Strategic Planning for Information Systems

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Strategic Planning for

Information Systems

Third Edition

JOHN WARD and JOE PEPPARD

  Cranfield School of Management, Cranfield, Bedfordshire, UK Copyright # 2002 by John Wiley & Sons Ltd, Baffins Lane, Chichester, West Sussex PO19 1UD, England National 01243 779777 International (þ44) 1243 779777 e-mail (for orders and customer service enquiries): cs-books@wiley.co.uk

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Wiley Series in Information Systems

CURRENT VOLUMES IN THE SERIES

  Currie: The Global Information Society Elliot: Electronic Commerce—B2C Strategies and Models Galliers and Baets: Information Technology & Organizational

  Transformation—Innovation for the 21st Century Organization Groth: Future Organizational Design—The Scope for the IT-based

  Enterprise Knights & Murray: Managers Divided Krcmar: EDI in Europe McKeen & Smith: Management Challenges in IS—Successful Strategies and Appropriate Action Remenyi, Sherwood-Smith with White: Achieving Maximum Value from Information Systems—A Process Approach Renkema: The IT Value Quest—How to Capture the Business Value of

  IT-Based Infrastructure Silver: Systems that Support Decision Makers—Description and

  Analysis Timmers: Electronic Commerce—Strategies and Models for

  Business-to-Business Trading Walsham: Making a World of Dierence—IT in a Global Context Wigand: Information, Organization & Management—Expanding

  Markets Corporate Boundaries Willcocks & Lacity: Strategic Sourcing of Information Systems—

  Perspectives and Practices Willcocks & Lester: Beyond the IT Productivity Paradox

  

Wiley Series in Information Systems

  Editors

  ICHARD OLAND

  R B Department of Management Information and Decision Systems, Weatherhead School of Management, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, Ohio 44106-7235, USA

  UDY

  IRSCHHEIM

  R H Department of Decision and Information Systems, College of Business Administration, University of Houston, Houston, Texas 77202-6283, USA

  Advisory Board N

  IELS B JØRN -A NDERSEN Copenhagen Business School, Denmark

  D. R OSS J EFFERY University of New South Wales, Australia

  EINZ LEIN

  H K. K State University of New York, USA

  OB LING

  R K Indiana University, USA

  ENN ONSYNSKI

  B R. K Emory University, Atlanta, USA

  IM

  INCOLN

  T J. L

  IBM UK Limited, UK

  RANK AND

  F

  F. L London School of Economics, UK

  NID UMFORD

  E M Manchester Business School, UK

  IKE EWMAN

  M N University of Manchester, UK

  ANIEL OBEY

  D R Georgia State University, USA

  URTON WANSON

  E. B S University of California, USA

  OBERT RICKER

  R T Warwick Business School, UK

  EOFF ALSHAM

  G W University of Cambridge, UK

  OBERT MUD

  R W. Z University of Oklahoma, USA

  

Contents

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  vi Contents

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  Contents vii viii Contents

  

  

  

  

  

  

Series Preface

  The Information Systems community has grown considerably since 1984, when we began publishing the Wiley Series in Information Systems. We are pleased to be a part of the growth of the field, and believe that this series of books is playing an important role in the intellectual develop- ment of the the discipline. The primary objective of the series is to publish scholarly works that reflect the best of the research in the Information Systems community. We are also interested in publishing pieces that cannot only help practitioners but also advanced students to understand the myriad issues surrounding IS and, in particular, the management of

  IS. To this end, the third edition of Strategic Planning for Information Systems by John Ward and Joe Peppard is an excellent example. Previous editions have been highly successful, and we believe the third edition will be even more so.

  The book adds new material on the latest developments in Informa- tion Systems, in particular ‘e’ (e-business and e-commerce), knowledge management, customer relationship management, enterprise resource planning and outsourcing. But, fundamentally, the book is not simply about technology or techniques but rather the strategic issues of how such technology can be used successfully in organizations. Ward and Peppard focus their attention on why and how to develop a strategy to use IS effectively. Such a treatment is important, and we believe this book will be of interest to practitioners, students and academics alike.

