempting to bring an outof-control IS function into line. Clearly, this calls for enlightened and sound planning with top-level management support-the information systems strategy. Technology

Traps

A further and most persuasive reason for developing a stragegy, is the potential waste of money by organizations who are unaware of the pitfalls in today’s computing technology. Standardization and portability provide examples of potential technology traps. In Europe recently much attention has been focused on communications and the model for open systems interconnection. Elsewhere Unix has been hailed by some as heralding a new era of applications portability. However these advances (even if they are achieved) are limited when that exist compared to the incompatibilities throughout computing. Almost every aspect of hardware and software differs between manufacturers to a degree which does not allow the user to migrate applications from one manufacturer (or even one system) to another. To make matters worse the situation is deteriorating rather than improving. Since the general introduction of Cobol in the mid 196Os, which gave a degree of application independence, developments have taken place which have reduced this independence. communication systems, management Data management systems and even languages are specific to a manufacturer or indeed system. For example a system developed using LINC and DMSll will run only on one manufacturer’s equipment. Because an organization may be tied to a supplier, it is essential that the supplier is able to support the future development of information systems required by the organization. User Computing Rockart and Flannery13 estimated that 50 per cent of computing was end-user computing. Estimates suggest that this will soon grow to a point where it

will utilize up to 75 per cent of an organization’s computing power. l4 It has been suggested that this growth is, in part at least, a response to user pressure to overcome the applications development backlog which has been estimated at 3 years for documented requests and another 168 per cent for undocumented needs.15 A study by Dickson et ~1.‘~showed that the issue of end-user computing was ranked by management information systems executives as second only in importance to IS planning. The strong trend towards end-user computing is also supported in an Australasian survey.” This trend has been supported to a large extent by the introduction of the personal computer (PC). Over two million PCs were sold in the U.S.A. in 1984.” A survey by Verity showed that the PC component of a typical DP budget in 1986 was 9.2 per cent, compared with mainframe CPUs 12.2 per cent, minicomputers 10.8 per cent and terminals 4.1 per cent. l9 This may, however, be an underestimate of PC expenditure, since in some organizations PCs are purchased by user departments from their own budgets. A surveyzO shows that, in the 1000 firms surveyed, the average number of micros increased from 62 per site in 1984, to 167 per site in 1985, and was projected to increase to 267 per site in 1987. The explosive growth in the use of PCs and the parallel move to end-user computing may, in many organizations, have led to a loss of control by the corporate IS function. This loss of control is likely to extend to data, applications and application development, operations, security and budgets.*’ At a stroke, the control laboriously established in the 1970s and reinforced by the introduction of data base management systems and data dictionaries, has been undone. As PC use grows, the grip that organizations have on their information resource is steadily weakening and the need for an information systems strategy underlined. Grosch** puts the argument succinctly: ‘One dumb insurance company has gone out and bought about 1000 Macintoshes. That means they’re going to have 1000 crazed amateurs going off in several thousand different directions. And you’ll never get them back together again.’ Increasing Investment Early surveys found DP expenditures of less than 1 per cent of sales in the 1960s and 1970s. Kanter’ suggests that a figure of 1 per cent of sales might be used as a yardstick. However a recent article by Van Rensselaer23 indicates how rapidly this investment is increasing. Over a 6 year period from 1978 to 1984 Hewlett Packard’s investment in commercial data processing increased, per employee, at a greater than 60 per cent annual rate. At the same time the number of employees doubled but the ratio of terminals to employees increased by a factor of ten, from 1:27 to 1:2*5. Total expenditure in 1984 amounted to 3.5 per cent of sales, excluding data

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Further compounding the issue is the fact that much of the benefit from this investment is no longer based on direct or indirect savings but on intangible benefits. IBM U.K. is investing A70m in an office automation system, largely justified on the basis of a post implementation survey of user’s estimates of the value of the system.24 While complex information systems were largely confined to major organizations and the focus of information systems was internal, the lack of planning in smaller organizations could be overlooked. However the increased penetration of information technology, the growing importance of external links and the shortage of skilled DP staff, suggest that smaller companies may have an equal need to plan. It is the smaller, entrepreneurial company that has made the most outstanding contribution to growth in the U.S. in the last decade.25 The increasing penetration of information technology and the opportunities offered by information economies will require these firms to plan their information systems. While the number of large IBM installations can be counted in thousands, the number of medium-sized installations can be counted in tens of thousands. Key MIS

Issues

The final justification for improved approaches to planning is provided by the results of surveys of the most important issues facing IS management. Both the Ball and Harris survey26 and the Dickson et al. survey l6 showed that IS Planning was the critical issue facing IS management. In the latter survey this issue scored 9.1 out of a possible 10 while the next highest issue scored 7.4. This emphasis on planning almost certainly reflects concern over user computing, the shortage of DP personnel and the increasing complexity of much of the technology.

