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Autor: anton 16 December 2010
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Strategic Planning for Information Technology
Strategic planning for information technology is one component of an overall company vision for success. This analysis enables IT professionals to successfully define short and long-term goals and discover the resources necessary to realize such goals. To ensure success, the strategic plan should be developed in a thorough but rapid manner, consist of a brief, succinct compilation of analyzed data, and provide opportunities by which additional planning and analysis can occur.
Several important benefits occur as the result of a successful strategic IT plan. First, employees are provided with an understanding of how their role fits in with the overall company structure. Also, this planning allows managers to realize additional opportunities for growth and success. Finally, important relationships between technology investment and positive outcomes, such as increased market share, are revealed.
In spite of these benefits, shortcomings of strategic planning do exist, involving the difficulties in implementing a new technology in a timely manner before other newer technologies reach the market place, the lack of qualitative information contained in the plan, and the sometimes overlooked component of human creativity. However, strategic planning remains an integral factor in any companyâ€™s success and the lack of a strategy can result in hidden costs such as decreased revenue potential.
A number of tools exist to facilitate strategic planning, including a Return on Investment (ROI) Analysis. This tool allows managers to assess the value of an investment over time, taking into consideration factors such as the strategic objectives of the analysis itself, measurement of costs and returns, the ways in which the analysis fits into overall business process and external environment, and political and organizational risk factors.
Strategic Planning for IT
Strategic planning is more a vision than a concrete plan. It encompasses what the company hopes to become and prioritizes the ways in which that vision will be realized. Strategic planning for information technology does not exist in a vacuum. It is but one part of an overall plan and should exist as an extension of business plan information technology fundamentals. This paper will discuss factors contributing to the success of strategic IT planning, the benefits and shortcomings of such a plan, reasons why some IT professionals may choose not to implement a plan and potential hidden costs associated with such a decision, and a model by which strategic planning can occur. In addition, Return on Investment analysis, an important tool in developing a strategic plan, will be discussed.
The successful IT strategic plan is a combination of a vision for the future with a strategy for decision making that incorporates long and short-term goals, architecture necessary to achieve these goals, and any other hardware, software, communications equipment or applications needed (Lucas, 2004). An implementation schedule is developed for the new technologies under consideration, and resources needed, such as money, time, and staff are carefully analyzed. The successful strategic IT plan facilitates the management of requests for the CIO and the IT team, allowing those involved to quickly evaluate technologies against the plan and eliminate those not appropriate.
Successful and effective strategic IT plans must also meet three criteria. First, development of a strategic plan should be a rapid process. Professionals should prioritize needs and outline key strategic questions to be answered. Typically a very small team comprised of the CIO and a few senior IT management personnel accomplishes this. Once the priorities are established, a larger team is formed of member representing the various IT departments and interests within the organization. The second criteria, completed by this larger team, is the condensing of detailed, complex material developed over a relatively short period of time into a brief, succinct output that can be effectively utilized by each IT department. Finally, this document should meet the third criteria in that it provides the framework by which additional planning can occur (Strategic Planning for IT: Information Technology Strategies, 2001).
The benefits of a successful and effective IT strategic plan have a significant impact upon a company. Three primary benefits are realized. First, strategic planning gives IT employees a picture of how their role in the company is linked to the overall objectives. This facilitates cooperation and coordination of efforts towards common goals. Second, planning allows managers to realize opportunities for growth and success. It encourages clear revenue growth goals, promotes understanding of the markets in which growth can occur, and provides clear insight into specific investments needed to generate overall company growth. Additionally, strategic planning and analysis also reveal the cause-and-effect relationship between technology investment and implementation and the desired outcomes, such as increased profits, enhanced workflow, or increased market share (Kaplan and Norton, 2000).
However, in spite of these benefits, several shortcomings of the overall process can exist. It is difficult, if not impossible, to accurately predict the time course of technological advances (Mintzberg, 1994). While a company devotes time and resources to planning, analyzing, and implementing new technology, the technology itself may be rapidly changing. Strategic IT planning can often take four to six months to generate a comprehensive document detailing projects and timetables (Kern, 2004). The world will not stand still to wait for completion of the planning process. Companies need to balance time invested in strategic planning with the pace of their competitors in the market place.
While the end result of strategic planning may be a succinct document based upon hard, quantitative data, the creation of this may actually exclude important details. Qualitative information and subtle nuances experienced only by those immersed in the daily and sometimes seemingly mundane details of the business, and typically not by senior level management, can provide rich and invaluable contributions to the real-life success of the plan. However, since time is a critical factor in the implementation of any new technology, these details must often be overlooked.
A third shortcoming of strategic planning lies in the formalization of the process itself. While formally developed systems provide the means to process hard information, they are incapable of the human abilities to internalize, comprehend, and synthesize. IT professionals should avoid the trap of sole reliance upon the strategy itself to accomplish goals and rather use it as a framework by which further creative discovery and planning can occur. In other words, a formalized strategic plan does not guarantee success. Creative human input is necessary to translate the plan into action (pp. 110-112).
