Strategic and Managerial IT Issues: An Ongoing Business Challenge

Businesses are created to make a profit and create value for stockholders, customers, and employees. All businesses have a need to manage data and to turn raw data into information that is useful to the goals of the business. Information technology is a necessary engine for operating most businesses. Building and maintaining the systems that provide the information technology infrastructure for an organization require careful planning and strategy. Business leaders must balance cost, resources, efficiency, security, and complexity. Cost, staffing, return on investment, outsourcing, and technology controls are only a few of the complex decisions that must be made at strategic, tactical, and operational levels of management. The global impact of IT is staggering, and IT expenditures and operating budgets continue to rise steadily each year. The pervasive nature of technology and the rapidity of technological innovations continue to make information technology a critical concern for business leaders. The need for speed and accuracy of information within the business world will continue to create the need for efficient IT systems that deliver data on demand.

Keywords Information Technology; Strategic IT Management; Technology Issues

Business Information Systems > Strategic & Managerial IT Issues

Overview

Information technology (IT) has evolved into a requirement for businesses and organizations of all sizes and types. It allows communication, analysis, and management of all business functions. The rise in organizational dependence upon information technology has increased the cost to manage and maintain the required IT infrastructure and personnel. The complexity of information technology has stressed all aspects of organizational resources and has become a key consideration in the business planning process.

The San Diego State University Glossary of Academic Information Technology Terms defines information technology by stating that it "includes matters concerned with the furtherance of computer science and technology, design, development, installation and implementation of information systems and applications." Information technology is complex because it is not one single application or computer, but rather a dynamic system that is built to provide businesses with a way to harness, manage, and control the information and data that concerns the business. Laudon and Laudon (2001, p.12) suggest that information technology can be thought of as "one of many tools managers use to cope with change." The authors go on to suggest that three technologies make up the infrastructure of IT and include computer software, storage technology, and communications technology.

Business leaders must define, prioritize, and consider various information technology issues at both strategic and managerial levels in order to adequately manage company resources and lay the groundwork for future growth. Business managers are constantly being challenged by stockholders, employees, customers, and competitors in efforts to create value. Value is an often intangible quantity that represents the ways in which a business can provide a solution to customer problems and at the same time provide a financial return or economic value for the business. The management of information technology directly influences an organization's ability to deliver value consistently. It does not matter whether that value is in the form of monetary profit, labor productivity, new product innovations, or speed of service delivery that is greater, faster, or cheaper than competitors. IT affects how products are made, services are delivered, how employees are paid, and how customers are communicated with, billed, and analyzed. There are few functions or business activities that are not tracked or supported by technology.

Gartner Inc., an IT research firm, projected worldwide IT expenditures to total nearly $3.7 trillion in 2013, representing a 2 percent increase from 2012 (Gartner Worldwide IT Spending Forecast, 2013). Of that total, global expenditures on telecom services amounted to $1.65 trillion, IT services to $926 billion, IT devices to $695 billion, enterprise software to $304 billion, and data center systems expenditures amounted to $143 billion. Information technology is a major expenditure and a significant investment for businesses.

The complex management of information technology has led to an increase in the number of jobs in the field. Outsourcing or contracting with external companies to perform internal tasks has been used successfully for IT tasks because of the widespread use of computers and computer networks. Having a computer on a network means that information can be accessed from anywhere and delivered to anyone somewhere else. Networks or connected computers have redefined the traditional definition of work. Work in prior years had to be done on a specific schedule at a specific location and during certain hours. The linking of computers via networks has allowed businesses to respond to the need to operate their businesses seven days a week and twenty-four hours a day without regard for time zones or specific individuals handling the business of the company.

The Evolution of Information Technology

Information technology has evolved within the realm of business. Once like a foreign language and separate from business operations, technology is now central to every department, every function, and almost every employee’s job. Stair and Reynolds (2001, p. 284) noted that all users, whether managers or employees or technologists, should care about the development of information systems because all will be affected by them.

Once personal computers and PC productivity applications became common in the office environment, the knowledge of technology pushed beyond IT specialists and into the user community. Once the user community became familiar with the power of technology, that group began to demand more functionality and even greater control over decisions regarding technology. Simple access to the Internet and the development of web-based applications drew more by users and multiplied the pressure on internal application development. The ability to source, monitor, and influence technology was no longer the purview of purely technical professionals.

Many organizations grappling with the management of information technology began to shift the information technology function from finance departmental control, to its own department, to being integrated within each business unit. Others even experimented with outsourcing the function. At the same time, businesses have needed to hire and invest in people who speak the language of IT. While understanding information technology is important, it is also important to understand technology in the context of the industry in which the organization operates and the marketplace the organization engages. A conflict arises because people in technology often conduct themselves in ways that are amenable to technology and technologists alone. Conversely, business-oriented employees want technology to perform specific tasks within cost guidelines and do not always have regard for the long-term technology impact.