(3) A Planning Model for Information Systems Strategy Overview

of the Planning Model

The importance of an IS strategy cannot be denied. What should be included in this strategy is however open to question. In a 1982 survey” it was suggested that information systems strategy could be equated with moving towards a loosely integrated organizational database. Others have described approaches to information requirements planning.*’ Wetherbe28 suggested that a strategic planning model is based on four major generic activities: strategic MIS planning, information requirements analysis, resource allocation and project planning. The planning model described here is based on the author’s experience as a consultant. An initial model

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based on this experience was developed and used for an information system strategy study undertaken for Allflex International Limited. As a result of the experience at Allflex, the model was modified.29 The revised model has been verified by an in-depth investigation of the planning procedures used in five other companies. These companies range from those with no specialist DP staff to one employing over six hundred DP staff. Further testing of the model is planned. The model is based on identifying a number of key areas where senior management needs to take strategic decisions regarding the objectives, management, technology and applications of information systems. Once these strategic decisions have been made, IS management has a framework within which information systems can be built. The need for such a framework was highlighted in the early 1970s by Dearden3(j who observed that individuals capable of designing management information systems did not exist. The model focuses on what should be included in a strategy study. It does not describe how the study should be conducted. McLean and Soden3’ describe a planning mechanism for information systems. The model is seen as part of an evolutionary process that has seen the planning of information systems develop from simple models for application development, to data modelling, information resource management and information requirements planning to the present. Further evolution seems inevitable and may lead to the development of expert systems for information systems strategies. The planning model comprises four major activities; strategic requirements planning, a management strategy, an applications strategy and a technology strategy. If senior management ensured that information systems were developed only after each of the areas shown below had been fully explored, a significant advance in the effective use of computers might be achieved. The planning model is shown schematically in Figure 1, while Figure 2 attempts to show the interactive nature of the model. Strategic requirements planning is a key activity since it links the plans and strategies for information systems with overall corporate objectives and strategies. It’s role is examined in detail after a brief discussion of the other components of the planning model. The management of the IS activity is clearly of vital concern. Strategies and policies must be formulated that define, among other things, the role of people, what their strengths should be, and where they belong, together with the control structures that are needed. Applications strategy deals with the enterprise’s data and the automation of the processes operating on that data. It avoids the complicating hardware-

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software-supplier issues while concentrating on the formulation of an information architecture. The technology strategy, on the other hand, is concerned with the computer equipment, both hardware and software, required to support the applications strategy. Given the applications specifications, the technology strategy evolves a system architecture that supports the desired applications both now and in the future. Although the importance of the applications and technology strategies needs no defending, the treatment of them may. Despite the technology being intimately tied to the applications, there are a number of reasons for making a distinction between the two strategies. In part, the benefits arising from this separation of applications and technology are simply ones of convenience. Applications strategy is easiest to define when the specific characteristics of the computer equipment are ignored. All that needs to be considered, in terms of computer hardwaresoftware, are the general capabilities of computer systems. Applications strategy formulation can thus concentrate on the issues of business activities and processes and business data and its interrelationships. Similarily, the development of the technology strategy is aided if the factors needing consideration are pared down to, among other things, product ranges (present and anticipated), technical details and price considerations.

