achieving value from ict - key management strategies
TRANSCRIPT
Achieving valuefrom ICT: keymanagementstrategies
Department of CommunicationsInformation Technology and the
Arts
ICT Research Study
April 2005
An appropriate citation for this paper is:
Gregor, S, Fernandez, W, Holtham, D, Martin, M, Stern, S, Vitale, M & Pratt, G. 2004, Achieving Valuefrom ICT: key management strategies, Department of Communications, InformationTechnology and the Arts, ICT Research Study, Canberra.
ISBN: 0 642 75290 7 hard copy
0 642 75291 5 online version
© Commonwealth of Australia 2005
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and
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Achieving value from ICT: key management strategies 3
Table of contents
List of acronyms 10
Executive summary 11
Realising value and obtaining benefits from ICT 11
Key factors in realising value from ICT 12
ICT deployment and use in Australia 13
Industry differences 13
Adding to previous work 14
1. Introduction 15
2. ICT use—a transformational model 18
2.1 Introduction 18
2.2 Questions concerning the value of ICT use 18
2.3 The significance of this study 21
2.4 A transformational model of ICT use 22
2.5 ICT—contribution to organisational performance 23
2.6 Industry influences 24
2.7 Enterprise level factors 24
2.8 Discussion 26
3. Methodology 28
3.1 Introduction 28
3.2 Approach overview 28
3.3 Large scale survey phase 28
3.4 Structured interview phase 34
4. ICT circumstances and settings 36
4.1 Introduction 36
4.2 ICT usage types 36
4.3 Financial factors and ICT spending 41
4.4 ICT management and outsourcing 42
4.5 ICT expenditure—decision making 49
4.6 Discussion 49
5. Value from ICT use 51
5.1 Introduction 51
5.2 The business value of ICT 51
4 Achieving value from ICT: key management strategies
5.3 ICT business value by organisational size 54
5.4 Nature of benefits 56
5.5 Discussion 60
6. What really matters in gaining value from ICT? 62
6.1 Introduction 62
6.2 Potential influences on ICT business value 62
6.3 Primary factors influencing degree of business value 64
6.4 ICT investment impetus 66
6.5 Additional factors influencing degree of business value 68
6.6 ICT management practices 70
6.7 Discussion 74
7. ICT-aware management 76
7.1 Introduction 76
7.2 ICT-aware organisations 76
7.3 Good practice in ICT management 79
7.4 Organisational transformation 82
7.5 ICT-aware practices as part of effective management practice 84
7.6 Discussion 85
8. Industry analysis 87
8.1 Introduction 87
8.2 Value from ICT by industry 87
8.3 Basis of competition 90
8.4 Value from ICT for industry groups 92
8.5 ICT business value influences for industry groups 95
8.6 ICT investment drivers for industry groups 96
8.7 Management practices by industry group 99
8.8 Basis of competition by industry group 99
8.9 ICT usage 101
8.10 Discussion 101
9. Other factors influencing value 103
9.1 Introduction 103
9.2 Intra-organisational factors 103
9.3 External environmental factors 110
9.4 Inhibitors to gaining value from ICT 112
9.5 Discussion 114
10. Conclusions 116
10.1 Key findings 116
Achieving value from ICT: key management strategies 5
10.2 Study findings and previous research 119
10.3 Final summation 120
11. References and bibliography 121
Annex A: Summary of survey instrument 127
Annex B: Summary of structured interviews 138
Annex C: Regression trees methodology 142
Annex D: Factor analysis— business value 145
Annex E: Structured interview coding 151
Annex F: Two-way analysis of revenue and ICT spending 153
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6 Achieving value from ICT: key management strategies
List of tables
Table 2.1 Winning management practices 25
Table 3.1 Sample sizes by industry and organisation size 30
Table 3.2 Australian businesses by business size 31
Table 3.3 Australian businesses by industry (ANZSIC classifications) 32
Table 3.4 Structured interview summary 34
Table 3.5 Structured interview statistics 35
Table 4.1 Weighted percentage of businesses using ICT applications by industry 37
Table 4.2 Weighted percentage of businesses using ICT applications by business size 40
Table 4.3 Level of ICT spending 41
Table 4.4 Weighted percentage of day-to-day ICT support that is outsourced 43
Table 4.5 Weighted percentage of software development that is outsourced 45
Table 4.6 Weighted percentage of organisations outsourcing offshore by industry 46
Table 4.7 Weighted percentage of organisations outsourcing offshore byorganisation size 47
Table 4.8 Extent of successful outsourcing arrangements by industry 48
Table 5.1 Categories for benefits of ICT use 52
Table 5.2 Comparative analysis of ICT business value 54
Table 5.3 Weighted mean ICT business values by organisational size 55
Table 6.1 Factors potentially influencing ICT business value 63
Table 6.2 Business value of ICT—organisation characteristics 66
Table 6.3 Business value of ICT—additional organisation characteristics 70
Table 7.1 Correlation matrix for practices in ICT-aware management 78
Table 7.2 Relationship between ICT-aware practices and ‘winning’ management practices 85
Table 8.1 Weighted mean overall business value by ANZSIC industry class 87
Table 8.2 Weighted average business value scores by industry and benefit type 89
Table 8.3 Industry groups by value 93
Table 8.4 Comparison of mean importance of ICT investment drivers by industry 98
Table 9.1 Weighted average business value scores by ICT spending and benefit type 104
Achieving value from ICT: key management strategies 7
Table 9.2 Government or non-profit—weighted mean business value 105
Table 9.3 Weighted mean business value by organisational type 106
Table 9.4 Presence of ICT department—weighted mean business value 106
Table 9.5 Presence of ICT department—by organisation size 107
Table 9.6 Mean weighted business values for firms that use/don’t use various ICT 108
Table 9.7 Mean weighted business values by number of ICT usage types 109
Table 9.8 Effect of inhibitors on perceived business value 113
Table D.1 Factor loadings—single factor solution 148
Table D.2 Factor loadings—four-factor solution 149
Table D.3 Description of codes 150
Table E.1 List of codes and their density 151
Table F.1 Two-way analysis of business value by ICT spending and revenue last year 153
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8 Achieving value from ICT: key management strategies
List of figures
Figure 2.1 Transformational model of ICT use 22
Figure 5.1 Relative frequency of types of ICT business value 53
Figure 5.2 ICT Business value by organisational size 55
Figure 6.1 Tree model for primary factors influencing business ICT value 65
Figure 6.2 Relationships between ICT investment drivers and ICT business value 68
Figure 6.3 Tree model for further factors influencing business ICT value 69
Figure 6.4 Relationship between management practices and business value 71
Figure 6.5 Relationship between management practices and business value for smallorganisations 72
Figure 6.6 Relationship between management practices and business value formedium-sized organisations 73
Figure 6.7 Relationship between management practices and business value for largeorganisations 74
Figure 7.1 Relationship between strategic planning practices and value from ICT 81
Figure 7.2 Relationship between ICT project planning practices and value from ICT 82
Figure 8.1 Weighted mean value by Industry 88
Figure 8.2 Proportion of competitive factors by industry 92
Figure 8.3 Mean business value for each industry group 94
Figure 8.4 Business benefit type by industry group 95
Figure 8.5 Differences in the following ICT investment drivers by industry group 96
Figure 8.6 Frequency of engaging in management practices by industry group 99
Figure 8.7 Basis of competition by industry group 100
Figure 8.8 Mean number of ICT usage types for each industry group 101
Figure 9.1 Mean value by ICT spending 105
Figure 9.2 Weighted mean business value by the number of ICT usage types 109
Figure 9.3 Relationship between external ICT investment drivers and business value 111
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Achieving value from ICT: key management strategies 9
List of exhibits
Exhibit 5.1 Informational benefits 56
Exhibit 5.2 Strategic benefits 58
Exhibit 5.3 Organisational transformation benefits 59
Exhibit 5.4 Transactional benefits 59
Exhibit 6.1 An example of ICT investment impetus 67
Exhibit 7.1 ICT investment impetus—managers’ rationale for investment 77
Exhibit 7.2 Need for formal contractual arrangements 79
Exhibit 7.3 Opportunistic benefits from ICT 79
Exhibit 7.4 Seeking to be an industry leader 80
Exhibit 7.5 Strategic planning practices 80
Exhibit 7.6 ICT project planning practices 80
Exhibit 7.7 Integration of new ICT across existing business processes 83
Exhibit 7.8 New ways of doing business and new business plans 83
Exhibit 7.9 Increasing ICT skill levels within the organisation 84
Exhibit 7.10 Delayed impact (or awareness)—time for organisational learning 84
Exhibit 9.1 Examples of outsourcing arrangements 107
Exhibit 9.2 Influences from globalisation and competition 112
Exhibit 9.3 Concerns about computer virus and security attacks 114
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10 Achieving value from ICT: key management strategies
List of acronyms
ABS Australian Bureau of Statistics
ACCC Australian Competition and Consumer Commission
ANZSIC Australian New Zealand Standard Industry Classification
DCITA Department of Communications, Information Technology and the Arts
ICT Information and Communications Technology
IT Information Technology
OECD Organisation for Economic Cooperation and Development
SOE Standard operating environment
GDP Gross Domestic Product
SME Small to medium enterprise
Achieving value from ICT: key management strategies 11
Executive summary
This study demonstrates that the effective management of information and communicationstechnology (ICT)1 can improve firm productivity and performance regardless of the size of anorganisation or the industry in which it operates. The study identifies management practicesand strategies that are critical for realising value from ICT and apply across a range ofindustries and organisations.
These findings arise from research that examined the circumstances and settings in which ICTis deployed in Australian organisations and the management strategies and organisationalforms that accompany ICT implementation. The study is based primarily on a telephonesurvey of 1050 organisations of varying sizes drawn from 15 of the 17 Australian and NewZealand Standard Industry Classification (ANZSIC) Codes.
Business use of ICT has increased significantly in the past five years. In 1998 63 per cent ofbusinesses used a computer, a figure which rose to 83 per cent in 2003. An even higher rate ofincrease has been experienced in Internet use, from just 29 per cent in 1998 to 71 per cent in2003.2 However, some Australian organisations and industries are obtaining greater benefitsfrom the use of ICT than others. Australian organisations can make use of the findings andobservations on effective ICT management presented in this report to optimise their ICTinvestments.
This study complements the Ovum Report (NOIE 2003), which examined the contribution ofICT to productivity growth in Australia using economic modelling of the Australian economyand case studies of 18 exemplar organisations.
Realising value and obtaining benefits from ICT
The survey found that ICT contributes positively to organisational performance. The benefitsobtained can be categorised as:
• informational benefits such as an increase in the quality, quantity and availability ofbusiness and other information;
• strategic benefits such as creating competitive advantage;
• transactional benefits leading to efficiencies and cost savings; and
• transformational benefits associated with positive organisational change.
1 The term ICT (information and communications technology) is used throughout this report, to some extent interchangeably
with IT (information technology). ICT is a more general term that includes the use of telecommunications technologies.2 Australian Bureau of Statistics, 2002–03, Business Use of Information Technology (Catalogue 8129), 17 March 2004
12 Achieving value from ICT: key management strategies
Organisations typically make gains in all four benefit categories and the pattern of perceivedbenefits is similar regardless of organisational size or industry grouping. While there was littledifference in the level of benefit obtained in each category, ICT was found to contribute valuemost often in terms of informational benefits and least often in terms of transactional benefits.
In all industry classes and organisation sizes, informational benefits were cited mostfrequently and also provided the greatest value. It seems that once users become accustomedto new ICT then informational benefits become readily apparent and realisable. These benefitsmay accrue from information shared more easily between colleagues, suppliers and businesspartners, better monitoring of customer needs and market developments and an improvementin the knowledge base for business decision making.
Key factors in realising value from ICT
ICT related benefits originate from factors largely within an organisation’s control. The sizeof the organisation and the industry that it operates within are not major determinants.Further, realising value is not dependent on the amount spent on ICT or the particularapplications or systems that are used. Rather, there are a number of common factors thatdetermine the value obtained from ICT and that apply across industries and organisations.These factors relate primarily to the adoption of particular ICT-orientated managementpractices and an ability to recognise and exploit the additional, and frequently unanticipated,benefits that can accompany ICT implementation. Factors that provide a good practice guidefor ICT implementation in Australian organisations include the following.
• Being ICT aware. ICT-aware organisations adopt a number of specific ICT-managementpractices and benefit from the organisational learning and transformation thataccompanies ICT implementation.
(a) Managers understand that the key purpose of investing in ICT is to gain advantage—itshould not be merely a response to external drivers of ICT deployment such asgovernment pressures or industry trends. Purposeful investment, to realise strategic,efficiency and competitive business objectives is the most significant predictor of ICTvalue-add across all business sizes and in all industries.
(b) Managers are knowledgeable about ICT opportunities—they are highly conscious ofthe opportunities that ICT can provide and take a keen interest in how ICT isimplemented. Such ‘ICT-savvy’ organisations are gaining most benefit from ICT.
(c) Managers implement good practice in managing ICT. This includes ensuring formalcontractual arrangements for ICT delivery and recognising and achieving thefrequently significant additional benefits that ICT can provide, apart from thoseoriginally predicted.
• Being open to organisational transformation. Organisational transformation must berecognised as a necessary accompaniment to ICT implementation. Transformationalopportunities for an organisation arise from activities such as the integration of ICT intoexisting business processes and the acquisition of new ICT skills. Organisations thatachieve the most significant benefits from ICT exploit these new capabilities to reformbusiness processes and create new business opportunities.
Achieving value from ICT: key management strategies 13
• Being persistent in realising ICT benefits. Because the successful use of ICT involves acontinuous cycle of learning and change, there is often a time lag between the initialinvestment in ICT and realising the full benefit of that investment. Time is required tolearn a new system and to use it in the most advantageous ways. Time is also required tointegrate a new system with other organisational systems and processes and for theorganisation to find innovative ways of using newfound capabilities.
What the research makes clear is that, to a large degree, realising value from the use of ICT issignificantly influenced by managerial choices and behaviours. That is to say, the extent towhich an organisation is able to obtain benefits from ICT is largely in the organisation’s ownhands. Further, ICT-savvy managers can generally realise value from ICT for theirorganisations independently of industry, size, and other structural factors.
ICT deployment and use in Australia
The survey provides a number of specific findings about the way in which ICT is deployedand used in Australia. In summary:
• ‘basic’ ICT applications such as email and electronic banking are widely used inAustralian organisations of all sizes and in all industries;
• however, more advanced applications of ICT such as electronic selling and businessprocess integration with suppliers and customers are still not commonly used;
• as expected, ICT spending is related to organisational size and the industry in which theorganisation operates;
• ICT outsourcing is widely practised, both for support and for software development, butthere is considerable variation within and between industries in the extent to whichoutsourcing is chosen as a business practice;
• offshore outsourcing for ICT has been taken up by only a small number of organisations,almost all of which are very large; and
• the ICT outsourcing experience is now generally regarded as successful by thoseorganisations who engage in this practice.
Industry differences
There were variations by industry in the business value obtained from ICT. Industries inclassifications such as Government, Communication Services and Electricity, Gas and WaterSupply reported obtaining the highest value from ICT. Industries including Accommodation,Cafes and Restaurants, Construction and Agriculture, Forestry and Fishing reported obtainingthe least value from ICT.
At the same time, and importantly for the purposes of this study, there do not appear to be anysignificant differences by industry group, in terms of the strategies and practices that wereinstrumental in achieving higher business value.
14 Achieving value from ICT: key management strategies
Adding to previous work
The findings have parallels in previous work, which is significant considering the differentmethodological approaches adopted in other studies. The study complements more detailedwork, as in the case studies undertaken for the Ovum Report, but also higher level economicanalyses of ICT and productivity.
There are striking similarities with what has been termed ICT-aware management in thecurrent study and the findings of the Ovum study. For example, the Ovum study also foundthat key factors in realising value from ICT were clear goals for ICT implementation,recognition of a wide range of benefits, flexibility in achieving unexpected benefits from ICT,attention to organisational change and transformation and attention to ICT projectmanagement.
This study adds further evidence to the debate about the relative importance of managementand organisational factors in driving ICT productivity. Earlier studies questioned thecontribution of ICT to productivity in what was termed the Productivity Paradox. However,subsequent studies (for example: Brynjolfsson 1993; Brynjolfsson & Hitt 2000a, 2000b)suggested that this apparent paradox could be explained by a time lag between investment inICT and the achievement of substantial potential benefits.
In other words, to properly measure the benefits of ICT, time needs to be allowed fororganisational change and transformation to take place. The close relationship betweenorganisational transformation measures and other forms of benefit in the current study supportthe findings of these earlier economic analyses.
The report clearly places the management of ICT as a key issue for managers in allorganisations seeking to obtain benefits from ICT. It suggests that managers should seek to beICT-aware and adopt management practices such as engaging in formal contractualarrangements for ICT and undertaking ICT planning and project management.
It is anticipated that the release of this report and the associated quantitative research data willencourage others in the research and business community to undertake their own analysis ofICT use in Australia and add to the growing body of literature that explores the intersection ofICT, management and organisation.
Achieving value from ICT: key management strategies 15
1. Introduction
In line with trends in the global economy Australian organisations are increasingly looking toinformation and communications technology (ICT) to raise productivity and createcompetitive advantage. However, a number of studies have shown that ICT can have diverseimpacts on organisations depending on when, where and how it is deployed. The Departmentof Communications, Information Technology and the Arts (DCITA) has commissioned thisstudy to examine the circumstances and settings in which ICT is implemented by Australianorganisations and the management strategies and organisational forms that accompanyimplementation.
The findings of this study as presented in this report are expected to build knowledge thatwill:
(a) provide valuable information to Australian organisations about ICT implementation andmanagement; and
(b) inform government policy development.
Australia is one of the highest ranking countries in the world for use ofICT. It is the third highest in ICT investment as a proportion of GDP amongOECD (Organisation for Economic Co-operation and Development) countries (ProductivityCommission 2004), yet there are wide differences within Australia in ICT use. SomeAustralian organisations are winning higher productivity gains from the useof ICT than others, as are some industries.
