IT management, distilled: Part 2

Organisational Systems

In the struggle towards delivering better services each organisation needs to reflect on its internal structure. Every business, from startup to enterprise, consists of business units that are interconnected. Such parts thrive to work together to achieve a certain goal. An altruistic goal is providing added value for its customers, but it can also be operational efficiency, net profits, growth etc. In order to manage the flow of tasks inbetween different business units, a company models business processes. A business process is a coordinated set of activities executed in the organisation. A business process is a recursive definition, as itself can be composed out of multiple business processes.

A business process is a chain of simple actions, called activities. An activity is an elementary unit of work which can be formulated as:

Business processes can often be aggregated into a collection called a business function. An enterprise consists out of multiple distinct business functions, such as:

• Research & Development
• Marketing
• HR
• Sales
• Financial
• IT

While in a startup it more often consists out of:

• Business (Marketing + Sales + HR + Financial)
• Development (R&D + IT)

A business function such as HR consists out of multiple processes, such as f.e. recruitment and payroll management. A recruitment process may involve sending texts on LinkedIn, interviewing an applicant and creating job hiring contracts. These things are referred to as the recruitment activities.

Business functions themselves can be sequenced into what Michael Porter called a value chain. Described nicely by Investopedia:

A value chain is a business model that describes the full range of activities needed to create a product or service. For companies that produce goods, a value chain comprises the steps that involve bringing a product from conception to distribution, and everything in between.

He abstracted away the most important business functions in what he calls primary & support activities (yes I know it is confusing). The role of support activities is to ensure the efficient operation of primary activities. The end result of the value chain is the margin, which is the difference between the total value of the delivered products/services and the total cost of the primary & support activities. By systematical examination, optimization and rearrangement of all the activities along the value chain, a competitive advantage could be obtained. Henceforth, Porter believed such a model could be key in deciding which information technology should be used.

Since a company often depends on the services and goods of other companies, also chains can be sequenced into larger structures called value systems. By connecting the value chains & systems of a series of organisations, we can create a single superstructure referred to as the supply chain.

Communication and efficient information transfer play key roles in the supply chain management, which entails the optimization and alignment of the activities alongside the supply chain. Hence, the economical value of well utilized information technology cannot be overstated.

Business & IT

To optimize, support and automate many of the business functions, organisations make use of business information systems (BIS). An information system simply consists of a collection of services, operators and equipment to create, process and store information. Rudimentary BIS can be traced back to the Egyptians, using papyrus as an inventory. But an exponential growth started with the adoption of IBM’s punch card machines, and its successor: the mainframe. The advent of personal computers paved the way for hyper-efficiency even further. Businesses can leverage information systems in many ways. The primary use cases are decision making support, (big) data processing/storage, knowledge management, business intelligence, analytics and task automation. The improvement of overall efficiency often involves the use of integrated information systems. Such systems demand process alignment. For example the use of a Customer Relationship Management (CRM) system or Enterprise Resource Planning system often demand specific input from its users in order to produce the expected results. Therefore some activities may need to be altered to ensure the correct input is filled in.

The use of BIS increases business operation efficiency, eventually leading to significant time savings and reductions in operational cost. The presence of business intelligence and analytics also enable better Key Performance Indicator (KPI) tracking and goal realisation. Last but not least it supports better long term decision making in sustaining the vision of the company. Hence, the benefits of BIS can be observed on all three business levels: Operational, Tactical and Strategic. There are also non-quantifiable benefits such as f.e. the reduction in burnouts due to the reduction of repetitive tasks or the influence (hype-factor) of the technology used on the recruitment process which are also very valuable.

However, as stated in previous articles, the use of IT is sometimes overrated. IT resources are a commodity since everything can be bought as a service. Therefore we have to draw a line between the resources a company mounts, and the IT capabilities it has acquired. The value of strong IT capabilities aggregated in a team, led by a battle-hardened project manager ensures the correct and efficient use of such systems. A well established management of the IT resources brings forth a possible competitive advantage. However, since the technology evolution is incredibly fast, it may also be limited in time. So we can state that the combination of aggregated IT capabilities, IT management and the possibility of intrapreneurship for continuous technological innovation is the way forward in establishing a longer lasting competitive advantage.

References

[1] IT Manager’s Handbook: Getting your New Job Done - Bill Holtsnider, et al.

[2] ICT Service Management - Claude Doom

[3] Hyperscale and Microcare - Peter Verhasselt and Nick Boucart