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Delta Corporation has been very impressed with the progress it has made with its new product line and the new marketing approach that you recommended and instigated. As a result, it is now considering expanding this approach for its other product lines, providing them with the ability to market and sell all of its products online. However, it has not considered the implications for its IT department in developing this type of plan. As the Social Media Marketing Consultant, you are familiar with integrating business and IT strategic planning. They have called upon you to provide advice. You need to:
Explain what the company needs to consider if it is going to move to a more on-line approach for its sales and marketing activities. In particular, describe the consequences for its IT department and why they need to be involved in the planning phase.
Given the likely increase in costs associated with this move, you need to outline the potential benefits and possible pitfalls of outsourcing the IT maintenance and development.

Outline some strategic technology trends that the company may wish to monitor and consider for the future.
Finally, research a company in Saudi Arabia and discuss whether they were able to align their overall strategy and their IT strategy. If they were successful discuss how they managed this alignment and what benefits they gained from doing so. If they were not so successful, explain how and why you felt that occurred.IT for Management: On-Demand Strategies for
Performance, Growth, and Sustainability
Eleventh Edition
Turban, Pollard, Wood
Chapter 12
IT Strategy, Sourcing, and Strategic
Technology Trends
Learning Objectives (1 of 5)
Copyright ©2018 John Wiley & Sons, Inc.
IT Strategy
• IT Strategy
A plan of action to create an organization’s IT capabilities for
maximum and sustainable value in the organization.
• Business strategy
sets the overall direction of a company
o defines how a business will achieve its mission, goals, and
o specifies the necessary financial requirements, budgets, and
Copyright ©2018 John Wiley & Sons, Inc.
IT Strategic Planning
• Strategic Planning
o A series of processes in which an organization selects and arranges its
businesses or services to keep the organization healthy or able to function
even when unexpected events disrupt one or more of its businesses,
markets, products, or services.
• Strategy
o The plan for how a business will achieve its mission, goals, and objectives
including questions such as:
• What is the long-term business direction?
• What is the overall plan for deploying resources?
• What trade-offs are necessary?
• How do we achieve competitive advantage over rivals in order to achieve or
maximize profitability?
Copyright ©2018 John Wiley & Sons, Inc.
IT Strategic Planning: Value Drivers
• Enhance the value of a product or service to
consumers, creating value for the company (such as
advanced IT, reliability, and brand reputation).
Three general types of Business Value Drivers:
o Operational Shorter-term factors
o Financial Medium-term factors
o Sustainability Long-term factors
Copyright ©2018 John Wiley & Sons, Inc.
IT Strategic Plan Objectives
IT Strategies Support the Business Strategy
• Four IT Strategic Plan Objectives:
Improve management’s understanding of IT opportunities
and limitations
Assess current performance
Identify capacity and human resource requirements
Clarify the level of investment required
Copyright ©2018 John Wiley & Sons, Inc.
Strategic Planning Issues
• IT and Business Disconnects
Not all business leaders will work with IT to achieve success.
• Corporate and IT Governance
A company can outsource the work, but not the responsibility
for it.
• Reactive Approaches Fail
Failure to align to real business needs
o Fail to deliver value to the business
Copyright ©2018 John Wiley & Sons, Inc.
Strategic Planning Tools: SWOT
Figure 12.2: SWOT Analysis consists of a realistic evaluation of internal strengths
& weaknesses and external opportunities and threats.
Copyright ©2018 John Wiley & Sons, Inc.
Figure 12.3: IT strategic planning process
Copyright ©2018 John Wiley & Sons, Inc.
Levels of the Strategic Plan
• Long-range IT Plan (3-5 years)
What IT should do to achieve the goals, objectives, and
strategic position of the firm and how this will be achieved
o The overall direction, requirements, and sourcing of resources
• Medium-term IT plan
Identifies general project plans in terms of the specific
requirements and sourcing of resources as well as the project
• Tactical Plan (Short-range)
Details budgets and schedules for current-year projects and
Copyright ©2018 John Wiley & Sons, Inc.
Strategic Plan Portfolios
• Project Portfolio
Lists major resource projects that are consistent with the longrange plan.
• Applications Portfolio
A list of major, approved information system projects that are
also consistent with the long-range plan.
Copyright ©2018 John Wiley & Sons, Inc.
IT Steering Committee Tasks (1 of 2)
IT Steering Committee should:
• Set the direction
Links corporate strategy with the IT strategy,
• Allocate scarce resources
Approves the allocation of resources for and within the
information systems organization including outsourcing policy.
• Make staffing decisions
Key IT personnel decisions involve a consultation and approval
process made by the committee, including outsourcing
Copyright ©2018 John Wiley & Sons, Inc.
IT Steering Committee Tasks (2 of 2)
IT Steering Committee should:
• Communicate and provide feedback
Information regarding IT activities should flow freely.
• Set and evaluate performance metrics
Establish performance measures for the IT department and
see they are met.
Copyright ©2018 John Wiley & Sons, Inc.
Learning Objectives (2 of 5)
Copyright ©2018 John Wiley & Sons, Inc.