As a result, businesses have a hard time finding people who understand technology as well as the business. Information technology gained prominence from a strategic planning perspective once technology managers were a part of the strategic management team with representation by C-level executives such as chief technology officers or chief information officers. Having managers at the strategic level of an organization gave IT credibility and made IT issues more visible. IT is almost a business within a business and requires skilled professionals at all levels of management and implementation. Kwak (2001) discussed the reluctance with which IT was welcomed into the corporate strategic arena:

"When chief information officers (CIOs) first entered the executive suite, some fifteen years ago, they were not exactly a popular addition. 'More comfortable with computers than people' was a common verdict on CIOs who advanced through the information systems ranks. Employers seemed to face a simple trade-off: CIOs with depth and breadth of technology expertise or those with general business and interpersonal skills, such as the ability to exercise influence within the organization."

Information systems are not automatically created and involve a complex web of hardware, software, policies and protocols, standards, training, users, application developers, projects, and costs, to name just a few. The confusing system is assisted in its complexity by many competing interests and events outside of the organization. Companies are besieged with the interests of vendors, consultants, and integrators as well as the speed with which technology evolves or becomes obsolete. The compatibility of systems and the ability to operate across various hardware and software platforms can be difficult to manage. All of these make the job of managing technology difficult because it can be a full-time job just to understand the terminology and keep up with the changes. In addition, many of those from whom business and technical managers get information have a vested interest in getting businesses to commit to a specific direction.

Technology Decision-Making

Technology decision-making occurs along the same lines as traditional business decision-making. Strategic decisions are those that occur at a high level and are mostly concerned with the future, often three to five years in advance. Tactical decisions emphasize implementing strategic plans about one year in advance. Operational decisions focus on the day-to-day operations and completing the mission of the organization. Coordinating these three levels of decision-making is challenging and can be at cross purposes. Stair and Reynolds (2001, p. 212 - 215) discussed the key role that decision-making plays in problem-solving and how systems play a role in decision-making, problem-solving, and solution implementation.

Strategic and managerial information technology issues relate to the planning and implementation of information technology. These issues often include cost, personnel, policies and standards, the selection of solutions and vendors as well as implementation timelines and strategies. Strategic decisions usually flow downward into tactical and operational decisions. Feedback from operational and tactical activities should ideally flow upward but do so with difficulty. For example, operationally, a request to increase staff to meet an implementation issue automatically clashes with a strategic directive to reduce all project costs by a specific value. Conflict in decision-making is not the only problem. Every discussion is time-consuming and costly in the resources and research required. Because IT projects can be highly visible, there is also a reluctance to commit strongly to a position or direction in case that position later becomes untenable.

Strategic managers, thinkers, and leadership teams must consider the role information technology plays in the organization and the manner in which IT supports strategic objectives. The IT evolution within an organization must adapt to changing internal objectives, marketplace pressures, and the change of technology itself. Change must be structured and planned and does not just occur. From a structural perspective, control of IT and responsibility for it is an important and challenging assignment. There are challenges associated with carrying out IT responsibilities and even assigning responsibility when it affects so many elements and areas of an organization. However, the true impact of information technology is not easy to predict and the depth of knowledge needed is often not easily garnered in one individual or department. As a result, collaborative decision-making is needed when departments are competing for budgets and control.

Managerial concerns related to technology are more immediate and focus on expenditures, staffing, and control of IT assets. Managerial IT decisions are primarily those that will keep an organization's technology infrastructure running efficiently and allocating resources effectively. While strategic managers may look at costs from the perspective of how investments should be made to accelerate specific objectives, tactical managers look at how to spend IT dollars efficiently. The tactical level of managerial IT issues covers concerns that have a more immediate impact on the business.

Viewpoint

Who controls IT and who should make IT decisions?

One of the most contentious and far-reaching issues related to IT is who controls it, establishes controls, and makes decisions for its adoption and use. The reason for the competition for control is threefold. First, IT represents a significant part of the budget of a business and controlling that budget means power. Second, every stakeholder in a business has a reason to tap in to the budget for information technology that is directly linked to personal or departmental objectives and desires. Third, the structure of the business may adversely or positively influence the flow of decision making and funds.

In an organization where IT is a centralized department, there may be a tendency to move toward standards and technical efficiency over end-user needs. If the IT department does not control the IT budget, then there may be difficulty in establishing standards and reigning in the wish list of the end-user community. On the other hand, if IT professionals are part of the business units and these departments control the budget, IT may have to justify IT expenditures and investments just like any other part of the business. The control of IT expenditures may not always rest with individuals or departments that have the best interest of those who control at heart. If a proposed IT project does not make or save money, organizations should reject it.

