Challenges of IT Implementation

Ismail Bin Ahmed August, 2006

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Contents

Introduction

IT and Challenges

1. IT People Glorify IT and Ignore Human Psychology

2. Information Needed – What Kind and When

3. IT Infrastructure

4. Technological Life-Cycle

Solutions: What Makes for Success?

Solutions: Business and IT Maxims According to Weill & Broadbent

Conclusion

Bibliography & References

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Challenges of IT Implementation Introduction The beginning of the modern information era started when Univac was used as the first commercial computer in 1951 with its cumbersome mainframe technology and punch card which necessitated a centralized, hierarchical approach in management. Later, computer applications broadened from accountancy to manufacturing support systems, finance, human resource management and marketing.

Coupled with progressive miniaturization and increasing cheapness and power of micro circuitry, the cost of processing and distributing information of all kinds plunged and by time of the ubiquitous era at the end of the 1980s and beginning of the 1990s, the personal computer market grew with extraordinary speed (Hoskisson et al, 2004) and companies became more and more dependent on their computers to handle massive databases.

Dramatic changes in IT occurred when personal computers, cellular phones, artificial intelligence, virtual reality, e-mail, instant messaging, voice mail, fax, electronic data-interchange (EDI), teleconferencing and video-conferencing, intranets, extranets came into being. Companies are electronically linked in networks with customers, employees, vendors, and suppliers over the internet and the e-business is big business. (Hoskisson et al, 2004) Technology is changing the way we live and work and today and the internet provides an infrastructure that allows the delivery of information via computers in any location. (Robins et. al, 2005) Wireless smart phones, notebook computers, and other pocket communication devices have spawned a whole new way for managers to "keep in touch" and the number of worldwide mobile users keeps increasing. (Robins et. al, 2005)

Access to significant quantities of relatively inexpensive information yields strategic opportunities for a range of industries and companies.

The impact of cheap information affects the costs of setting up a new business. One obvious area where the entry cost has fallen sharply is in mail order - it has become possible for a new firm, with half a dozen employees and a PC, to buy sufficiently accurate mailing lists to be able to launch a range of products aimed at a small niche in the market. (Mc Rae, 1995)

However, introducing new IT, even just to support the existing business model, emerges as a high-risk, hidden-cost process. Perpetual innovation and rapid technology diffusion is happening. Competitors can imitate a firm's successful competitive actions within a few days giving rise to Schumpeterian innovation. (Hoskisson et al, 2004)

In the 1980s, concern was about the way in which IT could be used by a firm to gain competitive advantage, but by the end of the decade it had become clear that IT was not the panacea for all ills, and that its implementation brought with it a new set of problems. (Fletcher, 2000 as cited by Baker) This is because while many firms have gained benefits from adopting IT, IT will be a competitive burden if it is adopted for the wrong reasons or implemented poorly.

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IT and Challenges The challenges faced by companies in the deployment of IT include:

1. IT People Glorify IT and Ignore Human Psychology IT managers put too much emphasis on hardware and not enough

emphasis on the soft science of how people actually share information. As in Harvard Business Review on Knowledge Management, Davenport in 1999 observed that:

(i). Information evolves in many directions, taking on multiple meanings. While IT specialists are drawn to common definitions of terms like customer or product, most information doesn't conform to such strict boundaries. Forcing employees to come to one common definition, as some technologies require, only truncates the very conversations and sharing of perspectives that the technology is supposed to ensure.

(2). People don't share information easily. Assuming that different departments, professionals, or line workers will want to use technology to share information is one of the biggest mistakes executives make.

(3). The presence of technology, in and of itself, cannot wholly transform a corporation. Changing a company's information culture requires altering the basic behaviors, attitudes, values, management expectations, and incentives that relate to information. Changing the technology only reinforces the behaviors that already exist.