Aligning IT with Business Objectives
Figure 12.4 The Role of aligning IT strategy with business strategy to achieve
organizational strategic objectives is still one of the most important key issues
that challenges IT executives.
Copyright ©2018 John Wiley & Sons, Inc.
Business-IT Alignment
• Business-IT alignment
Refers to applying IT in an appropriate and timely way that is
consistent with business strategies, goals and needs.
• Business-IT alignment improved by focus on:
Commitment to IT planning by senior management
2. CIO is a member of senior management
3. Understanding IT and corporate planning
4. Shared culture and good communication
5. Multilevel links
Copyright ©2018 John Wiley & Sons, Inc.
The CIO’s Role
• CIO Skillset
Political savvy
o Influence, leadership, and power
o Relationship management
o Resourcefulness
o Strategic planning
o Doing what it takes
o Leading employees
Copyright ©2018 John Wiley & Sons, Inc.
Porter’s Competitive Forces Model: The Five Forces
Copyright ©2018 John Wiley & Sons, Inc.
Achieving a Competitive Advantage:
Strategies for Competitive Analysis
Cost leadership
Produce product/service at the lowest
cost in the industry
Offer different products, services, or
product features
Select a narrow scope segment (Market
niche) and be the best in quality, speed,
or cost in that segment
Copyright ©2018 John Wiley & Sons, Inc.
Porter’s Value Chain Model
Figure 12.6 Porter’s Value Chain. The arrows represent the flow of goods,
services, and data in an organization.
Copyright ©2018 John Wiley & Sons, Inc.
Value Chain Support Activities
• Support Activities
Applied to any or all of the primary activities which may also
support each other.
1. Infrastructure, accounting, finance, and management
2. Human resource (HR) management
3. Technology development, and research and development
4. Procurement or purchasing
Copyright ©2018 John Wiley & Sons, Inc.
Aligning IT with Business Objectives
What are the three categories of value drivers?
Why do reactive approaches to IT investments fail?
What is the goal of IT–business alignment?
Why is IT strategic planning revisited on a regular basis?
What are the functions of a steering committee?
Describe the IT strategic planning process.
Explain how a good IT strategy can help companies gain a
competitive advantage in the marketplace.
8. What are the five competitive forces in Porter’s Five Forces
Copyright ©2018 John Wiley & Sons, Inc.
Learning Objectives (3 of 5)
Copyright ©2018 John Wiley & Sons, Inc.
IT Sourcing Strategies
IT Deployment Strategies
• In-house development
Systems are developed or other IT work is done in-house,
possibly with the help of consulting companies or vendors.
• Sourcing
Onshore: sourced to consulting companies or vendors that are
within the same country.
o Offshoring: work sourced to other countries.
Copyright ©2018 John Wiley & Sons, Inc.
Cloud Strategy Challenges
Cloud Complexity
• Extensibility
The ability to get data into and out of the cloud service
• Migration Issues
Cybersecurity, privacy, data availability, and service
• Newer Challenges
Cloud integration with on-premises resources, extensibility,
and reliability
Copyright ©2018 John Wiley & Sons, Inc.
Outsourcing Challenges: Lessons Learned
1. Manage change by securing the commitment of senior
2. Assess organizational readiness
3. Anticipate risks and formulate a plan for mitigating
4. Build project management infrastructure
5. Create a governance mechanism
6. Properly define how success will be measured
Copyright ©2018 John Wiley & Sons, Inc.
Factors Driving Outsourcing
• Reasons Why Organizations Outsource IT
Generate revenue
o Increase efficiency
o Agile enough to respond to market changes
o Enterprise can focus on core competency
o Cut operational costs
o More accepted IT strategy
o Cloud and SaaS have been proven
o Differentiation from competitors
o Reduce burden on internal IT department
Copyright ©2018 John Wiley & Sons, Inc.
Outsourcing Risks, Hidden Costs (1 of 2)
Outsourcing Risks
• Shirking
The vendor deliberately underperforms while claiming full
• Poaching
The vendor develops a strategic application for a client and
then uses it for other clients.
• Opportunistic repricing
Client enters into a long-term contract with a vendor, the
vendor changes financial terms at some point or overcharges
for unanticipated enhancements and contract extensions.
Copyright ©2018 John Wiley & Sons, Inc.
Outsourcing Risks, Hidden Costs (2 of 2)
• Breach of contract by vendor.
Vendor fails to carry out the terms of .the agreement.
• Inability of vendor to deliver as promised.
Outsourcers unable to deliver the products or services.
• Vendor lock-in.
In the event that the outsourcing relationship does not go well, it can be
difficult to get out of the outsourcing agreement.
• Loss of Control over data.
Organization has little control over how and when their data can be
accessed and by whom
• Lower employee morale.
IT employees may feel devalued.
Copyright ©2018 John Wiley & Sons, Inc.
• Work Not Readily Offshored
Work that has not been routinized.
o Work that if offshored would result in the client company
losing too much control over critical operations.
o Situations in which offshoring would place the client company
at too great a risk to its data security, data privacy, or
intellectual property and proprietary information.
o Business activities that rely on an uncommon combination of
specific application domain knowledge and IT knowledge in
order to do the work properly.
