Executive Summary
The contemporary world faces constant stream of information technology, integrated business practices and excellent management decisions. These aspects transform business practices leading to increased productivity in the business world. The world faces enormous development in business, broad information systems that offer unmatched and affluent information to managers besides enhancing production. Managers understand their clients and develop close relationships with their customers through information systems. IT helps facilitates easy access to significant information and processes, an aspect that promotes timely and concise decisions that enhances productivity in organization. While IT spending leads to permanent growth, some firms struggle to enhance their performance through prospects of financial analysis. Nevertheless, the real problem of failure in technology-intensive firms is lack of IT leadership skills and understanding functionality of information skills. This paper evaluates IT business value in IVK Corporation. A clear introduction analyzing the case will be provided along with a description of case issues. An overview of the impacts of firms IT issues will be provided, and description of possible options and selection of the best approach culminating with a concise conclusion.
Table of Contents
Introduction……………………………………………………………………………………………………4
Description of the Case Issues…………………………………………………………………….4
Overview of the Impacts on the Organization…………………………………………………….7
Description of the Available Option………………………………………………………….. 8
The Best Option…………………………………………………………………………………….. 11
Conclusion……………………………………………………………………………………….11
References List………………………………………………………………………………….12
Introduction
The IVK Corporation is trying to turnaround after a period of slowed business performance. The company experiences a drop in its stock leading to reduced expectations of the company’s growth by the investors. Given the poor performance, the company employs a new CEO, Carl, who takes over and creates a new team of IT managers (Austin, Nolan & O’Donnell, 2009). He appoints Barton as the CIO of the IT department, but Barton hold no prior knowledge in Information technology. As a result, Barton ponders about how effective Management would be valuable to the company. Barton is faced with issues of controlling the IT budget in maximizing its value. He is also faced with issues of managing large projects, risks and knowledge employees. This paper evaluates how IT investment creates value and how IT leaderships affect the value of IT.
Description of the Case Issues
While IT in modern organizations is supposed to yield more benefits for a given organization, IVK does not realize any value from IT. Part of the company’s problems is caused by lack of appropriate IT leadership. The significant need for IT leadership is for the IT employees staying on top of up-and-coming new technologies to win a competitive edge. The IT team should focus on shifts in new technologies economics and should be flexible enough to allow integration of crucial new technologies. IVK has incorporated old technologies in a manner that is not flexible thereby making the company to experience legacy systems issues. These issues are affecting the company in an indirect manner with its third-party loan origination package.
Most companies in the contemporary world are adopting the network era. This is the era where technology shifts from stand-alone centralized computers networked with PCs to combine networks of millions of computers are functioning over inter-linked networks. The network requires good IT management for a company to be productive. Moreover, the network era introduces virtual organizations. Findings from a research carried out by Kumar & Annamalai (2011) confirmed that network technology comes with immense challenges as well as opportunities. The current trends in modern organizations where network technology is used in most companies promote production through cost, space and time reduction. However, a good source of direction to all the major stakeholders in order to maximize productivity and reduce costs of production is paramount. Kumar & Annamalai (2011) assert that high speed, resolution graphics and user interaction gardens helps in establishing an appropriate procedure for realization of the final product and services.
Network technologies in financial industry allow companies to connect with their clients and partners besides utilization of a publicly available communications. Information technology in the company can foster both efficient processing of transaction and direct customer interactions in real time. However, the network technology presents an implausible set of potential prospects, but these prospects come with considerable exposure to dangers characterized by risks to IT service levels. As a result, there is a need to illustrate how talented knowledge workers and machines can effectively and efficiently be networked together to enhance productivity and swift innovation in real business venture (Kumar & Annamalai, 2011). This clearly suggests that there is a need for involvement of good leadership and excellent management strategies in IT.
IVK Corporation has realized the importance of network technologies and the internet. The company has taken the ability of the network era technologies to obtain a strategic advantage. Information Technology helps organizations in winning a competitive edge. However, IVK’s uses old packaged software based on batch processing as opposed to software based on real time processing. This software creates IT problems for the company. The company cannot reconcile its back-office batch technology with the current front-office-real time technology (Austin, Nolan & O’Donnell, 2009).
