System functions and corporate strategy
15 years ago, the relationship between information system functions and corporate strategy was not of much interest to Top Management of firms. Information Systems (IS) Technology was only concerned with automating functions at the operational level of organisations such as transaction processing. Because they were only concerned with making functions more efficient, it was easy to assess and justify the value of purchasing or upgrading the system. Evaluation was generally aimed at the identification and quantification of costs and benefits.
As technology evolved, IS began to take on many more roles in an organisation such as management information systems (MIS), and data communication systems. MIS help the people concerned with organisation’s Strategy to make better decisions via means of various analyses from collected facts and figures. Data communication systems were brought about due to integration of telecommunication with IS functions and helps the people inside the organisation to communicate more effectively between themselves and to others (suppliers and customers). World Wide Web, the Internet, and ubiquitous personal computing and communication devices have already changed the way people throughout the world gain access to information and interact with one another.
These systems however turned out to be both complex and difficult to measure the benefits of because such processes were deeply embedded in business processes. These systems catered 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. Organisations began to realise Information systems not merely as tools for cutting costs but as means to adding value.
With all these new roles, it was inevitable that Information Systems became a key element involved for a successful organisation. Ernst ; Young state that the linkage of business, Information systems, and Human Resources is crucial to the well being of an organisation. The strategic tree shows that when Information System Strategy is aligned correctly with Human Resource Strategy, this will result in adding organisational effectiveness as well as the traditional efficiency gains (automation of tasks). When Information System is aligned correctly with business strategy, this can result in innovative solutions and ideas to existing business problems.
Planning for information systems, same as any other systems, 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. Planning for information systems is very similar to strategic planning in business management. Objectives, priorities, and authorization for information systems projects need to be formalized. The systems development plan should try and identify issues such as future projects hopefuls, priorities for each project, resources, and general procedures, while also being flexible enough so that priorities can be adjusted if necessary and constraints for each application area. The plan must also be specific enough to enable understanding of each application and to know where it stands in the order of development. The term ‘Strategic Information Systems Planning’ (SISP) was born.
SISP is defined as ‘The means of identifying application systems which support and enhance organisational strategy and provides the framework for the effective implementation of these systems’ SISP is the analysis of a corporation’s IS processes using business information models together with the evaluation of risk, current needs and requirements. The result is an action plan showing the desired course of events necessary to align Information use and needs with the desired strategic direction of the company.
One of the main points to remember is that SISP is a management function and not a technical one. This is consistent with the earlier distinction between the older data processing views and the modern strategic importance view of Information Systems. SISP thus is used to identify the best targets for purchasing and installing new management information systems and help an organization maximize the return on its information technology investment. There is a growing realization that the application of information technology (IT) to a firm’s strategic activities has been one of the most common and effective ways to improve business performance.
The outcome of this was that some Information systems were no longer just automating functions at the operational level, but had evolved into SIS (Strategic Information Systems). SIS not only significantly affects the organisational performance but is also directly linked to the organisational strategy.