Strategic Information Systems

Strategic Information Systems

Information has emerged as an agent of integration and the enabler of new competitiveness for
today’s enterprise in the global marketplace. We reviewed the literature for commonly used or representative information planning methodologies and found that a new approach is needed. There are six methodologies reviewed in this paper. An integration of planning with development and management through enterprise information resources - which capture and characterize the enterprise - will shorten the response cycle and even allow for economic evaluation of information system investment.

I. Background

The concept of Strategic Information Systems or "SIS" was first introduced into the field of information systems in 1982-83 by Dr. Charles Wiseman, President of a newly formed consultancy called "Competitive Applications," (cf. NY State records for consultancies formed in 1982) who gave a series of public lectures on SIS in NYC sponsored by the Datamation Institute, a subsidiary of Datamation Magazine.

In 1985 Wiseman published an article on this subject (co-authored by Prof. Ian MacMillan) in the Journal of Business Strategy (Journal of Business Strategy, fall, 1984)

In 1985 he published the first book on SIS called "Strategy and Computers: Information Systems as Competitive Weapons" (Dow-Jones Irwin, 1985; translated into French by Bertrand Kaulek and into Italian by Professor Fabio Corno of Bocconi University). In 1988 an expanded version of this book called "Strategic Information Systems" was published by Richard D. Irwin. This book was translated into Japanese by Professor Shinroki Tsuji and published by Diamond Publishing. Over 50,000 copies have been sold.

For a long time relationship between information system functions and corporate strategy was not of much interest to Top Management of firms. Information Systems were thought to be synonymous with corporate data processing and treated as some back-room operation in support of day-to-day mundane tasks (Rockart, 1979). In the 80’s and 90’s, however, there has been a growing realization of the need to make information systems of strategic importance to an organization. Consequently, strategic information systems planning (SISP) is a critical issue. In many industry surveys, improved SISP is often mentioned as the most serious challenge facing IS managers (Pavri and Ang, 1995, Beath and Orlikowski, 1994; Martin, 1993; Porter and Miller, 1985).

Planning for information systems, as for any other system, begins with the identification of needs. In order to be effective, development of any type of computer-based system should be a response to need--whether at the transaction processing level or at the more complex information and support systems levels. Such planning for information systems is much like strategic planning in management. Objectives, priorities, and authorization for information systems projects need to be formalized. The systems development plan should identify specific projects slated for the future, priorities for each project and for resources, general procedures, and constraints for each application area. The plan must be specific enough to enable understanding of each application and to know where it stands in the order of development. Also the plan should be flexible so that priorities can be adjusted if necessary. King (King, 1995) in his recent article has argued that a strategic capability architecture - a flexible and continuously improving infrastructure of organizational capabilities - is the primary basis for a company's sustainable competitive advantage. He has emphasized the need for continuously updating and improving the strategic capabilities architecture

A Strategic Information System (SIS) is a system that helps companies change or otherwise alter their business strategy and/or structure. It is typically utilized to streamline and quicken the reaction time to environmental changes and aid it in achieving a competitive advantage.Key features of the Strategic Information Systems are the following:

 1) Decision support systems that enable to develop a strategic approach to align Information Systems (IS) or Information Technologies (IT) with an organization's business strategies

2) Primarily Enterprise resource planning solutions that integrate/link the business processes to meet the enterprise objectives for the optimization of the enterprise resources

3) Database systems with the "data mining" capabilities to make the best use of available corporate information for marketing, production, promotion and innovation. The SIS systems also facilitate identification of the data collection strategies to help optimize database marketing opportunities.

4) The real-time information Systems that intend to maintain a rapid-response and the quality indicators.

II. The Perspective of Strategic Information Systems Planning


In order to put the planning for strategic information systems in perspective, the evolution of
information systems according to the three-era model of John Ward, et al.(1990) is pertinent.
According to this model there are three distinct, albeit overlapping, eras of information systems, dating back to the 60’s. The relationship over time of the three eras of information systems is shown in table 1

	Era	Characteristics
60s	Data Processing (DP)	Standalone computers, remote from users, cost reduction function.
70s & 80s	Management Information System (MIS)	Distributed process, interconnected, regulated by management service, supporting the business, user driven
80s & 90s	Strategic Information System (SIS)	Networked, integrated systems, available and supportive to users, relate to business strategy, enable the business - business driven.