This report characterises and investigates the relationships between ICT organisation andmanagement and the way in which the use of ICT contributes to productivity, organisationaltransformation and the establishment of sustainable competitive advantage for Australianenterprises.
The objectives of the research project were to advance knowledge and practice at theintersection of ICT, management and organisation by:
• examining the circumstances and settings in which ICT is implemented in organisations inAustralia;
• describing the change management requirements, strategies and processes that accompanysuccessful ICT implementation;
• determining best practice strategies, including new organisational forms and structures,for the varying circumstances and settings in which ICT is implemented; and
• presenting the resulting information in a form that supports and encourages changedpractice at firm and industry level.
16 Achieving value from ICT: key management strategies
The project follows an earlier investigation commissioned by the same sponsors performed byOvum Pty Ltd in conjunction with Tasman Economics and documented in the Ovum Report
(NOIE 2003). This earlier study examined the contribution of ICT to productivity growth inAustralia through a series of 18 case studies of exemplar organisations and macroeconomicmodelling and analysis. The study also examined the role of ICT in organisationaltransformation.
The key objectives of this current study were developed into a set of questions for theresearch project. As a result, the study addressed the following key research questions.
1. What are the circumstances and settings in which ICT is implemented within Australianorganisations? (Chapter 4)
2. How does the use of ICT contribute to the overall performance of an organisation? Whatis the nature of the value gained? (Chapter 5)
3. What factors most influence the value an organisation realises from ICT? (Chapter 6)
4. What management practices are most strongly associated with the recognition of benefitfrom ICT? (Chapter 7)
5. What is the relationship between organisational transformation and the realisation ofbenefit from ICT? (Chapter 7)
6. Are there important differences between industries in the manner in which value isrealised from ICT? (Chapter 8)
The study investigated factors associated with organisations realising value from ICT, whichincluded:
• organisational level influences
- organisation size;
- ICT expenditure;
- ICT staffing structures;
- ICT usage types;
- management practices;
• the industry in which the organisation operates; and
• external environmental influences.
The potential benefits achieved through ICT use were also examined, including:
• informational benefits;
• strategic benefits;
• organisational transformation benefits; and
• transactional benefits.
Achieving value from ICT: key management strategies 17
The relative effects of organisation level, industry sector and external environmentalinfluences on obtaining the benefits of ICT were examined using a sophisticated statisticaltechnique known as regression tree analysis, which is useful for mining information fromlarge data sets.
This technique provides results in a visual form (trees) and aids the interpretation of the databy affording new insights into the relative effects of factors. The data set consists of responsesfrom 1050 organisations of varying sizes and from a wide range of industries from aroundAustralia.
The data were obtained through a large scale telephone survey conducted by a commercialsocial research organisation. Of these 1050 organisations, 50 agreed to undertake structuredinterviews allowing the collection of important qualitative information. This information addsadditional context and depth to the analysis and resultant findings.
18 Achieving value from ICT: key management strategies
2. ICT use—atransformational model
2.1 Introduction
A transformational model of ICT implementation and use was used as the basis for the surveyresearch in this study. This model links influences on ICT value to factors in the externalenvironment, the industry and within the organisation. The model builds on prior literatureand studies and shows value arising from ICT use through a continuous cycle of learning andorganisational transformation.
2.2 Questions concerning the value of ICT use
In 1987, Robert Solow, a Nobel laureate in economics, famously observed: ‘You can see thecomputer age everywhere but in the productivity statistics’ (Solow 1987). The apparentfailure of a massive investment in information technology to contribute to productivity growthbecame known as the ‘productivity paradox’, as early economic analyses to resolve thiscontradiction failed to find evidence of the expected relationship. Research work byBrynjolfsson (1993) concluded that the paradox existed due to a combination of:
• measurement errors in both IT capital and outputs;
• significant time lags between investment and productivity gains;
• management practices, and their readiness to realise the full potential of technologyopportunities; and
• redistribution of productivity, in that ICT can enhance productivity at a firm level, at theexpense of competitors in the industry (that is, ICT may provide increased productivity ata microeconomic level, but the effect at the macroeconomic level is diffused).
This apparent paradox led to many US based research studies on the economic effects of ICT.By the early 1990s, analyses at the firm level were finding support for the notion thatcomputers had a substantial effect on organisations’ productivity levels. These analyses alsofound a great deal of individual variation in organisations’ success with informationtechnology (Brynjolfsson & Hitt 2000b). Baldwin and Sabourin (2002) examined Canadianmanufacturing plants’ use of advanced technologies. The study found, using survey data, thatorganisations that had adopted advanced manufacturing technologies by the end of the 1990s,particularly network communications technologies, had superior productivity growththroughout the decade and higher gains in market share.
Achieving value from ICT: key management strategies 19
Collectively, the evidence from productivity studies show that the effects of informationtechnology are substantially larger when measured over longer time periods, supporting the‘time-lag’ aspect of the paradox. Brynjolfsson and Hitt (2000a) found that with one-year timeperiods the benefits from computer use were approximately equal to their cost (a one-to-onerelationship). With longer time periods, however, the measured benefits from IT for firmproductivity rose by a factor of two to eight, depending on the economic measures used. Theauthors’ interpretation is that the short-term returns represent the direct effects of ITinvestment, while the longer-term returns are a result of combining IT with organisational
change.
A further study, by the same authors, of 527 large firms (Brynjolfsson & Hitt 2003) found thatproductivity and output improvements arising from computer investments were up to fivetimes greater over long periods (five to seven years). They concluded that the observedcontribution of computerisation is accompanied by relatively large and time-consuminginvestments in complementary inputs, or organisational capital, which may be omitted inconventional calculations of productivity.
As an example, studies of banking have shown that many of the effects of computers dependupon the extent to which organisations couple computer investment with organisationalredesign and other managerial decisions (Hunter et al. 2000; Murnane, Levy & Autor 1999).
Further, ICT is best described as ‘general purpose technology’, similar to technologies such asthe telegraph, the steam engine and the electric motor, rather than a traditional capitalinvestment (Bresnahan & Trajtenberg 1995). With general purpose technologies, dramaticincreases come from the complementary innovations that the technology makes possible.Brynjolfsson and Hitt (2000b) argue that:
(i) a significant component of the value of ICT investment comes from its ability to leveragecomplementary organisational investments such as business processes and workpractices; and
(ii) these investments in turn lead to productivity increases by reducing costs and, moreimportantly, by allowing organisations to increase output quality, with new products andimproved customer service.
These authors support their arguments with a number of analyses of firm level data. They alsoargue that traditional macroeconomic measurement approaches do not capture the flow-oneffects from a general purpose technology well and, as a result, the economic contribution ofcomputers is likely to be understated in aggregate level analyses.3
Despite the measurement difficulties, some studies have considered the macroeconomiceffects. Dedrick and Kraemer (2001) found that wealthier industrialised countries in particularshow a significant positive relationship between IT and productivity. Parham, Roberts andSun (2001) also examined the link between ICT use and productivity gains in Australia.
3 For a discussion of the assumptions underlying the measurement of ICT productivity see Ilkka Tuomi, Knowledge Society
and the New Productivity Paradigm: A Critical Review of Productivity Theory and the Impacts of ICT, IPTS Working Paper,11/2/2004
20 Achieving value from ICT: key management strategies
Further, in Australia, the contribution of ICT to productivity growth was highlighted in arecent study by the National Office for the Information Economy which examinedproductivity growth in Australian manufacturing over the period from 1984–85 to 2000–01. Itconcluded that ‘for many parts of the manufacturing sector, new technology, including ICT,has made a much more significant direct contribution than was hitherto suspected’ (NOIE2004).
The variation in productivity growth among 19 industries examined in the study suggestedthat high-technology and capital intensive industries tended to record higher productivitygrowth. Further, the analysis indicated that much of this variation in growth rates is due todifferent technological paths or rates of technological innovation in the various industries andnot changes in broader economic settings. The study concluded that ‘between 65 and 85 percent of multifactor productivity growth in this period was due to technological factors, whileinstitutional-economic changes may explain between 15 and 36 per cent of MFP growth’.
These various studies serve to highlight that there is considerable debate concerning therelative importance of ICT’s contribution to productivity in Australia, especially incomparison with the part played by micro-economic reforms. In part, the debate centres ondifferent methodological approaches to the measurement of productivity increases attributedto ICT. A number of economists have pointed out problematic aspects of conventional totalfactor productivity (TFP) measures for ‘general purpose technologies’, including Lipsey et al.(1998). A further aspect to the debate centres on the way in which ICT is viewed as a ‘generalpurpose technology’. Lipsey et al. (1998) reflect on the importance of four distinctiveproperties of ICT:
• wide scope for improvement and elaboration;
• applicability across a broad range of uses;
• potential for use in a wide variety of products and processes; and
• complements existing or potential new technologies strongly.
Investment in ICT is seen as leading to value in the sense that there are gains in terms of‘knowledge capital’ and improved services. These gains are not well captured by traditionalgrowth accounting measures. Debate on what ICT means to Australia in economic termscontinues, as does work on refining measures that reflect the different dimensions of ICTimpact.
To sum up, it appears that there is widespread acceptance that the ‘productivity paradox’ canbe explained, and that ICT does have a positive influence on productivity growth, althoughthe relationship is complex and there are many dependencies. The studies described above aregenerally consistent in showing that productivity gains do not necessarily arise simply as aresult of investing in ICT. Such investments result in positive productivity gains whereappropriate organisational structures and management practices are in place to support andenhance the investments made.
Achieving value from ICT: key management strategies 21
2.3 The significance of this study
Paul David (1990) argued that ICT would need to reach a critical mass of diffusion andexperience before it would have a measurable impact on productivity. In Australia today, itcan be argued that we have well and truly reached this critical mass—many measures showthat Australia is an advanced user of ICT. Organisations are not facing the decision ofwhether to invest in ICT, but rather the question of how much to invest and in what specificform the investment should be made. Clearly, some organisations must and have invested inICT simply to stay in business.
Compared with most other OECD countries, Australia’s uptake of ICT from the mid-1990shas been strong. For example, Australia had the third highest investment in ICT in 2001 as ashare of total GDP, up from ninth position in 1980 (Productivity Commission 2004). AYellow Pages Business Index survey of 1800 SMEs found that 94 per cent of smallbusinesses and 100 per cent of medium size businesses own computers (Sensis 2004). Giventhe scale and pervasiveness of ICT throughout Australian today, it is clear that the‘productivity paradox’ is no longer relevant. The context within which organisations operateand make ICT investments has changed significantly. Organisations must put aside thequestion ‘Does ICT contribute to productivity growth?’ and focus on the question ‘How can
we best use ICT to improve productivity growth?’
Studies outside Australia have shown that there are differences in the degree to whichorganisations gain benefit from ICT use. One aim of the current study is to investigate themanner in which organisations in Australia gain benefits from ICT and the extent to whichthere is variability in gains.
A further aim is to investigate the reasons for any differences found. That is, what are thefactors that lead organisations to realise differing levels of benefit from ICT use? Are someorganisations able to gain more from ICT because of superior management practices or thenature of the systems they implement? Do the ‘ICT winners’ invest in ICT and implementtheir systems in some distinctive ways?
Previous studies in Australia have not provided complete answers to these questions. Much ofthe previous research in this field has been limited in scope and scale. Some research hasexamined a limited number of managerial and organisational technical factors that canpotentially impact on successful ICT implementation. Other research, including surveys bythe ABS and others, has focussed solely on the economic and technological aspects of ICTimplementation and use. There is an absence of comprehensive survey data to explore‘integrative models of IT business value’ that consider the broad range of factors influencingICT value.
This project is the first known study in Australia to systematically examine such a wide rangeof issues and specifically the relationship between organisational practices in differentindustries, contexts and settings and the value realised from ICT.
22 Achieving value from ICT: key management strategies
2.4 A transformational model of ICT use
The study has adopted a broad framework that takes into account potential influences on ICTuse from the wider external environment, and the industry in which an organisation operates,to the practices and conditions within the organisation itself. Figure 2.1 illustrates thisresearch model.
Figure 2.1 Transformational model of ICT use
At the highest level, ICT use within an organisation will be affected by the externalenvironment, including government activities and policies, global economic conditions,society and cultural issues, technology and the availability and accessibility of infrastructure.These influences are largely outside of the control of individual organisations or the industrieswithin which they operate. These influences must be considered, however, as they can have astrong effect on what ICT strategies a firm can or must employ.
The industry within which an organisation operates is also expected to influence the mannerin which ICT can be employed. The nature of the product in some industries, for example,makes online trading more or less feasible. The effects of successful use of ICT within onefirm can lead to changes in an industry as other organisations in the industry copy novel ideasor react as a result of competitive pressure.
Within an organisation both management practices in general, and practices more specificallyrelated to ICT, are expected to influence the extent to which value is gained from ICT use.
The research model shows that these influences are connected in a continuous cycle oflearning and change. The outcomes of ICT use are not just a matter of increased efficiencyand strategic advantages, but also include organisational transformation with new ways ofdoing business and organisational learning, which feed back to further changes inmanagement practice and application of ICT.
This model builds on preceding work by Gregor and Johnston (2001), Gregor and Menzies(1999), Johnston and Gregor (2000) and Gregor and Rolfe (2004), which also argued for the
Achieving value from ICT: key management strategies 23
necessity of understanding e-commerce information systems adoption and use in terms ofdifferent levels of analysis and as a dynamic process. The model has some similarities withthe model proposed by Melville, Kraemer and Gurbuxani (2004) but differs in that it showsexplicitly the organisational change and transformation that is seen as vital in understandingsuccessful use of ICT. The requirement to explicitly include organisational transformation inthe model is congruent with the economic studies of the productivity paradox referred topreviously, which show a lag in gaining returns from ICT investment while neworganisational forms come into being.
The remainder of this chapter examines the components of this model in more detail,beginning with the value derived from ICT use.
2.5 ICT—contribution to organisational performance
Evaluating the success, or impact, of ICT implementation is not simple. Economic analyses atmacro and micro levels use measures such as multifactor productivity (MFP) (Parham et al.2001) and gross marginal product (Brynjolfsson & Hitt 2000b). As noted previously, there aredivergent views on these measures.
At the organisational level, problems in conceptualisation of the range of outcomes from ICTimplementation and the complexity involved in evaluating and measuring these outcomesmust be acknowledged. The classic works in this area are the articles by DeLone and McLean(1992, 2003) on the ‘search for the dependent variable’ in assessing information systemssuccess. This work links the outcome effect of ‘organisational impact’ to other majordimensions of success of an information systems implementation—system quality,information quality, intention to use, user satisfaction and net benefits (DeLone & McLean2003). These authors concluded that:
Researchers should systematically combine individual measures from the IS successcategories to create a comprehensive measurement instrument.(DeLone & McLean 1992, p. 87–88)
Instruments to measure success have been developed by Mirani and Lederer (1998) andMartinsons, Davidson and Tse (1999), where success is defined as incorporating thefollowing benefits:
• strategic benefits (including competitive advantage, alignment, customer relations);
• informational benefits (including information access, quality and flexibility); and
• transactional benefits (including efficiencies associated with communications, systemsdevelopment and general business processes).
The Ovum study (NOIE 2003b) reports that productivity growth and transformation are twobenefits that can be produced by ICT, where transformation includes aspects such as new andgreater skills and know-how and a culture conducive to change and innovation.
A further complication in evaluating the impact of ICT on an organisation is the evidence thatwhile ICT can increase productivity and create substantial value for consumers, in the long
24 Achieving value from ICT: key management strategies
run the individual organisations do not experience increased business profitability—that is,the industry as a whole has ‘raised its game’ (Hitt & Brynjolfsson 1996). The question ofvalue must then be extended to include the value to an organisation of being able to remaincompetitive.
2.6 Industry influences
The measurement of differential effects of ICT use among industries is subject to difficultiessimilar to those occurring with the measurement of the effect of ICT on the economy as awhole.
Nevertheless, some studies suggest that the nature of the industry influences the value gainedfrom ICT. For example, in Australia research by Parham et al. (2001) suggests thatproductivity gains have been concentrated in a few industries. In particular, positiverelationships were found in finance and insurance and in wholesale trade. In the wholesaletrade industry it appears that IT has contributed to productivity through the use oftechnologies such as bar-coding and scanning, enabling businesses to streamline theirprocesses, reduce storage and inventory and support a more efficient flow of stock. TheOECD has also noted marked differences in the diffusion of ICT across sectors and acrosscountries and its contribution to productivity.4 However, because of the unresolved conceptualand data issues in the measurement of ICT productivity, these models need to be treated withsome caution—particularly as they show significantly different levels of impact.
While productivity gains may be more evident in some sectors than others, the benefits canflow on from ‘high-value-ICT industries’ to other industries. Many other industries depend ondistribution and financial intermediation and can gain from efficiencies in these serviceindustries.
2.7 Enterprise level factors
A number of factors at the enterprise level are expected to influence the value that is gainedfrom ICT—including structural aspects of an organisation (such as its size), level of resourcesand management practices (both in general and those relating more specifically to ICTmanagement).
With respect to what truly distinguishes ‘winners’ at the level of the firm as a whole, onestudy stands out. A striking study of large American companies published in the HarvardBusiness Review revealed what management practices were truly important for companysuccess (Nohria, Joyce & Roberson 2003). The study examined over 200 well-establishedmanagement practices in 160 companies over a ten-year period. Some insights can be gainedfrom this study as to how ICT can contribute to overall success.
4 OECD, Meeting of the OECD Council at Ministerial Level 2003: Seizing the Benefits of ICT in a Digital Economy. AlsoDirk Pilat, Frank Lee and Bart van Ark, Production And Use Of ICT: A Sectoral Perspective On Productivity Growth In TheOECD Area, OECD Economic Studies No. 35, 2002/2.
Achieving value from ICT: key management strategies 25
The results led to what the authors call the ‘4+2 formula’ for business success. They claimthat a company that consistently follows this formula has better than a 90 per cent chance ofsustaining superior business performance. The 4+2 formula means that a company has toexcel at four primary management practices and embrace at least two of four secondarypractices, as detailed in Table 2.1.