Whether it is because some IT professionals realize these shortcomings, or other influencing factors exist, not every IT department develops a strategic plan. This is unfortunate in that CIOs who incorporate such plans are better able to show a return on investments (Bernard, 2004). Three reasons may account for lack of planning insight. Information technology departments are still viewed by many as merely a services department rather than a revenue-generating entity. Thus, the importance of IT strategic planning is often overlooked. Second, IT professionals often feel that long-range planning can be futile in the rapidly changing face of technology. By the time a strategic plan involving a particular technology is implemented, newer and more appropriate technologies may already be entering the market. Finally, lack of strategic IT planning may merely reflect the overall lack of long-range planning present in the business itself. It is difficult for IT departments to be enthusiastic or garner support for such planning when those in charge of the company fail to realize its value (Bernard, 2004).
Lack of strategic planning can result in hidden costs to a company. One such example involved a potential decrease in revenue from initially forecasted values. The IT consulting component of a large firm had developed an independent strategy involving online solutions and document sharing. A significant financial investment was proposed in order to implement the necessary hardware, software, and training, and the consulting group forecast a substantial return on investment. However, this IT group was unaware that the in-house IT department, under the direction of the CIO, had already planned upgrades to the document management system for the entire company. These upgrades included many of the same hardware and software components proposed by the consulting firm. The lack of communication and collaborative strategic planning among all groups involved in information technology implementation resulted in the consulting arm investing in a strategy that could not be fully realized (Ross, 2004). Had a strategic plan existed from the start, the consulting firm could have focused its efforts on leveraging the IT investments planned by the company and pursuing other areas with greater revenue potential.
Since the initiation of strategic planning in the 1950s, a number of tools and techniques have evolved. Ward and Peppard (2002) describe an early model developed by Gluck et al. by which strategic planning evolves that still stands as a guide for IT professionals today. In the first of four phases, the primary concerns are cash flow and financial planning. The goal is to develop short-range budgets. Each component of the company completes this task with the sole purpose of being able to meet a budget.
Phase Two involves the prediction and forecasting of outcomes for a three to five year period. This is accomplished by referring to both historical performance and market research data concerning current conditions. Projections are calculated in business areas such as sales, market growth, and the effects that the strategic plan will have upon future income.
Phase Three incorporates the companyâ€™s external environment. This allows managers to better understand the competition, potential threats, and possible advantages. The focus becomes product development opportunities and marketing options aimed at finding those most suitable and profitable to the company.
The final phase moves the company from the planning phase into the management phase. Innovation is a key component, as the company is now capable of responding to changing markets and competition (pp. 64-68).
A variety of tools exist to assist IT professionals in financial planning and forecasting. Perhaps one of the most useful is the Return on Investment analysis. While there are many approaches to conducting a Return on Investment analysis, a lack of agreement exists in the literature as to the best one. In actuality, the most appropriate strategy is the one designed to meet the unique needs, characteristics, and situations of the particular business conducting the analysis. ROI analysis may not be appropriate for every business or every situation. Small, low-cost projects may not justify the time and financial commitment this type of analysis requires; ROI analysis may be better suited to high-cost, high-risk projects.
While the main purpose of ROI analysis is to assess the value of a particular investment over time described several factors must be taken into consideration. First, the strategic objectives of the analysis itself must be considered. In other words, IT professionals must determine how to conduct the analysis and the ways in which the results will be used. They must also understand the goals of the proposed investment and the ways in which it will meet the overall business strategic and organizational objectives. In addition, IT professionals must consider the scope, detail, complexity, and availability of resources to complete the analysis. A solid understanding of customer and stakeholder needs as well as those of the company staff and how the proposed investment will meet those needs is required. Finally, when considering the overall analysis objectives, a risk analysis is necessary to determine the risk factors in pursuing and completing the analysis itself (Cresswell, 2004).
A second consideration is the defining and measurement of costs and returns. In order to determine if the proposed IT investment is financially affordable, the company must calculate returns based upon savings and revenue increases as well as costs. Also, an acceptable payback timetable must exist. For example, the sales impact upon the market share can be calculated with and without the proposed investment to determine the potential dollar impact upon future profits. The impact of an improved market share on other business aspects, such as the benefit to customers or the benefit to the company itself as it assists customers, should also be considered. In addition, factors such as improvements to lead times, service, and time to market of products play a role in the costs and returns of the investment, as well as savings due to improved product yields and lowered purchasing costs (Cassidy, 1998).
