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TitleRepositioning the IT Organization to Enable Business Transformation (Practice-driven research in IT management series)
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LanguageEnglish
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Document Text Contents
Page 2

Repositioning the
IT Organization

To Enable Business Transformation

Carol V. Brown
Indiana University

V. Sambamurthy
University of Maryland

Practice-Driven Research in IT Management SeriesTM

Madeline Weiss and Robert W. Zmud, Editors
www.pinnaflex.com/apc

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Chapter 5 Repositioning IT Organizations for Process Integration 45

The IT Transformation Journey at Material-System1

Table 5.2 summarizes some of the pertinent background charaterisitcs of Material-System presented in
Chapter 2. The IT organization was recentralized in 1994 as part of an overall organization recentrali-
zation, and a CIO was brought in from the outside to play a new integrative IT leadership role.

Table 5.2: Process Integration at Material-System: Background

Business characteristics Ranked as world leader in building material systems and advanced
composite materials

New CEO brought in for financial turnaround

Factors motivating the Enhanced customer satisfaction through superior solutions that
business transformation thrust leverage the firm’s product range

Sharpened value proposition of customer intimacy

Growth that exploits global reach of the business

Vision for transformation Process Integration Actions
Common, simple, global business processes for value chain and
corporate support

Complementary Transformation Actions
Corporate vision that emphasizes core values: global, mobile,
paper-free, integrated, team-oriented, learning-based, customer-
focused, and technology-enabled

New integrative leadership role for IT

The Business Transformation Thrust
Material-System’s transformation was initiated by a CEO brought in for a financial turaround. Some of
his initial actions were to infuse his top management with new talent, divest some of the firm’s noncore
businesses, and invest in new manufacturing plants across the globe. He established new core values
and aggressive growth goals for the year 2000, and process integration became part of the vision for
achieving them.

Setting the Stage for Business Transformation

In early 1994 three business process reengineering (BPR) projects were initiated: the reengineering of
the logistics processes, customer service processes, and a consolidation of the finance function. A Big 6
consulting group at the time was engaged to work with these BPR teams, and it didn’t take long for the
teams to conclude that the company’s existing IT would not be able to support the following BPR
objectives:

• Accessing worldwide information in real time (for inventory, production, pricing, and distribution
information)

• Customizing responses to meet customer needs (for pricing, production and delivery schedules,
purchasing forecasts)

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46 Repositioning the IT Organization

• Communicating paper-free (internal and external in-person communications and business
transactions)

• Making fully informed decisions

In the past, the IT organization had primarily been an “order taker.” Initially, top management’s assump-
tion was that IT would build the applications to support the new business processes being designed by
the three separate BPR teams. The danger with this approach was that there was no integration across
the reengineering teams and that the requested systems would lead to “silo” solutions rather than the
common, integrated processes that the firm was seeking.

By mid-1994, a major reorientation of the reengineering efforts was initiated after the new CIO came
on board: the three teams were asked to explore whether their separate process redesign efforts could
be supported by common, global systems solutions. The result was a refocusing of the teams toward
enterprise-level core processes that could be supported by enterprise-level systems solutions. With help
from external consultants, a global process model was developed as a template for guiding the enterprise
process integration.

Once there was management buy-in to the global process model, the organization sought to identify an
off-the-shelf enterprise resource planning (ERP) solution that could support common business processes
and real-time integrated information demands and other BPR objectives across multinational and multi-
lingual business environments. By September 1994, the feasibility of an enterprise process model and
global systems solution for Material-System was established, and a six-month planning process was
begun. By December 1994, SAP’s R/3 client-server enterprise system was selected as the foundation
package.2 This solution meant buy-in to a new-open systems client-server architecture. The signing of
this contract therefore represented a top management commitment to a global initiative that would
involve the redesign of most of the company’s supply chain processes as well as replacement of virtually
all of its major systems.

By early 1995, a two-year implementation schedule (100-week plan) for reengineering the company’s
global business processes and implementation of the SAP R/3 was established. An aggressive schedule
was viewed as a critical decision: it minimized the likelihood that a key senior executive would jump
ship or cease to support the project goals before it was completed. Top management was sure that the
pain would be considerable, but the pain to achieve integration would be the same whether an aggressive
schedule was followed or not.

Multiple SAP releases were planned over the 100-week period. The release concept entailed the “shrink
wrapping” of several new processes and new system modules into a single release. This avoided the
problem of business units having to contend with multiple implementation dates by multiple project
teams. The number of releases was also intentionally small. Release 1 was finance modules only and
would build on the original reengineering project. Release 2 would include a full set of supply chain
modules for a major business unit outside the United States that needed replacement systems to
accommodate recent acquisitions. Release 3 implemented a standard client-server infrastructure in about
100 North American locations, including wide area networks, local area networks, and about 5000 new
desktops that would access a centralized Oracle database at headquarters. Release 4 would begin to
exploit the multinational and multilingual capabilities of a new R/3 version that would be implemented

Page 104

ABOUT THE AUTHORS

Carol V. Brown (Ph.D., Indiana University, 1989) is Associate Professor of Information Systems at
the Kelley School of Business of Indiana University. She has been conducting field research on IT
organization and management issues for more than a decade, including projects sponsored by the Center
for Information Systems Research (CISR) at the Sloan School of Management at Massachusetts Institute
of Technology, the Advanced Practices Council of the Society for Information Management (SIM), the
Lattanze Center, and IBM. Her current research addresses topics such as the design of IT process-based
organizations, the adoption and implementation of ERP systems, and the recruitment and retention of
IT professionals. Professor Brown has been an invited speaker on IT organization issues at several
forums for senior IS managers, including the SIM Interchange. Her research results on IT organization
design alternatives and IT business partnering have been published in major journals such as MIS
Quarterly, Organization Science, Information Systems Research, Journal of Management Information
Systems, and Information Systems Management. She is a coauthor of the third edition of the MBA
textbook Managing Information Technology published by Prentice Hall in 1999 and is the editor of
The IS Management Handbook 2000 to be published by Auerbach. She is currently serving as the
Vice President for Academic Community Affairs of the executive board of SIM International.

V. Sambamurthy (Ph.D., University of Minnesota, 1989) is Associate Professor of Decision and
Information Technologies at the Robert H. Smith School of Business at the University of Maryland at
College Park. He has conducted extensive research on the capabilities and organization design logics
of firms that are able to continuously sustain IT-based innovation. Some of the specific areas of his
expertise include the design of IT governance arrangements, the architecture of coordination mechanisms
for IT innovation, IT capabilities for innovation success, and the roles of the CIO and top management
teams in promoting effective IT use. He has worked with the Advanced Practices Council of SIM
International and the Financial Executives Research Foundation on several of these projects. Professor
Sambamurthy is a frequent speaker in executive forums of senior IT and business executives on ideas
related to leveraging business value from IT investments. His work has been published in a variety of
journals, including the MIS Quarterly, Information Systems Research, and Decision Sciences. Currently,
he is an associate editor on the board of MIS Quarterly.

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