Applications in the overall Data Processing (DP), Management Information Systems (MIS)
and Strategic Information Systems (SIS) area need to be planned and managed according to their existing and future contribution to the business. Traditional portfolio models consider the
relationship of systems to each other and the tasks being performed rather than the relationship with business success. A portfolio model derived from McFarlan (1984) considers the contribution of IS/IT to the business now and in the future based on its industry impact. Based on this model applications are divided into four categories, as shown here:

Strategic ( Applications which are critical for future success. Examples: computer-integrated manufacturing, links to suppliers, etc.)	Turnaround ( Applications which may be of future strategic importance. Examples: electronic data interchange with wholesalers, electronic mail, etc.)
Factory ( Applications which are critical to sustaining existing business. Examples: employee database, maintenance scheduling, etc.)	Support ( Applications which improve management and performance but are not critical to the business. Examples: time recording, payroll, etc.)

Strategic Information Systems Planning in the present SIS era is not an easy task because
such a process is deeply embedded in business processes. These systems need to cater to the strategic demands of organizations, i.e., serving the business goals and creating competitive advantage as well as meeting their data processing and MIS needs. The key point here is that organizations have to plan for information systems not merely as tools for cutting costs but as means to adding value. The magnitude of this change in perspective of IS/IT’s role in organizations is highlighted in a Business Week article, ‘The Technology Payoff’ (Business Week, June 14, 1993). According to this article, throughout the 1980s US businesses invested a staggering $1 trillion in the information technology. This huge investment did not result in a commensurate productivity gain - overall national productivity rose at a 1% annual rate compared with nearly 5% in Japan. Using the information technology merely to automate routine tasks without altering the business processes is identified as the cause of the above productivity paradox. As IT is used to support breakthrough ideas in business processes, essentially supporting direct value adding activities instead of merely cost saving, it has resulted in major productivity gains. In 1992, productivity rose nearly 3% and the corporate profits went up sharply. According to an MIT study quoted in the above article, the return on investment in information systems averaged 54% for manufacturing and 68% for all
businesses surveyed. This impact of information technology on re-defining, re-engineering
businesses is likely to continue and it is expected that information technology will play increasingly important roles in future. For example, Pant, et al. (1994) point out that the emerging vision of virtual corporations will become a reality only if it is rooted in new visionary information technology. It is information technology alone which will carve multiple ‘virtual corporations’ simultaneously out of the same physical resources and adapt them without having to change the actual organizations. Thus, it is obvious that information technology has indeed come a long way in the SIS era, offering unprecedented possibilities, which, if not cashed on, would turn into unprecedented risks. As Keen (1993) has morbidly but realistically pointed out that organizations not planning for strategic information systems may fail to spot the business implications of competitors’ use of information technology until it is too late for them to react. In situations like this, when information technology changes the basics of competition in an industry, 50% of the companies in that industry disappear within ten years. (reff: http://www.mis.boun.edu.tr)


III. Strategic Information Systems Planning Methodologies

The task of strategic information systems planning is difficult and often time organizations
do not know how to do it. Strategic information systems planning is a major change for
organizations, from planning for information systems based on users’ demands to those based on business strategy. Also strategic information systems planning changes the planning characteristics in major ways. For example, the time horizon for planning changes from 1 year to 3 years or more and development plans are driven by current and future business needs rather than incremental user needs. Increase in the time horizon is a factor which results in poor response from the top management to the strategic information systems planning process as it is difficult to hold their attention for such a long period. Other questions associated with strategic information systems planning are related to the scope of the planning study, the focus of the planning exercise - corporate organization vs. strategic business unit, number of studies and their sequence, choosing a strategic information systems planning methodology or developing one if none is suitable, targets of planning process and deliverables. Because of the complexity of the strategic information systems planning process and uniqueness of each organization, there is no one best way to tackle it. Vitale, et al. (1986) classify SISP methodologies into two categories: impact and alignment. Impact methodologies help create and justify new uses of IT, while the methodologies in the “alignment” category align IS objectives with organizational goals. 




A. Impact Methodologies
1. Value Chain Analysis:
 The concept of value chain is considered at length by Michael Porter
(1984). According to him, ‘every firm is a collection of activities that are performed to design,
produce, market, deliver, and support its product. All these activities can be represented using a value chain.
Once the value chain is charted, executives can rank order the steps in importance to
determine which departments are central to the strategic objectives of the organization. Also,
executives can then consider the interfaces between primary functions along the chain of production, and between support activities and all of the primary functions. This helps in identifying critical points of inter-departmental collaboration. Thus, value chain analysis:
(a) is a form of business activity analysis which decomposes an enterprise into its parts.
Information systems are derived from this analysis. 
(b) helps in devising information systems which increase the overall profit available to a firm.
(c) helps in identifying the potential for mutual business advantages of component businesses, in the same or related industries, available from information interchange.
(d) concentrates on value-adding business activities and is independent of organizational structure.