Table 2.1 Winning management practices
Primary management practices
Strategy Devise and maintain a clearly focused strategy
Execution Develop and maintain flawless operational execution
Culture Develop and maintain a performance-oriented culture
Structure Build and maintain a fast, flexible, flat organisation
Secondary management practices
Talent Hold on to talented people and find more
Innovation Make industry-transforming innovations
Leadership Find leaders who are committed to the business and its people
Mergers and partnerships Seek growth through mergers and partnerships
Some conclusions can be drawn about the role of ICT in the primary practices required forsuccess.
• ICT strategy must be an integral part of the overall company strategy and must also beclearly focussed and communicated.
• ICT must support flawless operational execution. Whatever happens, the ICT systemsmust continue to operate smoothly and efficiently—computer system failures or hiccupscannot be allowed.
• ICT must support a performance-oriented culture—in order to reward high-levelperformance, companies need clear, accurate and timely access to performanceinformation upon which to base rewards.
• ICT systems must support structures with seamless sharing of information andknowledge.
In addition, ICT can contribute to some of the secondary practices for success, with:
• good ICT infrastructure and systems that can assist in attracting and keeping talented
people;
• ICT-led innovations—innovations for new products or services, or for increasedefficiency; and
• ICT that supports mergers and partnerships—for example, in virtual organisations,interfacing various systems, sharing of intellectual property and good communicationslinks.
26 Achieving value from ICT: key management strategies
In relation to the manner in which ICT contributes to firm performance, an article by NicholasCarr entitled ‘Why IT doesn’t matter’ in the Harvard Business Review (Carr 2003) hasattracted considerable attention. Carr argued that, even as the power and presence of ICT hasgrown, its strategic importance has decreased. ICT is necessary for competitiveness butinsufficient for advantage. Carr argues that ICT has increasingly become a simple factor ofproduction and that a goal should be to have ICT infrastructure that is so stable and robustthat it is taken for granted and no longer requires high-level management. This latter viewremains controversial. For example, Broadbent, McGee and McDonald (2003) argue that Carrgoes wrong by equating IT with hardware and networks and that the essence of IT isinformation management. These authors argue convincingly for continued managementattention to risk-managed innovation, the integration of business technology planning andexecution and effective IT governance.
There is a large body of literature on strategic management, strategic information systemsplanning and the requirement for alignment between information system strategy and overallcompany strategy. Theory relating to the strategic management of information systemssuggests that organisations cannot be competitive if their business and information technologystrategies are not aligned and governance issues are not adequately addressed. Earl (1989)gives a comprehensive overview of different frameworks for planning and decision makingfor strategic information systems and examines how ICT can be exploited for strategicadvantage. Luftman, Papp and Brier (1999) describe a method by which managers canachieve alignment between business and information technology strategies. This methodinvolves assessing the firm’s perspectives, learning to recognise and leverage ICT formaximum efficiency, incorporating financial measurements suitable for the particularindustry, giving everyone a role to facilitate synergy between ICT and the business and,finally, continuous review of alignment and assessment.
The substantial body of literature on the use of ICT for strategic competitive advantage (see,for example, Porter & Millar 1985) describes processes for analysing a firm’s environmentand identifying opportunities such as outsourcing or divesting portions of the firm’s businessand starting new business. The appropriateness of ICT governance arrangements should alsobe ensured (Boynton, Jacobs & Zmud 1992; Brown 1997; Bushell 2003). Managementpractices associated with the implementation and use of ICT are also an important part ofgaining maximum value from ICT.
Project management principles must be enforced in order to avoid system defects, projectoverruns and failures. Work in information technology over a long period has resulted inrecognised principles for project management that enable the successful implementation ofICT projects. These principles are documented in texts on software engineering and systemsanalysis and design (for example, Sommerville 2001).
2.8 Discussion
In summary, a considerable body of literature indicates that ICT can contribute significantlyto enterprise performance. The positive effects of ICT, however, can take some time to beappreciated, with complementary organisational investment in changed business processesand organisational change and learning also required before benefits are fully realised.Influences on the effective use of ICT include:
Achieving value from ICT: key management strategies 27
• environmental influences, including drivers of ICT investment, such as governmentpolicies, and factors such as the availability of infrastructure, the complexity oftechnological change and facilitative mechanisms including a secure and trusted onlineoperating environment;
• industry influences, for example the nature of competition, which varies among industries;and
• organisational level influences, including
- structural aspects of the organisation, such as size and resources;
- general management practices;
- ICT related management practices; and
- nature and type of ICT applications.
Each of these potential influences on the realisation of ICT benefits were investigated in thestudy and provided the basis for the key questions in the survey questionnaire.
28 Achieving value from ICT: key management strategies
3. Methodology
3.1 Introduction
The requirements for the study included conducting in-depth research, including acomprehensive survey of a broad sample of organisations. This chapter describes themethodology used to undertake the study.
3.2 Approach overview
This study examined the circumstances and settings in which ICT is implemented byAustralian organisations in a number of industry contexts. In particular, it explored therelationships between ICT, the environment, the industry and organisation and management,and the associated contribution of ICT to business value.
A telephone survey was used to capture the required research data. This method enabled thegathering of survey data from a large number of Australian organisations within the requiredtime and cost constraints.
To augment the statistical data, structured interviews were conducted with some of therespondents to the telephone survey. The data gathered from these interviews has providedsome interesting examples to support findings of the telephone survey. Data from thestructured interviews is qualitative in nature and is not necessarily representative of Australianorganisations generally. Hence, for this study, analysis of the data has been limited toprovision of examples to illustrate key findings from the survey.
The approach to the study means that the data, while broad, is limited in depth. The studydoes not extend to many specific examples or detailed explanatory information about eachfactor.
3.3 Large scale survey phase
3.3.1 Survey instrument development
The development of the survey instrument was an important aspect of the study, as theusefulness of the data gathered was entirely dependent upon the survey questions asked. Asurvey instrument that relies upon relevant theory, prior research work and grounding incurrent Australian industry context was essential to ensure a sound basis for identification andspecification of constructs, rigour in the project methodology and to give legitimacy andcredibility to the results.
Achieving value from ICT: key management strategies 29
Several steps were undertaken by the research team in developing the survey instrument:
• review of relevant theoretical models;
• review of related survey instruments;
• review of previous research outcomes;
• focus group consultations with executives and senior ICT managers from a range ofAustralian organisations; and
• cognitive interviews with a limited number of executives and senior ICT managers to testdraft survey questions.
The review of previous research was undertaken to inform the development of the researchmodel presented in Chapter 2: ‘ICT use—a transformational model’. In parallel with thisreview, a series of focus groups were convened with executives and senior ICT managers toprovide input to the initial development of the survey instrument.
A total of 27 organisations took part in four focus groups which were held in Melbourne,Sydney and Canberra. The results were used to ensure that the instrument was ‘grounded’ andrelevant to the current circumstances and settings of Australian organisations across a range ofindustries, organisation sizes and geographical locations.
In each focus group, some group discussion was undertaken to introduce the ICT context andto discuss the concept of ICT benefits. The Nominal Group Technique (Delbecq, Van de Ven& Gustafson 1986) was then used to develop and prioritise a list of issues associated with thesuccessful use of ICT.
The experience of the focus group participants regarding the benefits arising from ICT alignedwell with previous research that categorised benefits as being strategic, informational ortransactional. Factors identified as important to successful ICT use included strategicplanning, education and training, cost, support for ICT, effective client-supplier relationships,business case understanding and effective management decision making. These keyobservations from the focus groups were used as inputs to the development of a draft surveyinstrument.
The draft survey instrument was then refined through cognitive testing.5 Seven cognitiveinterviews were conducted with participants from Sydney and Canberra, to test responses tothe survey questions. The results of these interviews enabled the researchers to identify anypotential problems that respondents may have in understanding the questions and to revise thesurvey questions accordingly. Finally, the survey instrument was vetted and cleared by theABS Statistical Clearance House.
A summary of the survey instrument is provided in Annex A: Summary of
survey instrument.
5 Cognitive testing was done by conducting face-to-face interviews with a respondent. Respondents were asked to report notso much on what their answer to a draft question would be, but how they would come to their answer. For example, whatmeaning did they ascribe to the terms used and what context did they apply when considering their answer. Such knowledgeof respondents’ thought processes allowed the research team to ensure that questions were understood the way they wereintended.
30 Achieving value from ICT: key management strategies
3.3.2 Sampling frame
The data consist of observations on a number of variables for each of the 1050 organisationssurveyed. The sampling frame was drawn from the Dun and Bradstreet database of Australianorganisations. The sampling methodology used stratification by business size, so that the finalsample included 225 large organisations (100 or more employees), 450 medium organisations(20–99 employees) and 375 small organisations (5–19 employees).
The approach was also intended to cover 15 of the ANZSIC industry classifications, soinitially quotas by industry as well as size were planned While the allocated sample size wasnot met for all industries, the number of responses obtained within each of the 15 industrieswas sufficient for further analysis.
Details of the actual numbers of responses obtained by industry as well as organisation sizeare provided in Table 3.1.
Table 3.1 Sample sizes by industry and organisation size
Industry
Number of
responses
Small size
Number of
responses
Medium size
Number of
responses
Large size
Agriculture, Forestry & Fishing 31 37 15
Manufacturing 33 35 17
Electricity, Gas & Water Supply 12 12 18
Construction 27 39 12
Wholesale Trade 37 30 9
Retail Trade 39 32 13
Accommodation, Cafes & Restaurants 25 15 8
Transport & Storage 19 29 7
Communication Services 33 35 16
Finance & Insurance 13 31 11
Property & Business Services 42 32 20
Govt Administration & Defence 5 27 22
Education 11 25 22
Health & Community Services 26 36 17
Cultural & Recreational Service 22 35 18
Totals 375 450 225
The initial sampling frame included 2600 organisations and advance letters were sent to theseorganisations with the objective of increasing anticipated response rates. The sampling framewas then topped up by another 2780 organisations to which advance letters were not sent.Telephone contact was made with approximately 63 per cent of the organisations. The overallresponse rate was calculated as 31 per cent, being the proportion of completed surveyscompared with the total number of organisations with whom a connection was made.
Achieving value from ICT: key management strategies 31
Comparisons of the sample characteristics with the overall population are given in Table 3.2and Table 3.3. These tables show the number of (non-agricultural) private sector businessesoperating in Australia in 2000–1 and 2002–3, described by each of business size and ABSindustry classification. The sample sizes obtained deliberately over-sampled large (and to alesser extent medium) size businesses and under-sampled small businesses. This strategy wasdesigned to provide more comprehensive data for medium and large businesses where it isexpected that use of ICT is planned on a much larger scale. Stratum weights were applied bybusiness size for all analyses.6
Table 3.2 Australian businesses by business size
Businesses in Australia
2000–20017Study sample
Number ofEmployees Number
(000’s)Percent of
totalNumber
Percent ofTotal
Number ofEmployees
NumberPercent of
total
0 (Non-employing)
582.1 50.00 (Non-
employing)0 0
1–4 370.1 31.8
0 0
1–4 0 0
5–19 169.8 14.6 375 35.7 5–19 375 35.7
20–50 311 29.620–100 35.9 3.1 450 42.9
51–100 139 13.2
101–150 36 3.4101–200 3.4 0.3
151–200 27 2.6
201–500 69 6.6
501–1000 46 4.4
1001–5000 40 3.8201+ 2.8 0.2
225 21.4
5001+ 7 0.7
Total 1164.1 100 1050 100 Total 1050 100
6 Stratum weights applied to organisations by size: small weighted by 2.23, medium weighted by 0.40, large weighted
by 0.16.7 Source: ABS, Year Book Australia 2003
32 Achieving value from ICT: key management strategies
Table 3.3 Australian businesses by industry8 (ANZSIC classifications)
Businesses in Australia Study sample
Industry classification Number9
(000’s)Percent of
totalNumber10
Percent oftotal
Agriculture, Forestry & Fishing na na 83 7.9
Mining 3 0.44 na na
Manufacturing 58 8.53 85 8.10
Electricity, Gas & Water Supply 1 0.14 42 4.00
Construction 101 14.85 78 7.43
Wholesale Trade 42 6.18 76 7.24
Retail Trade 114 16.76 84 8.00
Accommodation, Cafes & Restaurants 35 5.15 48 4.57
Transport & Storage 34 5.00 55 5.24
Communication Services 6 0.88 84 8.00
Finance & Insurance 28 4.12 55 5.24
Property & Business Services 155 22.79 94 8.95
Government Administration & Defence na na 54 5.14
Education na na 58 5.52
Health & Community Services 52 7.65 79 7.52
Cultural & Recreational Services 18 2.65 75 7.14
Personal & Other Services 33 4.85 na na
Total 680 100 1050 100
Data collection
Telephone interviewing was used to conduct all survey interviews. Colmar Brunton SocialResearch (CBSR) conducted the data collection process for the research team, using aComputer Assisted Telephone Interviewing (CATI) facility. CBSR is an accreditedorganisation in CATI with Interviewer Quality Control Australia (IQCA). This accreditationprovides confidence in the integrity of the data collected by this process.
8 ABS Business Use of Internet Technology 2002–3. Some categories were not collected by ABS for the 2002–3 BUIT
survey. These are marked ‘na’ in the table, and were not included in total or percentage calculations. As a result, the totalnumber of organisations differs between Tables 3.2 and 3.3.9 Includes ‘micro’ businesses with 0–4 employees.10 Does not include any ‘micro’ businesses with 0–4 employees.
Achieving value from ICT: key management strategies 33
Key aspects of the data collection process are summarised as follows.
• The survey fieldwork was preceded by training and briefing of interviewers and theirsupervisors.
• The first 20 interviews in the survey were used as a pilot, to check survey length andidentify any problem questions. Some questions were removed at the end of the pilot inorder to ensure that the survey could be completed within a reasonable time.
• Following the pilot the completion of the survey on average took 20 minutes.
• All fieldwork was completed between 8 June 2004 and 7 July 2004.
• Interviews were mainly conducted during business hours. In some cases appointmentswere made and interviews were completed at other times in accordance with respondentrequests.
3.3.3 Non-response bias
The potential for non-response bias must be considered when reviewing the findingscontained in this report. Non-response bias may have influenced the results in that managersgaining little or no value from ICT, or those who are indifferent to the potential benefits ofICT, may have elected not to respond to the survey.
The research team has no direct evidence of any non-response bias, and the use of industrybest practice standards by CBSR in conducting the survey would have assisted in reducing thenon-response bias to the minimum possible in such circumstances. For example, interviewerswere fully trained in areas such as approaching and interviewing reluctant respondents.
3.3.4 Statistical methods
The regression tree approach was used to analyse the data. Classification and RegressionTrees are a modern alternative to classical statistical modelling techniques, such as logisticregression. Their advantages include the lack of a required a priori choice of model structurefor the predictor scales and interactions, being easily visualised using a tree structure andbeing easy to fit and interpret with almost any combination of explanatory variables.
Regression tree algorithms are also readily adapted to handle the difficult issues of multipleresponse outcomes as well as observations with missing predictor values. The latter is anextremely common problem for survey-based data sets and is not easily handled by theclassical techniques which lead to sometimes substantial loss of information. A detaileddescription of regression tree methodology is provided at Annex C: Regression trees
methodology.
34 Achieving value from ICT: key management strategies
3.4 Structured interview phase
3.4.1 Sample
Fifty structured interviews were conducted by CBSR researchers with participants who hadresponded to the large scale survey stage of this project. All interviews were completedbetween the 2nd and 23rd July 2004.
Participants were recruited by CBSR by contacting potential participants who indicatedduring the large scale survey stage that they would be willing to participate in further researchfor this project.
Table 3.4 indicates the location of the participants in this stage of the research and themethodology used to complete the interview.
Table 3.4 Structured interview summary
Face-to-face Telephone Total
ACT 3 0 3
NSW 10 9 19
Qld 3 4 7
Vic 10 7 17
SA 0 1 1
WA 0 2 2
Tas 0 1 1
Total 26 24 50
3.4.2 Interview purpose and format
The purpose of the interviews was to collect data regarding specific contextual andmanagerial aspects related to ICT uses and implementations considered as significant by theparticipants. The interviews were designed to collect descriptions of:
• how the use and implementation of ICT impacted the organisation;
• how the organisation managed these uses and implementations;
• results achieved from using and implementing ICT;
• contribution of ICT to overall organisational change; and
• current organisational challenges and the role of ICT in facing these challenges.
An interview protocol was developed to ensure a consistent approach to the interviews. Fourpilot interviews were conducted in three locations (Canberra, Sydney and Melbourne) to fine-tune the questions before conducting the remaining 46 interviews. The final protocol allowed
Achieving value from ICT: key management strategies 35
interviewers to conduct the interviews in different Australian states in similar fashion andwith the same questions. A summary of the interview guide is given in Annex B: Summary
of structured interviews.
Based on the structured questionnaire, interviewers took comprehensive notes, which wereanalysed as described in the next section. Participants were also asked for permission torecord the interview and 96 per cent of them agreed.
3.4.3 Data analysis
The collected notes were analysed using ATLAS.ti, a software tool for text analysis. Thepurpose of the analysis was to produce a set of quotations that could be used to illustrate thefindings from the extensive survey previously conducted. The analysis of interview notesproduced 301 pages of quotations. Table 3.5 provides some statistics on the interviews.
Table 3.5: Structured interview statistics
Number of interviews 50
Quotations 1245
Codes 131
Codings 1351
The notes from interviews were systematically coded, providing a rich set of examples.
Annex E: Structured interview coding shows the list of codes and the number of examplesof comments within each category arising during the structured interviews.
36 Achieving value from ICT: key management strategies
4. ICT circumstancesand settings
4.1 Introduction
This chapter highlights some of the general findings of the survey and provides a descriptivesummary of ICT use in Australia at mid 2004. Specifically, it describes the extent to which arange of common ICT applications have been adopted, the magnitude of ICT spending, ICTmanagement, ICT outsourcing and ICT decision making in organisations. Subsequentchapters will cover the key issues relating to value and effectiveness of ICT.
