This article looks at some key IS strategic planning concepts, review representative approaches to the formulation of IS strategy and make some observations on relevance to firms operating in offshore financial centres such as the Channel Islands. The concepts and methods outlined here can do much to help businesses in this environment to use technology to obtain business advantage. The proof of this is to be found in those offshore organisations that have deployed technology to tip the balance in their favour. Yet many organisations remain captive to inappropriate approaches and ideas. This may have been forced upon the firm by a parent that does not recognise the distinct nature and needs of the subsidiary's business. Or gaps in awareness of the ways in which technology can be relevant to the business may be the root cause. Either way, many firms may still find significant opportunities to improve performance through effective use of technology.

IS strategic planning fundamentals

I start from the assumption that the aim of IT strategic planning is to align IT resources with wider business goals. More than this, opportunities can sometimes be found for IT to create fundamentally new businesses (so called “business scope redefinition”). This possibility had been registered years before ecommerce gained popular recognition. Celebrated examples such as the introduction of the SABRE flight booking system which, at one point, overtook operating aircraft as key profit earner for American Airlines or the American Hospital Supplies case illustrate this. These cases overcome any doubts of the priority business drivers must take over technical considerations in creating an effective IS strategy. Developing sound IS strategy thus calls for business insight and creativity and is supported by a grasp of the technological possibilities. For this reason, whilst one would not expect to find guaranteed recipes for success in the literature on IS strategy, but some well established pointers into what works and where to focus attention can certainly be found.

Not all businesses are the same!

The figure presents one scheme for classification of industries and businesses in relation to the strategic significance of IT for that industry. Developed several years ago, it might look different now that customer expectations have been changed so significantly by the popularisation of the Internet. The approach to IT strategic planning will differ depending on each business unit’s location within a grid such as this. This perspective can help a firm to debate the appropriate attitude to IT (especially when examples of how IT has been deployed in other businesses are used to open up debate). However, judgements of the strategic relevance of IT are themselves the major challenge in a dynamic business environment. A gifted business strategist might see opportunities where others see none and indeed plans which assume IT plays only a minor role should be challenged periodically to avoid self fulfilling prophecies.

Integrated IT Strategy

Where IT might be expected to have the potential to give strategic advantage it would perhaps be appropriate to aim for an integrated strategy formulation process. Here IT is considered simultaneously with other aspects by a team conversant with both the business and IT. The team might look for ways to derive competitive advantage from IT as strategy is being created. Any of the well-known techniques for strategy development could be used to provide a stimulus and structure for this essentially creative activity.

When IT is not Strategic

In contrast, firms that do not anticipate strategic advantage is to be derived from information resources might develop business strategy without such intense consideration of IT. Responsibility for IT strategy might be assigned to a senior manager capable of following in the wake of business strategy to ensure priorities are aligned with business direction. Cost constraints and analysis of benefits (including non financial benefits) will likely be decisive in such a scenario.

Generic Strategies

These simple alternatives can be further refined into generic IT philosophies which characterise many of the de facto businesses attitudes to IT:

• Scarce Resource: IT costs tightly controlled; IT investment decisions based on ROI.
• Leading Edge: High R&D investment to develop state of the art systems.
• Necessary Evil: IT for basic purposes only if there is no alternative.
• Centrally Planned: IT and business needs integrated by high level decision making unit.
• Monopoly: Internal IT group is the sole source of IT services, it aims to satisfy demand within reasonable costs.
• Free Market: Users assess their IT needs and select source of supply.

The appropriateness of each of these generic attitudes depends on the strategic importance of IT to the business today and in future. The chart below summarises how well these attitudes align in each case:

Example Strategy Formulation Frameworks

Some examples of IT strategic planning methodologies or guidelines illustrate how these principles and conceptual foundations are put into practice.

Example 1: Duffy & Assad

Duffy and Assad set out a framework that is particularly simple to follow (see references at the end of this article).

Information Systems Orientation

According to Duffy & Assad “it is rare management team that is sufficiently up to date on IT and sufficiently creative to relate it to the organisation’s strategic needs”. If information is a strategic resource, regular management workshops are appropriate to stay abreast of IT and IS thinking and creatively explore strategic opportunities and threats.

Issue Analysis

Issue analysis focuses on the broader context, IT impact on operations, finance, human resources must be considered.

IS / Corporate Linkage

Duffy & Assad suggest linkage is achieved by

• IS manager participation in the corporate strategy process (if information is strategic)
• involving key managers in the IS strategy process
• study of corporate business plans for IS implications

Notably Duffy and Assad refer to critical success factors in the context of identifying key information needs of executives to monitor each CSF. This is consistent with Rockart’s original work where he states “the CSF method centres, rather, on the information needs for management control”. Duffy and Assad supplement CSFs with separate consideration of business processes to identify transaction-processing needs. The latter will be prioritised alongside MIS needs derived from the CSFs.