  Rudy Hirschheim

  

Preface to the Third Edition

Y

  Since the second edition of this book appeared in 1996, we have seen Information Technology (IT) become an increasingly integral component

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  of everyone’s working life and personal environment. IT is now ubiquitous and enables a degree of connectivity that was difficult to envisage even 10 years ago. The technology has evolved rapidly, pro-

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  ducing significant advances in its capabilities and hence the business options and opportunities now available. Without doubt, the Internet has evolved into a significant business opportunity—when the second

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  edition was published, Amazon.com, the doyen of the Internet, had only just come into being. Indeed, since the second edition the so- called ‘dot.com bubble’ has inflated and burst leaving much in its wake. Apart from the spectacular failures, many companies are now downgrading their forays into the world of cyberspace; many online ventures are even dropping their dot.com names. Despite this, there is no doubt that we have still only scratched the surface of the possibilities. Interactive digital television (iDTV) offers great promise in bringing the Internet and new broadcast services directly into the homes of consumers. Wireless technologies are poised to provide further opportunities to organizations as both employees and customers become less dependent on location in carrying out their jobs and conducting business.

  In the six years since the last edition, the language of information systems and technology (IS/IT) has also changed. E-commerce and e- business have come into common business parlance and even entered the home via TV advertising! While e is largely a relabelling of what was previously known as IS/IT, there are a number of new dimensions in the use of IT implied by e. These are considered in this edition. Perhaps, most importantly, the introduction of these new terms attracted increasing senior management interest in IS/IT and its importance to their organiza-

  ® Preface to the Third Edition xi tions. Unfortunately, the over-hyped promises have left many senior executives more uncertain than ever before about what can actually be achieved through IT use. One IT director summed up the dramatic changes in sentiment by saying, ‘in 2000 you could get any amount of money by putting an e in front; but in 2001 anything with an e had no chance of funding!’

  The late 1990s also witnessed a push to manage corporate knowledge, as organizational success became increasingly dependent on its intellectual rather than its physical assets. Technology is seen as a key enabler of knowledge management (KM), yet many technology-driven KM initia- tives have floundered. While managing information has proved difficult, we still have much to learn about how knowledge can be effectively managed before we can begin to understand how best to deploy technol- ogy and ‘systems’ in this context.

  Large enterprise-wide systems, such as enterprise resource planning (ERP) and customer relationship management (CRM) applications, are being implemented by organizations to improve the efficiency and effec- tiveness of their operations, by adopting new business models and through greater integration of processes and information use. The scale and com- plexity of these systems has proved a challenge to both IS specialists, in terms of implementation, and business management, in terms of identify- ing and managing the business changes essential to gaining benefits from these very expensive investments.

  The greater use of ‘outsourcing’ for significant aspects of IS/IT supply reflects the increasing sophistication and maturity of the IT industry and provides a challenge to optimize internal and external resourcing options to meet the range of business IS/IT needs. Undoubtedly, the recession of the early 1990s, and the resulting financial pressures, focused management on cost and supply issues, and perhaps increased the rate of outsourcing. Application service providers (ASPs) are now on the horizon poised to have an impact on the provisioning of applications. No longer is it neces- sary to make a decision either to ‘make’ or ‘buy’, but now we must also include ‘rent’ in the options. Experience has shown that, while outsourcing is a valid part of any strategy, outsourcing the development and manage- ment of the strategy itself can lead to serious business problems.

  Over the same period, much more has been learned about the prac- ticalities of managing IS/IT strategically and the issues and factors that influence the success of the process in both the short and the long term. This edition considers both the implications of the developments in IS/IT and the most useful of the recent thinking and experiences concerning

  IS/IT strategic management.

  Although some things have moved forward since the second edition, many of the issues that were relevant then remain so today. Managing xii Preface to the Third Edition

  IS/IT successfully is perhaps even more difficult in today’s environment of faster business change combined with greater choices in IS/IT supply. The turbulence in both business and IS/IT environments may explain why, despite the increasing criticality of IS/IT for business, surveys continue to show that most IS/IT investments still fail to deliver the expected benefits to the organization. Many organizations are still concerned that

  IS/IT expenditure does not produce demonstrable ‘value for money’.

