Strategic Planning for Information Systems, John Ward & Joe Peppard, 3rd Edition, 2002

John Wiley & Sons, Inc
The book adds new material on the latest developments in Information Systems, in particular ‘e’ (e-business and e-commerce), knowledge management, customer relationship management, enterprise resource planning and outsourcing. But, fundamentally, the book is not simply about technology or techniques but rather the strategic issues of how such technology can be used successfully in organizations. Ward and Peppard focus their attention on why and how to develop a strategy to use IS effectively. Such a treatment is important, and we believe this book will be of interest to practitioners, students and academics alike. Rudy Hirschheim The Information Systems community has grown considerably since 1984, when we began publishing the Wiley Series in Information Systems. We are pleased to be a part of the growth of the field, and believe that this series of books is playing an important role in the intellectual development of the the discipline. The primary objective of the series is to publish scholarly works that reflect the best of the research in the Information Systems community. We are also interested in publishing pieces that cannot only help practitioners but also advanced students to understand the myriad issues surrounding IS and, in particular, the management of IS. To this end, the third edition of Strategic Planning for Information Systems by John Ward and Joe Peppard is an excellent example. Previous editions have been highly successful, and we believe the third edition will be even more so. Since the second edition of this book appeared in 1996, we have seen Information Technology (IT) become an increasingly integral component of everyone’s working life and personal environment. IT is now ubiquitous and enables a degree of connectivity that was difficult to envisage even 10 years ago. The technology has evolved rapidly, producing significant advances in its capabilities and hence the business options and opportunities now available. Without doubt, the Internet has evolved into a significant business opportunity—when the second edition was published, Amazon.com, the doyen of the Internet, had only just come into being. Indeed, since the second edition the socalled ‘dot.com bubble’ has inflated and burst leaving much in its wake. Apart from the spectacular failures, many companies are now downgrading their forays into the world of cyberspace; many online ventures are even dropping their dot.com names. Despite this, there is no doubt that we have still only scratched the surface of the possibilities. Interactive digital television (iDTV) offers great promise in bringing the Internet and new broadcast services directly into the homes of consumers. Wireless technologies are poised to provide further opportunities to organizations as both employees and customers become less dependent on location in carrying out their jobs and conducting business. In the six years since the last edition, the language of information systems and technology (IS/IT) has also changed. E-commerce and ebusiness have come into common business parlance and even entered the home via TV advertising! While e is largely a relabelling of what was previously known as IS/IT, there are a number of new dimensions in the use of IT implied by e. These are considered in this edition. Perhaps, most importantly, the introduction of these new terms attracted increasing senior management interest in IS/IT and its importance to their organiza- TEAMFLY Team-Fly® tions. Unfortunately, the over-hyped promises have left many senior executives more uncertain than ever before about what can actually be achieved through IT use. One IT director summed up the dramatic changes in sentiment by saying, ‘in 2000 you could get any amount of money by putting an e in front; but in 2001 anything with an e had no chance of funding!’ The late 1990s also witnessed a push to manage corporate knowledge, as organizational success became increasingly dependent on its intellectual rather than its physical assets. Technology is seen as a key enabler of knowledge management (KM), yet many technology-driven KM initiatives have floundered. While managing information has proved difficult, we still have much to learn about how knowledge can be effectively managed before we can begin to understand how best to deploy technology and ‘systems’ in this context. Large enterprise-wide systems, such as enterprise resource planning (ERP) and customer relationship management (CRM) applications, are being implemented by organizations to improve the efficiency and effectiveness of their operations, by adopting new business models and through greater integration of processes and information use. The scale and complexity of these systems has proved a challenge to both IS specialists, in terms of implementation, and business management, in terms of identifying and managing the business changes essential to gaining benefits from these very expensive investments. The greater use of ‘outsourcing’ for significant aspects of IS/IT supply reflects the increasing sophistication and maturity of the IT industry and provides a challenge to optimize internal and external resourcing options to meet the range of business IS/IT needs. Undoubtedly, the recession of the early 1990s, and the