A further reason for the distinction is that by divorcing technology from applications one is making a conceptual-implementation distinction. The effect of this separation of concerns is to enforce logical design before physical design, leading to a degree of independence between the applications and the technology; changes in either applications or technology will thus be easier to realize. Secondly, applications strategy is largely internally focused; the business needs determine the information architecture, while the technology strategy is primarily dependent on the software-hardware vendors. This means that the technology strategist needs an initimate knowledge of such things as machine characteristics and compatibility issues, while the applications strategist needs an in-depth understanding of business combined with the ability to deal with all levels of management. A final point is that the IS strategy will often be simply too large an undertaking in its entirety. For the strategy as a whole to be effective, the three aspects (management, applications, and technology) must be unified and aligned with the policies, objectives and strategies of the enterprise. Strategic Requirements Planning fulfils this need. The need for Strategic Requirements Planning (SRP) should be clear; not undertaking SRP makes a mockery of the whole concept of an IS strategy, since there will

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be a little chance of the strategy reflecting the real needs and priorities of the enterprise. These then are the fundamental components of IS strategy. SRP is carried out first, followed by the concurrent planning of management (management strategy), information (applications strategy) and systems (technology strategy) architectures. The Strategic Requirements Plan is critical that the IS strategy receives top management support. Further, it is imperative that the IS strategy, from the start, reflects and supports the overall, long-term objectives and strategies of the organization. SRP lies at the heart of the strategy, and as its foundation, needs to be defined first.32 To accomplish SRP, the organization must at least: assess the organizational objectives and strategies, define the IS mission in relation to organization strategies, assess the current environment and set IS policies, objectives and strategies.

Factors,33v34two specific approaches may be useful. The first, strategy set transformation,35 aims to transform the overall corporate requirements or strategy set into a ‘MIS strategy set’ consisting of MIS system objectives and associated instructions and design approaches. The second comes from the need to assess the current state of information systems development in terms of the Nolan cycle. NolanlO gives a number of guidelines which help with this assessment.

It

In addition to techniques used elsewhere in corporate planning, for example Critical Success

However, the key issue is to realize the purpose of, and need for, strategic requirements planning and in particular to relate information systems strategy to the opportunities offered by the external and internal environments. Diebold asserts that much IS strategy is reactive and that the opportunities for a more proactive approach to information systems are frequently overlooked. MacLean emphasizes that information technology will offer many exciting possibilities for new services and products, while Strage25 suggests that small- and medium-sized entrepreneurial companies will identify and take advantage of many of these opportunities. Many

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smaller companies may not be able to afford the mistakes which many larger companies have accepted as part of the price of progress with data processing. The Management Strategy People are the most vital ingredient in the development, implementation and maintenance of any strategy. Consequently, the policies, objectives and strategies for the organization of people within the IS function must be defined. At what level will the person in charge of IS be reporting? What are the policies on personnel recruitment? Will control be centralized? Decentralized? Will a matrix style of management be used, or will the approach be the more conventional line of functional management? Should an information centre be developed alongside the traditional data processing function? This type of planning will be occurring in other areas of the business. It deserves mention here because it is such a vital aspect of planning for information systems, and because there is often confusion as to the role and place of information systems management. (1) Reporting Structure. Historically DP has reported to a functional executive, typically an accounting executive. With the development of systems outside the accounting area, this line of reporting retains little validity. In fully developed organizations, where IS expenditures may account for 5 per cent or more of turnover, the function may have the same reporting structure as other line functions. Alternatively where expenditures are lower, or where the degree of distribution of DP is greater, a staff reporting structure may be chosen. The scope of the IS department needs to be defined; particularly with reference to the rapid growth of user computing. The need for an information centre or personal computing resource centre should be examined, with particular reference to its reporting structure.37.38 The role of, and need for, a Steering Committee should be examined, both in regard to the ongoing development of information systems and the development and review of an information systems strategy. While this arrangement has received much support, particularly since it involves top management, there are disadvantages. McKeen and Guimares39 point out that projects selected by such committees tend to be chosen on the basis of satisfying the majority of members. (2) Degree of Decentralization. Until recently this discussion might have been headed Centralization vs Decentralization. With the advent of micro computers and in particular the personal computer, a degree of decentralization seems inevitable in most organizations. The issues referred to in the section headed Allflex International Limited need to be examined with specific reference to this topic.