While financial data is important in determining costs and returns, other factors contribute as well. The effectiveness of the proposed investment in contributing to company goals, product or service output or quality, and customer satisfaction is important (Cresswell, 2004). The efficiency of the proposed system in its ability to produce the greatest value for its costs is a key factor as well. Potential efficiency gains exist in areas such as labor savings, inventory and forecasting improvements, and better utilization of assets (Cassidy, 1998). These gains can result in enhanced capabilities and less waste. Finally, in determining costs and returns involved in the implementation of a new IT resource, its social and economic impact should be considered. In other words, ways in which quality of life will be improved or increased political support will be gained are important. However, since these two potential areas of impact are very complex, they are often not included in the ROI analysis.
A third factor that should be taken into consideration when performing an ROI analysis is the ways in which the investment fits into the overall business process, organizational setting, and external environment. In other words, what is the context of the project, and how does it fit into the larger picture? The costs and returns resulting from implementation of an IT project may affect other business processes such as staff training for the new project, or performance and workflow. Also, applying additional resources to one project may affect the availability of resources for other company projects. Changes in any one part of a business always have the potential to result in positive or negative changes in other aspects of a business (Cresswell, 2004).
The final factor important when performing an ROI analysis is the consideration of political and organizational risk factors. Political risk factors include the potential for failures and mistakes to be made public, conflicting goals among stakeholders such as customers, vendors, and staff, and uncertainty over future budgets, which can represent a critical problem for projects implemented over a longer time span. In addition, regulated procurement procedures can present a problem. For example, in the bureaucracy of a major university, an order typically passes through several hands before actually being placed. Often the procurement specialist has limited expertise in the variety of specific IT applications and resources needed in various departments throughout the university. Thus, the buyer simply follows procurement procedures and engages in competitive bidding to obtain the product, without realizing that the specific and detailed components of the IT product may not be met at that lower price.
In addition to political risk factors, organizational risk factors are important. Any changes in IT may affect other interconnected programs and businesses. Level of support from top company officials also plays a role in the performance and presentation of an ROI analysis. Finally, differences in goals among different parts of the organization can greatly affect the analysis and how it is received. It is not uncommon for conflict to occur between IT product developers and end-users regarding the goals and applications of a product.
Other risk factors do exist in addition to political and organizational, such as whether or not the system under consideration truly meets the companyâ€™s needs and is flexible enough to change as the company grows and changes, how the new technology will interact with existing technologies, and whether or not rapidly changing technology will make the new system obsolete by the time it is implemented (Cresswell, 2004).
One example of a successful, comprehensive strategic IT plan exists for Kitsap County, Washington. The goals of this plan were to identify opportunities for utilizing new and existing technologies, total costs associated with these opportunities, ways to integrate current and proposed information systems, and IT solutions which, when implemented, would provide positive value for the county (Brazell, 2001, p.9). The committee charged with development of the strategic plan encompassed a variety of departments, including not only Information Services, but also departments such as Public Works, Community Development, and Parks and Recreation. Such varied composition allowed for a more comprehensive plan in which all County employees and their interests are represented.
The Kitsap County strategic plan begins with a clear overview of plan objectives and the challenges in developing and implementing the plan. Concerns such as the cost effectiveness of new hardware and infrastructure, protection of data systems from external and internal threats, and consistent customer satisfaction are expressed. Next, an overview of the Countyâ€™s technical infrastructure and its management strategies and related standards are presented. This includes technologies such as distributed application and database architecture, desktop hardware and applications, and communication networks.
Following this overview is a discussion of current, outstanding, and proposed technology initiatives, detailing the technology characteristics, potential users, time frame for implementation, justification, benefits, and implementation costs. These initiatives provide opportunities to improve upon existing applications, systems, and infrastructure.
Next, strategies to maximize the use of resources and their positive contributions are presented as well as suggestions for updates that would encompass future technologies yet to be developed. Finally, the strategic IT planning report concludes with the Countyâ€™s vision for the future to maximize opportunities for success (Brazell, 2001).
This particular strategic IT plan encompassed several of the qualities and goals of successful plans discussed earlier. It clearly discussed long and short-term goals and the necessary hardware, software, and infrastructure needed to achieve these goals. Implementation schedules for new technologies were presented along with the required financial resources. The team developing the final proposal consisted of members representing the various departments within the county, thus ensuring that the interests of all employees were represented. In addition, the document itself was brief and succinctly presented, utilizing tables to simplify presentation of information. Finally, as with any successful strategic plan, goals and visions for the future were presented, thus providing the framework by which additional planning could occur.
Creating an information technology strategic plan is an important component of success in any company. By carefully analyzing cash flow and financial planning, mid-range outcomes such as sales and market growth, and the companyâ€™s internal and external environments, businesses can develop a comprehensive IT plan that will contribute to growth and success. While not every company utilizes strategic planning, those that do will realize the benefits of providing employees with an overall view of the company, thus promoting teamwork and cooperation, clearly defining opportunities for growth, and revealing the relationships between technology investment and positive outcomes, such as increased market share or increased employee productivity. Strategic planning for IT provides the vision and direction by which a companyâ€™s technology resources contribute to a successful and financially rewarding future.
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