Aligning IT projects with business strategy is consistently the top concern for CIOs. It is often difficult to educate line managers on technology s possibilities and limitations and keep IT professionals in tune with changing business needs. Most organizations face thousands of problems and opportunities for improvement. Therefore, an organization s strategic plan should guide the information technology project selection process. Recall from Chapter 2 s Best Practice feature that IT governance is also important in ensuring that IT supports business goals.
IT governance helps organizations maximize their investments in IT and address IT-related risks and opportunities. An organization must develop a strategy for using information technology to define how it will support the organization s objectives. This information technology strategy must align with the organization s strategic plans and strategy. In fact, research shows that supporting explicit business objectives is the number one reason cited for why organizations invest in information technology projects.
Other top criteria for investing in information technology projects include supporting implicit business objectives and providing financial incentives, such as a good internal rate of return (IRR) or net present value (NPV). 2 You will learn more about these financial criteria later in this section. Information systems can be and often are central to business strategy. Author Michael Porter, who developed the concept of the strategic value of competitive advantage, has Tie information technology strategy to mission and vision of organization. Identify key business areas. Information Technology Strategy Planning Business Area Analysis Project Planning Resource Allocation Information Technology Planning Stages Select information technology projects.
Assign resources. Results Produced Document key business processes that could benefit from information technology. Define potential projects. Define project scope, benefits, and constraints. FIGURE 4-3 Planning process for selecting information technology projects 136 Chapter 4 written several books and articles on strategic planning and competition. He and many other experts have emphasized the importance of using information technology to support strategic plans and provide a competitive advantage.
Many information systems are classified as strategic because they directly support key business strategies. For example, information systems can help an organization support a strategy of being a low-cost producer. As one of the largest retailers in the United States, Wal-Mart s inventory control system is a classic example of such a system. Information systems can support a strategy of providing specialized products or services that set a company apart from others in the industry. Consider the classic example of Federal Express s introduction of online package tracking systems.
They were the first company to provide this type of service, which gave them a competitive advantage until others developed similar systems. Information systems can also support a strategy of selling to a particular market or occupying a specific product niche. Owens-Corning developed a strategic information system that boosted the sales of its home-insulation products by providing its customers with a system for evaluating the energy efficiency of building designs.
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