resulting financial pressures, focused management on cost and supply issues, and perhaps increased the rate of outsourcing. Application service providers (ASPs) are now on the horizon poised to have an impact on the provisioning of applications. No longer is it necessary to make a decision either to ‘make’ or ‘buy’, but now we must also include ‘rent’ in the options. Experience has shown that, while outsourcing is a valid part of any strategy, outsourcing the development and management of the strategy itself can lead to serious business problems. Over the same period, much more has been learned about the practicalities of managing IS/IT strategically and the issues and factors that influence the success of the process in both the short and the long term. This edition considers both the implications of the developments in IS/IT and the most useful of the recent thinking and experiences concerning IS/IT strategic management. Although some things have moved forward since the second edition, many of the issues that were relevant then remain so today. Managing Preface to the Third Edition xi IS/IT successfully is perhaps even more difficult in today’s environment of faster business change combined with greater choices in IS/IT supply. The turbulence in both business and IS/IT environments may explain why, despite the increasing criticality of IS/IT for business, surveys continue to show that most IS/IT investments still fail to deliver the expected benefits to the organization. Many organizations are still concerned that IS/IT expenditure does not produce demonstrable ‘value for money’. As stated in the preface to the second edition, the following example problems can still result from the lack of a coherent strategy for IS/IT investment: . Business opportunities are missed; the business may even be disadvantaged by the IS/IT developments of others. Systems and technology investments do not support the business objectives and may even become a constraint to business development. . Lack of integration of systems and ineffective information management produces duplication of effort, inaccurate and inadequate information for managing the business. . Priorities are not based on business needs, resource levels are not optimal, project plans are consistently changed. Business performance is not improved, costs are high, solutions are of poor quality and IS/IT productivity is low. . Technology strategy is incoherent, incompatible options are selected and large sums of money are wasted attempting to fit things together retrospectively. . Lack of understanding and agreed direction between users, senior management and the IS/IT specialists leads to conflict, inappropriate solutions and a misuse of resources. Some or all of these can occur when the organization does not have the means to plan and manage IS/IT strategically (i.e. driven by the business needs for the long-term benefit of the organization). Much of the failure of IS/IT to deliver consistent benefits is often due to the short-term business focus and the delegation of IS/IT strategy to IT specialists. Over the long term, any organization will get the information systems it deserves, according to the approach adopted to the use and management of IS/IT. It is against this background that this book considers how IS/IT strategy development can be brought about and then sustained. The intention is to provide a structured framework and practical approach, expressed primarily in the language of business and management, which can be adopted jointly by senior management, line managers and IS/IT professionals to apply their various knowledge and skills most effectively to identifying what needs to be done and how best to do it. Developing a xii Preface to the Third Edition strategy is not a one-off exercise; it must be constantly improved and reviewed as achievements are made, options alter or business and IS/IT issues change. Defining a strategy for any organization is a creative and evolving process, which can be assisted by the use of tools, techniques and models to identify and select the most appropriate options. If there is an overall lesson that can be learned from experience it is that, since new technologies continually come and go, the pursuit of opportunities through IT must be driven, not only by what is technologically feasible but by what is strategically desirable. A key objective of this book is to provide this strategic focus for IS/IT. Clearly, an IS/IT strategy is merely one component of the business strategy and, as such, must be integrated with that strategy. This implies that IS/IT strategy development must become an integral part of the business strategy process. The IS/IT strategy must be understood by the business management and owned by them if it is to be implemented effectively. In putting together this third edition, we have read a considerable volume of recent research, articles, reports and books. However, some of the seminal work in the IS strategy area is still very relevant today even though it may have been written 10, or even 20, years ago. We have drawn on this, together with the more recent research. On occasions, we have modernized some of the language to reflect the vocabulary of today better. One of us is old enough to remember the first appearance of ‘e’ with eDP! In developing the contents of this book, we have also drawn