IT decision-making may be influenced by how well the organization has adapted to and adopted technology. The "technology acceptance model" (Stair & Reynolds, 2001, p.18) describes the factors that measure the degree of technology acceptance. For example, "technology diffusion" shows how far technology has spread throughout an organization. "Technology infusion" tells how entrenched technology is in a specific functional area or department within the enterprise. Even if the spread and depth of technology adoption are high, Stair and Reynolds believe there can still be room for increased value related to technology.

From a management-level perspective, higher-level managers make the ultimate decisions in a business but may lack the technical expertise to understand the issues. More important, the issues may be far-reaching and it may be unclear what the ramifications of various decisions will be in the future. Higher-level management may be besieged by advice from vendors, managers, and lower-level technical employees. However, the level of credibility of lower-level technical personnel may be low because of the lack of organizational status. High-level management may want an absolute bottom-line decision about the expected return on investment and that may be difficult or impossible to quantify. Finally, upper-level managers are most likely to be distracted by other issues such as lagging sales numbers, high inventory, and falling stock prices.

Mid-level or tactical managers are usually the buffer between those who actually operate and maintain technology and high-level managers who decide what they want from technology. These managers filter requirements from operational personnel up to higher-level managers and translate directives from high-level managers to those at the operational level who must execute. Tactical managers have the unenviable position of having to communicate bad news. The bad news could be telling higher-level managers that information they want tracked may be useless and time-consuming or lower-level technical professionals that the solution they recommend is rejected and additional resources are not funded.

Top Strategic & Managerial Issues

Strategic IT issues concern how to help businesses meet their objectives more effectively. Information processing turns raw data into strategic knowledge. Individual understanding of the value of information is directly linked to the responsibilities an individual has within the organization. Sales managers are concerned about sales numbers, trends, the performance of sales staff, and the profitability of various products and services. Manufacturing managers are interested in labor costs and productivity and on-time deliveries. Customer service professionals are interested in customer wait times, replacement costs, and specific customer complaints. Stair and Reynolds (2001, p. 6) described the characteristics that are important to decision-makers and give information value. The characteristics include information that is:

• Accurate
• Complete
• Economical
• Flexible
• Reliable
• Relevant

• Simple

• Timely

• Verifiable
• Accessible

• Secure

All of these characteristics can address the key need for workers to be productive in the use of IT. Laudon and Laudon (, p. 29) described the "Information Systems Investment Challenge," which asserts the major problem in IT is management, not technology. Technology has proven to be a powerful set of tools and systems but not a cost-effective one. Hitt and Brynjolfsson (1994) define three strategic IT issues:

• Have investments in computers increased productivity?
• Have investments in computers improved business performance?
• Have investments in computers created value for consumers?

The authors suggested that these three questions are related and help strategic managers determine the value of information technology investments. Strategic IT issues also cross into the boundaries of other key functional areas. Wehmeyer (2004) gives examples of strategic information technology issues that are important in the alignment of a major function such as marketing. Part of the challenge is to begin to think of the functional area as being "enhanced" by IT. Wehmeyer (2004, p. 245) stated; "to become successful, information systems, strategy and infrastructure have to be aligned with business and marketing strategy and processes." Such alignment takes a collaborative effort between technologists and functional experts.

Cost containment, staff allocation, and major projects to be initiated are examples of strategic issues. Strategic issues typically look at the future, but a major shift in technology today can affect strategic direction. For example, the emergence of the Internet required organizations to take a strategic look at security in order to be prepared for possible issues as web-based applications allowed access to internal databases and employees had access to the Internet as a part of work. The managerial view of these strategic issues looks at specific implementation details as opposed to setting the direction. Managerial issues in IT often concern the delivery of IT services, the management and implementation of IT projects, and the control of IT operations.

CFO magazine (2003) suggests the managerial aspect of information technology has often concerned purchase and acquisition considerations. CFO highlighted five managerial issues in information technology including:

• Budgets and Return on Investment
• Internal Controls
• Software Licensing
• Outsourcing
• Utility Computing

The information technology budget and return on investment is crucial to any business because businesses have to be able to justify the investment in and cost associated with IT. In addition, costs have to be separated into initial acquisition and ongoing maintenance costs. The total cost of ownership of information technology assets is often much greater than the initial acquisition cost. Internal controls are needed to ensure that purchase decisions follow guidelines, assets and usage are tracked, and that only those who are authorized are allowed to access sensitive systems and information.