The author is unaware of a generally accepted framework for dividing responsibility for information systems between the IS department and users. In many organizations a pragmatic approach seems to be adopted; if IS is unable to deliver a systems in an acceptable timeframe and the system can be developed using a personal computer, then the system is developed by the user. Such an approach must lead to inconsistency. An alternative approach, based on the tools and technology used for, on the one hand, transaction processing systems and on the other hand, information and decision support systems, has been suggested by Hayward and Tate.40 Further consideration should be given to the management style, which must be geared to the differing requirements of a project over its life cycle as it develops from an IS activity to a user activity, and the differing requirements of ‘development’ and ‘maintenance’. (3) Standards. Although a full treatment of standards is more appropriate at the tactical and indeed operational levels, certain strategic decisions need to bc taken. Martin4’ has suggested that these decisions can be represented by an octagon and cover the areas of usage, application development, data design, standards, architecture and the selection ofhardware and software. The responsibility for setting standards in each of these areas might be wholly DP’s, wholly the users, or a shared responsibility. (4) Security. Security is concerned with both the physical security of the equipment and the integrity of the data. The risks, in terms of accidental or intentional damage have to be weighed against the costs. That top management must be involved is emphasized by the lack of security implicit with many of the newer developments in computing technology. Local area networks are almost impossible to secure,42 while a standard configuration PC, equipped with one or two floppy disk drives, can only be made secure by restricting access, thus undermining most of the advantages of personal computing. 43 Merely by following standard backup procedures, a user can fill a diskette with 300500 pages of information and become an industrial spy. In this age of the ‘corporate raider’, the danger should not be underestimated. (5) Education. One further aspect that deserves special mention is education. Unlike many areas of the business, staff involved in the IS area will be dealing with new concepts much of the time. The virtue of the Nolan cycle is that it is a learning curve; if the Nolan cycle is broken and replaced with a new cycle, that learning curve is lost. Education then, must be a crucial part of this strategy. It applies not only to the IS department but also to the users. Organizations need to make strategic decisions as to the level of education required and who will be responsible for the education. The commitment of many Japanese organizations in this area hardly

Developing needs to be underlined. Dr Takeda, Director of NEC’s Institute for Technology Education, is quoted by Gregory” as saying that ‘work in the age of information technology is permanent life-long education. The enterprise has become essentially as much an educational institution as it is a place of work.’ The Applications Strategy Three fundamental problems arise when the applications strategy is considered, namely: the identification of the data and process needs of the enterprise, the priority to be applied to the application and subsequent resource allocation, and the development of applications on schedule and to budget. Corresponding to these problems, three elements of the applications strategy, each dealing with an increasing level of detail, emerge: information requirements analysis, resource allocation and project planning.28 (1) Information Requirements Analysis. Information requirements analysis is the most general and allencompassing activity of applications strategy formulation. This first step is necessary because the information requirements of the enterprise must be properly understood before any decisions are made on computerization. Information requirements must be considered in terms of the (relatively) stable underlying data and in terms of the less stable processes.

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At the application level the problem initially appears simpler. However, even at this level, the intangible benefits associated with many categories of information and decision support systems make the task difficult. At its simplest the problem is to allocate the limited resources available to those systems with the highest priorities. A related consideration is the sequencing of project development; the successful implementation of many information systems will call for the full functioning of other systems as a prerequisite. Resource allocation then, involves deciding the information subsystems priorities, taking into account not only resources, but also subsystem interdependencies. A further consideration, which might also be considered strategic, is the proper mix of development projects.49 The organization also needs to decide which techniques for evaluation should be used and whether these should be restricted to economic models, for example DCF, ROI, etc. Related problems associated with chargeout and the evaluation of existing systems also need to be decided.50*5’ (3) Project Haming. A successful conclusion of the applications strategy is ultimately dependent upon the implementation of the designated information subsystems without time or cost over-runs. To ensure that this does happen, detailed planning for each application must be undertaken. Project planning typically involves the expression of schedules and specific resource requirements. Techniques that might be used include milestones, together with PERT, critical path analysis or Gantt charts. The pitfalls of project implementation, specifically those relating to data processing projects, are well documented.52v53

Essentially, the analysis of information requirements revolves around data analysis, functional analysis and distribution analysis. Examples of techniques that might be used are given below. Data analysis, involving analysis of data entities and relationships, might be achieved using the entity-relationship approach developed by Chen.45 Martin’s enterprise modelling techniques are useful in functional analysis, where business processes and activities are analysed in terms of data usage and timing.& Distribution analysis, for which no formal techniques are popular, is concerned with the use of data across spatial dimensions. Specific techniques such as IBM’s Business System Planning,47 Wetherbe and Davis Ends/Means Analysis,48 and Rockart’s Critical Success Factor?“ may be appropriate. Certain of these techniques may be more suited to the analysis of transaction processing system requirements, others to the analysis of information systems and decision support systems.“”

The Technology Strategy An organization-wide perspective of hardware and systems software needs is required; without the technology strategy to gain this overall view, the business will find it difficult to reconcile the differing needs of the many applications. Bearing in mind the timespan of the IS strategy, the problem is further complicated by the rapidly changing technology. This rapid, indeed accelerating change, apart from widening the scope of computerization through new product development, means that standardization and compatibility issues are evolving.