4.2 ICT usage types
An analysis of responses to a simple Yes/No question about the usage of 11 applications ofICT is set out in Table 4.1 across the 15 industry groups.
Ach
ievin
gva
lue
from
ICT
:ke
ym
an
ag
em
en
tstra
teg
ies
37
Tab
le4.1
Weig
hted
percen
tage
of
busin
essesusin
gIC
Tap
plicatio
ns
by
industry
11
Integrated processes, suppliers & customers
69.7
37.3
22.3
48.8
59.2
47.0
51.7
47.9
Electronic payments
88.3
79.6
87.1
83.8
82.3
74.0
83.6
90.2
Electronic sales
36.0
10.9
19.9
39.3
43.6
30.2
27.1
17.2
Electronic banking
88.7
88.4
91.6
98.2
91.2
85.4
95.6
82.1
Electronic purchasing
58.3
43.5
44.4
57.0
57.1
73.6
53.9
59.4
Website
79.8
54.4
54.6
76.5
82.7
98.1
83.3
84.2
Internet searching
100
100
96.8
99.3
100
100
100
100
Email for business communications
100
100
100
100
100
98.9
98.4
98.0
Internal networked applications
91.6
68.5
65.5
64.4
86.1
91.0
82.1
76.8
Mobile devices
37.5
39.6
30.1
54.7
41.2
59.5
63.6
46.8
Standard desktop
96.7
92.1
87.0
86.7
78.5
85.6
89.0
79.4
Industry
Finance & Insurance
Electricity, Gas &
Water Supply
Agriculture, Forestry
& Fishing
Transport & Storage
Communication
Services
Education
Government Administration & Defence
Property & Business
Services
11
Insev
eralin
dustries
the
result
is100
per
cent
usag
efo
ra
particu
larasp
ectof
ICT
.F
or
exam
ple,
for
‘Intern
etsearch
ing’
eightof
the
15
industries
hav
ereco
rded
a100
per
centusag
eresp
onse.
38
Ach
ievin
gva
lue
from
ICT
:ke
ym
an
age
me
ntstra
teg
ies
Tab
le4.1
cont’d
Integrated processes, suppliers & customers
37.1
34.3
40.4
45.0
50.2
22.3
36.4
Electronic payments
79.2
64.5
75.8
87.2
80.9
78.0
66.6
Electronic sales
26.5
17.9
38.4
35.5
37.5
9.3
27.7
Electronic banking
83.4
77.2
80.0
86.7
81.3
73.3
86.1
Electronic purchasing
44.3
49.2
33.3
44.3
53.7
37.3
43.1
Website
71.7
74.3
94.5
64.8
57.5
59.9
50.8
Internet searching
100.0
97.0
100.0
94.9
95.3
93.0
88.1
Email for business communications
95.7
97.0
96.6
95.4
93.1
91.1
83.5
Internal networked applications
68.5
71.5
81.9
70.0
70.2
68.0
44.7
Mobile devices
34.1
29.8
34.2
33.9
39.9
30.1
12.9
Standard desktop
88.3
93.4
91.6
84.0
90.9
98.7
82.9
Industry
Manufacturing
Health & Community Services
Cultural &
Recreation Service
Wholesale trade
Retail trade
Construction
Accommodation, Cafes & Restaurants
Achieving value from ICT: key management strategies 39
Some broad comments regarding usage patterns in the various industries begin with theobservation that electronic mail usage is virtually universal, with usage rates over 95 per centfor 12 of the 15 industries. All but one industry enjoy over 90 per cent usage, with onlyAccommodation, Cafes and Restaurants having a moderately lower usage rate (83.5 per cent).
Similarly, both electronic banking and electronic Payments are in widespread use (mostlyexceeding 75 per cent) across almost all industries. Health and Community Servicesexperience lowest usage rate for electronic payments (64.5 per cent). On the other hand, theuse of electronic sales is relatively low in all industries. Usage rates range from 9 per cent inConstruction to 44 per cent for Communication Services.
There is considerable industry variation in the availability of public access websites, rangingfrom 51 per cent for Accommodation, Cafes and Restaurants to 98 per cent for Education.The importance of a standard desktop seems to have been recognised by Australian industry.The majority of usage percentages are 80 per cent and above.
The use of ICT in respect to electronic business process integration with suppliers andcustomers is mixed—in nine of the 15 industries it occurs in less than 50 per cent oforganisations. The highest usage rate is in Finance and Insurance at 70 per cent with thelowest in Agriculture, Forestry and Fishing and Construction, both at only 22 per cent. Theresult for Finance and Insurance is not surprising given the focus on process reengineering inthis market sector over the last decade.
The extent of internal networked applications is fairly widespread with nine of the 15industries having reported over 70 per cent usage. Finally, the usage of remote or mobileterminals/devices is generally below 50 per cent across the various industries, the majorexceptions being Government, Administration and Defence, and Education.
The data reveals the widespread usage of ICT across industries in 2004. Applications such asemail, Internet searching and electronic banking are very pervasive—these applications are areality of daily business life. However, adoption of more advanced applications such aselectronic sales, remote devices, and electronic integration of business processes withsuppliers or customers, is considerably lower—in many cases 50 per cent or less.
In Table 4.2 following, the usage rates for the 11 ICT applications are reported according tobusiness size, as measured by the number of employees.
40
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Tab
le4.2
Weig
hted
percen
tage
of
busin
essesusin
gIC
Tap
plicatio
ns
by
busin
esssize
Integrated processes, suppliers & customers
41.2
47.9
42.1
36.1
50.0
50.7
74.4
71.8
100.0
Electronic payments
80.0
85.8
76.7
87.1
88.5
79.1
95.5
85.7
71.4
Electronic sales
27.3
31.6
26.1
27.8
40.7
35.3
40.9
38.5
57.1
Electronic banking
83.4
89.8
91.0
94.3
96.2
97.0
95.7
85.0
100.0
Electronicpurchasing
49.2
50.3
43.7
50.0
55.6
59.7
77.3
65.0
85.7
Website
68.5
79.7
87.0
86.1
81.5
91.3
93.5
92.5
100.0
Internet searching
97.0
98.4
100.0
100.0
100.0
100.0
100.0
97.5
100.0
Email for business communications
95.6
99.4
99.3
100.0
100.0
100.0
100.0
100.0
100.0
Internal networked applications
69.8
81.8
79.7
94.4
96.3
92.8
93.5
92.5
100.0
Mobile devices
34.6
42.2
54.1
52.8
51.9
60.9
68.9
67.5
85.7
Standard desktop
87.8
87.4
85.5
94.4
88.9
85.5
73.9
82.5
100.0
Number of employees
5–19 employees
20–5 0 employees
51–100 employees
101–150 employees
151–200 employees
201–500 employees
501–1000 employees
1001–5000 employees
5001 or more employees
Achieving value from ICT: key management strategies 41
For the pervasive ICT applications such as email, Internet searching and electronic bankingsize is barely a consideration—usage is almost equal across sizes. However, for the moreadvanced applications of ICT such as electronic sales and electronic business processintegration with suppliers or customers, size becomes relevant as usage levels increase as sizeincreases.
4.3 Financial factors and ICT spending
The survey asked managers to report on total sales or budget size (for non-profitorganisations). In addition, managers were asked about their organisation’s total spending onall aspects of ICT for the last financial year.12, 13
Of the 1050 organisations in the survey 871 answered the question related to ICT spendingfor the last financial year. The number of respondents reporting spending according to thenine levels of ICT spending is reported in Table 4.3 below.
Table 4.3 Level of ICT spending
Level of ICT spending Number of respondents Weighted percentage
Less than $10 000 145 27.9
Between $10 001 and $20 000 128 20.7
Between $20 001 and $100 000 266 34.7
Between $100 001 and $200 000 94 7.1
Between $200 001 and $1 000 000 96 4.9
Between $1 000 001 and $2 000 000 41 1.2
Between $2 000 001 and $10 000 000 41 0.9
Between $10 000 001 and $20 000 000 15 0.3
More than $20 000 000 45 2.2
Total respondents 871 100
Almost half (48.6 per cent) of organisations spent less than $20 000 on ICT in the lastfinancial year, while just approximately five per cent of organisations spent in excess of$1 000 000. Only one in 50 organisations spent in excess of $20 000 000 in the last year onICT.
The industries with large numbers of small ICT spenders (less than $20 000 for the lastfinancial year) are Construction (likely due to a large number of small contractors in this
12 As the survey commenced in June 2004, the ‘last financial year’ was defined as the financial year of 2002–2003.13 ICT spending was analysed in comparison with revenue, but the two-way analysis provided data with very low responsenumbers in each category. The resultant high standard errors make further analysis difficult. This information is provided inAnnex F.
42 Achieving value from ICT: key management strategies
industry); Agriculture, Forestry and Fishing (perhaps due to small family farms and fishingboat operators); Accommodation, Cafes and Restaurants; and Manufacturing.
The industries with strong representation of high ICT spenders (in excess of $1 000 000 forthe last financial year) are Government Administration and Defence (due to the large scale ofthese operations); Electricity, Gas and Water Supply (probably due to the capital intensivenature of the industry and its large customer base); and Finance and Insurance. Furtheranalysis of ICT spending is provided at Annex F.
4.4 ICT management and outsourcing
Survey participants were asked to provide one or more ‘yes’ answers to the followingcategories, relating to the sources from which the organisation draws its ICT support:
1. internal specialist ICT unit;
2. other staff specialised in ICT;
3. staff not specialised in ICT;
4. external support—consultant or outsourced provider; or
5. other types of support.
The observations that can be made are as follows:
• the two most frequent choices across all industries were the use of an internal specialistICT unit and some form of external support such as outsourcing;
• the presence of an internal specialist ICT department increases with organisational size;
• the choice of an internal ICT unit was lowest in those industries with large numbers ofsmall organisations such as Agriculture, Forestry and Fishing and Accommodation, Cafesand Restaurants; and
• the use of some form of external support was highest in the organisations with betweenfive and 150 employees.
Results regarding selection of ICT support are varied. There are several choices available forICT support and organisations appear to be choosing the mix that best suits their needs.
The responses relating to the percentage of day to day ICT support that is outsourced arereported in Table 4.4.
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43
Tab
le4.4
Weig
hted
percen
tage
of
day
-to-d
ayIC
Tsu
pport
that
isoutso
urced
%
33.5
15.6
31.9
13.9
26
23.5
23.7
29.2
24.7
17.6
19.7
13.6
15.1
11.5
9.7
81–100%
Number
8
13
19
6
16
14
8
14
18
7
4
11
5
9
7
%
5.6
10.7
5.3
3.2
3.9
1.7
5.1
2.6
2.7
1
1.8
3.6
2.7
3.5
3.4
61–80%
Number
2
5
5
2
4
4
2
5
3
2
3
4
3
2
3
%
7
8.7
3.5
14.8
6.2
4.1
10.4
7.8
9.3
6
2.8
8.4
6.2
8.5
3.7
41–60%
Number
4
5
2
6
5
5
5
4
6
5
3
6
1
8
3
%
8.5
6.1
12.2
17.4
7.6
3.6
3.9
9.8
5.8
13.6
3.8
8.5
3.8
3.4
9.2
21–40%
Number
5
6
7
7
8
5
5
8
7
6
3
8
4
7
6
%
37.7
46.9
31.5
34.7
37.9
47.1
36.1
29.2
33.4
31.9
38.7
31.8
37.6
35.6
17.8
17.81–20%
Number
24
33
26
24
33
30
22
25
36
14
17
27
22
28
24
%
7.7
12
15.7
16.1
18.2
20
20.8
21.5
24.1
29.9
33.2
34.1
34.5
37.6
56.3
Nil
Number
10
11
16
8
14
15
10
16
19
10
8
22
22
22
37
Industry
Finance & Insurance
Cultural & Recreational Service
Health & Community Services
Government Administration & Defence
Manufacturing
Wholesale Trade
Transport& Storage
Agriculture, Forestry & Fishing
Property & Business Services
Accommodation, Cafes &Restaurants
Electricity, Gas & Water Supply
Retail Trade
Education
Construction
Communication Services
44 Achieving value from ICT: key management strategies
One observation relating to the preceding table is that nil outsourcing for day-to-day ICTsupport ranges from a low of 7.7 per cent in Finance and Insurance to a high of more than 56per cent for the Communications Services industry.
However, in all industries except Communications Services, a majority of companies areoutsourcing some ICT support. At the higher end, (81–100 per cent outsourcing support) therange is from around a 10 per cent figure in Communications Services to 34 per cent inFinance and Insurance, in keeping with the first observation.
There are relatively low percentages for all industries in the three categories covering the 21to 80 per cent range. It seems that when outsourcing is pursued it is either in small or largeproportions with not much in between.
The percentage data by industry for the outsourcing of software development is reported inTable 4.5 as follows.
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45
Tab
le4.5
Weig
hted
percen
tage
of
softw
aredev
elopm
entth
atis
outso
urced
%
37.9
45.1
38.9
32.5
30.6
39.4
34.5
34.7
25.2
32.5
30.9
29.1
24.4
21.4
19.9
81–100%
Number
16
26
21
15
23
29
24
23
27
13
14
13
25
16
10
%
13.9
8.9
4.1
0.4
4.3
0.2
1.1
4.3
4.7
18.8
10.1
5.5
0.7
6.8
2.4
61–80%
Number
6
6
3
1
6
1
3
5
4
6
4
4
2
6
3
%
4.8
1.5
3.3
15.7
5.7
4.8
6
6.9
5.4
3.8
4.3
1.5
1.1
0.5
1
41–60%
Number
3
3
1
7
4
3
4
6
5
4
1
2
2
1
2
%
5.7
5.2
4.4
2.3
0.4
3.5
0.2
2.7
4.8
3.6
5.1
5.2
6.2
8.8
0.5
21–40%
Number
6
4
4
4
1
1
1
2
3
5
2
3
3
5
1
%
17.3
17.9
26.4
23.7
32.4
24.7
28.4
21.3
27.7
6.1
12.1
18.6
22.8
12.6
26.1
17.81–20%
Number
10
18
20
13
22
19
21
18
23
7
13
8
17
18
14
%
20.5
21.4
22.9
25.4
26.5
27.2
29.8
30.2
32.1
35.1
37.5
40.2
44.8
49.9
50.1
Nil
Number
12
14
24
18
21
19
24
17
27
17
18
13
26
35
10
Industry
Government Administration &Defence
Agriculture, Forestry &Fishing
Health & Community Services
Education
Retail Trade
Cultural & Recreational Service
Manufacturing
Wholesale Trade
Property & Business Services
Finance & Insurance
Transport & Storage
Accommodation, Cafes &Restaurants
Construction
Communication Services
Electricity, Gas & Water Supply
46 Achieving value from ICT: key management strategies
The results here for software development are more evenly spread than for ICT support, butagain there is a falling away in the middle ranges between the 21 per cent and 80 per centrecorded take up rate. It is interesting to note that no industry group records an aggregatescore in excess of 45 per cent in the 81–100 per cent range for outsourcing softwaredevelopment. Overall, it seems there is a wide variety of industry practice in relation to theoutsourcing of software development, but it is notable that in every industry exceptElectricity, Gas and Water Supply—and in that industry only very narrowly—a majority oforganisations outsource at least some of their software development.
It is important to note that organisations that reported ‘Nil’, as represented in Table 4.5included organisations that do not undertake software development at all, as well as thoseorganisations that undertake software development in-house without outsourcing.
The data relating to whether an organisation outsources any aspect of ICT offshore is reportedin Table 4.6 by industry, and Table 4.7 shows the data by organisation size.
Table 4.6 Weighted percentage of organisations outsourcing offshore by industry
No Yes
Industry Number Percent Number Percent
Transport & Storage 25 81 5 19
Accommodation, Cafes & Restaurants 17 84.2 3 15.8
Wholesale Trade 27 85.2 6 14.8
Manufacturing 38 86.3 6 13.7
Health & Community Services 39 86.7 6 13.3
Finance & Insurance 31 87.6 5 12.4
Agriculture, Forestry & Fishing 44 87.6 5 12.4
Electricity, Gas & Water Supply 24 88.9 3 11.1
Construction 39 90.8 4 9.2
Property & Business Services 43 91.3 5 8.7
Communication Services 31 91.8 4 8.2
Government Administration & Defence 40 95.5 2 4.5
Retail Trade 37 96.7 1 3.3
Education 34 98.3 1 1.7
Cultural& Recreational Service 47 100 0 0
Achieving value from ICT: key management strategies 47
Table 4.7 Weighted percentage of organisations outsourcing offshore by organisation size
No Yes
Number of Employees Number Percent Number Percent
20–50 employees 237 90.8 24 9.2
51–100 employees 98 89.9 11 10.1
101–150 employees 32 97 1 3
151–200 employees 21 95.5 1 4.5
201–500 employees 60 93.8 4 6.2
501–1000 employees 37 92.5 3 7.5
1001–5000 employees 27 75 9 25
5001 or more employees 4 57.1 3 42.9
Table 4.6 shows that in each industry 80 per cent or more of organisations did not participatein offshore outsourcing. The weighted percentage of overall participation in offshoreoutsourcing was 9.6 per cent.
Table 4.7 shows that offshore outsourcing is significant only for the very largest organisations(those with more than 1000 employees).
Organisations were also asked about the success of their outsourcing arrangements. Theresults are shown in Table 4.8 following, where a response of 1 meant ‘completelyunsuccessful’ and a response of 10 meant ‘completely successful’.
The data reveals that after almost a decade of active ICT outsourcing across the economy inAustralia, a large majority of respondents to the survey who are engaged in outsourcingrecorded relatively high levels of success with their outsourcing arrangements.