Identify Strategic IS Options

This task is undertaken by a team with industry knowledge, management experience and IS knowledge. Duffy & Assad recommend the team include individuals “inclined to challenge perceptual boundaries”. This of course assumes that suitable individuals are available and willing to contribute. A danger exists in some organisational cultures that such individuals will be marginalised.

Setting Priorities

In Duffy & Assad’s model, candidate systems are prioritised by the management group which “reduces subjectivity and political issues [and improves] communications and awareness of organisation wide issues”. The factors to be considered might include cost, ROI, risk, urgency, ease of implementation, natural precedence, synergistic factors, market place image and survival. The management group selects the factors that they consider relevant, score each candidate system (including new applications and enhancements to existing applications) and tabulate results as a vehicle for structuring the discussion.

Relevance in the Offshore Context

Duffy and Assad provide a cogent and practical framework. It’s age is apparent in the limited reference to business process redesign or knowledge management but it does succeed in its goal of “providing approaches to help managers think more effectively about IS related issues”.

Example 2: Information Engineering

My second illustration is a methodology with an Information Engineering heritage. In this case the planning phase “focuses on developing a strategic information system vision that supports the enterprises business plans and objectives” and comprises eight stages. Mechanisms are offered to integrate the planning with business strategy, through collection of information on goals, objectives and CSFs in the “enterprise strategy analysis” phase. Emphasis is placed on integration of users in the process.

Techniques for Linking Business and IT Strategy

This approach assumes CASE tools will be employed which provide facilities to associate key “knowledge base objects”. Examples of associations that are especially important in terms of linking IT strategy and business strategy are:

• goal to objective, objective to CSF
• critical assumption to goal or objective or CSF
• process to objective or CSF or opportunity / problem
• opportunity / problem to objective or information need (information needs are derived from both business strategy and operational requirements)
• information need to goal or objective or CSF
entity to information need

These associations provide insight but are insufficient in themselves. The methodology is not prescriptive about techniques for assessing relative strategic priorities of individual projects. Senior management views on business investment criteria are taken into account which permits an element of sensitivity to the organisation’s culture and management style. Despite the detailed analysis decisions ultimately rest on qualitative judgements of relative benefits (and more pedestrian project dependencies).

Relevance in the Offshore Context

A planning exercise which painstakingly articulated these associations (supported by sophisticated CASE tools) would inevitably develop understanding of how IS strategy is woven into the fabric of the business strategy. The rigour and consistency of the methodology is it’s great strength. However the very sophistication of the approach creates a danger of hiding the wood for the trees unless implemented by highly experienced and competent personnel. Regrettably a key constraint in the typical medium size organisation, and especially in offshore firms, is a shortage of such skills.

In summary, Information Engineering rigour is only partially relevant, “building software will always be hard. There is inherently no silver bullet” . A simpler approach is needed by organisations of the size and nature found offshore. I outline my suggestions for a subset of this apparatus suited to such circumstances at the end of this paper.

Example 3: ICAEW IT Faculty

The Institute of Chartered Accountants in England and Wales (“ICAEW”) has issued guidance on developing IT strategy. This modest 22 page booklet is especially significant as one might expect that material issued by this profession to be attuned with the culture of offshore financial services firms.

Notably, the ICAEW booklet is couched in moderate, low key style and is sympathetic to the aversion of language which is alien to the world of financial services. Nonetheless, many themes and issues already described are restated in this low key language. The following extracts convey the substance of the booklet:

• “For best results a business must have a [business plan] within which it can operate...” (Although terminology differs this corresponds to the business strategy in sources discussed).
• IT “may be used to advance, or even make possible, business objectives”. (examples are provided)
• “IT strategy should be prepared in parallel with, or as an extension of, business strategy”
• There should be an “examination of activities (possibly brainstorming) to determine the extent to which technology may enhance or reduce cost”
• In respect of IT organisation, applications and data, technology infrastructure planning “care must be taken to avoid following fashionable infrastructure solutions such as client server without a full analysis”
• “developing...an IT strategy is as much about people as...technology...culture, working practices and training needs must be an integral part...”
• communication and updating and monitoring processes are required.

Relevance to the Offshore Context

Whilst no detailed guidance or techniques are provided the booklet provides a simple statement of many principles elaborated earlier. It would be especially valuable as a briefing for managers with no prior exposure to these ideas but it is insufficient to fulfil the role of a simplified methodology. Finally, credit must be given for encouraging review of competitors and involving customers.

Applying the Frameworks

The literature on “traditional” IS strategy still has much to offer firms in the offshore financial services milieu. However, the practical challenges present such obstacles that firms often fail to reap substantial benefits. A pragmatic approach that guaranties the easy wins is needed. This must tread a path somewhere between the rigour of Information Engineering and the obscurity of vague statements of intent.

A prerequisite will be broad commitment from key players. Understanding of, and support for, IS strategic planning among senior management has perhaps been the Achilles heel for many firms. This might best be overcome by facilitated which develop awareness of the strategic role of IT (and to the cost of IT failures!) using examples drawn from similar businesses. Handled carefully this would establish a shared understanding that would enable IS strategic planning to be effectively undertaken.