  As stated in the preface to the second edition, the following example problems can still result from the lack of a coherent strategy for IS/IT investment:

  Business opportunities are missed; the business may even be dis- . advantaged by the IS/IT developments of others. Systems and tech- nology investments do not support the business objectives and may even become a constraint to business development. Lack of integration of systems and ineffective information manage- . ment produces duplication of effort, inaccurate and inadequate information for managing the business.

  Priorities are not based on business needs, resource levels are not . optimal, project plans are consistently changed. Business perform- ance is not improved, costs are high, solutions are of poor quality and IS/IT productivity is low. Technology strategy is incoherent, incompatible options are selected . and large sums of money are wasted attempting to fit things together retrospectively.

  Lack of understanding and agreed direction between users, senior . management and the IS/IT specialists leads to conflict, inappropriate solutions and a misuse of resources.

  Some or all of these can occur when the organization does not have the means to plan and manage IS/IT strategically (i.e. driven by the business needs for the long-term benefit of the organization). Much of the failure of IS/IT to deliver consistent benefits is often due to the short-term business focus and the delegation of IS/IT strategy to IT specialists. Over the long term, any organization will get the information systems it deserves, according to the approach adopted to the use and manage- ment of IS/IT.

  It is against this background that this book considers how IS/IT strategy development can be brought about and then sustained. The intention is to provide a structured framework and practical approach, expressed primarily in the language of business and management, which can be adopted jointly by senior management, line managers and IS/IT professionals to apply their various knowledge and skills most effectively to identifying what needs to be done and how best to do it. Developing a

  Preface to the Third Edition xiii strategy is not a one-off exercise; it must be constantly improved and reviewed as achievements are made, options alter or business and IS/IT issues change. Defining a strategy for any organization is a creative and evolving process, which can be assisted by the use of tools, techniques and models to identify and select the most appropriate options.

  If there is an overall lesson that can be learned from experience it is that, since new technologies continually come and go, the pursuit of opportu- nities through IT must be driven, not only by what is technologically feasible but by what is strategically desirable. A key objective of this book is to provide this strategic focus for IS/IT. Clearly, an IS/IT strategy is merely one component of the business strategy and, as such, must be integrated with that strategy. This implies that IS/IT strategy development must become an integral part of the business strategy process. The IS/IT strategy must be understood by the business manage- ment and owned by them if it is to be implemented effectively.

  In putting together this third edition, we have read a considerable volume of recent research, articles, reports and books. However, some of the seminal work in the IS strategy area is still very relevant today even though it may have been written 10, or even 20, years ago. We have drawn on this, together with the more recent research. On occasions, we have modernized some of the language to reflect the vocabulary of today better. One of us is old enough to remember the first appearance of ‘e’ with eDP!

  In developing the contents of this book, we have also drawn on the work of many others. We recognize the contributions that these research- ers and writers have made to the contents at appropriate points in the book. We hope that we have been able to bring it all together in a coherent and readable volume. Over the years, we have worked with hundreds of business and IS/IT executives and managers. Their knowledge, insights and experience and their use of many of the ideas, models and frameworks in this book, has ensured that the approaches described can be applied successfully in practice.

  The previous editions of the book have been read by many thousands of students, academics and practitioners. We have attempted to incorporate some of their suggestions for improvement into this current volume. One area, in particular, that we have attempted to improve is navigation through the book. While the overall structure of the book is similar to the previous edition, we have improved the layout of the chapters, incorporated running headings indicating precisely where the reader is and improved the index. We are aware that many readers dip in and out of chapters rather than read the book from cover to cover. In this edition, we have made extensive use of chapter endnotes. Some readers may be interested in following up in more detail some of the points made, xiv Preface to the Third Edition

Figure 0.1 Book overview

  models used or research findings drawn upon—the endnotes will guide them to the original source.