1 2 3 4 5 6 7 8 9 10
Industry No. % No. % No. % No. % No. % No. % No. % No. % No. % No. %Total Mean
Transport &Storage
0 0 0 0 1 0.9 2 1.3 4 7.2 9 11.2 7 8.8 17 48.2 3 11 2 1.3 45 7.409
CommunicationServices
1 0.8 1 4.5 1 4.5 1 0.8 8 20.6 6 14.3 12 31.1 10 13.9 4 1.7 7 7.8 51 6.379
Education 0 0 0 0 1 7.1 3 3 2 7.6 3 3.8 12 21.4 11 20.9 9 27.3 3 8.8 44 7.457
Property &BusinessServices
0 0 3 1.3 4 5.7 2 2.6 10 18.1 7 8.5 11 10 26 33.7 9 10.8 8 9.2 80 7.011
Retail Trade 0 0 1 0.2 2 3.7 0 0 6 13.3 7 9.1 14 19.7 21 36.1 6 8.2 5 9.8 62 7.304
Finance &Insurance
0 0 0 0 1 1 1 1 2 0.8 4 7.8 14 30.3 18 34.2 6 14.2 2 10.9 48 7.790
Cultural &RecreationalServices
0 0 0 0 1 0.7 1 0.7 6 13.7 6 10.8 14 20.9 22 32.3 5 9.7 7 11.1 62 7.419
Agriculture,Forestry &Fishing
0 0 1 0.2 2 3.9 1 0.6 14 24 4 2 19 20.1 17 25.5 7 12.4 5 11.2 70 7.150
Construction 1 0.8 0 0 0 0 3 10.2 10 18.8 5 8 13 17.5 14 20.6 5 11.8 6 12.2 57 6.996
WholesaleTrade
0 0 2 5.8 2 0.7 2 3.1 7 8.5 8 15.5 17 19.9 15 27 4 6.6 6 12.7 63 7.044
GovernmentAdministration &Defence
0 0 0 0 0 0 2 11.3 4 5.3 4 6.4 16 21.1 11 33.6 6 7.9 3 14.4 46 7.416
Manufacturing 0 0 0 0 1 0.5 3 3.4 5 10.1 3 3.8 15 22 26 32.2 8 13.6 9 14.4 70 7.661
Electricity, Gas& Water Supply
0 0 0 0 1 0.8 0 0 4 25.7 3 2.4 4 15.1 15 40.8 0 0 4 15.1 31 7.291
Accommodation,Cafes &Restaurants
0 0 0 0 2 0.7 0 0 7 22.5 5 11.2 5 17 10 25.2 4 7.3 4 16.1 37 7.291
Health &CommunityServices
0 0 1 0.6 1 0.6 4 7.1 8 9.8 8 12.5 12 19.6 16 27.7 6 2.5 11 19.7 67 7.331
Total 2 0.1 9 1.07 20 2.24 25 2.80 97 13.90 82 8.95 185 19.85 249 29.87 82 9.58 82 11.64
Table 4.8. Extent of successful outsourcing arrangements by industry (percentages given are weighted percentages by business size)
48
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Achieving value from ICT: key management strategies 49
4.5 ICT expenditure—decision making
The survey asked managers to nominate who mainly makes the expenditure decision whenICT investments are planned. The choices were as follows:
1. board of senior managers;
2. the CEO/owner;
3. the relevant business unit manager/director;
4. ICT department;
5. cross functional team; or
6. others.
The most frequent response was the CEO/owner category where the industry ranges were25.3 per cent (Finance and Insurance) to 62.5 per cent (Retail Trade). Eight of the 15industries recorded responses in excess of 50 per cent for this decision making choice.
The closely tied second and third choices for expenditure decision makers were board ofsenior managers and the relevant business unit manager. The board of senior managers rangedfrom 3.7 per cent for the Electricity, Gas and Water industry to 36.8 per cent for Finance andInsurance. For the departmental managers the industry range was 9.4 per cent in Health andCommunity Services to 37.6 per cent for Agriculture, Forestry and Fishing with seven scoresin the 20–30 per cent range. Of the remaining decision making categories, nearly all receivedsingle digit percentages for the responses. The ICT department decision making percentagesranged from a low of 0.2 per cent to a high of 8.1 per cent.
When analysed by organisation size, the CEO/owner was chosen as the main decision makerfor small and medium organisations and large organisations up to 200 employees. Again, theboard of senior managers was the second choice for organisations of these sizes and therelevant business unit manager was third.
For organisations with more than 200 employees and, in particular, for very largeorganisations with more than 1000 employees, decision making on ICT expenditure is mainlymade by the board, generally followed by the CEO/owner.
The recorded data again confirms commonly held views that ICT expenditure decisionmaking is mainly the prerogative of the CEO/owner followed by the relevant business unitmanagers or committees of senior managers, except for larger organisations. ICT expendituredecisions are mainly made by the board in organisations with more than 200 employees.
4.6 Discussion
The data reported here indicate that the use of ‘fundamental’ ICT applications such as emailand electronic banking is extensive across Australian organisations of all sizes and in all
50 Achieving value from ICT: key management strategies
industries. However, the use of more advanced applications of ICT such as electronic sellingand business process integration with suppliers or customers is still not common.
As expected, ICT spending is related to organisational size and the industry in which theorganisation participates. ICT outsourcing is widely practised, both for support and forsoftware development, but there is considerable variation within and between industries in theextent to which outsourcing is chosen as a business practice.
Offshore outsourcing for ICT has been taken up by only a small number of organisations,almost all of which are very large. ICT outsourcing is generally regarded as successful bythose organisations who engage in this practice.
Achieving value from ICT: key management strategies 51
5. Value from ICT use
5.1 Introduction
Important questions for this study were how the use of ICT leads to the recognition of valuefor ICT deployment in Australian organisations and in what ways ICT value can be realised.Assessing the value arising from ICT use is a complex undertaking and many measures canbe used, as noted in Chapter 2 ‘ICT use—a transformational model’.
This chapter explores both the overall benefits recognised from ICT use and the relativefrequency and intensity of different types of benefit. Variations in perceptions of ICT valueare also investigated, particularly with respect to differences in organisational size.
5.2 The business value of ICT
Managers were asked to assess the benefits that their organisation gained from ICT in fourcategories—informational benefits, strategic benefits, transactional benefits andorganisational transformation benefits (see Table 5.1). Previous studies have shown thatperceptual measures of organisation performance correlate highly with objective measures(Dess & Robinson 1984; Tallon et al. 2001; Venkatraman & Ramanujam 1987), indicatingthat managers are in a good position to assess the value of ICT to their enterprise.
Measures for the first three benefit types were adapted from Mirani and Lederer (1998) andthe measure for organisational transformation benefits was developed from the findings of theOvum study (NOIE 2003). Statistical analysis showed that each benefit type is recognisableas a separate and distinct form of benefit.
52 Achieving value from ICT: key management strategies
Table 5.1 Categories for benefits of ICT use
Benefit type Details
Strategic benefits Strategic benefits include the ability to create competitive advantage, align businessstrategies to directly support organisational goals, provide new products or services,and improve relationships with customers.
Informational benefits Informational benefits include faster and easier access to internal and externalinformation, more useful, accurate and reliable information, and increased flexibilityfor manipulation of content and format of information.
Transactional benefits Transactional benefits include operational and cost savings, supply chainmanagement savings, staff cost savings, and improved business efficiency ofemployees, business processes, and financial resources.
Organisational transformation Benefits associated with organisational transformation include improved skill levels,new business plans and business models, expanded capabilities, and improvedstructure and processes.
ICT business value An overarching indicator of the value of ICT to the organisation, which combinesstrategic benefits, informational benefits, transactional benefits and organisationaltransformation benefits.
In addition to the four types of benefit described above, the study has shown that oneoverarching indicator of business value could be derived (analysis described in Annex D).This indicator, which is also described in Table 5.1, shows the combined recognition of theother types of benefits. This overall indicator of the extent to which the organisationrecognises business value from ICT is referred to as ‘business value from ICT use’ or ‘ICTbusiness value’ in the remainder of the report.14
Overall, the organisations surveyed indicated that they were gaining benefits from ICT use.Figure 5.1 and Table 5.2 show that, overall, managers agreed that business benefits from ICTwere achieved in all four benefit categories.
14 The business value measure referred to throughout this report is a perceived measure. The measure indicates the extent towhich executives and senior managers agreed that the use of ICT has contributed to each benefit, rather than a quantifiablemeasure of the actual benefits experienced. That is, a higher business value means that managers more strongly agreed thatbenefits were achieved.
Achieving value from ICT: key management strategies 53
Figure 5.1 shows the mean value for each type of business benefit. Informational benefitswere recognised significantly more frequently than the other benefit types and transactionalbenefits were recognised significantly less frequently.15 The differences between the benefittypes while statistically significant are not particularly large in aggregate terms.
Figure 5.1 Relative frequency of types of ICT business value16
15 The differences between the types of benefits are statistically significant, as demonstrated in Table 5.2.16 The graph shows the overall (weighted) means for each benefit type. Weightings were applied by business size asdescribed in Section 3.3.2.
54 Achieving value from ICT: key management strategies
Table 5.2 Comparative analysis of ICT business value17
Type of benefit Weighted mean value Standard error Plausible range
Informational 7.518 0.055 (7.38, 7.66)
Strategic 6.578 0.067 (6.41, 6.75)
Organisational transformation 6.444 0.063 (6.29, 6.60)
Transactional 5.969 0.070 (5.79, 6.14)
5.3 ICT business value by organisational size
It might be expected that the recognition of value gained from ICT use would vary with thesize of the organisation, with larger organisations able to realise benefits more often becauseof the economies of scale that can apply and an ability, amongst other things, to devote agreater level of resources to ICT to achieve a reduction in coordination and communicationcosts. Therefore variation in value recognised by organisation size was investigated to assistwith understanding the comparative value analysis.
Contrary to expectations, the data showed similar patterns of perceived benefits from ICT useacross organisations of different sizes (Figure 5.2 and Table 5.3). Informational benefits wererecognised more often than other benefit types for organisations of all sizes. The overallfrequency of recognising value from ICT use was higher for very large organisations (thosewith more than 5,000 employees).18 Otherwise, organisations of different sizes believed withmuch the same frequency that ICT contributed to business benefits and said they were gainingbenefits of much the same type, with informational benefits more frequent and transactionalbenefits less frequent.
17 This table includes the standard error and plausible range for each type of benefit, which shows that the differences appearto be statistically significant. The plausible range has been calculated using a normal approximation (which is reasonablegiven the sample size involved in these calculations) and simultaneous Bonferroni bounds. Using overlapping as a criterion,
the mean for informational value is statistically significantly higher than the others, the strategic and organisational changemean values are not statistically different from one another, but all are higher than mean transactional value.18 Only 7 very large organisations were surveyed, so inferences about this difference should be made with caution.
Achieving value from ICT: key management strategies 55
Figure 5.2 ICT business value by organisational size
Table 5.3 Weighted mean ICT business values by organisational size
Number of employees Informational Strategic Orgtransformation
Transactional Overall
5001 or more employees 8.256 7.907 7.246 7.672 7.790
501–1000 employees 7.705 7.274 6.345 6.530 6.945
151–200 employees 7.696 6.746 6.840 6.011 6.778
1001–5000 employees 7.681 6.973 6.567 6.357 6.952
51–100 employees 7.638 6.801 6.745 6.158 6.894
201–500 employees 7.637 6.803 6.522 6.234 6.778
20–50 employees 7.576 6.547 6.420 6.154 6.663
5–19 employees 7.494 6.554 6.419 5.911 6.580
101–150 employees 7.466 6.400 6.527 6.369 6.730
56 Achieving value from ICT: key management strategies
5.4 Nature of benefits
In addition to the frequency with which benefits were recognised, structured face-to-face andtelephone interviews with managers from a number of the organisations studied gave furtherinsight into the ways in which ICT is perceived to contribute to firm performance.
Exhibit 5.1 shows examples of informational benefits. The interview data showed threedifferent types of informational benefits: information sharing within the organisation,improved business intelligence through better understanding of customer needs and wants,and improved information for managing the organisation.
Exhibit 5.1 Informational benefits
Information sharing within the organisation
Builder of luxury homes
Information sharing is critical. Every month we have a project management meeting. Every project manager has toproduce a cost report. Doesn’t matter if [the projects are] in their first month or if almost finished—they have toknow how that job is going to finish and when. That’s hard, things flow on. Monthly meetings look at reporting, andmakes [project managers] look at their schedule. They know how things are going, but have to sit down and reportto us that this has happened and when, ensures they look at every aspect of the job. That computer system reallydoes that.
Mushroom grower
We can monitor performance of individual crops, and growing rooms. We can now better understand the benefitsof treatments to mushroom crops to achieve better yields, quality, etc … Also allowed for a better understanding ofhow employees work and their efficiency rates.
Also publish staff picking efficiency rates—pickers are always interested in these figures. Allows opportunity forperformance review/improvement programs ... provide ‘individual tuition’ for those who are not picking at optimalrates. Without that knowledge ... we are only guessing ... we don’t have any evidence ... could stand there andwatch pickers ... but that is not very efficient when you have 50 pickers working for you.
Registered club
So the board can [now] make more informed decisions. Much more in tune with how finances are going to makedecisions. Don’t have real time access to data ... but it is ready at the end of each month, which is when the boardmeets. But the figures now meet at the end of each month ... instead of once a year, because the data is sentmonthly to auditors. Means that the information is always correct when go to board. No nasty surprises at the endof financial year as there might have been previously.
Video rental chain
There has been a huge impact on communications across the board. The delivery of tools [that] people did nothave before eg they can check online the stock other stores have, they don’t have to ring around them all, alsothey don’t have to take time to verify client phone numbers, we can do that now just by having the electronic whitepages. And previously we used to send out an 80...90 page report to 120 stores, now we just send it on...line.
Health care provider
We were under financial stress ... need to be able to confirm ‘gut feelings’ that there are inefficiencies. This systemcan evidence on these gut feelings. Also hoped that we can reduce duplicate test requests, medication errors,etc…
Ship broker
Makes us more effective as a group ... can rely on info filtering through the whole organisation so we act as one,not 40 individuals. Can access resources from other offices ... share experience and learnings
Achieving value from ICT: key management strategies 57
Improved business intelligence through better understanding of customer needs and wants
Tourist attraction
Very little reconciliation to do. Get a lot more information that allows us to plan marketing ... really important.Information has traditionally been generic. Now collect where [customers] come from, demographics like age,have fairly good handle on customer.
Medical supplies manufacturer
Immediately easier to keep track of appointments and what happened during interviews, etc… When they are inmeetings, they can now quickly look up prices, previous quotes, etc…
Tourist attraction
[We] get more accurate records, identify how we sell to them [customers]. Location, demographic, which marketsegments. Other thing we ask for if [customers] pre...book ... where did you hear about us. This tells us whichcampaigns are working.
Retailer
[We] couldn’t operate a reasonable size business without it ... if the information is not there, couldn’t do anyresearch for customers, cannot run a large debtors system etc
Wholesale engineering supplies
ICT will make us more aware of what is going on ... which will enable us to respond faster to customer needs.
Computer education and training provider
Great records / easy to interrogate data Learn things about business/clients, helpful.
Improved information for managing the organisation
Builder of luxury homes
Industry has changed, apart from GST, compliance is a major issue with tax authorities. Payroll tax, Workcover,Federal tax. Another big thing, homeowner’s warranty insurance. Our reporting has had to get a lot better. Havingsystem, allows us to tailor reporting. Without it would have closed our doors. Whole system manages everythingwe want. Can get custom reports. Had an ATO audit ... talked to [programmer], [he] wrote a program, exactly whatwe wanted, probably more than what was needed, names, amounts, tax file numbers. Had it to them within aweek. Our records very good, no negative repercussions. Whatever we want happens.
Retailer
Helps with management of issues ... instant knowledge.
Non...profit organisation
Have a complete set of data to base decisions on for management.
Health care provider
We are also trying to get more information about our activities so that we can better inform our decision makingprocesses. There has been a real perception that there is a lack of information available within the organisation.
Exhibit 5.2 provides examples of strategic benefits realised through the use of ICT. Thesebenefits include increased profitability, shorter response times and improved competitiveness.Some organisations attributed their very survival to the effective use of ICT.
58 Achieving value from ICT: key management strategies
Exhibit 5.2 Strategic Benefits
Jewellery manufacturer
The market has become more and more competitive, and we have too. We can give better prices to our customersnow. The second thing is that we can give our clients much better service. Before when they rang, they mighthave a client with them and need a quote, and we’d have to go away and work it out and ring them back, so theymight lose a customer while they waited. With the new system in place the quote is instant ... no waiting and noneed to ring back. And we can quote the wholesale and retail price at the same time.
Queensland State statutory authority
At a functional level, [clients] being able to report real time there and then puts control back into the client’s hands,because they have got the data to resolve the issues before we come around again.
Provider of computer education and training
Lower cost of delivery service ... made more competitive ... Still here four years [later] ... because of systems ...less reliant on individuals ... don’t suffer as much [from competition]Confident that we obtained commercialadvantage from it ... difficult to quantify
Sporting peak body
Processing time exceeded 4–6 weeks (estimated). The solution was to write code to track licenses and developCRM capability. Time now is 4–10 days, significant increase in satisfaction at membership level.
Telecommunications infrastructure provider
Would never be able to change if didn’t embrace technology. We are technology company, two years ago wastexting, now photos, video. Got to embrace because customers want. They will go straight to competitors.
Retailer
Yes, we are more like a ‘city’ business ... the business is more professional ... looks like a proper retail business,we can actually service the needs of customers. Enhanced management ... access to reports etc ... difference isunbelievable really ... far more responsive
Video rental chain
IT has been all about making us more profitable
Residential real estate developer
The main change is the way people enquire about property ... emailing rather than phoning. Reception [is] lessbusy. Plus people have done their homework by the time they contact us which means we have to be moreeducated too! We have to treat them at a certain level ... the old cowboy days are gone for sure ... people knowwhat they’re in for. Need to be more professional in the way we approach clients.
Hotel
With 80 rooms, every room needs to be occupied ... if not every room occupied then tomorrow is too late. Theaccuracy of information was paramount. Able to overbook, more precise information about how best works,according to season, weekend, week days, what kind of risks we could take to maximise revenue.
Exhibit 5.3 provides examples of the organisational transformation benefits achievedthrough the use of ICT. Of particular interest is the iterative nature of ICT use andorganisational transformation—initial use leads to change, which leads to more use, and soon. In some cases the use of ICT has led to job creation, because organisations were able tomake more effective use of temporary workers. The employees of some organisations havebecome more productive through the use of ICT.
