Management by Maxim: How Business and IT Managers Can Create IT Infrastructures
By Marianne Broadbent and Peter Weill
April 15, 1997
Creating a business-driven IT infrastructure requires that executives thoroughly understand their firm's strategic context. By formulating a series of business and IT maxims -- short simple statements of the business's positions -- they can identify the IT infrastructure service suited to their company. The authors' framework has four components:1. Considering strategic context. What business demands, roles, and relationships are critical to infrastructure decisions? Keeping in mind the firm's strategic intent, business units may be able to coordinate and leverage some approaches across units, while keeping some autonomous and local.2. Articulating business maxims. Using insight gained from examining the strategic context, both business and IT managers formulate business maxims and articulate agreed-on positions that they can readily understand and act on. The maxims should focus employees' attention on the firm's competitive stance, the extent of coordination across units, and the implications for information and IT management.3. Identifying IT maxims. From the business maxims, executives identify IT maxims that describe how the firm must lead or follow in the deployment of IT in its industry, electronically process transactions, and share data across the firm and with other strategically allied companies. The maxims specify the role of IT and levels of investment relative to competitors, whether processing is tailored or standardized, and how different types of data are accessed, used, and standardized.4. Clarifying a firm's view of IT infrastructure. A company should determine how it sees infrastructure from among four views: none, utility, dependent, and enabling. It can forgo synergies among units and not invest in infrastructure services. It can take a utility view and use the infrastructure primarily to reduce costs. With a dependent perspective, it can make investments primarily to respond to current strategies. With an enabling view, the company can overinvest in IT infrastructure to provide flexibility in responding to long-term goals.According to Broadbent and Weill, some companies may be prevented from developing clear maxims by two barriers -- expression and implementation. Managers may not understand the firm's strategic intent, executives may not have communicated strategy to operational managers, and the firm's culture may deter use of maxims. Organizational, political, cultural, and reward system issues, as well as a lack of IT leadership, may form implementation barriers.Decisions on investments in IT are both critical and contentious. With a thorough understanding of a company’s strategic context, managers can identify business and IT maxims that can help them determine the IT infrastructure capabilities necessary to achieve their business goals.
An information technology (IT) infrastructure is vitally important to companies, particularly those in industries going through dynamic change, those reengineering their business processes, and those with widely dispersed operations. Yet executives find decisions on infrastructure investments difficult because they often have to make them before forming specific business strategies.
In this paper, we explain how successful firms create business-driven IT infrastructures. Some firms do not invest in a firmwide infrastructure, while others invest up to 10 percent of their revenues in an IT infrastructure, such as communication networks, databases, and expertise that is shared across multiple business units. Both approaches may be correct, provided they match the firm’s specific needs.
Creating a business-driven IT infrastructure involves decisions based on a sound understanding of a firm’s strategic context. This understanding can be communicated by what we call business maxims, which capture the essence of a firm’s future direction. Business maxims lead to the identification of IT maxims that express how a firm should deploy IT resources and gain access to and use information. IT maxims provide a basis for a firm to make decisions on its IT infrastructure services.
Investments in IT Infrastructure
IT infrastructure investments are long-term commitments that account for more than 58 percent of the total IT budget of large firms and about 4 percent of revenues; they have increased at about 11 percent annually.To read the complete article, login or sign-up using the form below.
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