Core IS Capabilities for Exploiting Information Technology

As managers experience more volatile marketplaces, global competition, shortened product life cycles, customer pressures for tailored offerings and tighter performance standards, they increasingly depend on new information systems. The IS components in business solutions must be constructed rapidly and effectively despite the massive changes in IT (information technology) product capability, a restructured supply industry, potential shifts in system development approaches, and new ambiguities in terms of what should be regarded as a business-side versus a technical specialist task. Rockart et al. suggest that the IT organization must address “eight imperatives” that represent a combination of organizational arrangements and target achievements.1 And Ross et al. argue that companies must build and sustain three key IT assets: a strong IT staff, a reusable technology base, and a partnership between IT and business management.2

Our own analysis links the idea of a strong IT staff with two developments that have been prominent in the recent literature and in the thinking of managers with whom we have worked: the concept of core competencies and the potential for IT outsourcing. Consider first the rationale for core competencies. In an increasingly complex, fast-changing world, businesses succeed, it is claimed, through sustained commitment to excellence within a narrow domain. It is simply not possible for any organization to remain competitive, let alone world-class, if it dissipates managers’ attention across many diverse markets and activities when each is subject to potential transformation. Thus we see corporations divesting subsidiaries in order to focus on fewer businesses that exploit their core competencies.3 Phrases such as “virtual” and “hollow” corporations and examples such as Benetton and Nike capture the prescriptions of Quinn and others: successful businesses focus on creating advantage through a small number of core activities, while other activities are outsourced to world-class supplier-partners.4 Hence managers are debating whether IS is core or noncore and peripheral to the future of their business.

Next is the potential for IT outsourcing. The IS/IT domain arguably represents an extreme example of growing complexity and rapid change. Can any business, however rich in resources, manage IS/IT activity through this turbulence as well as third-party providers with wholly dedicated managers? Organizations such as General Dynamics, Xerox, and the UK’s Inland Revenue have concluded huge IS outsourcing deals.

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References

1. J.F. Rockart, M.J. Earl, and J.W. Ross, “Eight Imperatives for the New IT Organization,” Sloan Management Review, volume 38, Fall 1996, pp. 43–55.

2. J.W. Ross, C.M. Beath, and D.L. Goodhue, “Develop Long-Term Competitiveness through IT Assets,” Sloan Management Review, volume 38, Fall 1996, pp. 31–42.

3. G. Hamel and C.K. Prahalad, “The Core Competence of the Corporation, “Harvard Business Review, volume 68, May-June 1990, pp. 79–91.

4. J.B. Quinn, Intelligent Enterprise (New York: Free Press, 1992).

5. F.W. McFarlan and R.L. Nolan, “How to Manage an IT Outsourcing Alliance,” Sloan Management Review, volume 36, Winter 1995, pp. 9–23.

6. Rockart et al. (1996).

7. B.J. Pine, B. Victor, and A.C. Boynton, “Making Mass Customization Work,” Harvard Business Review, volume 71, September-October 1993, pp. 108–119.

8. J.F. Rayport and J.J. Sviokla, “Managing in the Marketspace,” Harvard Business Review, volume 72, November-December 1994, pp. 141–150; and

J.F. Rayport and J.J. Sviokla, “Exploiting the Virtual Value Chain,” Harvard Business Review, volume 73, November-December 1995, pp. 75–85.

9. McFarlan and Nolan (1995);

M.C. Lacity, L.P. Willcocks, and D.F. Feeny, “The Value of Selective IT Sourcing,” Sloan Management Review, volume 37, Spring 1996, pp. 13–25; and

M.J. Earl, “The Risks of Outsourcing IT,” Sloan Management Review, volume 37, Spring 1996, pp. 26–32.

10. Rockart et al. (1996).

11. Ibid.; and

Ross et al. (1996).

12. Ibid.

13. P.G.W. Keen, Shaping the Future: Business Design through Information Technology (Boston: Harvard Business School Press, 1991), pp. 179–210.

14. M.J. Earl and D.F. Feeny, “Is Your CIO Adding Value?,” Sloan Management Review, volume 35, Spring 1994, pp. 11–20.

15. D.F. Feeny, V. Abl, E. Millie, A. Minter, C. Selby, and J. Williams, “Defining New Skills and Competencies” (Oxford, England: Oxford Institute of Information Management, Research and Discussion Paper, 1997).

16. Lacity et al. (1996).

17. L. Willcocks and G. Fitzgerald, “Towards the Residual IS Organization? Research on IT Outsourcing Experiences in the United Kingdom,” in R. Baskerville et al., eds., Transforming Organizations with Information Technology (Amsterdam: Elsevier, 1994), pp. 129–152.

18. M. Broadbent and P. Weill, “Management by Maxim: How Business and IT Managers Can Create IT Infrastructures,” Sloan Management Review, volume 38, Spring 1997, pp. 77–92.

19. Lacity et al. (1996).

20. J.F. Rockart, “The Line Takes the Leadership —IS Management in a Wired Society,” Sloan Management Review, volume 29, Summer 1988, pp. 57–64.

21. D.M.S. Lee, E.M. Trauth, and D. Farwell, “Critical Skills and Knowledge Requirements of IS Professionals: A Joint Academic/Industry Investigation,” MIS Quarterly, volume 19, September 1995, pp. 313–340;

P.A. Todd, J.D. McKeen, and R.B. Gallupe, “The Evolution of IS Job Skills: A Content Analysis of IS Job Advertisements 1970–1990,” MIS Quarterly, volume 19, March 1995, pp. 1–27; and

M.J. Earl, “The Changing Shape and Skills of the IS Function” (London: London Business School, Centre for Research in Information Management, WP 95/3, 1995).

22. Earl and Feeny (1994).

23. Feeny et al. (1997).

24. R.E. Bohn, “Measuring and Managing Technological Knowledge,” Sloan Management Review, volume 36, Fall 1994, pp. 61–73.

25. Feeny et al. (1997).

26. M.J. Earl, “The Chief Information Officer: A Study of Survival” (London: London Business School, Centre for Research in Information Management, WP 93/3, 1993).

27. Feeny et al. (1997).

28. M.S. Scott Morton, The Corporation of the 1990s: Information Technology and Organizational Transformation (New York: Oxford University Press, 1991).

29. For further definition of the insourcing concept, see:

Lacity et al. (1996).

30. Rockart et al. (1996).

31. Ibid.