Achieving value from ICT: key management strategies 59
Exhibit 5.3 Organisational transformation benefits
Video rental chain
There has been almost a technological revolution in our stores, which had outdated systems, and as people sawthe potential, the project grew and grew ... snowballed ... people said wow if it can do that can it do this for us?And we delivered an even bigger system than was ever originally planned.
Bible college
We can respond to things more quickly, we are [able] to change more quickly
Wholesale engineering supplies
Organisation was held back by old software package. Didn’t have the cash flow that they needed to expand. Thisnew tool allowed improved cash flow. Allowed more versatility in stock management. Could expand to multiplesites without changing/adding ICT systems. Allowed expensive stock to be held in one location and then use acentral ordering system.
Structure of the business still very similar ... except that the managers have been given more autonomy by theDirectors than previously
Added some understanding of technology/computers to wider workforce ... build on for future projects.
Jewellery manufacturer
A major problem has always been to get specialised staff, qualified people, for us when we are a seasonalbusiness, gets very busy from here on to Christmas but then quiet again, so not only do we need skilled andqualified production staff for manually producing rings etc, we also only need them casually, very difficult to find.With the introduction of the software, we can fill the void, basically we can employ uni students or others who onlyneed basic computer skills and to be able to scan a bar code ... not very difficult. They need to put the blank ringson a bar, scan the bar code and then the machine takes over.
Medical supplies manufacturer
[The new computer system] assisted change. Easier for sales staff to concentrate on their jobs. Can take notesimmediately. Sales staff don’t forget anything when they do a proposal. Capabilities of organisation changed ... weare now a step forward ... from a client’s Point of view, the company is a lot more efficient, turn around timesfaster. Use of [system] bought about some change ... having price lists available on [system] has really helped.Don’t need to call back to office anymore. Facilitated efficiency. ... and going to make the company more efficient... use customised software, etc… Enabled company to give sales staff more tools and more portable tools.
Exhibit 5.4 provides examples of transactional benefits achieved through the use of ICT.Many of these benefits involve lower operating costs, while others flow from reduced needfor working capital and other efficiencies.
Exhibit 5.4 Transactional benefits
Not for profit health education provider
[ICT is a] tool for Corporates to achieve lower training costs, with quality delivery of training. Save money, savetravel, access to resources on line. Ultimately it will save us money too.
Builder of luxury homes
If you don’t work out early enough, and take steps to remedy problem, could lost $ million. Could put too muchconcrete in basement, could over budget for steel and make some savings.
Costs can run up very quickly. Houses we do are in waterfront areas ... if you don’t monitor in advance, you canlose money very quickly. We’ve lost, when people take their eye off the ball. We’ve made good money too.
60 Achieving value from ICT: key management strategies
Steel processor
The start up of MYOB, we found that it saved us so much money because we no longer needed to get monthlyreports from an independent accountant, we now just get annual reports and go to him for some adviceoccasionally and his annual bill as reduced by something like 85 per cent
Telecommunications infrastructure provider
Business users ... new set of infrastructure, perform significantly better, at reduced cost, without significantexpenditure outside budget. Took our maintenance cost and that was our spend, can’t go outside that. Weachieved it easily. Ongoing costs going forward going to be less.
Gas installation specialist
Efficiencies markedly improved. Filing system cut down. Ability to track progress of job. Ring up customer number,rather than dig through files. Cut down on labour. Cut out invoicing ... put in autopay, when job is completed, [ourcustomer] generates invoice automatically. Cut down 100 invoices a week. Admin side, huge efficiency gain.
Video rental chain
The end result is better customer service, happier staff, and improved operations in every way.
Superannuation fund
Enabled our staff numbers to stay static while we’ve moved from a single defined benefit scheme of 40 000members to a hybrid benefit scheme of 100 000 members.
5.5 Discussion
Overall, the organisations surveyed indicated that ICT contributed positively to organisationalperformance.
Of the four forms of benefits examined in the large scale survey, ICT was judged to add valuemost in terms of informational benefits and least in terms of transactional benefits. However,the differences between all four benefit types, while statistically significant, were not large inaggregate terms.
The pattern of perceived benefits was similar across all organisational sizes and all industries,with informational benefits being rated more highly than others in all cases. Informationalbenefits were defined to include faster and easier access to internal and external information,more useful, accurate and reliable information and increased flexibility in the manipulation ofcontent and format of information.
The interviews add depth to the statistical findings with regard to the recognition of businessbenefits. The interview data includes many examples of important ongoing value in all fourtypes of benefits realised by organisations from the implementation of ICT.
Once users become accustomed to a new system, informational benefits are apparent to themevery day—they can share information with their colleagues more easily, they have greaterawareness of customer needs and wants, and they are better able to manage theirorganisations. It is therefore not surprising that organisations of all sizes recognised thiscategory of benefit most frequently.
Strategic and organisational transformation benefits were recognised about equally often inthe survey and the interview data cited illustrates some of the many benefits that ICT can
Achieving value from ICT: key management strategies 61
bring in these areas. These benefits would be expected to arise some time afterimplementation; a few of the interviews noted this time lag explicitly. The question ofwhether organisational transformation precedes, coincides with, or follows ICTimplementation can best be answered ‘yes’—all three are possible, and indeed all three maywell occur in the same implementation.
Somewhat surprisingly, transactional benefits were recognised least frequently, even thoughthese benefits are generally the easiest to quantify in advance and to recognise after a newsystem has been implemented. One possible explanation for this result is that the transactionalbenefits were achieved quite quickly after implementation, and then taken for granted, makingthem less salient for managers. Another possible explanation is that transactional benefits areseen as ‘old style’ computing and ignored, with the focus on innovations such an e-business.
62 Achieving value from ICT: key management strategies
6. What really matters ingaining value from ICT?
6.1 Introduction
As noted in Chapter 2 ‘ICT use—a transformational model’, many factors are believed toinfluence the effective use of ICT. A key focus of this study is to understand whichorganisational practices and strategies contribute to maximising the benefits of ICTimplementation and use.
The study drew on earlier studies that identified those factors which can potentially influencethe realisation of ICT benefits. These factors were to some extent refined and then included inthe survey instruments. The impact of each of these factors was then measured and analysedusing the innovative statistical technique known as ‘tree analysis’ as described elsewhere inthis report. The relative effects of these factors are reported below.
6.2 Potential influences on ICT business value
A list of factors that potentially influence the value obtained from ICT use was prepared fromprior literature. Table 6.1 summarises the factors that were investigated in the survey, whileAnnex A: Summary of survey instrument provides a summary of the survey questions.
Each one of these factors could be hypothesised to affect the value gained from ICT.However, no previous study could be found that investigated all these different factors acrossorganisations of different sizes and in different industries. On this basis, all factors wereincluded in the tree analyses since, a priori, there was no compelling reason to believe thatsome factors would be of more importance than others.
While most of the factors listed in Table 6.1 are self explanatory, the derivation of the term‘ICT investment impetus’ requires comment. The original data set contained eight questionsrelating to drivers of ICT investment, examining the following matters.
• The recognition of potential advantages from ICT investment in regard to:
- keeping up with competitors;
- customer relations;
- acquiring competitive advantage;
- opportunistic aspects;
- cost reduction; and
Achieving value from ICT: key management strategies 63
- efficiency.
• External force from trading partners.
• External force from government or regulatory bodies.
A factor analysis of the results showed that the six variables listed under the first bullet pointabove (‘recognition of potential advantages from ICT investment etc’) could be representedby a single, underlying common factor. Consequently, a degree of ICT investment impetus
factor19 was developed to represent this six-faceted driver of ICT investment.
ICT investment impetus is defined as the measure of the importance placed on competitiveand efficiency reasons for investing in ICT. This, and other important factors associated witheffective ICT use, are identified in this chapter and examined in detail in the followingchapter.
Table 6.1 Factors potentially influencing ICT business value
Factor Indicator
Industry influences The industry in which the organisation operates (using the ANZSIC classifications)
Drivers of ICT investment • ICT Investment Impetus—the recognition of potential advantages from ICTinvestment (meeting competition, customer expectations, opportunistic,competitive advantage, cost reduction, efficiency)
• External force from trading partners
• External force from government or regulatory bodies
Organisational size Number of full-time employees
Resources available for ICT ICT expenditure
ICT staffing structures • Internal versus external support
• Degree of outsourcing
ICT usage types Use of various types of ICT, including SOE, mobile devices, internal networkedapplications, external email, Internet enabled, website, electronic purchasing,electronic banking, electronic sales, electronic payments, inter-organisationalsystems
Management practices Degree to which the following occur:
• strategic planning (formal strategic business and ICT planning);
• ICT planning (project management, formal business cases for ICT, post-implementation reviews for ICT);
• opportunism—gaining additional unanticipated benefits from ICT;
• increasing ICT skills within the organisation;
• establishing formal contractual arrangements for ICT; and
• integrating new ICT into existing business processes across key functionalareas.
19 A term derived in the course of this study to describe a key driver in ICT investment where factor analysis showed that sixof eight original variables could be represented by a single, underlying common factor. For this six-question set of variablesCronbach’s was 82 per cent.(see Annex D)
64 Achieving value from ICT: key management strategies
Factor Indicator
Inhibitors to effective ICT use • Cost, security concerns, complexity from ICT change, entrenched workpractices and structures, customer unwillingness to use ICT
• Lack of education and training
• Insufficient information about ICT opportunities
• Lack of technical support
• Lack of adequate telecommunications infrastructure
• Lack of co-operation among competitors
6.3 Primary factors influencing degree of business value
As a pre-study assumption, we might have expected factors such as industry, size, ICTresources and spending on ICT to be the most important predictors of value gained from ICT.The analyses suggest that this is not the case. Rather, the most important predictors arevariables that are within management control and not dependent on factors such as theindustry within which the organisation operates or the organisation’s size. More specifically,the organisations that get the most value from ICT are those with an impetus to invest in ICTin order to achieve particular goals that include competitive advantage, efficiency, and/orcustomer service.
In order to present the findings in the most meaningful way the study makes use of theregression tree analysis technique for data mining. This innovative technique, which is furtherdescribed in Annex C: Regression trees methodology, offers a visual tool in the form of atree structure to depict complex interrelationships among variables.
Figure 6.1 shows the tree analysis for the prediction of the business value of ICT. Thebranches of the tree, working downwards from the top, are formed by use of a recursivepartitioning algorithm to find the factors in the study which have the most explanatory powerin terms of the business value of ICT (the dependent variable). The values in the nodes(ellipses and rectangles) represent the ICT value to organisations on a scale of 10. The labelson the branches identify the influencing factors in creating ICT value.
In this study, of the 1050 organisations in the sample, 705 were identified as providingcomplete data. For these 705 organisations the rating for the business value of ICT overallwas 6.62 on a 10 point scale. These values are shown in the top node.
Analysis to determine the branches from the top node reveals that of all the factors assessed,the factor that provides the most explanatory power is the degree of ICT investment
impetus. To provide further perspective, the branches from the top node are split into thosefor organisations whose ICT investment impetus is greater than or less than 6.5 on a scale of10.
Analysis of the right hand branch reveals that the 404 organisations whose ICT investmentimpetus exceeded 6.4 out of 10 assessed the business value of ICT as 7.54 on a scale of 10.And a further split of the right hand branch reveals that the 84 organisations whose ICTinvestment impetus rated above 8.4 assessed the business value of ICT as 8.61 out of 10.
Achieving value from ICT: key management strategies 65
By way of contrast, successive branching of the left hand branch from the top node reveals,for example, that the 45 organisations with an ICT investment impetus of less than 4 rated thebusiness value of ICT at 3.78 on a scale of 10. And so on.
Figure 6.1 Tree model for primary factors influencing business ICT value20
20 Industry Group A: Education; Property and Business Services; Finance and Insurance; Communication Services; Transport
and Storage; Accommodation, Cafes and Restaurants; Wholesale Trade; Construction; Manufacturing.
Industry Group B: Cultural and Recreational Services; Health and Community Services; Retail Trade; Electricity, Gas andWater Supply; Agriculture, Forestry and Fishing.
66 Achieving value from ICT: key management strategies
Further analysis was conducted to separately fit an additional four trees for the four types ofICT business value (i.e. strategic value, informational value, transactional value andtransformational value). Once again, the analysis revealed that the degree of ICT investmentimpetus was the primary predictive factor in each tree influencing the rating achieved for ICTbusiness value.
At this level of the analysis however, other factors also emerged that had some influence onthe rating of ICT business value. These included the frequency of engaging in strategicplanning, use of Internet banking, success of outsourcing arrangements, decision makingpoint within the firm and the industry in which the organisation operates.
Table 6.2 below uses results of the tree analysis to illustrate some key correlations andcharacteristics of organisations with differing predicted business value from ICT:
Table 6.2 Business value of ICT—organisation characteristics
Organisation Type Characteristics
Typical organisations with predicted high valuefrom ICT (7.23 or greater out of 10)
• Place a high level of importance (6.5 or more out of 10) onICT investment impetus
Typical organisations with predicted moderatevalue from ICT (around 6 out of 10)
• Place a moderate level of importance (between 4 and 6.5out of 10) on ICT investment impetus; and
• Integrate ICT across business processes at least sometimes
Typical organisations with predicted mediumvalue from ICT (around 5 out of 10)
• Place a low level of importance (less than 4 out of 10) onICT investment impetus; and
• Belong to Industry Group B
Typical organisations with predicted lower valuefrom ICT (around 4.5 out of 10)
• Place a moderate level of importance on ICT investmentimpetus; and
• Integrate ICT across business processes rarely or never
Typical organisations with predicted least valuefrom ICT (around 3 out of 10)
• Place a low level of importance on ICT investment impetus;and
• Belong to Industry Group A
6.4 ICT investment impetus
The tree analysis showed that the level of ICT investment impetus was the primary
determinant of whether a high rating was predicted for the value arising from ICT use.
The finding that the drivers of investment in ICT are important is congruent with a number ofother studies, including the work of Tallon, Kraemer and Gurbaxani (2001). This study foundthat organisations who had a focussed approach to ICT spending goals (either for operationaleffectiveness, strategic positioning or both) perceived greater business value from ICT thandid organisations who had no clear goals, or were indifferent towards ICT investment.
Achieving value from ICT: key management strategies 67
Exhibit 6.1 illustrates an example of ICT investment impetus with a quote from one of thestructured interviews.
Exhibit 6.1 An example of ICT investment impetus
Competitive tool—Car manufacturing support service
We face international competition. The segment that we operate in is multinational and global. Our offshore competitorsmay be operating within larger automotive markets and have cost advantages. ICT is fundamental to our strategy. Wehave to have world beating technology and to apply it.
As previously described the composite single factor ‘ICT investment impetus’ coversinvestment in ICT for where the drivers are:
• competitive factors (keeping up with competitors, establishing or enhancing a competitiveadvantage, meeting customer expectations, taking advantage of an unplannedopportunity); and
• efficiency advantages (reducing costs, gaining efficiencies).
It does not include investments in ICT as a reaction to external forces. For example, beingforced to invest in ICT by trading partners such as suppliers, or by changes to regulatory andother government requirements.
Figure 6.2 graphs the relationship between business value and the ratings given to thedifferent types of ICT investment drivers. The graph shows perceptions of value increasing asorganisations place more importance on each investment driver. The graph also includes thetwo external ICT drivers for investment; government and regulatory changes and pressurefrom trading partners.
These two external drivers are also related to the perceived value to be gained from ICT use(as shown in Figure 6.2) but they are not as important as predictors of the overall value gainedfrom ICT. Their absence from the tree analyses relates to the relative inability of these twofactors to predict ICT business value when considered against the ICT Investment Impetusfactor since that factor alone overrides all other factors in predicting ICT business value.Further discussion of this important factor occurs in the following chapter.
68 Achieving value from ICT: key management strategies
Figure 6.2 Relationships between ICT investment drivers and ICT business value
6.5 Additional factors influencing degree of business value
In order to investigate other factors that influence business value from ICT, a further treeanalysis was performed that did not including the ‘level of ICT investment impetus’ factor.Figure 6.3 shows this tree. The tree identifies additional important subsidiary organisationalbehaviours and strategies that contribute to successful ICT implementation.
For example, higher ratings for business value (7.48) were predicted for organisations thatengage in contractual arrangements for ICT more than ‘rarely’ and who also ‘often’opportunistically achieve additional benefits from unforeseen opportunities arising from ICT.
Moderate business value (6.62) is predicted for organisations that engage in contractualarrangements for ICT more than rarely but who only ‘sometimes’ achieve benefits from
Achieving value from ICT: key management strategies 69
unforeseen opportunities. On the other hand, for organisations that never engage incontractual arrangements for ICT, higher predicted value is associated with organisations thatat least sometimes integrate ICT across business processes and that often seek to increase ICTskills within the organisation. Organisations that never engage in contractual arrangements forICT and that only rarely integrate ICT across business processes tend to have lower predictedratings for ICT business value (4.3). Once again, the tree distinguishes the relativeperformance of two broad groupings of industries (C and D) which overlap those used inFigure 6.1.
Figure 6.3 Tree model for further factors influencing business ICT value21
Table 6.3 below uses results of the tree analysis (with the ICT investment impetus factorremoved) to illustrate additional key characteristics of organisations with differing predictedbusiness value from ICT:
21 Industry Group C: Transport and Storage; Accommodation, Cafes and Restaurants; Construction; Agriculture, Forestry andFishing.
Industry Group D: Cultural and Recreational Services; Health and Community Services; Education; GovernmentAdministration and Defence; Property and Business Services; Finance and Insurance; Communication Services; Retail Trade;Wholesale Trade; Manufacturing.
70 Achieving value from ICT: key management strategies
Table 6.3 Business value of ICT—additional organisation characteristics
Organisation Type Characteristics
When removing the effect of ICT Investment Impetus from the tree analysis
Typical organisations with predicted high valuefrom ICT (more than around 6.4 out of 10)
• Engage in formal contracts for ICT at least sometimes; and
• even higher value (7.5 out of 10) associated withorganisations that can often or always gain additionalunanticipated benefits from ICT.