  To help the reader navigate through the content of the book, Figure 0.1 illustrates the overall structure. The book is essentially split into two parts. The first part, Chapters

  1–6, is concerned with introducing and describing the context, nature and processes of IS/IT strategy and the associated tools and techniques. Chapters 7–11 address the issues to be managed in delivering the benefits from having the strategy such as managing investments, making resourcing decisions, organizing for IS/IT and the design of the IS function, deciding about insourcing or outsourcing, and managing IT infrastructure.

  Any strategy must identify, as far as possible, ‘where the organization wants to be’ in the future and assess accurately ‘where it is now’ in order to decide ‘how best to get there’, given the alternative options and resources available. The first six chapters of the book consider how the organization can assess where it is with regard to IS/IT, in the context of current business environment, and what the business wants to achieve in the future. One key aspect of any strategy is to obtain the maximum value from past investments, which implies achieving an objective, consensus view of the current situation before defining new requirements.

  At the same time, the business situation, the environment in which the

  Preface to the Third Edition xv organization exists, the competitive pressures and the future strategy must be understood to enable the strategic planning process to be focused on areas of criticality for the future. The business objectives and organiza- tional issues must be interpreted, analysed and supplemented by creative thinking, so that the IS/IT strategy not only supports the business strategy but also enhances it where that is possible.

  Chapter 1 sets the strategic context for IS/IT. It traces the historical development of IS/IT in organizations, bringing it up to date both in terms of e-commerce and e-business development and the latest thinking on the strategic role of IS/IT in organizations.

  Chapter 2 considers approaches and techniques involved in business strategy formulation and strategic management and their implications for IS/IT strategy development. Chapter 3 considers what is involved in establishing an IS/IT strategy process and presents an approach to IS/IT strategy formulation and planning.

  Chapters 4 and 5 describe the tools and techniques that can be used in the process; the focus is on the practical application of these tools.

  Chapter 6 is a summary chapter and brings together the material intro- duced in Chapters 2–5 to show how the ‘demand side’ of the strategy can be coherently addressed.

  Chapters 7 to 11 consider how the portfolio of requirements and demands can best be satisfied in terms of ‘supply’ management stra- tegies—the means by which the strategies are to be achieved. The various ways in which the IS/IT resources can be obtained, developed, deployed and managed most appropriately to satisfy the variety of demands are considered. This must take account of the business and organizational structure, in order to establish the appropriate balance between cen- tralized and devolved roles and responsibilities. The aim is to produce a relevant set of management policies and principles and a partnership between business people and IS/IT specialists cooperating to achieve common goals.

  Chapter 7 describes ways in which the current and future applications of IT can be assessed in terms of their business contribution, both indi- vidually and as an overall portfolio of IS/IT investments. The appropriate means of managing each element of the portfolio and the overall set of applications can then be selected.

  Chapter 8 considers a wide range of aspects related to structuring and organizing IS resources and the governance of IS/IT activities. Chapter 9 presents approaches to managing IS/IT investments, setting priorities to gain the best overall return from those investments and defining and realizing the business benefits that IT-enabled changes can produce.

  Chapter 10 focuses on information as a strategic asset and the require- ments and activities involved in the development of an information xvi Preface to the Third Edition management strategy. It also explores the requirements, issues and options associated with the increasingly important role IS/IT needs to play in the management of organizational knowledge. Chapter 11 con- siders some of the key strategic issues associated with the management of

  IT infrastructure and the provision of services to satisfy the organization’s systems, information and technology requirements. Outsourcing is dis- cussed in detail and the potential role of application service providers (ASPs) is considered.

  While the book concentrates on the strategic planning and management mechanisms needed by most organizations today, the last chapter looks to the future of IS/IT strategy development. The effects of IS/IT on any enterprise, its strategy, its operations and even its organization structure have, steadily and inexorably, become more profound and complex over the past 30 years, and this is more likely to increase than abate in the future. Chapter 12 considers the longer-term implications of current trends and emerging issues, which will have a significant influence on organizations’ future business and IS/IT strategies and how they are managed.