(2) Resource Allocation. Resource allocation while conceptually a single activity, may be considered for practical purposes at two levels; corporate and application. At the corporate level an organization has to allocate scarce resources to competing claims. Little experience is available to guide the executive as to the level of resources that might be allocated. In the final analysis firms may well invest according to top managements’ perception of information tech-

How many different brands of micro-computers will be used? What communications standards are going to be important over the next 5-10 years? Which data management system will fulfil our diverse needs in the operational area? In what way will computing power be distributed? These are examples of technology strategy issues and their importance stems from the fact that an organization’s committment to a specific technology may

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involve a timespan considerably in excess of its investment in a particular model of computer. Communication and database architectures are likely to be embedded in applications. Cobol’s longevity, as a programming language, is in large part due to the enormous investment organizations have in systems written in the language. Surprisingly, one finds that there is little in the literature dealing with IS strategy, specifically dealing with the need for a technology strategy, let alone the issues involved; yet some generic and useful model seems essential. It is suggested that the distinctly separate and key issues of the technology strategy are data, communications, distribution and software and that strategies are required for each of these areas. (1) Data Strategy. Data is central to the IS strategy. The administration of data needs to be supported by software such as modelling systems, data dictionaries and data base management systems, while consideration will have to be given to software and hardware for migration, retrieval, manipulation and output of the data. In terms of a specific database management system (DBMS), speed, simplicity, facility, compatibility, and cost must all be juggled to arrive at the best answer to an organization’s requirements.5‘+56 Recent evidence also suggests that a single DBMS is unlikely to meet all requirements. The operational efficiences of a transaction processing system may be irreconcilable with the flexibility required of an information retrieval or decision support system. The requirements of graphics based systems (CAD) are not met by current standard implementations of hierarchical or network databases.w An organization’s approach needs to be carefully planned and structured, if these diverse requirements are to be met satisfactorily and data migrated from one application to another. (2) Communicatiovls Strategy. If any distribution of computing power is anticipated, and it is more than likely, communications hardware and software will be required. If the computer communications field did not have such disparate standards, or if one of these standards were eminently successful, there might be no need for a communications strategy. Communications compatibility cannot even be guaranteed across a manufacturer’s product line, let alone between different manufacturers. Unfortunately, while the IS0 seven layer Open Systems Interconnection standard is well known, what adherence there is to it is ambiguous and incomplete. The problem is further compounded by the appearance of defacto standards such as IBM’s SNA. What this means for the organization attempting distributed processing is that integration will have to be carried out in a manner that allows for changes in the communica-

tions standards area, while allowing integration through currently feasible communications. Finally, some standards are beyond the business’s control; for geographically dispersed computing, the standards of the telephone and carrier companies will have to be adhered to. It is therefore vital that an organization-wide perspective be maintained, one that takes compatibility issues, both present and projected, into account. Decisions must be made on the local communication protocols to be adhered to, and decisions may also have to be made on compliance with outside standards.4’*57*58Communication facilities required by other functional areas, for example, internal mail, telephone and video conferencing, will form a key part of this strategy. Planning models for communication architectures have been suggested by Martins9 and Buchanan and Linowes.60 (3) Distribution Strategy. Because a totally centralized computer system is infeasible (an extremely large, unwieldy and complex data base is necessitated, leading to performance problems and high maintenance, installation, and administration costs) some means of decentralizing the information system architecture is needed. Only an organization-wide examination of the issues involved will yield the best solution to this problem: a separate distribution strategy is essential. There are, however, major problems. Kleinrock6’ has pointed out that millions of dollars are being invested in distributed data processing, yet this investment is being made largely on a trial and error basis. Distributed data processing lacks a macro theory; decisions having to be based on micro theories which themselves are incomplete62 and which threaten to overwhelm with a mass of detail. A further complication arises since there are two aspects to distributed computing : functional and geographical distribution. It is likely that some mix of these two types of distribution will be required. Geographical Distribution: The business may find that information requirements analysis identifies the need for computer processing in different geographical locations. In conjunction with the functional distribution plans, the issues of geographical distribution must be considered. Key issues are the duplication-replication of data and the cost of data transmission.57-59 Fumtionul Distribution: The functional distribution of computing involves the dedication of computing power to a specific function. The dramatic fall in the cost of hardware allows this alternative to be considered. See Figure 3. Apart from the difficulties inherent in a large and monolithic centralized system, there are a number of reasons why computing should be functionally

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lnternaf~*)$;;ications Communications

Note:

In theory a user’s workstation may be connected transparently to any of these functions. In practice current technology makes this both technically very difficult and too costly. Nevertheless the author believes it is feasible within five years given that prices of hardware and software continue to fall.