The company cannot maintain its present competitive advantage.IVK faces leadership challenges. Given the changes in economics and technology, IT constantly changes. Productive leaderships relays on the company’s specifics and situations. This entails the company’s strategy, size, growth rate, the industry and its competitors. IVK employs a three levels sophisticated IT leadership. Type one is less sophisticated and the leadership ability has developed functional capabilities of transaction-processing (Austin, Nolan & O’Donnell, 2009). This enables the organization to achieve efficiency in operational business procedures. The Type one leadership also allows the company to attain a considerable deal of loan origination besides linked back-office procession. While the type I leadership is beneficial, reacting to the developing volume of transaction stretched back-office systems. Instead of tackling the new needs of divergent company’s clients through configuration shifts, the management replicates and customizes the entire systems for individual clients. This aspect creates great intricacy that requires management of parallel systems. This perspective assists in solving temporary problems in client functionality delivery. However, maintenance of the perspective is difficult. It has lead to increased shifts some of which cause problems (Austin, Nolan & O’Donnell, 2009). The aptitude of IT staff to control the intricacy is also problematic. As a result, the CIO needs to re-structure the IT infrastructure to contain the growth of business.
The company has adopted Type two IT leadership which entails shifting from managing personal functional applications to infrastructure management. Operational systems dominate the current applications portfolio. Poorly combined spreadsheet applications are used for purpose of operations, an aspect that creates problems to data flows and transaction flows. The IT infrastructure lacks structural consistency. IVK should address the requirement to implement type 2 applications portfolio management together with the build up of an IT structure that support IT infrastructure (Austin, Nolan & O’Donnell, 2009). To maintain a completive edge through IT application, IVK should design its portfolio strategy of application and IT structure through implementation of Type three level of IT leadership.
Overview of the Impacts on the Company
The problems facing IVK Corporations leads to:
Slowed business performance
Reduced productivity and profitability
Reduced investors confidence and expectations
Loss of competitive edge
Inefficient processing of transactions
Reduced direct customer interactions
Increased IT costs due to Increased IT funding that fall under corporate budget
Lack of IT value in the organization
Problems in managing large projects which require intense involvement of IT
Reduced Market share
Description of Available Options
According to Bani-Hani et al. (2009), information technology is an influential tool in the modern global society. The arrival of information technology and computers considerably influences performance of most organizations. Technology is revolutionizing all aspects of life particularly in industrial performance. Business landscapes have greatly changed and information technology is considered the building blocks of contemporary industrial society. From this perspective, the efficient use of information systems is a fundamental aspect of contending in a fast-paced knowledge-based economy.
As a result, the company needs to change the philosophy of their IT management. It must change into the mode of cost minimization that would lead to reduction of total expenditure on Information technology. The management should adopt good leadership skills which will allow feedback from employees to their managers and vice versa. Poorly managed IT causes reduced market value while well-managed IT contributes to an organization’s market value (Austin, Nolan & O’Donnell, 2009). In this regard, good management skills are paramount.
Barton must employ the use of TCO (Total Cost of Ownership) to help him make budgetary decisions and allocation of resources in a manner that adds value to the business. TCO (Total Cost of Ownership) is increasingly becoming the principle in most IT industry. TCO looks past preliminary capital investments, and it includes costs linked to administration, training and technical support. This method approximates yearly charges per user and for each prospective choice of infrastructure where the approximated charges are not summed up (Tesar, 2003). However, correct TCO estimations offer the best numbers of assets to balance financial income numbers when evaluating net returns. In components such as printers and servers which are shared, the estimates of TCO are computed in relation to components and then shared among the users. For multifaceted conditions, the hardware analysis is segmented through a platform. However, it is easier to approximate for soft costs, which include training and administration.
TCO also acts as a tool for managers as it can assist managers to comprehend the ways in which they can break down infrastructure costs (Tesar, 2003). TCO assists managers in making budgetary decisions, organizational culture and allocation of resources.