Strengths : The main strength of value chain analysis is that it concentrates on direct value adding activities of a firm and thus pitches information systems right into the realm of value adding rather than cost cutting.
Weaknesses: Although a very useful and intuitively appealing, value chain analysis suffers from a few weaknesses


2. Critical Success Factor Analysis: 
Critical success factors analysis can be considered to be both an impact as well as an alignment methodology. Critical Success Factors (CSF) in the context of SISP are used for interpreting more clearly the objectives, tactics, and operational activities in terms of key information needs of an organization and its managers and strengths and weaknesses of the organization’s existing systems. Rockart (1979) defines critical success factors as being ‘for any business the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization.’ As shown in figure 3, CSFs can exist at a number of levels. They represent the few key areas where things must go right for the business to flourish. Consequently, critical success factors are areas of activity that should receive constant and careful attention from management. 




Strengths: CSF analysis provides a very powerful method for concentrating on key information
requirements of an organization, a business unit, or of a manager. This allows the management to concentrate resources on developing information systems around these requirements. Also, CSF analysis is easy to perform and can be carried out with few resources.
Weaknesses: although a useful and widely used technique, CSF analysis by itself is not enough to perform comprehensive SISP - it does not define a data architecture or provides automated support for analysis.



B. Alignment Methodologies
1. Business Systems Planning (BSP): This methodology, developed by IBM, combines top down planning with bottom up implementation. The methodology focuses on business processes which in turn are derived from an organization’s business mission, objectives and goals. Business processes are analyzed to determine data needs and, then, data classes. Similar data classes are combined to develop databases. The final BSP plan describes an overall information systems architecture as well as installation schedule of individual systems


2. Strategic Systems Planning (SSP): Also known as PROplanner and developed by Robert
Holland, this methodology is similar to BSP. A business functional model is defined by analyzing major functional areas of a business. A data architecture is derived from the business function model by combining information requirements into generic data entities and subject databases. New systems and their implementation schedules are derived from this architecture. This architecture is then used to identify new systems and their implementation schedule. Although steps in the SSP procedure are similar to those in the BSP, a major difference between SSP and BSP is SSP’s automated handling of the data collected during the SISP process. Software produces reports in a wide range of formats and with various levels of detail. Affinity reports show the frequencies of accesses to data and clustering reports give guidance for database design. Users are guided through menus for on-line data collection and maintenance.




3. Information Engineering (IE): This methodology was developed by James Martin (1982) and
provides techniques for building enterprise, data and process models. Theses models combine to form a comprehensive knowledge base which is used to create and maintain information systems. Basic philosophy underlying this technique is the use of structured techniques in all the tasks relating to planning, analysis, design and construction of enterprise wide information systems. Such structured techniques are expected to result in well integrated information systems. IE relies on an information systems pyramid for an enterprise



4. Method/1: Method/1 (Arthur Anderson and Co., 1982) is a layered approach for SISP. The top layer is the methodology itself, the middle layer of techniques supports the methodology, and a bottom layer of tools supports the techniques. Techniques supported by this methodology include data flow diagramming, matrix analysis, functional decomposition, focus groups and Delphi studies

This methodology incorporates the value chain analysis in its approach towards business and
competitive assessment. The seven work segments of Method/1, their actions and products are shown in table 3 (Lederer and Gardiner, 1992).

Work Segment	Actions	Product
1. Scope Definition and Organization	Determine key planning issues Determine project scope Organize project team Obtain management commitment	Definition of key planning Issues Definition of project scope Schedule of key management checkpoints Proposal letter
2. Business and Competitive Assessment	Study business and competitive environment Identify competitive information opportunities Define strategic information needs	Opportunities to use information competitively Definition of priority-setting criteria
3. Present State Assessment	Document present systems Assess effectiveness of information services Review functional operations Assess present operations Evaluate competitive IT position	Evaluation of organization’s IT position Description of present and planned application characteristics Assessment of present operations, architecture, and capacity
4. Information Technology Opportunities	Analyze IT trends Determine information needs Define major IT objectives Identify opportunities for improvement	Summary of needs of each major functional department Description of opportunities for improvement Summary of IT objectives and trends
5. Information Technology Strategies	Develop high-level IT strategies Define conceptual architecture of required information systems Identify high-priority projects	IT strategies Description of high-priority projects
6. Organization Plan	Develop change management approach Develop human resources plan	Organization plan
7. Data and Applications Plan	Define data and applications Define data and maintenance approaches Develop data and application plan	Data and application plan