Figure 3. Functional distribution distributed. Perhaps the primary advantage lies in the increased flexibility of the resulting business information systems. Because of the large measure of independence between different components of the functionally distributed system, the system is better able to respond to changing business needs and to the changing abilities allowed by evolving technology. A functionally distributed system allows elements to be updated, almost at will. Secondly the task specialization inherent in a functionally distributed system may allow more efficient computing; CAD/CAM, for example, is extremely expensive to provide in a generalized environment. Finally the problems of reliability and resource control may be more effectively and efficiently resolved using this architecture. (4) Software Strategy. At the same time as the applications strategy is being devised, and the information architecture defined, work needs to be carried out on tackling the problems of system implementation. Resource allocation, in particular, requires some estimate of the money and time required to computerize a particular application. Further, an organization-wide view of the processes is needed if process development is to take place in a rational and consistent manner. A process strategy then, is needed at the overall level to establish guidelines for implementing applications. A recent survey l7 of Australian companies revealed that the documented backlog for computer applications was typically in excess of 3 years, with an undocumented backlog of 100 per cent. The results of this and other studies15 show that major problems are being experienced by companies in their quest

for computerized information systems. Clearly, a rational and comprehensive attack on the problems of software development productivity is required. three broad One possible solution combines approaches.63 The Enhanced Conventional Approach---Software Engineering: Application development tools (ADT) and prototyping present two opportunities for enhancing productivity in the conventional environment. An application development tool is, as the name may suggest, software that provides facilities for easing the work of system development. Among the functions of an ADT or workbench, one may find test data generation, logic testing, prototype execution harness, operational execution harness and documentation generation. Software development, being such a labour-intensive activity can benefit much from ADT.@ Both Alvey and Esprit are investing heavily in research into Integrated Program Support Environments. A second means of bettering productivity is to employ prototyping. The advantages to be gained by prototyping are well-documented in the literature; quality, in terms of the software meeting user requirements, is the main benefit.65 The Fourth Generation Environment: In recent years, one of the most important changes in computing has been the tendency towards increased active user involvement in applications development.” This user involvement has now reached the stage where it is common for users to be developing their own applications. It is now possible, using the new Fourth Generation Languages (4GL), for users to

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carry out some development easily and speedily; there are a number of 4GLs capable of being understood by the business user after a day’s training. 4GLs will enable some computer subsystems to be developed better; users know what is needed. Secondly, they will enable applications to some of the be developed faster, overcoming problems associated with the development backlog. 4GLs may also be used by the information systems function. However, they should not be seen as a total panacea. Hayward and Tate6’ explores some of the disadvantages, as well as the advantages, of these tools. Application Packages: A third major development of recent times has been the growing popularity of application software packages. Where these packages use database management techniques, the user may lose little flexibility. Wherever possible the buying in of solutions should be considered. (5) Supplier. The inclusion of supplier at a strategic level may at first sight seem incongruous. Certainly the academic literature contains few references to this topic. However an organization’s committment to a supplier, through the purchase of hardware and/ or software, has major implications. The organization may effectively be handing over control of its information systems, at a time when these systems are essential to its well being or even survival. The long-term security of these systems and their ongoing maintenance must be top management’s responsibility.