  The overall purpose of the book is to demonstrate why strategic planning for information systems is essential to organizational success and that it is also feasible, even in times of increasingly rapid change. To obtain the whole range of benefits available from IS/IT and avoid the potential pitfalls, every organization must establish the means to manage IS/IT as an integral part of its approach to strategic management. The approaches described in this book are intended to enable greater understanding of both what needs to be done and how it can be done.

  Acknowledgements: This book could not have been written without the help and support of a number of people. Since the last edition was produced, Pat Griffiths has retired and the authors recognize the con- tribution made by her to the previous editions and therefore to this one.

  Colleagues in the Information Systems group at Cranfield School of Management, visiting academics Ed Fitzgerald and John Hoxmeier and the many people who have attended IS Strategy courses and workshops have directly and indirectly contributed a wealth of knowledge and prac- tical experience to the contents. By applying the ideas and techniques, they have not only helped in their development but have also demon- strated the relevance and value of the approaches described. We also acknowledge the contribution of many researchers and writers in the IS field, on whose work we have drawn and referenced throughout the book.

  Finally, this book could not have been produced without the expertise and diligence (not to mention hard work!) of Justine Cullen, who prepared the bulk of the text and figures.

1 The Evolving Role of

  

Information Systems and

Technology in Organizations:

A Strategic Perspective

  Today, most organizations in all sectors of industry, commerce and government are fundamentally dependent on their information systems.

1 In the words of Rockart ‘[i]nformation technology has become inextric-

  ably intertwined with business’. In industries such as telecommunications, media, entertainment and financial services, where the product is already or is being increasingly digitized, the existence of an organization crucially depends on the effective application of information technology (IT). With the emergence of e-commerce, the use of technology is becoming just an accepted, indeed expected, way of conducting business. Consequently, organizations are increasingly looking toward the application of technol- ogy not only to underpin existing business operations but also to create new opportunities that provide them with a source of competitive advantage.

  In order to manage information systems and information technology (IS/IT) strategically, it is helpful to understand how the role of technology-based information systems has evolved in organizations.

  While organizations today want to develop a more ‘strategic’ approach to managing IS/IT, many have probably arrived at their current situation as a result of various short-term ‘tactical’ decisions regarding IS/IT. Many organizations would no doubt like to rethink their investments, or even begin again with a ‘clean sheet’, but unfortunately have a ‘legacy’ resulting from a less than strategic approach to IS/IT in the past. It is rarely possible to start again—many banks and insurance companies still depend on systems first developed over 30 years ago; neither is it neces- sarily advisable—there is no real reason to expect more success in the future than has been the case in the past, unless ability and knowledge

  2 Information Systems and Technology in Organizations have increased in the meantime. Learning from experience—the successes and failures of the past—is one of the most important aspects of strategic management. Earl has noted that much learning about the capability of

  IT is experiential, and that organizations tend to learn to manage IS/IT

  2 by doing, not appreciating the challenges until they have faced them.

  However, no one organization is likely to have been exposed to the whole gamut of IS/IT experiences, and neither is it likely that what has been experienced can always be evaluated objectively. This chapter provides an appraisal of the general evolution of IS/IT in major organ- izations, against which any organization can chart its progress and from which lessons can be learned for its future management. This evolution of

  IS/IT in organizations is examined from a number of viewpoints, using a variety of models, some of which are further developed and used later in the book, when considering the particular approaches required in planning strategically for IS/IT investments.

  A number of important forces affect the pace and effectiveness of progress in using IS/IT and in delivering business benefits. The relative weighting of each factor varies over time, and will also vary from one organization to another. These factors include: the capabilities of the technology; . the economics of deploying the technology; . the applications that are feasible; . the skills and abilities available, either in-house or from external . sources, to develop the applications; the skills and abilities within the organization to use the applications;

  . the pressures on the particular organization or its industry to . improve performance.

  This list is not meant to be exhaustive and could be expressed in other terms—but it is in a deliberate sequence of increasing ‘stress’, as the complexity and criticality of the management decision-making process becomes more strategic.

  Most assessments of the evolution of IS/IT in organizations tend to focus on one or two aspects of its development—organizational, applica- tions, management of technology, planning, etc.—but, in this chapter, these various perspectives will be brought together, as much as possible.