Often, technically minded individuals lacked communication skills in speaking and presenting because the marketers have superior presentation skills and excel in the gentle art of persuasion while the technical experts believe they could not realistically deliver. (Davis, 2000 as cited in Mastering Information Management by Marchand et. al)

2. Information Needed – What Kind and When

A major productivity issue facing Intel and other large organizations is the difficulty employees face when they attempt to access the information they need, when they need it. While corporations have enormous amounts of intellectual property, company information, documents and presentations, most employees are unaware of this information and many are unable to find it even if they know what they are looking for. (Burns, 2000 as by Marchand et. al)

In Malaysia for example, many SME companies realize that ICT is critical to the productivity and performance of their companies. Nevertheless, most SMEs are not able to handle the implementations and maintenance of these ICT systems due to high staff turnover and lack of ICT project management expertise. Moreover, many Malaysian SMEs which are still very much family-based with flat organisation hierarchy are still running business the conventional way. As a result, many of these SMEs which have invested in ICT systems fail to implement and maintain these systems successfully. (Lim Tong Ming, 2004)

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To switch to an Internet business, is to switch from managed time to real time. "Traditional organizations run like buses, with routes to follow and schedules to meet; real-time organizations are taxis, responding to a waving arm or a voice crackling on a two-way radio." In the Internet business, too many similar sites are chasing after too few dollars. And even if a company reaps benefits from lower supply costs, the Internet also will drive down profit margins for everyone. For example, at GE, diminished earnings slammed GE's bottom line. The Internet has been a touchy game and will continue to be so. (Lowe, Janet 2001)

3. IT Infrastructure

IT infrastructure has become one of the most important investment decisions made by senior management. Companies' IT infrastructure investments will be as critical for creating long-term shareholder value as previous waves of physical infrastructure decisions about location, buildings and plant. (Weill & Broadbent, 2000 as cited by Marchand et. al)

IT infrastructure investment accounts for about 55 per cent of the investments that companies make in their IT portfolios. Infrastructure provides the underlying capability to apply technology to business processes, to link people and data through communication networks, and to manage increasingly demanding workplaces. Yet decisions about infrastructure capability and investments are often a "leap of faith" - or are not made until too late, by which time the lack of infrastructure has become a barrier to new initiatives. (Weill & Broadbent, 2000)

Executives find decisions on infrastructure investments difficult because they often feel that they do not know what they are getting, what business capability will be provided and how it will lower costs or facilitate new business development. And taking a cue from other companies' decisions is apt to be confusing. Weill & Broadbent in 2000 cited that:

Johnson & Johnson is investing in shared IT services across previously autonomous businesses.

Hong Kong-based conglomerates Hutchison Whampoa and Jardine Matheson make little or no company-wide investments in IT infrastructure.

Citibank Asia is centralizing and standardizing all backroom IT processes into one location for its local Asian operations.

Ralston Purina has no company-wide IT infrastructure investments.

Has each of these companies made the right decision? How did they arrive at their decisions? How can business and IT executives together identify the best choices for their businesses?

Another challenge is the complex task of managing the chain of events from a customer's order, to manufacture, to distribution and support. Worse,

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many organizations still see technology as a cost to be constantly managed down instead of an investment in the future. (Davis, 2000 as cited by Marchand et. al) In the past, most IT organizations have focused more on managing technology - by deploying cost-effective servers, systems and networks - than on managing information. Today, many organizations still view IT as a service provider and cost center rather than a strategic business partner.

4. Technological Life-Cycle

Technological changes tend to follow a predictable pattern known as the technological life-cycle. The pattern is as relevant to machines employed in the factory as it is to machines used in the office and to new models of car, washing machine or television set.

At the introduction phase, the introduction of new technology normally requires capital expenditure of varying magnitude depending on the nature and extent of the envisaged changes. The office accommodation has to be restructured, or even new premises found. Personnel will often require retraining, especially for radical changes of equipment. During system changeover (assuming the old system continues to function) productivity may decline because of the need for staff to be involved with both the old and new system during the implementation phase. This situation will tend to increase the operating cost per unit of output, but after the changeover it should be anticipated that unit costs will fall.

At the growth phase, staff become more familiar with the complexities of the new system and experience is gained, so the level of productivity should rise and the operating cost per unit fall. This will be a progressive situation until productivity stabilises at the maturity phase, i.e. when the new system has been operational for some time, reach its peak performance level as staff become more confident in and less apprehensive of the system. Productivity and operating costs stabilise at the optimum performance level.