Application

of the Model

Alljlex International Limited The planning model was used as a basis for developing an information systems strategy for Allflex International Limited (Allflex). Hayward6* describes the evolution of the model and the detailed implementation. In terms of Nolan’s stage hypothesis, Allflex was, at the time of the study, at stage 1 and about to enter stage 2. For example, plans were being discussed for inventory control and costing systems, computer aided design and the use of PCs for decision support. A major objective of the strategy was to ensure that Allflex moved from stage 1 directly to stage 5. Whether this has been totally achieved, only time will tell. However, the broad framework has been put in place and a development plan charted. In broad terms the strategy study provided an essential focus of attention. The process itself highlighted the need for a single body to control the development of the strategy and supervise the implementation of that strategy. This body, which took the form of a Steering Committee, was chaired by the chief executive and included representatives from the major functional areas. Although many

authors have called for the need for top management support, the study again emphasized that without this support the progress of information systems is likely to be piecemeal. At Allflex, since the original management structures were developed, changes in personnel have taken place. This underlines one of the major advantages of a strategy. The organization has a set of written plans and procedures and does not solely rely on the knowledge of individuals. Such key issues as the need for integrated hardware, a database management system and key application packages were readily identified. The study also allowed various tradeoffs to be identified and evaluated. These included the balancing of technology, supplier and cost and the tradeoff of application packages and flexibility. Once the need for these tradeoffs was identified, realistic decisions could be taken. The formal approach also allowed policy issues to be raised and problems confronted, before the strategy was officially adopted. This was critical since conflicts of policy (and management) can and did arise. The strategy provided a framework which allowed changes in reporting structure and the management of data processing itself to take place without causing the strategy to be recast. This may be critical since data processing staff are highly mobile. A further advantage of the approach was that management obtained a realistic estimate of the total cost that would be involved over a three-year period. This included upgraded disk capacity and processor, a second processor (office system), printers and additional personal computers. It also meant that future application software and systems software costs could be identified. The availability of this information, given the widespread feeling that DP always over-ran budgets, was of comfort to management, since they were aware of the total costs that might be involved. The protection of the initial investment through the availability of a planned upgrade path was also seen as critical. Finally, the study provided an essential framework for negotiations with suppliers. The final negotiations for the systems set out to achieve a price reduction for the CAD systems and long-term application support for the commercial system. Both these objectives were achieved. The strategy focused attention on these key issues and this applied to both the supplier and the purchaser. The final contracts made CAD affordable and an ambitious implementation programme for the commercial systems realistic. Although many of the advantages accruing from a strategy study can, with hindsight, be put down to commonsense, experience shows that this commodity may be scarce in a situation where management

Developing is confronted with an extremely complex technological environment. An information systems strategy focuses attention and makes ‘commonsense’ easier to apply. As a by-product an information systems strategy may considerably improve the negotiating position of an organization by identifying key requirements. At Allflex, the cost of the study was repaid several times by the direct savings. Further Applications of the Model The model has been retrofitted to a number of consultancy assignments carried out by the author. In all cases the model fitted. A questionnaire, based on the planning model, has been applied to five companies in New Zealand. The questionnaire was administered by the author over a l/2 day period in each of the companies. The companies ranged from those with no DP staff to one organization that DP specialists. employed over six hundred Although the planning mechanisms in use in these companies varied widely, from little planning to the use of sophisticated models for data, hardware, networks, etc. the model highlighted areas where planning could be improved in all cases. In all but one company, which came closest to the model in terms of planning mechanisms, major defects in their strategies were identified. These included inappropriate data technology, incompatible hardware, and application strategies that conformed with an industry norm rather than the specific objectives of individual organizations. The model may also be valid on an industry sector basis. The planning mechanisms currently used by Databank conform, in broad terms, with the approach outlined in this paper. The systems operated by Databank include the major operational systems required by the banking industry in New Zealand. Further research is planned at both the organization and industry sector levels.

an Information

Systems

Strategy

111

companies will have less to gain. Application packages and personal computers may have to be treated as disposable commodities rather than longterm investments. Nevertheless aligning information systems with company objectives and developing pro-active systems can yield substantial benefits.“’ Large companies, with a substantial investment in information systems, may be constrained by that investment. This may lead, in the short and medium term, to significant compromises regarding the overall strategy for information systems. However, the constraints themselves often indicate a need for a long-term strategy to free-up the IS function and make it more responsive to corporate needs. On its own, the model described will not produce an optimum strategy. The factors involved are too many and too complex. However, even a cursory examination of the key issues could lead to a great improvement in many firms’ policies and the avoidance of the more obvious pitfalls. The model gives senior management guidelines for evaluating their organization’s approach to information systems. A final caution concerns the scope of the planning model. The model only addresses the strategic decisions needed to implement information systems. As such it sets the overall direction for development but much further work is required at the tactical and operational levels before systems can be implemented.

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