on the work of many others. We recognize the contributions that these researchers and writers have made to the contents at appropriate points in the book.We hope that we have been able to bring it all together in a coherent and readable volume. Over the years, we have worked with hundreds of business and IS/IT executives and managers. Their knowledge, insights and experience and their use of many of the ideas, models and frameworks in this book, has ensured that the approaches described can be applied successfully in practice. The previous editions of the book have been read by many thousands of students, academics and practitioners. We have attempted to incorporate some of their suggestions for improvement into this current volume. One area, in particular, that we have attempted to improve is navigation through the book. While the overall structure of the book is similar to the previous edition, we have improved the layout of the chapters, incorporated running headings indicating precisely where the reader is and improved the index. We are aware that many readers dip in and out of chapters rather than read the book from cover to cover. In this edition, we have made extensive use of chapter endnotes. Some readers may be interested in following up in more detail some of the points made, Preface to the Third Edition xiii models used or research findings drawn upon—the endnotes will guide them to the original source. To help the reader navigate through the content of the book, Figure 0.1 illustrates the overall structure. The book is essentially split into two parts. The first part, Chapters 1–6, is concerned with introducing and describing the context, nature and processes of IS/IT strategy and the associated tools and techniques. Chapters 7–11 address the issues to be managed in delivering the benefits from having the strategy such as managing investments, making resourcing decisions, organizing for IS/IT and the design of the IS function, deciding about insourcing or outsourcing, and managing IT infrastructure. Any strategy must identify, as far as possible, ‘where the organization wants to be’ in the future and assess accurately ‘where it is now’ in order to decide ‘how best to get there’, given the alternative options and resources available. The first six chapters of the book consider how the organization can assess where it is with regard to IS/IT, in the context of current business environment, and what the business wants to achieve in the future. One key aspect of any strategy is to obtain the maximum value from past investments, which implies achieving an objective, consensus view of the current situation before defining new requirements. At the

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The book adds new material on the latest developments in Information Systems, in particular ‘e’ (e-business and e-commerce), knowledge management, customer relationship management, enterprise resource planning and outsourcing. But, fundamentally, the book is not simply about technology or techniques but rather the strategic issues of how such technology can be used successfully in organizations. Ward and Peppard focus their attention on why and how to develop a strategy to use IS effectively. Such a treatment is important, and we believe this book will be of interest to practitioners, students and academics alike. Rudy Hirschheim The Information Systems community has grown considerably since 1984, when we began publishing the Wiley Series in Information Systems. We are pleased to be a part of the growth of the field, and believe that this series of books is playing an important role in the intellectual development of the the discipline. The primary objective of the series is to publish scholarly works that reflect the best of the research in the Information Systems community. We are also interested in publishing pieces that cannot only help practitioners but also advanced students to understand the myriad issues surrounding IS and, in particular, the management of IS. To this end, the third edition of Strategic Planning for Information Systems by John Ward and Joe Peppard is an excellent example. Previous editions have been highly successful, and we believe the third edition will be even more so. Since the second edition of this book appeared in 1996, we have seen Information Technology (IT) become an increasingly integral component of everyone’s working life and personal environment. IT is now ubiquitous and enables a degree of connectivity that was difficult to envisage even 10 years ago. The technology has evolved rapidly, producing significant advances in its capabilities and hence the business options and opportunities now available. Without doubt, the Internet has evolved into a significant business opportunity—when the second edition was published, Amazon.com, the doyen of the Internet, had only just come into being. Indeed, since the second edition the socalled ‘dot.com bubble’ has inflated and burst leaving much in its wake. Apart from the spectacular failures, many companies are now downgrading their forays into the world of cyberspace; many online ventures are even dropping their dot.com names. Despite this, there is no doubt that we have still only scratched the surface of the possibilities. Interactive digital television (iDTV) offers great promise in bringing the Internet and new