2 - strategic it

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Strategic Uses of InformationStrategic Uses of Information

TechnologyTechnology

Topic 2. What is a Strategic IT System?Topic 2. What is a Strategic IT System?


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IT EvolutionIT Evolution

Automate

Informate

Innovate

Time

Value

Data

Information

Knowledge?

Cost Substitution

Analyse

Re-engineer,

Learn


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Some Examples of Strategic ITSome Examples of Strategic IT

SystemsSystems American AirlinesAmerican Airlines

(Sabre)(Sabre)

FedexFedex Dell ComputerDell Computer

BaycorpBaycorp

What makes their systems Strategic?


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American Airlines (Sabre)American Airlines (Sabre)

Pioneer in Electronic Reservations (1963)Pioneer in Electronic Reservations (1963)

Pioneer in hosting other airlinesPioneer in hosting other airlines

Pioneer in related reservationsPioneer in related reservations Hotel, rental car, etcHotel, rental car, etc

Now separate company, earning (2000)Now separate company, earning (2000)

$US200M on revenues of $2600M.$US200M on revenues of $2600M.American Airlines is one of worlds 10 largestAmerican Airlines is one of worlds 10 largest

airlinesairlines

P

anA

merican no longer existsP

anA

merican no longer exists

2.1


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Federal ExpressFederal Express

FedexFedex -- became #1 courier company,became #1 courier company,

50% of market50% of market

largest freight airline in the worldlargest freight airline in the worldby focussing on qualityby focussing on quality

onon--time delivery (undamaged of course)time delivery (undamaged of course)

Key IT systemKey IT system -- track packagestrack packages Quality monitoring so detailed, customer isQuality monitoring so detailed, customer is

often unaware of quality failures!often unaware of quality failures!

2.2


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Direct Marketing.Direct Marketing.

Case Study, Dell ComputersCase Study, Dell Computers Creating a $US12Bn company in 13 yearsCreating a $US12Bn company in 13 years

Dells ModelDells Model

Build on orderBuild on order Close integration (virtual company) withClose integration (virtual company) with

customer and supplier.customer and supplier.

Velocity, low inventory.Velocity, low inventory.

Web salesWeb sales

Within a year, $US2m per day.Within a year, $US2m per day.

1999 $US18M/day1999 $US18M/day

now 50$ of salesnow 50$ of sales -- $32bn annually ($43M/day)$32bn annually ($43M/day)

2.3


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BaycorpBaycorp

1974 Creditman1974 Creditman--Dun almost had aDun almost had amonopoly on credit informationmonopoly on credit information

Cooperatively owned, ProfitableCooperatively owned, Profitable

Saw an opportunity to save costs through ITSaw an opportunity to save costs through IT but abandoned system when costs escalatedbut abandoned system when costs escalated

In the meantime, small Hawkes BayIn the meantime, small Hawkes Bay

company developed minicomputer systemcompany developed minicomputer system

saw it as a strategic opportunitysaw it as a strategic opportunity

Today Baycorp is dominant, CToday Baycorp is dominant, C--D a distantD a distant

memory.memory.


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Characteristics of StrategicCharacteristics of Strategic

SystemsSystems -- 11 All of these IT systems wereAll of these IT systems were

FUNDAMENTAL to the business strategyFUNDAMENTAL to the business strategy

IT strategy = Business StrategyIT strategy = Business Strategy They changed the dynamics of theirThey changed the dynamics of their

industryindustry

competitors forced to followcompetitors forced to follow

Often pushing the state of the art, eitherOften pushing the state of the art, either

technically or in businesstechnically or in business


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Organizational Change andOrganizational Change and

Information SystemsInformation Systems Introducing a strategic system will lead to aIntroducing a strategic system will lead to a

culture changeculture change

Some elements of existing culture elementsSome elements of existing culture elementswill help, some will hinder. Which?will help, some will hinder. Which?

Understanding culture clash/reinforcementUnderstanding culture clash/reinforcement

is important for strategic successis important for strategic success ToolTool -- Matrix of ChangeMatrix of Change

Brynjolfsson et al - The Matrix of Change, Sloan Management

Review, Winter 1997, p19972.4


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Trends in Corporate SoftwareTrends in Corporate Software

Automate

Informate

Innovate

Time

Value

Data

Information

Knowledge?

Cost Substitution

Analyse

Re-engineer,

Learn

Old metrics

dont apply

Legacy Codeis a Major Risk

Top Software

Talent Scarce


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Corporate SoftwareCorporate Software

P

erformance MetricsP

erformance Metrics Old metricsOld metrics

System response, utilisation, availabilitySystem response, utilisation, availability

ROI, payROI, pay--back timeback time

Applications backlogApplications backlog

Saving MoneySaving Money

New MetricsNew Metrics

Achieving business objectives,Achieving business objectives, AlignmentAlignment

Responsiveness to Business ChangesResponsiveness to Business Changes

Making MoneyMaking Money


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If we need new metricsIf we need new metrics --

What are our present metrics?What are our present metrics?

What should we use?What should we use?

Topic 3Topic 3 -- The Business Case,The Business Case, but first:but first: --

2 - strategic it

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