  INFORMATION SYSTEMS (IS) AND

  INFORMATION TECHNOLOGY (IT) Before providing any strategic perspective, it is important that there is a clear understanding of the distinction between the terms information Information Systems (IS) and Information Technology (IT)

  3 systems (IS) and information technology (IT). While both terms are often used interchangeably, it is important to differentiate between the two if a meaningful dialogue is to take place between business and IS staff and ultimately successful IS/IT strategies are to be developed. It should be remembered that information systems existed in organizations long before the advent of information technology and, even today, there are still many information systems present in organizations with technology nowhere in sight.

  IT refers specifically to technology, essentially hardware, software and telecommunications networks. It is thus both tangible (e.g. with servers, PCs, routers and network cables) and intangible (e.g. with software of all types). IT facilitates the acquisition, processing, storing, delivery and sharing of information and other digital content. In the European Union, the term Information and Communication Technologies or ICT is generally used instead of IT to recognize the convergence of traditional information technology and telecommunications, which were once seen as distinct areas.

  The UK Academy of Information Systems (UKAIS) defines informa- tion systems as the means by which people and organizations, utilizing technology , gather, process, store, use and disseminate information. It is thus concerned with the purposeful utilization of information technology. The domain of study of IS, as defined by the UKAIS, involves the study of theories and practices related to the social and technological phenomena, which determine the development, use and effects of infor-

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  mation systems in organizations and society. Mingers notes that, although technology is the immediate enabler of IS, ‘IS actually is part of the much wider domain of human language and communication, that

  IS will remain in a state of continual development and change in response both to technological innovation and to its mutual interaction with

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  human society as a whole.’ Some information systems are totally automated by IT. For example,

  Dell Computers has a system where no human intervention is required, from taking customer orders, to delivery of components to the Dell factory for assembly, to shipment to customers. With this build-to- order model, perfect information and tight linkages match supply and demand in real time. The company can receive an order for a personal computer (PC) directly from a customer via its own website (www.dell. com). Indeed, Dell has built in an element of ‘intelligence’ into its site to help the customer in making decisions regarding the configuration of components, ensuring that ‘non-optimal’ configurations or configura- tions not technically possible are not selected. Customers can also choose from a variety of delivery options. Once a customer order has been confirmed, purchase orders for components are automatically

  4 Information Systems and Technology in Organizations generated and electronically transmitted to suppliers. This has enabled Dell to build exactly what the customer has ordered, resulting in a stock- turn of 56–60 times per year compared with 13.5 for Compaq and 9.8 for

5 IBM’s PC business. Dell also feeds real-time data from technical support

  and manufacturing lines directly through to suppliers on a minute-by- minute basis. They also have links to many of their suppliers’ manufac- turing lines so that they can see their yields. This information system (or, perhaps more correctly, multiple information systems) is underpinned by a variety of different technologies—servers, storage, software, networks, etc.

  Another term that is frequently used along with IS and IT is appli- cation . Essentially, an application refers to the use of IT to address a business activity or process. There are essentially two types of application:

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  general uses of IT hardware and software to carry out particular . tasks such as word processing, electronic mail or preparing presenta- tion materials;

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  uses of technology to perform specific business activities or pro- . cesses such as general accounting, production scheduling or order processing.

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  These applications can be carried out using pre-packaged, pre-written software programs for a particular business activity or be developed to

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  provide particular functionality. Some business-application software packages can be tailored or customized to the specific requirements of an organization. One of the key selling points of large enterprise resource planning (ERP) packages from vendors like SAP, Baan, Oracle or JD Edwards is that they can be configured, to some extent, to meet the specific way in which an organization operates.

6 Checkland and Holwell have pointed out that many people find

  difficulty in distinguishing between IS and IT, because technology seems to overwhelm their thinking about the fundamental information

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  system that the technology is to support. Checkland also notes that information systems exist to serve, help or support people taking action in the real world. He asserts that, in order to create a system that effectively supports users, it is first necessary to conceptualize that which is to be supported (the IS), since the way it is described will dictate what would be necessary to serve or support it (the IT).