OR
• Engage in formal contracts for ICT rarely or never;
• integrate ICT across business processes at least sometimes;and
• often or always increase ICT skills within the organisation.
OR
• Engage in formal contracts for ICT rarely or never;
• integrate ICT across business processes at least sometimes;
• increase ICT skills within the organisation at most sometimes;and
• belong to Industry Group D.
Typical organisations with predicted mediumvalue from ICT (around 4.5 out of 10)
• Engage in formal contracts for ICT rarely or never;
• integrate ICT across business processes at least sometimes;
• increase ICT skills within the organisation at most sometimes;and
• belong to Industry Group C.
Typical organisations with predicted least valuefrom ICT (4.3 or lower out of 10)
• Engage in formal contracts for ICT rarely or never; and
• integrate ICT across business processes rarely or never
6.6 ICT management practices
The subsidiary tree analyses showed that some management factors were related to higherpredicted levels of ICT value. These factors included the integration of ICT across existingbusiness processes, formal contracting, opportunistic gaining of additional benefits from ICTuse, and increasing skills through ICT use. Formal contracting was shown in this analysis tobe the strongest predictor of value gained from ICT.
Figure 6.4 shows the relationships between these management practices and value from ICTuse. The other management practices that were surveyed are also included. The graph showsvalue increasing as organisations more often engage in each practice. In other words, ICTbusiness value is highest for organisations that always employ such management practices.
72 Achieving value from ICT: key management strategies
Figure 6.5 Relationship between management practices and business value for small organisations
Note that for small organisations, some questions were omitted from the survey, hence theabove graph shows the relationship with business value for the seven management practicesincluded in the survey for all organisations. The graph shows that there is a clear relationshipbetween business value and the frequency with which small organisations engage in thesepractices.
Achieving value from ICT: key management strategies 73
Figure 6.6 Relationship between management practices and business value for medium-sizedorganisations
The above graph shows that the frequency with which medium-sized organisations engage inthese management practices has less impact on business value than for either small or largeorganisations.
74 Achieving value from ICT: key management strategies
Figure 6.7 Relationship between management practices and business value for large organisations
This graph indicates that there is a relationship between the frequency of engaging in eachpractice and the value gained. However, the number of observations on which mean value isbased is extremely small. Consequently, mean business value has low precision.
6.7 Discussion
A statistical technique known as regression tree analysis was used to identify the factors thatwere most clearly linked to the gaining of value from ICT use by organisations.
The factors identified as most salient in predicting a high rating for ICT value were:
Achieving value from ICT: key management strategies 75
• level of ICT investment impetus—choosing to invest in ICT for strategic and efficiencyreasons, as opposed to being forced to invest by external bodies;
• frequency of integration of ICT into and across business processes for key functionalareas (ICT integration);
• frequency of establishment of formal contractual arrangements for ICT investments;
• frequency of being able to opportunistically recognise and achieve significant additionalbenefits form ICT that were initially unanticipated;
• frequency of achieving valuable increases in ICT skill levels within the organisation; and
• the Industry Group within which the organisation operates.
In summary then, apart from industry effects, the important factors that affected the rating ofvalue from ICT were related to management practice. These management practices arediscussed in more detail in the following chapter.
It is interesting to note that a number of factors that might have been thought to affect thevalue from ICT were not found to be of primary importance. That is, when compared with thefactors described in this section, perceived value was not as strongly related to organisationalsize, expenditure on ICT, use of specific applications or perceived inhibitors to ICTimplementation.
76 Achieving value from ICT: key management strategies
7. ICT-aware management
7.1 Introduction
The results of this study indicate that ICT-related benefits originate from factors largelywithin an organisation’s control. The corollary of this finding is that the industry theorganisation is in and its size are not major determinants in achieving business value fromICT implementations. Rather, what is required is effective ICT-oriented managementpractices and an understanding and appreciation of the positive benefits that derive frominvesting in ICT.
This chapter looks more closely at those management practices and features of organisationalchange and transformation that are associated with higher realisation of value from ICT.
7.2 ICT-aware organisations
As shown in the previous section, ‘ICT investment impetus’ is the factor that was mostinfluential in determining whether a high rating was predicted for the value gained from ICT.That is, organisations were more likely to realise benefits from ICT when they invested inICT because they were aware of the importance of ICT in:
• keeping up with competitors;
• gaining a competitive advantage
• taking advantage of unplanned opportunities that emerged;
• meeting customer expectations;
• achieving cost reductions; and
• producing increased efficiencies.
Exhibit 7.1 provides samples from the qualitative interviews that illustrate ICT investmentimpetus.
Achieving value from ICT: key management strategies 77
Exhibit 7.1 ICT investment impetus—managers’ rationale for investment
Keeping up with competitors—Steel processing company, medium-size
Don’t think it has contributed to competitiveness because everyone has to have it (computer systems and MYOB). Itcan help by keeping up with the opposition and keeping us more efficient. It is no longer the case that IT creates profit,just if you don’t have it you fall behind.
Customer expectations—A private school which regards itself as a leader in ICT use
The main driver was the student population. Staff were falling behind students. There was very strong pressure fromthe community. It required a substantial capital investment. We got laptops for all students.
Unplanned opportunity for investment—Medium-sized, wholesale engineering supplies
The future is Internet ordering, especially for overseas customers, business-to-business and business-to-customerapplications. The Internet was considered as a possible scenario before buying Momentum Pro, but the facility has, insome way, helped bring about the decision to invest in Internet selling.
Gaining efficiency—A Worker’s Union
Not sure if we were ready, but we definitely needed to do it. Our old infrastructure was unreliable. There hadn’t been abig investment in IT for a long time.
Reducing costs—Jewellery manufacturer
As much as possible is computerised and our goal is for everything to be computerised. The latest thing we have doneis import two German computerised lathes and we have written the software and interfaced the planning and orderingsystem with the production of rings through the lathe. The costs savings are great because the time and cost ofproducing one-off rings all the time was big and there was room for so much error doing it manually.
The rationale of these ‘ICT aware’ managers contrasts with those whose motivation forimplementing ICT was based more on pressure from regulatory or trading partner situations.These managers tended to perceive less business value from ICT.
In addition to ICT investment impetus, the study revealed a number of other complementarymanagement practices that are related to a greater recognition of ICT value in organisations.These additional management practices that particularly distinguished the higher-valued ICTusers were:
• the frequency with which ICT was integrated across business processes;
• the frequency of engaging in formal contractual arrangements for ICT investments;
• the ability to recognise and achieve significant additional benefits from ICT that wereinitially unanticipated; and
• the extent to which the above management practices were related to recognised ‘goodpractice’ in managing ICT.
To present a more formal view, Table 7.1 shows the study results for relationships betweenthe levels of engagement in different managerial ICT practices. The table shows correlationsfor the above management practices in addition to other practices included in the survey.
78 Achieving value from ICT: key management strategies
Table 7.1 Correlation matrix for practices in ICT-aware management
Practice (1) (2) (3) (4) (5) (6) (7) (8) (9)
(1)ICT invest impetus 1.00
(2)ICT planning1 .28 1.00
(3)Strategic planning2 .30 .66 1.00
(4)External changemanagement
.17 .25 .17 1.00
(5) Opportunisticbenefits
.24 .26 .29 .10 1.00
(6) ICT skill increases .24 .37 .36 .14 .32 1.00
(7) Seek to be leaderin ICT
.39 .37 .42 .11 .27 .30 1.00
(8) Formal contractsfor ICT
.17 .55 .49 .20 .20 .24 .31 1.00
(9) ICT integration .22 .42 .46 .00 .31 .32 .40 .35 1.00
Notes:
1A composite measure representing: use of a formal project methodology; the development of formal businesscases for ICT investment; and post-implementation reviews of ICT investments. Assessed only for organisationswith 20 or more employees2A composite measure representing: formal business strategic planning; and formal ICT strategic planning.
The results reveal that the management practices represented in the tabulation are inter-relatedto a reasonable degree. For example, if an organisation has an ICT investment impetus then itis also likely to engage to some significant degree in practices such as strategic planning,formal contracting, integration of ICT across business processes and increasing ICT skills.
In addition to showing the relationship between ICT investment impetus and othermanagement practices, the correlation matrix in Table 7.1 shows the inter-relationshipsbetween all of the management practices. For example, a correlation of 0.55 between ICTplanning and formal contracts for ICT shows that there is a strong relationship between thesetwo practices. In other words, organisations that engage in ICT planning are also highly likelyto establish formal contractual arrangements for ICT, and so on.
In summary, what the study results indicate is that the management practices described aboveare all positively related to the realisation of greater benefit from ICT, for organisations in allsize categories and industries. It seems useful then to use the term ‘ICT-aware organisations’to describe those organisations that in general engage to a greater degree in what are regardedas good ICT management practices.
The following section describes in more detail some of the management practices identifiedabove as those observed in ICT-aware organisations. Other influential management practicesmore specifically associated with organisational transformation, namely ICT integration andICT skills improvement, are discussed in the subsequent section.
Achieving value from ICT: key management strategies 79
7.3 Good practice in ICT management
The above section identified a number of management practices that tend to exist inorganisations that have relatively high ICT investment impetus and rate the business value ofICT relatively highly. These practices are listed in Table 7.1 Correlation matrix for practicesin ICT-aware management. This section provides analytic and qualitative detail on this ‘goodpractice’ suite of management practices.
Exhibits 7.2 and 7.3 below are taken from the qualitative interviews and illustrate therequirement for formal contractual arrangements and opportunistic benefiting from ICT.
Exhibit 7.2 Need for formal contractual arrangements
A Bible College
What we would do differently? We would have a tighter contract, we probably paid more than we agreed tobecause it wasn’t really clear what we agreed to, so we would make the contract very clear and overcome differentunderstandings of what was meant to happen.
Exhibit 7.3 Opportunistic benefits from ICT
Manufacturer of medical products
We had the opportunity to take duplication and costs out of the system. Telecoms only touched the surface.People have bad habits with mobile phones. We can make people aware of the cost of calls.
Provider of telecommunications infrastructure
Previously people ran little ‘fiefdoms’ of information and knowledge. The IT system exposed individualperformance to management. Information became very open.
University
They are still exploring the new capabilities of the system and expect to find capabilities/options that they did notinitially expect to find.
Timber manufacturing company
We can now monitor performance better. We probably did not perceive this as being a benefit.
Exhibits 7.4 to 7.6 illustrate further the good management practices associated with an ICT-oriented approach. Exhibits 7.5 and 7.6 in particular relate to planning, both strategicplanning, and ICT related planning.
80 Achieving value from ICT: key management strategies
Exhibit 7.4 Seeking to be an industry leader
Plumbing specialist
Our vision is to be a leader amongst all contractors. Management was driving ICT. It was a necessary step if wewanted to be leaders.
Exhibit 7.5 Strategic planning practices
Aged health care provider
Organisation has learnt that you have to put resources into planning and training. You can’t rely on people outsideof the organisation to do this planning for you.
Automotive information organisation
What affected our outcome was constantly, at the highest levels, understanding what was being done and how itmeshed with our needs. Also, the way the project was managed and the approach and planning when decidingwho to use for outsourcing.
Exhibit 7.6 ICT project planning practices
Health care provider
This time we had a project management external to the software providers and he brought a lot of discipline intothe organisations. So any implementation needs rigid project management structure, and so now we areimplementing project management disciplines and it is working really well.
Tertiary institution
What would you do differently? We still need to improve project management methodologies for managing aportfolio of projects. We need transparency to the rest of the university, an interface to financials and budgeting,clarity in terms of goals, and clearly defined accountability
Workers Union
We learned the importance of planning. It’s good to have a third party involved. It gives another perspective, frompeople who have no agenda apart from the success of the project.
To support the anecdotal evidence, the graphs in Figures 7.1 and 7.2 show clearly from thestatistical viewpoint the relationship between planning and perceived value from ICT.
Achieving value from ICT: key management strategies 81
Figure 7.1 Relationship between strategic planning practices and value from ICT
82 Achieving value from ICT: key management strategies
Figure 7.2 Relationship between ICT project planning practices and value from ICT
7.4 Organisational transformation
A key question for this study was the degree to which organisational transformation wasrequired in order to realise the benefits from ICT.
Our research model posited that organisational transformation was both an important inputand an important outcome of successful ICT for organisations that had a high business valuefor ICT. That is, achieving organisational transformation was seen as an objective ofsuccessful ICT implementation as well as organisational transformation being seen as an inputto further, improved and increased value from the use of ICT in a continual cycle of learningand change.
The analysis of the output measures of value from ICT was congruent with this hypothesis, asdiscussed in Chapter 5. That is, measures of organisational transformation were stronglyrelated to other estimates of value gained, and included the development of new businessplans and models and improvements in organisational structures and processes. This section
Achieving value from ICT: key management strategies 83
examines the data gathered in structured interviews to gain further insights into the nature oforganisational transformation.
The two factors relevant to organisational transformation were shown to be of primarysignificance in determining value in the tree analysis. These are:
• the integration of new ICT into existing business processes across key functional areas;and
• valuable increases in ICT skill levels.
Exhibits 7.7, 7.8 and 7.9 use anecdotal information from interviews to illustrate thesepractices.
Exhibit 7.7 Integration of new ICT across existing business processes
Jewellery manufacturer
We are now just implementing a new part of the software. We don’t keep a lot of stock because our products areso diverse and unique, not mass produced, and some rings are made from several different rings combined.Anyway, when an order comes in and we do the quote or invoice, the system now automatically orders thematerials needed for that ring, so there is a huge saving in time and stress for the accounts and purchasing staff.The order will call up all the ingredients for each ring. The only kinds of stock we keep are blanks. The next stepwill be that as the order comes through it will order all the blanks for the next day’s production.
The significance of the integration factor in achieving business transformation has also beenrecognised in previous research. Gartner (2003), refers to this factor as ‘business processfusion’ and notes that IT offers value by extending business capabilities and creating newones.
Exhibit 7.8 provides an illustration of organisations extending business capabilities throughthe use of ICT.
Exhibit 7.8 New ways of doing business and new business plans
Medium-sized organisation that builds exhibitions at trade fairs
There’s a number of ways we can change what we do, to go through and try, for example, voice over IP. We get costsavings as we get more efficient in what we do. Looking through venues, we came up with a system to save the promoter$20–25 thousand on power bill. IT played a major role in that.
Jewellery manufacturer
We do a lot of one-off rather than mass produced and the machines were developed for the mass produced Europeanmarket so we had to do some adapting, in fact the Germans were very curious as to why we wanted the lathe if we weredoing individual stuff. When someone places on order, the computerised ordering system issues a ticket with a bar codeand that is sent into production, the lathe operator scans the bar code and the software is written for the machine to makethe product after that. So the raw stuff is put into the machine by the operator, the ticket is scanned, the codes areautomatic and the lathe produces the finished product.
Private school
IT changed the way that a lot of teachers look at what they do in the classroom. The move from talk and chalk tofacilitating and a new way learning, a more team- oriented way of learning.
84 Achieving value from ICT: key management strategies
Exhibit 7.9 Increasing ICT skill levels within the organisation
Steel processing company
The people were ready to accept a new technology. There is one classic example. People sometimes resistchange. My second-in-charge has a mathematical mind. I put a computer on his desk and for eight months hewouldn’t use it, so I called his bluff. I said you will either learn to use the computer and learn to use it properly orlook for another job. It was a bluff but I knew he would be able to meld with the machine and he is now one of themost proficient and experienced users of the computer system. We rarely if ever have to call on outside help. Hefixes computers, his knowledge in this area is so good he actually does a lot of work for the community fixingcomputers.
Manufacturer of medical products
A steering team was the right approach. We developed our own ‘Super Users’. Everybody was represented. Theywould train in everything to do with system and would be the first line of support. We still have most in play today.If someone in the team has an issue, they are first person they go to. We had a huge amount of support fromconsultancy groups. We are not used to spending money on consultancy. Their level of expertise was critical. Wegot knowledge transfer. It’s now in house. We now only bring in consultants on software about five times a year.
In a cross-sectional large scale survey it is difficult to assess how the effects of ICT vary overtime. However, the qualitative data from the interviews suggests that a time lag between ICTimplementation and the reaping of benefits is very real. The interviews provided manyexamples that illustrated that organisations needed time to appreciate the benefits of ICT andthat organisational learning was necessary before the full benefits could be gained. Exhibit7.10 shows some examples.
Exhibit 7.10 Delayed impact (or awareness)—time for organisational learning
Not-for-profit superannuation fund
We had a rollout of our combined website and access to our secure site. Workers and employers can come into our sitethrough a secure portal to check details and obtain quotations for types of exit from the scheme. It has been active for threeyears but has come to fruition only in the last few months. It is seen as very positive; although there was an initial lack of willto change to the web for business tools.
Manufacturer of medical products
Implementation occurred in 2000. It had a big impact. Some would say it was positive, some would say it was negative.Now it’s four years down the track and it’s very positive.
7.5 ICT-aware practices as part of effective management practice
The findings of this study have highlighted that an ICT-aware organisation is more likely togain value from ICT. The management practices engaged in by ICT-aware organisations canalso be seen to have a corollary in management practices that have been identified by otherresearch as associated in a more general sense with successful organisations.
Table 7.2 shows how effective ICT-related practices identified in this study are related topractices in the ‘4 + 2 formula’ for success developed by Nohria, Joyce and Roberson (2003).This analysis draws on findings from previous chapters in addition to the current chapter.
Achieving value from ICT: key management strategies 85
Table 7.2 Relationship between ICT-aware practices and ‘winning’ management practices
ICT-aware practices Management practices
The primary strategies:
A higher level of both strategic planning and ICT project planning was found tobe related to realisation of value from ICT.
Strategy—clearly focussed
The ability of ICT to contribute to performance through transactional benefitswas realised, though this was not seen as the most salient benefit from ICT.