IV. Key Issues in SISP Methodologies:

Lederer and Sethi (1988) surveyed 80 organizations to examine the problems faced by1 4
information systems managers when they attempt to implement one of three alignment
methodologies, BSP, SSP or IE. Barlow (1990) has also examined the SISP methodologies and has provided some insights into their structure and implementation problems. Bergeron et al. (1991) examined the issue of application of two ‘impact’ methodologies, Porter’s Value Chain Analysis and Wiseman’s Strategic Thrust Methodology. These studies and the insights developed by us form the basis of this section which provides a critique of the existing methodologies.
The detailed list of problems in implementing SISP methodologies has been classified by Lederer and Sethi as resource, planning process, or output related problem associated with the three methodologies. According to this survey, the most severe problem identified by IS managers is the failure to secure top management commitment for carrying out the final plan. The second most severe problem identified is the requirement for substantial further analysis after the completion of the IS plan. Both these problems are related to the output of the planning process. Besides these top two, six of the next top eight problems are related to the resources required to carry out the strategic information systems planning (success of the plan depends on the team leader, difficulty in finding the team leader meeting the criteria specified in the study, methodology lacking computer support, planning exercise taking long time, etc.). Among the top ten problems encountered while implementing one of these methodologies (or, even while implementing an in-house methodology), three are common: difficulty in obtaining top management commitment for implementing the outputs, the requirement of substantial further analysis and difficulty in finding a good team leader. The results of this survey suggest that IS planners are not particularly satisfied with their methodologies. If the objective of the SISP exercise is to align IS objectives with business goals, then detailed, lengthy and complex SISP may be of limited value. Where the objective is to use IT to impact a business strategy, these methodologies may not generate useful ideas for that purpose. Bergeron et al. (1990), however, point out that the value chain analysis and Wiseman’s strategic methodologies do help in achieving that purpose. Barlow (1990) suggests that the large number of methodologies that have been developed can often ‘add confusion rather than clarity to the (IS) planning process.’


V. Conceptual Framework for SISP - A Research Agenda

A conceptual framework for SISP is necessary both from a theory building perspective as
also providing a basis for undertaking SISP. 


The theory building perspective of SISP is expected to contribute to research in this area,
which, being in its infancy, has been largely anecdotal.
Based on the literature in this area and a careful study of the current methodologies, certain
generic steps in a typical SISP formulation can be identified. These are:
• Study Internal Business Environment. This is a prerequisite to determining the business IS
needs. The internal business environment is comprised of mission of the organization, its
objectives, strategies and plans, business activities, the organizational environment, core
competencies, its critical success factors and the internal value chain.
• Study external business environment. This helps an organization focus attention on the forces and pressure groups it encounters. These external forces exert a very strong influence on the business strategy of an organization. Factors to be considered here are the industry that the organization is in and that industry’s critical success factors, competitive position of the organization in the industry, relationship with major buyers and suppliers.
• Study internal IS/IT environment. This is mainly comprised of the current and planned
applications portfolio that supports the business. Other aspects to be considered here are the present IS organization, skills and attitudes of people in the organization, IT environment and the IS/IT budgets.





VI Conclusions

Information-based enterprises must be planned in an integrated way whereby all stages of the
life cycle are engaged to bring about agility, quality, and productivity. This integration is similar in nature to the integration of product life cycle for an enterprise. The existing methodologies,
however, tend to support information planning as an island separated from the wealth of the
enterprise’s information resources. A needed new approach would tap into these resources which capture and characterize the enterprise to allow for integration of the planning stage with information systems development stages and support a shortened and adaptive cycle. This paper is a small first step towards a big task: developing a framework and a theory for strategic information systems planning. The need for such a framework is established by the existing problems in implementing SISP methodologies and also by what these methodologies themselves lack. A possible approach to building a framework is traced to the theoretical work of Hsu and Rattner (1993) and that is where the thrust of this line of research is expected to lie.