Finally, at the decline or decay phase, the `new' technology eventually become outdated and machines will eventually become worn, causing system performance to decline. This is the point where the technological life-cycle returns to the introduction phase. Machine maintenance costs, unless of a fixed nature, will become uneconomical, and the sum of the annual costs of depreciation and maintenance will increase to an unacceptable level. At this point productivity will fall as a result of machine down-time due to wear and tear and prolonged maintenance.

Part of the management of IT is to anticipate this situation and act at the right moment to minimise system delays, increases in operating costs and low levels of performance. Management must adopt a 'forward, outward looking' stance to recognise when change is imperative to sustain or improve productivity. (Anderson, 1991)

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Solutions: What Makes for Success? To achieve its promise, IT needs to take a human-centered approach.

But implementing such an approach is far more difficult than figuring out which computers work together and how to construct a new network. It means building flexibility and disorder into information systems. It means accepting that different departments frequently can't come up with a shared definition for things that might seem obvious, such as what constitutes a drug, an airport, or a sale. And it means changing corporate behaviors that discourage information sharing. (Davenport, 1999)

In terms of shifting the focus from cost to IT value and competitive advantage, IT organizations can produce a staggering return on investment by providing constant computing capabilities. The UK insurance company Direct Line in the early 1990s achieved five years of competitive advantage by identifying what customers disliked most and significantly reduce operating costs. Dell has used the internet as a channel to eliminate all intermediaries except a courier service where prospective buyers visit the website, choose a PC configuration and place an order. (Feeny et. al, 2000, as cited by Marchand et. al)

Amazon.com's success is the result of the cumulative effect of many sources of competitive advantage including the location of its warehouses, its focus on continuously enhancing its customer's experience, its rigorous approach to hiring, its extreme frugality, its approach to corporate development, and the way it manages executive time. (Cohan, 2000)

The toughest thing about operating in an atmosphere of technical change is strategic planning, since it becomes impossible to predict the future based on the past. Often the best planning strategy is to take advantage of those aspects of change that most suit the company's needs and taxing the imagination in trying to figure out which aspects those may be. At GE, much of the growth that Jack Welch orchestrated at GE was through efficiency efforts. Briefly, until the Internet light went on, it seemed that Welch may have wrung the most he could out of cost cutting, labor saving, and time saving. The Internet gave him one more crack at it, but the actual impact of the Internet remains unknown. This is an area of intense competition. (Lowe, Janet 2001)

Successful IT investment starts from being close to the customer. In practice, few IT-based business innovations have materialised from formal planning processes, routine meetings of IT investment committees, or from IT departments working alone. Sabre in airline reservation systems, Baxter in medical supplies ordering and Merrill Lynch in account management systems developed incrementally, through a gradual process of learning and a strong external focus. (Feeny et. al, 2000, as cited by Marchand et. al)

Total cost of ownership (TCO) is an industry indicator used by IT consulting and analyst firms to measure IT efficiency. In addition to system depreciation and support costs, TCO metrics include the lost end-user productivity due to system downtime. Reducing TCO continues to be a key objective for IT groups including Intel. (Burns et. al, 2000, as by Marchand et. al)

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At Intel, a comprehensive approach where business and IT executives work together as strategic partners to maximize the value of corporate information involve a transition from viewing IT as a "cost center" that provides basic services to viewing, and investing in, IT as a "value center" that meets strategic business objectives. (Burns et. al, 2000, as cited by Marchand et. al)

Solutions: Business and IT Maxims According to Weill & Broadbent

Weill & Broadbent in 2000 stressed that business and IT executives need to work on business and IT maxims together to ensure that they are clearly articulated and to give IT executives insight into future business directions. This process is necessary because many companies do not have comprehensive and timely strategic statements, nor is their documentation sufficiently focused.

From the business maxims, business and IT executives together identify "IT maxims", which describe how a company needs to deploy IT and connect, share and structure information.