Planning might conform to the spirit of an Information Engineering approach but must be capable of being quickly grasped by senior management. This group will usually need to be closely involved because of the specialised nature of offshore businesses and restricted pool of IS management skills at that level. An appropriate level of sophistication for a typical offshore firm might consist of:

• a clear and concise articulation of business strategy developed with senior management and including briefings and workshops to facilitate search for IT opportunities among the partners. This would need to go some way beyond the current business plans to elucidate implied strategic directions. The challenge of this step suggest that this is fraught with risk. Defining the market and identifying competitors is a vital element of the strategic process, different answers may lead to radically different strategies. However, without this step IS resources stand little chance of being effectively marshalled.
• an explicit description of the information needs implied by the strategy (analysed by an IS strategy team and validated with senior management)
• an explicit statement of the key operation information needs and processes (based on interviews with line management)

Once the team who are tasked with developing the IS strategy have internalised this, analysis might proceed to identify information systems (both automated and manual) supporting each business area and data management strategy. At a minimum, this might result in an entity model for the firm, a high level process model a “CRUD” matrix and organisational overview.

Information Engineering inspired approaches include development of architectures and principles within the IS planning (see earlier panel). In my view, if approached with an appreciation of the business risks of, for example, obsolete or proprietary technology, decisions on these aspects can be undertaken without extensive senior management involvement. In a firm of the size encountered offshore principles would emphasize preference for mainstream technologies and packaged software. The order of magnitude increase in costs for custom development are unlikely to be justifiable for such firms (I make this assertion recognising that truly innovative and strategic use of IT, being ground breaking, typically requires custom development). A best of breed package also provides the window of opportunity to redesign business processes around the package and introduce best practices in this way. The increased flexibility and customisability features of the current generation of packages further reinforce the attractiveness of this route for such firms.

Toward the end of IS strategy development, terms of reference for subsequent projects may be drafted. The links of the projects to our business strategy could be explicitly stated (probably in narrative format) as a key element of these terms. These would be validated with senior management to provide a final check that the strategy is on target (and, equally important, has the required support). This step would incorporate a prioritisation debate with senior management as the most satisfactory route to gauging the importance of each Information System to the business strategy or the relative importance of the element of the business strategy addressed. An experienced facilitator can use formal techniques that draw out these judgements. However, even a semi-structured, round table discussion may be sufficient given the uncertainties of the business judgements on which the priorities rest.

Finally, there is a good case for exploiting new technologies or packaged applications (including vertical market packages) earlier than competitors as a guiding principle in the situation of the typical offshore firm. Alliances with competitors to develop custom systems may however provide some scope to gain limited competitive advantage.

Final Thoughts

I have looked at how the principles of IS strategic planning, and particularly the spirit of Information Engineering, can be adapted to the circumstances of the typical offshore business. Whilst many businesses could gain from these established approaches some caveats must be noted. In particular:

The increasing pace of change in the business environment is reducing attention given to longer term planning disciplines and increasing the importance of factoring in more flexibility in the planning. This can be built in as an explicit principle for IS planning. The alternative is to continue to operate with disjointed, ad hoc and incompatible systems which have constrained many businesses in past years (so called “legacy systems”).

Whilst there is much that can be done to improve strategic planning the challenge is in implementation. Even when plans are well founded and appropriate few firms see these plans consistently though to implementation. But there are techniques and approaches that can help, especially the greater sophistication in organisational change management that has emerged in the last decade.

The traditional approaches we have discussed here do have a wider horizon that Information Systems. But the greatest advances in the 1990’s have been in the alignment of business processes and organisational design, underpinned by the enabling role of technology. A planning process which integrates these aspects requires even greater sophistication and cross disciplinary co-operation.

Sources & Recommended Reading

Mintzberg, H, 1994, “The Fall and Rise of Strategic Planning”, Harvard Business Review, January-February discusses the contrast between strategic planning and strategic thinking, and the creativity essential for the latter which can be impeded by formal technique.

Duffy, N and M Assad, 1989, Information Management, Cape Town, Oxford, pp 75-82 provides the framework discussed in this article.

Rockart, J, 1979, “Chief Executives define their own data needs”, Harvard Business Review, March-April. This article introduced the world to CSFs and is repays reading 20 years later.

Schach, S, 1990, Software Engineering, Richard D Irwin Inc. chapter 2 discusses the limitations of Information Engineering in an academic but insightful way.

Faculty of Information Technology of the Institute of Chartered Accountants in England and Wales, 1995, Developing your IT Strategy, Chartech Publishers, discussed above.

Cash, J, F McFarlan and J Mckenney, 1992, Corporate Information Systems Management, 3rd edition. A rich source of material and well worth careful reading.

Parsons, G L, 1983, Fitting Information Systems to the Corporate Needs: The Linking Strategy, HBS class discussion note. Do not be misled by its age, this paper still has much to offer the enterprise of the third millennium.