Managing Information Technology

Chapter 13 • Leading the Information Systems Function 537

“Local” Applications

(Software applications specific to

a business unit or function)

Shared IT Applications

(Enterprise systems such as ERP, CRM)

Shared IT Services

FIGURE 13.1 Shared Versus “Local” IS Resources

IS ORGANIZATION RESPONSIBILITIES
AND GOVERNANCE

The IS organization today is accountable for two primary
responsibilities: (1) computer and network operations and
(2) software applications. In the mainframe era of
the 1970s, these two primary IS activities were typically
managed by a single unit: a centralizedIS governance
design. As mid-range computers became more common, a
business division may have had its own IS staff running its
own applications on computers under its control—with
little or no coordination across the other divisions. This
design resulted in what was primarily a decentralizedIS
governance design. Decentralized IS designs can still be
found in organizations with highly autonomous business
units that can achieve minimal benefits from sharing IS
operations or applications with other business units in the
company. Instead, the business units are given essentially
total control over their IS resources although a corporate
IS group may set some IT architecture standards.
Today, highly centralizeddesigns are especially com-
mon for computer and network operations. This is because
greater cost efficiencies can be achieved when expensive
computer equipment and networks can be purchased and
operated by a central (corporate) IS group for all business
units. It is important to note that decisions on how to
distribute IS decision-making authority and oversight are
separate from decisions on how to distribute computer-
processing power, storage equipment, and network hubs.
The discussion here focuses on centralized versus decen-
tralized decision-making authority for a set of IS activities,
not the economies of locating data processing operations
close to a supplier or a specific business user.
Large multinationals as well as smaller businesses
also have chosen to implement centralized governance
designs for most of their software applications in an
attempt to achieve greater integration across their business

processes and the systems to support them. One approach

here is to have a central IS group responsible only for

“shared” applications (see Figure 13.1):

• “shared” applications are used across an organization
  (e.g., enterprise system modules for financials, human
  resource systems, and the purchasing of materials)


• “local” applications are used only by a particular
  business unit, such as a scheduling system for one
  type of manufacturing plant or a claims processing
  system for a particular service unit.
  The rationale here is that these more specialized “local”
  applications may be better supported by a separate group
  of IS personnel that is not part of a centralized IS unit;
  instead, these IS personnel reside in and may report only to
  a business manager in a single business unit.
  Hybrid IS governance designs—which combine
  elements of centralized and decentralized designs—are
  therefore common today (Brown, 2003). As shown in
  Figure 13.2, some organizations may choose a federal
  designin an attempt to achieve cost efficiencies from cen-
  tralized computer and network operations, as well as to give

The Executive IS Leadership Role

Computer operations and networks have long been seen as a critical corporate resource with significant

costs that need to be controlled. But today’s CIO is also asked to help hone corporate strategies to bet-

ter leverage IT—including how to reach new customers, how to better design products, and how to

increase revenue growth rates. Corporate Web sites are now also critical channels for branding and

communicating with customers and potential customers, and IS managers may work with a company’s

business unit to design new customer-centric products that can be digitally delivered. In a survey of U.S.

organizations during the economic downturn (Luftman and Ben-Zvi, 2010), the top five IT management

concerns were (1) business productivity and cost reduction, (2) IT and business alignment, (3) business

agility and speed-to-market, (4) business process re-engineering, and (5) IT cost reduction.