For example, Honda's business maxim was, in effect, to "expedite global operations by maximizing synergies of production and operations in many countries". This leads to a series of IT maxims, including:

• information flow throughout Honda should allow all parts of the company to spot trends more easily and quickly and use these to Honda's advantage

• Honda R&D staff in different parts of the world must have ready access to each other to be able to communicate ideas and output to colleagues

• communication systems must facilitate high-quality person-to-person interaction among R&D staff and between R&D, production, operations and marketing personnel

• communication systems must support the transfer of sophisticated design concepts, data and documentation in a high-quality, cost-efficient manner to cut cycle time.

IT infrastructure is such a critical resource that it requires special attention during the IT investment process. Companies that treat this part of their IT portfolio in the same way as other IT investments risk never having the infrastructure to support their business strategies.

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Conclusion Where are we going?

Prediction is always difficult but where IT is concerned, it seems almost impossible. Knowledge (information, intelligence, and expertise) is the basis of technology and its application. In the 21st-century competitive landscape, knowledge is a critical organizational resource and is increasingly a valuable source of competitive advantage.

As a result, many companies now strive to transmute the accumulated knowledge of individual employees into a corporate asset. Some argue that the value of intangible assets, including knowledge, is growing as a proportion of total shareholder value. The probability of achieving value creation in today's business environment is enhanced for the firm aware that its survival depends on the ability to capture intelligence, transform it into usable knowledge, and diffuse it rapidly throughout the company. Firms accepting this challenge shift their focus from merely obtaining information to exploiting that information to gain a competitive advantage over rival firms.

Risk taking is natural in an emerging industry. The computer industry is about as far into its development as cars were in the 1910s and planes were in the 1930s. Those industries underwent radical and often chaotic technical and business change before they matured, and the same phenomenon is happening in the computer industry. The phrase mature industry implies less risk taking, but in well developed industries, where vendors approach parity in most areas, taking a risk that information technology can change the rules is the best way to create product and market breakthroughs. (Gates, 1999, Business @ The Speed of Thought: Big Wins Require Big Risks, pg 263)

The global networks of economic wealth, political power and media will depend more and more on knowledge generation. Society will become more and more symbolic - that is, the capacity to produce and distribute goods and services will become increasingly dependent on the ability to create and manipulate electronic symbols. Companies will have to adapt to this new environment, although the process will not be easy. Companies will have to conceive of themselves as located within a shifting network of suppliers, competitors and consumers; their boundaries will accordingly be highly fluid. Permanent flexibility will be the key to survival in the new economy.

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Bibliography & References Books Anderson, R.G (1991) Data Processing Volume 2: Information Systems & Technology (7th edition). London: M&E Handbooks, Pitman Publishing. Baker, Michael, J (2000) The Marketing Book. Oxford: Butterworth-Heinemann.

Brown, David (1997) Cybertrends. England: Viking

Cohan, Peter S (2000) E- Profit. New York: Amacom. Gates, Bill (1999) Business @ The Speed of Thought – Using A Digital Nervous System, Warner Books, New York. Gilmore, Fiona (2001) Warriors On The High Wire. London: Profile Books Ltd. Lowe, Janet (2001) Welch: An American Icon. John Wiley & Sons, Inc. Marchand, Donald A., Davenport, Thomas H. & Dickson, Tim (2000) Mastering Information Management. Great Britain: Prentice Hall. Mc Rae, Hamish, (1995) The World In 2020. London: Harper Collins. Paliwoda Stanley J. & Thomas, Michael J. (1999) International Marketing. Oxford: Butterworth- Heinemann. Robbins, Stephen P. & Coulter, Mary (2005) Management. New Jersey, Pearson Education – Prentice Hall. Hoskisson, Hitt & Ireland (2004) Competing for Advantage. Ohio: Thompson-South Western Journal Thomas H. Davenport (1999) Saving IT's Soul: Human-Centered Information Management, Harvard Business Review on Knowledge Management, HBS Press. Internet References http://www.infotech.monash.edu.my/workshop/ Dr. Lim Tong Ming, Outsourcing to Ensure Successful ICT Systems: Implementation and Maintenance (Accessed August 24, 2006)