  This gives a clue as to why organizations may fail to realize any benefits from their investments in IT—investments are often made in technology without understanding or analysing the nature of the activities the tech- nology is to support—either strategically or operationally—in the organ- ization. For example, over the last few years, many organizations have

  ® Information Systems (IS) and Information Technology (IT)

  5 built websites without sufficient thought to the rationale behind the decision other than because everyone else seems to be getting on the ‘Net’. We have heard stories recounted of senior executives returning from business trips abroad demanding that a new technology be pur- chased or a new application be implemented because they have seen an advertisement in an airline’s in-flight magazine. It is important to remember that IT has no inherent value—the mere purchase of IT does not confer any benefits to the organization; these benefits must be unlocked. We shall return to this point throughout the book.

  E-business and E-commerce There are two other concepts that we believe are important to discuss up front, particularly given the prominence both have received: e-business and e-commerce. Since the mid-1990s, both concepts have entered the everyday vocabulary of managers and, having observed activity in many organizations such as the appointment of ‘Directors of e’, ‘e-managers’ and ‘e-Czars’ and the fact that many have developed ‘e-strategies’, suggests that e-commerce and e-business are being treated as something new and different from seeking out opportunities to deploy IS/IT. This should not be the case.

  Literally, e-commerce refers to the conduct of commerce or business electronically—essentially using Internet technologies. In the 1980s, elec- tronic commerce was already a reality, in this instance referring to inter- company trading, specifically the exchange of business documents, using

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  electronic data interchange (EDI). EDI was a cumbersome technology, requiring the use of a third party (a value-added network supplier or

  VANS) to facilitate information flow, but it did enable business partners to reduce the costs of exchanging business documents such as orders, invoices and price lists with each other. Indeed, the advent of Financial EDI—the issuing of electronic payment instructions and receiv- ing remittance notices electronically—was seen as closing the loop between purchaser and supplier. Of course, all parties involved had to adhere to particular technical standards in exchanging information and, as has been the case throughout the history of IT, a variety of different EDI standards emerged. Industries such as automotive, banking and retail had their own standards to define message structures. The United Nations did attempt to bring some uniformity to these diverse standards through UN/EDIFACT (United Nations/EDI for Administration, Commerce and Transport), but with mixed success.

  With the opening up of the Internet for commercial activity in 1991, a vast new medium was emerging for the conduct of business transactions. This ‘network of networks’ was based on open standards, facilitating

  6 Information Systems and Technology in Organizations easier connectivity without the need for the use of VANS. More latterly, the emergence of WAP (Wireless Application Protocol) has made it possible for mobile devices (phone, personal digital assistant [PDA], etc.) to connect up to the Internet, thereby permitting everything from ‘browsing the Net’ to engaging in business transactions while on the move. M-commerce has been coined to refer to the use of mobile devices for the conduct of business transactions while t-commerce refers to a similar use of television.

  E-business, on the other hand, has come to refer to the automation of an organization’s internal business processes using Internet and browser technologies. At one extreme, we have the ‘pure play’ dot.coms, whose business models are often portrayed as being totally web- or Internet- enabled, often reaching out directly to customers. However, unless the product is digitizable, such companies do not exist totally in the virtual world. In industries such as retailing, manufacturing and transportation, the physical aspects overpower the virtual—logistics still wins the day,

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  not glossy websites as many dot.coms have found to their detriment. At the other extreme, we have companies who have ‘web-enabled’ selected business processes using Internet technologies. Such companies still operate in the physical world and seek to develop a ‘bricks and clicks’ strategy to integrate the Internet with their mainstream operations.

  Unfortunately, the potential benefits and impact of those aspects of IS/

  IT that have been labelled e-business, e-commerce and latterly m- commerce and t-commerce have been exaggerated, resulting in tremen- dous hype surrounding these concepts, much of it fuelled by technology vendors and the media. In 1999, just issuing a press release stating the company was embracing the ‘net’ or announcing an e-commerce strategy was enough to send a company’s share price rocketing. Subramani and

10 Walden examined the impact of e-commerce announcements by firms

  on share price and found that e-commerce initiatives did lead to cumu- lative abnormal increases in shareholder value. Even changing a company name to incorporate the ‘.com’ label had a significant increase in the

  11 share price and trading activity.