Software is a necessary asset that often is underestimated in terms of its overall cost. Companies must ensure that proper licenses are maintained for the usage of software, and this activity is made more difficult as the company size grows. There are benefits to standardization of software but difficulties in maintaining the standard. Newer versions may offer greater features and functionality but may have a downside in terms of the learning curve for users and the possibility of buggy software. After years of feeling forced to upgrade to the latest and greatest software, organizations are becoming more strategic in selecting software and examining whether new features are even necessary. Westerback (2000, p. 27) noted three management practices that have helped the federal government achieve success with IT. The practices include using performance to measure return on investment, being leading edge and not bleeding edge, and using successful and proven project management techniques.

Outsourcing is the practice of taking specific IT-related functions and allowing those functions to be completed by someone outside of the company. In some cases, it may mean allowing another company to take on the tasks formerly performed by internal employees. For example, in the 1990s, the IBM Corporation outsourced the servicing of midrange computer repair to another company. More likely, companies will take entire departmental staff such as customer service, technical support, or in-bound call centers and outsource the function to another country where workers are available at a lower cost. Because of the varying time zones, companies can also have twenty-four-hour support from around the world without the client necessarily knowing where support is coming from and who is delivering it.

Utility computing decisions involve how to make IT delivery simpler, easier, and less complex for the end user. The idea behind this type of computing is the concept that IT should become as intuitive as any utility one can simply flip a switch to turn on, such as electricity or water. When technology controls so many aspects of life, the user adapts to having it function in the background, unnoticed.

Finally, strategic IT issues deal with direction in concert with organizational objectives. Managerial issues consider the implementation of strategic direction. As IT becomes more intertwined (Wehmeyer, 2004, p. 244) with functional business areas, the need for different types of expertise becomes necessary in order to deal with broad and complex problems. Managers who emphasize value of IT investments will be better able to identify gaps and address those gaps effectively (Hitt, & Brynjolfsson, 1994, para. 54).

Terms & Concepts

• Information Systems: Interrelated components that collect, process, Store, and disseminate information to support decision-making, coordination, control, analysis, and visualization in an organization (Laudon & Laudon, 2001).
• Information Technology: Technology applied to business for processing data and transferring information.
• Management Control Information: Information that managers use to determine performance of information technology systems and return on investment.
• Operational Level of Management: Usually refers to the lowest level of management dealing with day-to-day or operational issues.
• Strategic Level of Management: Usually refers to the top level of management within a company charged with executive leadership and strategic planning for the future about three to five years in advance.
• Strategic Planning: The development of a method for achieving organizational strategic objectives such as profitability, productivity, or customer service.
• Tactical Level of Management: Usually refers to the middle or tactical level of management responsible for planning one to three years out.
• The Umbrella Effect of Management: Concept that suggests the objectives of one layer of management should be congruent with other layers and feed into each layer in a coordinated way.

Bibliography

Bartels, A., Holmes, B.J., & Lo, H. (2006). Global IT Spending And Investment Forecast, 2006 To 2007. Retrieved March 4, 2007, from http://www.forrester.com/Research/Document/Excerpt/0,7211,40451,00.html

Drnevich, P. L., & Croson, D. C. (2013). Information technology and business-level strategy: toward an integrated theoretical perspective. MIS Quarterly, 37, 483–509. Retrieved December 2, 2013 from EBSCO online database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=87371536

Gartner Worldwide IT Spending Forecast. (2013). Gartner says worldwide IT spending on pace to reach $3.7 trillion in 2013. Retrieved November 27, 2013 from http://www.gartner.com/newsroom/id/2537815

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Kuruzovich, J. (2013). Sales technologies, sales force management, and online infomediaries. Journal of Personal Selling and Sales Management, 33, 211–224. Retrieved December 2, 2013 from EBSCO online database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=86457301

Kwak, M. (2001). Technical Skills, People Skills: It's Not Either/Or. MIT Sloan Management Review Reprint 4231, 42, 16.

Laudon, K.C. & Laudon, J.P. (2001). Essentialsof Management Information Systems: Organization and Technology in the Networked Enterprise. Upper Saddle River, NJ: Prentice-Hall, Inc.

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Suggested Reading

Lu, Y., & Ramamurthy, K. (2011). Understanding the link between information technology capability and organizational agility: an empirical examination. MIS Quarterly, 35, 931–954. Retrieved December 2, 2013 from EBSCO online database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=67129445

Marchand, D. A., Kettinger, W. J., & Rollins, J.D. (2000). Information Orientation: People, Technology and the Bottom Line. MIT Sloan Management Review, 41, 69-80. Retrieved March 4, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3358406&site=ehost-live

Prahalad, C.K. & Krishnan M.S. (2002) The Dynamic Synchronization of Strategy and Information Technology. MIT Sloan Management Review, 43, 24-33. Retrieved March 4, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=7109715&site=ehost-live

Strategic Technology Primer by Summit Consulting Collaborative: http://www.summitcollaborative.com/current%5fmaterials/strat%5ftech%5fplanning/fctsht%5fwhatisST.pdf