broadcast services directly into the homes of consumers. Wireless technologies are poised to provide further opportunities to organizations as both employees and customers become less dependent on location in carrying out their jobs and conducting business. In the six years since the last edition, the language of information systems and technology (IS/IT) has also changed. E-commerce and ebusiness have come into common business parlance and even entered the home via TV advertising! While e is largely a relabelling of what was previously known as IS/IT, there are a number of new dimensions in the use of IT implied by e. These are considered in this edition. Perhaps, most importantly, the introduction of these new terms attracted increasing senior management interest in IS/IT and its importance to their organiza- TEAMFLY Team-Fly® tions. Unfortunately, the over-hyped promises have left many senior executives more uncertain than ever before about what can actually be achieved through IT use. One IT director summed up the dramatic changes in sentiment by saying, ‘in 2000 you could get any amount of money by putting an e in front; but in 2001 anything with an e had no chance of funding!’ The late 1990s also witnessed a push to manage corporate knowledge, as organizational success became increasingly dependent on its intellectual rather than its physical assets. Technology is seen as a key enabler of knowledge management (KM), yet many technology-driven KM initiatives have floundered. While managing information has proved difficult, we still have much to learn about how knowledge can be effectively managed before we can begin to understand how best to deploy technology and ‘systems’ in this context. Large enterprise-wide systems, such as enterprise resource planning (ERP) and customer relationship management (CRM) applications, are being implemented by organizations to improve the efficiency and effectiveness of their operations, by adopting new business models and through greater integration of processes and information use. The scale and complexity of these systems has proved a challenge to both IS specialists, in terms of implementation, and business management, in terms of identifying and managing the business changes essential to gaining benefits from these very expensive investments. The greater use of ‘outsourcing’ for significant aspects of IS/IT supply reflects the increasing sophistication and maturity of the IT industry and provides a challenge to optimize internal and external resourcing options to meet the range of business IS/IT needs. Undoubtedly, the recession of the early 1990s, and the resulting financial pressures, focused management on cost and supply issues, and perhaps increased the rate of outsourcing. Application service providers (ASPs) are now on the horizon poised to have an impact on the provisioning of applications. No longer is it necessary to make a decision either to ‘make’ or ‘buy’, but now we must also include ‘rent’ in the options. Experience has shown that, while outsourcing is a valid part of any strategy, outsourcing the development and management of the strategy itself can lead to serious business problems. Over the same period, much more has been learned about the practicalities of managing IS/IT strategically and the issues and factors that influence the success of the process in both the short and the long term. This edition considers both the implications of the developments in IS/IT and the most useful of the recent thinking and experiences concerning IS/IT strategic management. Although some things have moved forward since the second edition, many of the issues that were relevant then remain so today. Managing Preface to the Third Edition xi IS/IT successfully is perhaps even more difficult in today’s environment of faster business change combined with greater choices in IS/IT supply. The turbulence in both business and IS/IT environments may explain why, despite the increasing criticality of IS/IT for business, surveys continue to show that most IS/IT investments still fail to deliver the expected benefits to the organization. Many organizations are still concerned that IS/IT expenditure does not produce demonstrable ‘value for money’. As stated in the preface to the second edition, the following example problems can still result from the lack of a coherent strategy for IS/IT investment: . Business opportunities are missed; the business may even be disadvantaged by the IS/IT developments of others. Systems and technology investments do not support the business objectives and may even become a constraint to business development. . Lack of integration of systems and ineffective information management produces duplication of effort, inaccurate and inadequate information for managing the business. . Priorities are not based on business needs, resource levels are not optimal, project plans are consistently changed. Business performance is not improved, costs are high, solutions are of poor quality and IS/IT productivity is low. . Technology strategy is incoherent, incompatible options are selected and large sums of money are wasted attempting to fit things together retrospectively. . Lack of understanding and agreed direction between users, senior management and the IS/IT specialists leads to conflict, inappropriate solutions and a misuse of resources. Some or all of