Sunday, April 15, 2012

Chapter 15 - Managing Global Systems

Today electronic companies are assigning the distribution and production of their products to other countries.  International information systems architecture consists of the basic information systems required by organizations to coordinate worldwide trade and other activities.  The levels for developing an international information systems architecture are the global environment, the corporate global strategies, the structure of the organization, the management and business processes, and the technology platform.  The global environment the firm is operating in is the first place to start when building an international system.  The overall market forces, or business drivers, that are pushing the industry toward global competition must be understood.  A business driver is a force in the environment that businesses must respond and that influences the direction of the business.  A corporate strategy for competing in that environment will then need to be considered.  Once a strategy is developed, how to structure the organization so it can pursue the strategy is considered.  Management issues must then be considered in implementing the strategy and making the organization design come alive.  The final issue is to consider the technology platform.

The global environment includes business drivers and challenges.  Global business drivers can be divided into two groups:  general cultural factors and specific business factors.  General cultural factors include global communication and transportation technologies, development of global culture, emergence of global social norms, political stability, and global knowledge base.  Specific business factors include global markets, global production and operations, global coordination, global workforce, and global economies of scale.  Business challenges on a global level include cultural particularism (regionalism, nationalism, language differences), social expectations (brand-name expectations, work hours), and political laws (transborder data and privacy laws, commercial regulations).  Business challenges on a specific level include standards (different Electronic Data Interchange (EDI), email, telecommunications standards), reliability (phone networks not uniformly reliable), speed (different data transfer speeds, many slower than US), and personnel (shortages of skilled consultants).

International companies often times are behind in the most up-to-date applications and systems.  Significant difficulties are faced in building appropriate international architectures.  These difficulties involve planning a system appropriate to the firm’s global strategy, structuring the organization of systems and business units, solving implementation issues, and choosing the right technical platform.

Corporations seeking a global position face three organizational issues:  choosing a strategy, organizing the business, and organizing the systems management area.  Four main global strategies form the basis for global firms’ organizational structure:  domestic exporter, multinational, franchiser, and transnational.  Each of these strategies is pursued with a specific business organizational structure.  Three kinds of organizational structure are centralized (in the home country), decentralized (to local foreign units), and coordinated (all units participate as equals).  A domestic exporter strategy is characterized by heavy centralization of corporate activities in the home country of origin.  Most international companies begin this way.  Production, finance/accounting, sales/marketing, human resources, and strategic management are set up to optimize resources in the home country.  A multinational strategy concentrates financial management and control out of a central home base while decentralizing production, sales, and marketing operations to units in other countries.  Franchisers are a mix of old and new.  The product is created, designed, financed, and initially produced in the home country, but for product-specific reasons must rely heavily on foreign personnel for further production, marketing, and human resources.  Transnational strategy is where nearly all the value-adding activities are managed from a global perspective without reference to national borders, optimizing sources of supply and demand wherever they appear, and taking advantage of any local competitive advantages.  They take the globe as their management frame of reference and there is a strong central management core of decision-making.

Configuration, management, and development of systems tend to follow the global strategy chosen.  Four types of systems configurations are considered.  Centralized systems are those in which systems development and operation occur totally at the domestic home base.  These are found in domestic exporters.  Duplicated systems are those in which development occurs at the home base but operations are handed over to autonomous units in foreign locations.  These are found in franchisers.  Decentralized systems are those in which each foreign unit designs its own unique solutions and systems.  These are found in multinationals, and somewhat in domestic exporters and franchisers.  Networked systems are those in which systems development and operations occur in an integrated and coordinated fashion across all units.  These are found in transnationals, and somewhat in multinationals.

To develop a global company and information systems support structure, firms need to follow the following principles:  (1) Organize value-adding activities along lines of comparative advantage.  (2) Develop and operate systems units at each level of corporate activity—regional, national, and international.  (3) Establish at world headquarters a single office responsible for development of international systems.  Not only does the success of companies rely on the proper organization of activities, but also a management team that can understand the risks and benefits of international systems and that can devise strategies for overcoming the risks.

Management faces problems by developing international systems.  These problems are also the main difficulties managers experience in developing ordinary domestic systems, but they are enormously complicated in the international environment.  They include agreeing on common user requirements, introducing changes in business processes, coordinating applications development, coordinating software releases, and encouraging local users to support global systems. 

Management needs to have solutions to face these challenges.  They need to realize that not all systems should be coordinated on a transnational basis, but only some core systems are truly worth sharing from a cost and feasibility point of view.  Core systems support the functions that are absolutely critical to the organization.  Step one is to define a short list of critical core business processes by conducting a business process analysis.  The second step is to conquer the core systems and define these systems as truly transnational.  The third step is to choose an approach.  The last step is to make the benefits clear.  Although each system offers unique benefits to a particular budget, the overall contribution of global systems lies in four areas:  contribution to superior management and coordination; vast improvement in production, operation, and supply and distribution; global customers and global marketing; the ability to optimize the use of corporate funds over a much larger capital base.

The problems faced by managers developing the global information systems architectures now have solutions.  Agreeing on common user requirements:  establishing a short list of the core business processes and core support systems will begin a process of rational comparison across the many divisions of the company, develop a common language for discussing the business, and naturally lead to an understanding of common elements.  Introducing changes in business processes:  success as a change agent will depend on legitimacy, authority, and ability to involve users in the change design process; involving people in change, assuring them that change is in the best interests of the company and their local units, is a key tactic.  Coordinating applications development:  choice of change strategy is critical for this problem.  Coordinating software releases:  firms can institute procedures to ensure that all operating units convert to new software updates at the same time so that everyone’s software is compatible.  Encouraging local users to support global systems:  the key is to involve users in the creation of the design without giving up control over the development of the project to parochial interests; the overall tactic for dealing with resistant local units is a transnational company is cooptation, which is bringing the opposition into the process of designing and implementing the solution without giving up control over the direction and nature of the change.  Several alternatives are possible for cooptation to proceed.  One is to permit each country unit the opportunity to develop one transnational application first in its home territory, and then throughout the world.  Another is to develop new transnational centers of excellence, or a single center of excellence.

Once a global business model and systems strategy has been defined, firms must select hardware, software, and networking standards, along with key system applications to support global business processes.  Hardware, software, and networking pose technical challenges in an international setting.  One is finding some way to standardize a global computing platform when there is so much variation from operating unit to operating unit and from country to country.  Another is finding specific software applications that are user friendly and that truly enhance the productivity of international work teams.  Overcoming these challenges requires systems integration and connectivity on a global basis.  The goal with computing platforms is to develop global, distributed, and integrated systems to support digital business processes spanning national boundaries.  Data standards and other technical standards with which sites are to comply must be established.  In addition, integrated global systems must have connectivity, which is the ability to link together the systems and people of a global firm into a single integrated network.

Challenges for application software also need to be addressed.  The old system interfacing with the new is one issue.  If new systems are to be built and tested, this could be costly and messy.  Also, it should be taken into consideration to build software that can be realistically used by multiple business units form different countries.  Problems also arise of human interface design and functionality of systems with language becoming a barrier.  

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