Copyright ©2018 John Wiley & Sons, Inc.
Five Phase Outsourcing Life Cycle
Copyright ©2018 John Wiley & Sons, Inc.
Managing IT Vendor Relationships
• Finding and Selecting a Vendor
Experience with very similar systems of similar size, scope,
and requirements; experience with the ITs that are needed,
integrating those ITs into the existing infrastructure and the
customer’s industry.
o Financial and qualified personnel stability. A vendor’s
reputation impacts its stability.
• Ask for “Proof of Concept” or a Trial Run
Vendor demonstration of product to see how well it works
• Get Everything in Writing
Copyright ©2018 John Wiley & Sons, Inc.
IT Sourcing and Cloud Strategy
1. What contributes to the complexity of a cloud strategy?
2. How does tactical adoption of cloud services differ from a
coordinated cloud strategy?
3. What is onshore sourcing?
4. What are the major reasons for sourcing?
5. What types of work are not readily outsourced offshore?
6. When selecting a vendor, what two criteria need to be assessed?
7. What is the risk of putting too great an emphasis on cost when
selecting or dealing with an IT vendor?
8. What needs to be done before signing a contract with an IT
9. Why would a company want to invest in strategic technologies?
Copyright ©2018 John Wiley & Sons, Inc.
Learning Objectives (4 of 5)
Copyright ©2018 John Wiley & Sons, Inc.
Balanced Scorecard (BSC)
Typical Approach to Business: quantify past performance
• Lagging Indicators
P&L, Cash Flow, Balance Sheets
o Confirm what has already happened
o Represent history, not ideal for managing day-to-day
operations and planning
Balanced Scorecard Approach: multidimensional
• Leading indicators
Predict future events to identify opportunities.
Copyright ©2018 John Wiley & Sons, Inc.
Figure 12.8 SMART Criteria objectives should meet
Copyright ©2018 John Wiley & Sons, Inc.
Figure 12.9 Balanced Scorecard (BSC) uses four metrics to measure
performance—one financial metric and three nonfinancial metrics
Copyright ©2018 John Wiley & Sons, Inc.
Balanced Scorecard Metrics
Balanced Approach Perspectives
• Financial
Revenue, earnings, asset utilization
• Customer
Market share, Brand image, price-value relationship
• Business processes
Cycle times, cost per process/transaction
• Innovation, learning and growth
Employee skills, IT capabilities, R&D
Copyright ©2018 John Wiley & Sons, Inc.
Figure 12.10 : Overview of a low-cost airline’s BSC objectives, measures, targets,
and actions to achieve targets
Copyright ©2018 John Wiley & Sons, Inc.
The BSC Methodology
Copyright ©2018 John Wiley & Sons, Inc.
Balanced Scorecard
1. How did the BSC approach differ from previous
measurement approaches?
2. How does the BSC approach “balance” performance
3. What are the four BSC perspectives?
4. Give an example of each BSC metric.
5. How does BSC align IT strategy with business strategy?
Copyright ©2018 John Wiley & Sons, Inc.
Learning Objectives (5 of 5)
Copyright ©2018 John Wiley & Sons, Inc.
Strategic Technology Trends (1 of 2)
Gartner’s Top 10 Strategic Technology Trends (2017):
1. Artificial Intelligence and Machine Learning
• Robots, autonomous vehicles, consumer electronics
2. Intelligent Apps
• Virtual Personal Assistant (VPA), Virtual Customer Assistance
3. Intelligent Things
• Drones, smart appliances
4. Virtual and Augmented Reality
• Immersive content in mobile, wearables, IOT
5. Digital Twin
• Dynamic software model of a physical thing
Copyright ©2018 John Wiley & Sons, Inc.
Strategic Technology Trends (2 of 2)
Gartner’s Top 10 Strategic Technology Trends (2017):
6. Blockchain and Distributed Ledgers
• Peer-to-peer networked token or bitcoin chains
7. Conversational System
• Greater cooperative interaction between devices
8. Mesh App and Service Architecture (MASA)
• Mesh of back end services linking apps
9. Digital Technology Platforms
• Building blocks for a digital business
10. Adaptive Security Architecture
• New remediation tools to protect IoT
Copyright ©2018 John Wiley & Sons, Inc.
Strategic Technology Scanning
• Every organization needs to continually scan for
emerging technologies to enhance IT strategy
• Improvements gained can range from incremental to
• Scanning approaches include:
General Technology Search
o Technology Mapping
o Systems Modeling
o Customer Requirements Analysis
o Analysis of Specific Technologies
Copyright ©2018 John Wiley & Sons, Inc.
Finding Strategic Technologies
• Major research centers and technology conferences
COMDEX, IBM InterConnect
o Google Next, Adobe Summit, HIMSS
• Look for emerging technologies
Digital mesh is an expanded sets of endpoints used to access
applications, gather information or interact with people, to
ensure instant connection and response to build experience.
• Smart devices, wearables, consumer and home
electronic devices
• Companies need to strategically invest in emerging
Copyright ©2018 John Wiley & Sons, Inc.
Copyright © 2018 John Wiley & Sons, Inc.
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