these can occur when the organization does not have the means to plan and manage IS/IT strategically (i.e. driven by the business needs for the long-term benefit of the organization). Much of the failure of IS/IT to deliver consistent benefits is often due to the short-term business focus and the delegation of IS/IT strategy to IT specialists. Over the long term, any organization will get the information systems it deserves, according to the approach adopted to the use and management of IS/IT. It is against this background that this book considers how IS/IT strategy development can be brought about and then sustained. The intention is to provide a structured framework and practical approach, expressed primarily in the language of business and management, which can be adopted jointly by senior management, line managers and IS/IT professionals to apply their various knowledge and skills most effectively to identifying what needs to be done and how best to do it. Developing a xii Preface to the Third Edition strategy is not a one-off exercise; it must be constantly improved and reviewed as achievements are made, options alter or business and IS/IT issues change. Defining a strategy for any organization is a creative and evolving process, which can be assisted by the use of tools, techniques and models to identify and select the most appropriate options. If there is an overall lesson that can be learned from experience it is that, since new technologies continually come and go, the pursuit of opportunities through IT must be driven, not only by what is technologically feasible but by what is strategically desirable. A key objective of this book is to provide this strategic focus for IS/IT. Clearly, an IS/IT strategy is merely one component of the business strategy and, as such, must be integrated with that strategy. This implies that IS/IT strategy development must become an integral part of the business strategy process. The IS/IT strategy must be understood by the business management and owned by them if it is to be implemented effectively. In putting together this third edition, we have read a considerable volume of recent research, articles, reports and books. However, some of the seminal work in the IS strategy area is still very relevant today even though it may have been written 10, or even 20, years ago. We have drawn on this, together with the more recent research. On occasions, we have modernized some of the language to reflect the vocabulary of today better. One of us is old enough to remember the first appearance of ‘e’ with eDP! In developing the contents of this book, we have also drawn on the work of many others. We recognize the contributions that these researchers and writers have made to the contents at appropriate points in the book.We hope that we have been able to bring it all together in a coherent and readable volume. Over the years, we have worked with hundreds of business and IS/IT executives and managers. Their knowledge, insights and experience and their use of many of the ideas, models and frameworks in this book, has ensured that the approaches described can be applied successfully in practice. The previous editions of the book have been read by many thousands of students, academics and practitioners. We have attempted to incorporate some of their suggestions for improvement into this current volume. One area, in particular, that we have attempted to improve is navigation through the book. While the overall structure of the book is similar to the previous edition, we have improved the layout of the chapters, incorporated running headings indicating precisely where the reader is and improved the index. We are aware that many readers dip in and out of chapters rather than read the book from cover to cover. In this edition, we have made extensive use of chapter endnotes. Some readers may be interested in following up in more detail some of the points made, Preface to the Third Edition xiii models used or research findings drawn upon—the endnotes will guide them to the original source. To help the reader navigate through the content of the book, Figure 0.1 illustrates the overall structure. The book is essentially split into two parts. The first part, Chapters 1–6, is concerned with introducing and describing the context, nature and processes of IS/IT strategy and the associated tools and techniques. Chapters 7–11 address the issues to be managed in delivering the benefits from having the strategy such as managing investments, making resourcing decisions, organizing for IS/IT and the design of the IS function, deciding about insourcing or outsourcing, and managing IT infrastructure. Any strategy must identify, as far as possible, ‘where the organization wants to be’ in the future and assess accurately ‘where it is now’ in order to decide ‘how best to get there’, given the alternative options and resources available. The first six chapters of the book consider how the organization can assess where it is with regard to IS/IT, in the context of current business environment, and what the business wants to achieve in the future. One key aspect of any strategy is to obtain the maximum value from past investments, which implies achieving an objective, consensus view of the current situation before defining new requirements. At the

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