  Right up until the Nasdaq crash in March 2000, we could not fail to pick up a newspaper or magazine without reading a story about the Internet and its impact. Attention grabbing headlines such as ‘The ‘‘net’’ changes everything’, ‘Log on or log out’ or ‘The death of the job’ and articles spotlighting the 21st century economy with promises of change in the lives of everyone ensured that the Internet became a popular topic of conversation. Acronyms such as B2B (business-to- business), B2C (business-to-consumer), B2E (business-to-employee) and P2P (peer-to-peer) entered the business vocabulary.

12 Coltman et al. have evaluated some of the early predictions about the

  Information Systems (IS) and Information Technology (IT)

  7 Internet and what the reality is some years later. For example, Kalakota

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  and Whinston predicted that brands would die—this has not been the experience. In fact, many ‘Internet brands’ have themselves become extinct—as many banks have discovered as they attempted to launch ‘Internet brands’. The prediction that the middlemen would disappear has again proved false. In fact, a new breed of ‘infomediary’ has

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  emerged. Evidence also suggests that being first is not the key to

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  success as suggested by Downes and Mui. Yahoo!’s real advantage is not that it was a first mover, but a ‘best mover’. If Lycos or some other portal is considered better, it is possible that Yahoo! will decline, as switching costs are low. In many cases, the early follower has the advan- tage of complementary assets, like brands, that form the real basis of competition for customers. This is what occurred in many industries when the incumbents took on the dot.com upstart. Yet, some predictions have come to pass. The claim that the Internet represents a new nearly ‘frictionless market’ has some empirical support. In a study of books and

  16 CD retailing, Brynjolfsson and Smith found that prices on the Net were 9–16% lower than prices in conventional outlets.

  What we are essentially looking at is another technology—in this instance, the Internet, including wireless technologies—to add to the range of technologies that already exist. The fundamental challenge for any organization is still to identify opportunities to deploy this new

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  technology, as with any other. As Porter noted ‘[w]e need to move away from the rhetoric about ‘‘Internet industries’’, ‘‘e-business strate- gies’’, and a ‘‘new economy’’ and see the Internet for what it is: an enabling technology—a powerful set of tools that can be used, wisely or unwisely, in almost any industry and as part of almost any strategy’.

  It should also be noted that IT is not the business strategy. Statements

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  like ‘[i]n this new age, IT is not about the business—it is the business’

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  are misleading and unhelpful. Rangan and Adner have dispatched sound advice in this regard. ‘The sooner firms stop being distracted by the hype of new technology, the sooner they can focus on the key strategy lessons that business experience of the past couple of decades has taught us: regardless of the industry that a firm operates in, it can achieve and sustain profitable growth to the extent that it grasps and delivers on two strategy fundamentals—product advantage and produc- tion advantage.’ In a similar vein, Hamel, in his book Leading the Re-

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  volution , is quite forthright in stating that ‘[t]he real story of Silicon Valley is not ‘‘e’’, but ‘‘i’’, not electronic commerce but innovation and imagination. _{. . . It is the power of ‘‘i,’’ rather than ‘‘e,’’ that separates the} winners from the losers in the twenty-first century economy’.

  Yet, this is not to say that the Internet is not different. Apart from its technical characteristics, three aspects make the Internet distinct

  8 Information Systems and Technology in Organizations from other technologies. First, it is pervasive. For example, it directly reaches end consumers, facilitating the conduct of business directly with consumers in new ways—something which has not been possible before, except with dedicated systems like France’s Minitel. Interactive Digital TV allows consumers to access Internet services directly from the sitting room of their home. Second, it is interactive. This interactive element is of crucial importance since much business activity consists of interactions (human and technical communication, data gathering,

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  collaborative problem solving, negotiation). Third, its virtual nature means that it is a new medium that has different characteristics from the physical world—often referred to as the marketspace as opposed to

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