To get a quantitative handle on the level of value provided by IT, the IT team should also be able to use ROI (Return on Investment) IT value metrics. This approach helps in ascertaining how the organization values its IT costs. It highlights hard costs value, and also highlights the effects of indefinable savings. Economic Value Added metric based on prospective costs should also be used. IT project values should be calculated through Real Options Valuation in order to confirm the projects impacts on the company’s assets. The value of all IT projects should be calculated through ROA (Return on Assets).
It was important for Barton to understand the leadership weakness exhibited by Davies. This way, Barton would change the firm’s IT leadership and employ productive IT management skills. Due to the less IT value experienced in the company, the company’s board sought for a person with a different managerial approach to IT. From the case Davies was respected by his IT staff, but experienced difficulties in interacting with other people in the organization (Austin, Nolan & O’Donnell, 2009). He concentrated on IT world and he never concerned himself with the organizations businesses and practices. This was very wrong and instigated lack of IT value in the organization. For IT to create value in business, CIO and managers requires an understanding of business practices and procedures. This is because suitable understanding of business units and activities enhances business production. Understanding information system will allow those in management or IT specialists make the required changes, improve or perfect practices (Gelinas, 2011).
Remember that the CIO is core to IT organization. He is tasked with duties of controlling information technology resources. IT resources help in implementation of strategies. The CIO offers technology leadership and vision for implementation and development of IT initiatives. This approach is aimed at assisting businesses in upholding a competitive advantage. In this view, understanding the processes and practices of the organization is essential as it is through this understanding that a CIO can offer leadership and vision in developing and implementing business strategies (Gelinas, 2011). The CIO must gain full knowledge of business performance, recognize his limits in the business to enhance effectiveness. The significance and contribution of technology in business consequently leads to significance of CIO in the organization.
However, for CIO to be productive in his activities in a business, he must have an understanding of the organization, its work policies and the units of business (Senaratne & Sexton, 2011). This is because he is required to work productively with all the company’s units and not IT unit alone. Similarly, other units’ managers should comprehend how IT works, its limitations and benefits to enhance productivity and implementation of strategies and vision (Gelinas, 2011). The CIO should lead the firm, develop the firm’s business strategy, plan business technology, manage IT infrastructure and ensure satisfaction of customers. Barton should therefore hold both business and technical skills because his role in the business is supreme.
The Best Approach
IVK should retain Barton whom the board selected. Barton should, however, employ excellent leadership and management skills. He should not focus only on IT department but rather focus on the entire organization. He must establish good relationships with his IT team, colleagues and the entire management team to ensure IT value in the organization. Moreover, the entire management should support Barton and his IT team to guarantee IT value in the organization. Given that the new CIO worked as the head of Loan Operations he understands the firm’s business practices. Barton will be productive in IT and experience easy transition to Type 2 IT leadership. He should be able to plan, organize, coordinate and control IT in the organization.
Conclusion
Information systems are leading contributors to advancement in economy and business performances. For IT to be effective in enhancing adding value to business, proper management of resources and information systems in an organization is paramount. This helps in enhancing job performance and business value. However, IT business value growth can only be realized through effective management of information technology. Effective performance can only be realized when Information technology is planned, organized, coordinated and controlled. The new CIO must work with and via other people in the organization to achieve organizational objectives and IT value. This entails good IT leadership skills and collaboration with members in other business units in the organization.
References List
Austin R., Nolan, R., & O’Donnell, S.(2009). The Value of IT: How Best to Measure It?. Harvard: Harvard Business Press.
Bani-Hani et al. (2009). The impact of management information systems on organizations performance: Field study at Jordanian Universities. Review of Business Research, 9(2), 126-137
Gelinas, U. (2011). Accounting information systems. London: Cengage Learning
Kumar, E., & Annamalai, K. (2011). An overview of virtual manufacturing with case studies. International Journal of Engineering Science and Technology, 3(4),2720-2727.
Senaratne, S., & Sexton, M. (2011). Managing change in construction projects: A knowledge-based approach: London: John Wiley & Sons
Tesar, G.(2003).Strategic technology management: Building bridges between sciences, engineering and business management. London: Imperial College Press.