Execution—flawless
The culture of the organisation was not investigated directly in the large-scaletelephone-based surveys. Qualitative data from the structured interviewsrevealed however, that a number of organisations found that their new ICTsystems allowed them to better monitor the performance of their employees,sometimes as an unanticipated outcome of the system.
Performance-oriented culture
The informational advantages provided by computer systems were the mostrealised benefits of ICT in this study. Many examples were provided oforganisations that found that ICT gave them information that made them moreefficient, saved money and led to improved decision-making.
Flexible structure with informationsharing
The secondary strategies
Increasing the ICT skills of employees was found to be a primary determinant ofthe value that ICT contributed to the organisation.
Talent—people
Data from the structured interviews showed a number of examples of ICT-enabled innovations.
Innovation—industry-transforminginnovations
ICT is not expected to be associated with the personal qualities of the CEO ofan organisation.
Leadership
Successful outsourcing was seen as of considerable benefit, as was theadvantages to be gained from the appropriate use of consultants, as a sourceof knowledge and independent advice in implementing ICT.
Mergers and partnerships
7.6 Discussion
Our findings have painted a picture illustrating that ICT-aware organisations engage in anumber of effective ICT-management practices and also benefit from organisational learningand transformation that accompanies their ICT implementations.
What does this mean for managers within Australian organisations?
1. Organisations of all sizes and in all industries are realising value from ICT by employingsimilar ICT-related good practice. Importantly, the lessons learned here apply across allindustries and all organisational sizes and are not dependent on how much is spent onICT.
2. ICT value is enhanced when managers are ‘ICT-aware’. They understand the importantreasons for investing in ICT to gain advantage and not just invest indifferently, or react toexternal drivers of investment from government regulations or industry partners. Ourexamples show many managers who are highly conscious of the opportunities that ICT
86 Achieving value from ICT: key management strategies
can give and take a keen interest in how ICT is implemented and managed well in theirorganisation.
3. Transformational aspects of ICT are particularly important to ICT value:
• ICT integration across business processes; and
• ICT skills must be gained.
4. Other ICT related management practices contribute to realising value for the organisation:
• engagement in formal contractual arrangements for ICT; and
• the ability to recognise and opportunistically exploit significant additional benefitsfrom ICT apart from those initially anticipated.
5. Awareness of an expected and accepted time lag between investment in ICT andrealisation of full benefits from the investment because time is required to:
• learn about a new system and how to use it in the most advantageous ways;
• integrate the new system with other organisational processes; and
• get over the ‘hump’ of potential resistance to the change that often accompanies ICTimplementations.
The findings in this chapter are consistent with previous research that investigated executives’perceptions of the business value of ICT.
Tallon, Kraemer and Gurbaxani (2001) found that the level of perceived payoffs (value) fromICT is directly related to corporate goals for ICT. They found that executives in organisationswith more ‘focussed’ goals for ICT will perceive higher value than executives in ‘unfocussed’organisations with no clear goals for ICT. Further, it was found that organisations with‘focussed’ goals are more likely to engage in ICT related management practices such asstrategic planning and ICT investment evaluation (including business cases and post-implementation reviews).
The study also yielded results that are congruent with those of the Ovum Report (NOIE2003b). A key finding from that report was that substantial improvements in productivity andrapid return on investment were achievable ‘if the ICT investment is effectively managed’(p. 7).
Further parallels between the current study and previous studies are reported in the concludingchapter.
Achieving value from ICT: key management strategies 87
8. Industry analysis
8.1 Introduction
This chapter explores the differences in ICT value achieved by individual industries andindustry groups, as well as differences in internal and external influencing factors betweenindustry groups.
This study sought to determine whether there were important differences between industriesin the manner in which value is realised from ICT. Organisations from 15 of the ANZSICindustry classes were interviewed, which enabled the results to be analysed by industry. Fourindustry groups were also created to categorise industries by the average levels of ICTbusiness value recognised by organisations within each industry.
8.2 Value from ICT by industry
Overall business value was assessed for each industry class as indicated in Table 8.1 below,and the associated graph.
Table 8.1 Weighted mean overall business value by ANZSIC industry class
Industry Mean SE
Government, Defence & Administration 7.327 0.371
Communication Services 7.221 0.229
Electricity, Gas & Water Supply 7.101 0.387
Cultural & Recreational Service 6.960 0.273
Retail Trade 6.938 0.242
Finance & Insurance 6.877 0.334
Transport & Storage 6.744 0.376
Manufacturing 6.586 0.365
Property & Business Services 6.552 0.311
Health & Community Services 6.477 0.343
Wholesale Trade 6.455 0.286
Education 6.340 0.467
Agriculture, Forestry & Fishing 6.201 0.325
Construction 6.021 0.340
Accommodation, Cafes & Restaurants 5.779 0.553
88 Achieving value from ICT: key management strategies
Figure 8.1 Weighted mean value by industry
There are clear differences between the average value achieved across different industries,with industries such as ‘Government, Administration and Defence’, ‘CommunicationsServices’, and ‘Electricity, Gas and Water Supply’ achieving greater value from ICT thanindustries such as ‘Accommodation, Cafes and Restaurants’, ‘Construction’ and ‘Agriculture,Forestry and Fishing’.
There are some possible reasons for the differences in value achieved by different industries.
• Size bias—The sample size for the industry in which the lowest value is achieved,‘Accommodation, Cafes and Restaurants’, is dominated by small organisations, and thesample size for the industry where highest value is achieved, ‘Government,Administration and Defence’, is dominated by medium and large organisations. Hencesome of the industry results achieved above may reflect some characteristics of thebusiness size analysis, particularly for these two industries.22 Some two-dimensional
22 Note that stratum weights were applied by business size for all analyses, with the same weighting applied across everyindustry group. For further details, refer to Chapter 3 ‘Methodology’ and footnote 6.
Achieving value from ICT: key management strategies 89
analysis across industry and size was attempted, however sample sizes in each categorywere too small to enable any meaningful conclusions to be drawn.
• Adoption rates for various ICTs—Analyses were carried out to assess the variationsbetween different industries in their ICT implementations (summarised in Chapter 4).Analysis determined that industries achieving lower value such as ‘Accommodation,Cafes and Restaurants’, ‘Construction’ and ‘Agriculture, Forestry and Fishing’ were quitedifferent in their ICT usage patterns than other industries achieving higher value. Forexample, the lowest proportion of businesses using internal networked applications, emailfor business communications, Internet for information searching, and having anorganisation website were found in the ‘Accommodation, Cafes and Restaurants’ industryclassification.
For each of the four types of business benefits, average business values were computed foreach of the 15 industry classifications. These averages were also ranked23 within each type ofbenefit to assess differences between individual industry classifications. Table 8.2 shows theresults of this investigation. There was broad agreement across the four value types as to theorder in which industries rated their business value.
Table 8.2 Weighted average business value scores by industry and benefit type
Industry Informational Strategic Organisationaltransformation
Transactional
Cultural & Recreational Service 8.016 (1) 6.649 (8) 6.679 (4) 5.999 (8)
Government, Defence & Administration 7.944 (2) 7.479 (1) 7.136 (1) 6.298 (4)
Electricity, Gas & Water Supply 7.924 (3) 6.763 (9) 6.791 (3) 6.439 (3)
Retail Trade 7.678 (4) 6.829 (6) 6.676 (5) 6.266 (5)
Wholesale Trade 7.667 (5) 6.646 (9) 6.004 (13) 5.761 (11)
Transport & Storage 7.660 (6) 6.906 (4) 6.420 (9) 6.117 (6)
Health & Community Services 7.628 (7) 6.319 (11) 6.621 (8) 5.940 (9)
Finance & Insurance 7.613 (8) 7.150 (3) 6.631 (7) 6.566 (2)
Communication Services 7.611 (9) 7.229 (2) 7.134 (2) 6.611 (1)
Manufacturing 7.486 (10) 6.195 (12) 6.024 (12) 5.790 (10)
Property & Business Services 7.328 (11) 6.877 (5) 6.654 (6) 6.067 (7)
Education 7.319 (12) 6.631 (10) 6.357 (10) 5.656 (12)
Agriculture, Forestry & Fishing 7.211 (13) 5.796 (14) 5.799 (15) 5.630 (13)
Accommodation, Cafes & Restaurants 7.101 (14) 6.008 (13) 5.995 (14) 4.960 (15)
Construction 6.993 (15) 5.718 (15) 6.202 (11) 5.506 (14)
Benefits are largely achieved in the same way across all industries, with all industries ratinginformational benefits higher than other benefit types. Some aspects of interest include thefollowing:
23 Rank of average score follows score in brackets, (1) is highest score, (15) is lowest score.
90 Achieving value from ICT: key management strategies
• the Cultural and Recreational Services sector rates informational benefits much morehighly than the other types, in comparison to other industry classifications;
• the Finance and Insurance sector rates the strategic and transactional benefits relativelyhigher, in comparison to other industry classifications; and
• the Communications Services sector rates strategic and organisational transformation
benefits much more closely to informational benefits than other industries.
8.3 Basis of competition
Organisations were asked to state whether their competitors vie by price, functionality,reliability or convenience, or whether the notion of ‘competition’ was not applicable to theirsituation. The proportion of organisations reporting competition of each type was computed,and compared by industry, firm size and level of ICT spending. It is of interest to assesswhether the nature of competition differs by industry in particular. The following chartssummarise the results.
Achieving value from ICT: key management strategies 91
92 Achieving value from ICT: key management strategies
Figure 8.2 Proportion of competitive factors by industry
Price competition was identified as the dominant type of competition in almost everyindustry. Certain industries (e.g. government, education) differ markedly in how they viewcompetition. Some of the reasons for this are, of course, obvious. Characteristics of otherindustries make certain types of competition redundant (for example, functionality is notrepresented in energy utilities as all companies offer much the same product range) or veryimportant (functionality is very important for communications services and for cultural andrecreational services, while price dominates typical service industries).
8.4 Value from ICT for industry groups
Industries were grouped to enable further detailed analysis. Various factors were examined foreach group to determine any differences between industry groups perceiving high ICTbusiness value, compared with industry groups perceiving lower ICT business value. Thefollowing grouping of industries was made in order of the relative mean values of ICT
Achieving value from ICT: key management strategies 93
business value and the groups are broadly consistent when analysed in various other ways.24
Figure 8.3 illustrates the mean ICT business value for each industry group.
The four categories of industries are distinguished in Table 8.3 below.
Table 8.3 Industry groups by value
Industry group Industries
Highest value Government, Administration & Defence
Communication Services
Electricity, Gas & Water Supply
Moderately highvalue
Cultural & Recreational Services
Retail Trade
Finance & Insurance
Transport & Storage
Moderate value Manufacturing
Property & Business Services
Health & Community Services
Wholesale Trade
Education
Least value Agriculture, Forestry & Fishing
Construction
Accommodation, Cafes & Restaurants
24 Industry groupings are broadly consistent when comparing mean ICT business value, cluster analysis for ICT businessvalue, cluster analysis for ICT usage patterns, cluster analysis for ICT investment drivers and cluster analysis for employingvarious ICT management strategies. Further information regarding these analyses can be obtained from the authors uponrequest.
94 Achieving value from ICT: key management strategies
Figure 8.3 Mean business value for each industry group
The differences between ICT business benefit types were also examined by industry group, asillustrated in Figure 8.4.
Achieving value from ICT: key management strategies 95
Figure 8.4 Business benefit type by industry group
Each industry group rates the four ICT business benefit types in the same way, however thereappears to be less variation in the informational benefits perceived by all industry groups thanthe other benefit types, indicating that all industry groups achieve similar informationalbenefits.
8.5 ICT business value influences for industry groups
Further tree analysis was conducted for each industry group.25 As with the overall analysisdiscussed in Chapter 6, the ICT investment impetus was clearly the dominant predictor of ICTbusiness value for all four industry groups. This analysis confirms that ICT-awareorganisations within any of the industry groups can still achieve higher ICT business value,and that there are no other overriding factors within a specific industry group.
25 As these analyses did not shed new light on the overall findings, the tree diagrams have not been presented in this report.For further detail, please contact the authors.
96 Achieving value from ICT: key management strategies
8.6 ICT investment drivers for industry groups
Figure 8.5 shows the differences in the following ICT investment drivers by industry group:
• ICT investment impetus—a significant influencer of business value as shown in Chapter6;
• forces from trading partners; and
• pressure from government and regulatory changes.
Figure 8.5 Differences in the following ICT investment drivers by industry group
Achieving value from ICT: key management strategies 97
ICT investment impetus dominates the other investment drivers. The two external investmentdrivers do not appear to be related to value for these industry groupings, as the graph does notillustrate a consistent ordering for these factors.
In order to further examine the impact of the two external investment drivers on variousindustries, the mean importance rating of each ICT investment driver was examined for eachindividual industry rather than by industry groupings. Table 8.4 shows the importance of eachinvestment driver, with the components of ICT investment impetus presented separately.
The table shows that all industries rated ‘forces from trading partners’ as the least importantreason for investing in ICT. The importance of government and regulatory pressures factorhowever, was variable across industries with this being a relatively important driver for ICTinvestment in heavily regulated industries such as Health and Community Services andFinance and Insurance, as well as the Government, Defence and Administration industryitself.
98
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3.69
3.586
4.703
4.051
4.846
4.11
4.331
4.579
3.408
5.068
4.574
4.116
4.809
4.169
3.439
Regulatory
or government
issues
4.541
6.279
5.77
6.575
5.414
7.218
4.516
5.376
5.344
5.204
5.556
5.209
5.995
4.073
4.215
Taking
advantage of
unplanned
5.289
4.874
5.199
5.446
5.694
5.209
5.992
5.512
4.242
5.615
5.587
4.639
5.783
5.212
3.861
Keeping up
with competitors
6.039
4.756
5.547
6.228
6.348
6.613
7.344
6.91
6.105
6.636
5.951
6.317
5.524
5.862
4.623
Customer expectations
6.405
6.056
7.261
7.878
6.851
7.017
7.873
6.805
5.365
6.462
6.585
6.115
6.074
5.807
5.118
Establishing
a competitive advantage
6.615
5.822
6.08
6.433
7.129
7.503
7.866
7.247
5.559
6.159
6.628
6.18
6.437
6.058
5.396
Reducing costs
6.606
6.684
6.073
7.274
6.58
7.288
7.104
6.987
5.989
6.783
7.071
6.171
5.627
6.595
6.024
Gaining efficiencies
7.533
8.086
7.647
8.196
7.833
7.925
8.21
7.908
6.849
7.607
7.734
6.995
8.03
7.521
7.346
ICT investment drivers
Industry
Cultural & Recreational Services
Health & Community Services
Education
Government, Defence & Administration
Property & Business Services
Finance & Insurance
Communication Services
Transport & Storage
Accommodation, Cafes & Restaurants
Retail Trade
Wholesale Trade
Construction
Electricity, Gas & Water Supply
Manufacturing
Agriculture, Forestry & Fishing
Achieving value from ICT: key management strategies 99
8.7 Management practices by industry group
Figure 8.6 shows the average frequency that organisations engage in particular managementpractices by industry group.
Figure 8.6 Frequency of engaging in management practices by industry group
Not surprisingly, industry groups that engage in these management practices more often,achieve higher value, which is consistent with the overall analyses that found that thesefactors are strong predictors of business value.
8.8 Basis of competition by industry group
Figure 8.7 below illustrates how the basis of competition varies for the four industry groups.Price clearly dominates, as when examined by individual industries earlier in this chapter,
100 Achieving value from ICT: key management strategies
however there are some other interesting differences depending upon the level of ICTbusiness value recognised.
Figure 8.7 Basis of competition by industry group
The highest value group includes government and utilities (water, gas, electricity). Thisexplains the higher percentage of not applicable responses for competition, as manyorganisations within this industry are not subject to competition. The highest value group alsocompetes more on functionality than any other group, due to the presence of communicationsservices and government industries in this group, both of which nominated functionality as animportant basis of competition. Organisations within the moderate value group compete moston price, while organisations within the lowest value group compete more on convenience.
Achieving value from ICT: key management strategies 101
8.9 ICT usage
Figure 8.8 below illustrates how ICT usage varies for the four industry groups. As presentedin Chapter 4 ‘ICT circumstances and settings’, managers were asked to nominate from a listof 11 different usage types whether each particular type of ICT was being used in theirorganisation. The average number of usage types of ICT used by organisation within eachindustry group was then computed. These findings demonstrate that the industry groups usingmore ICT recognise higher ICT business value.
Figure 8.8 Mean number of ICT usage types for each industry group
8.10 Discussion
There are variations in the ICT business value achieved by various industries, with industriessuch as Government, Communication Services and Electricity, Gas and Water Supplyrecognising highest value from ICT, and industries including Accommodation, Cafes and
102 Achieving value from ICT: key management strategies
Restaurants, Construction and Agriculture, Forestry and Fishing recognising least value fromICT.
The outcomes of the analysis of various factors by industry group are consistent with theoverall analysis, and there does not appear to be any particular differences by industry groupin the strategies and practices for achieving higher business value. That is, the strategies and
practices required to achieve higher business value are the same, regardless of whichindustry group an organisation is in.
There are key differences in the practices of industries achieving least value from ICT,compared with industries achieving highest value from ICT. These differences are particularlyapparent for the following factors:
• industry groups recognising the least value from ICT rate ICT investment impetussignificantly lower than industry groups recognising the highest value;
• industry groups recognising the least value from ICT engage significantly less often inICT management practices such as formal contracts, ICT planning and strategic planningthan do industry groups recognising the highest value; and
• industry groups recognising the least value from ICT use a significantly lower number ofICT usage types than industry groups recognising the highest value.
Other factors such as inhibitors faced by organisations appeared to have no significantrelationship on ICT business value when analysed by industry group.
Achieving value from ICT: key management strategies 103
9. Other factors influencing value
9.1 Introduction
This chapter reviews the influence of some of the lesser but still significant factors indetermining the extent to which an organisation benefits from ICT.
Chapter 6 describes the factors that were expected to be found to influence the value gainedfrom ICT. The absence of some of these factors in the regression tree analyses presented inSections 6.3 and 6.4 indicates that many of these factors were not strong influencers ofbusiness value when considered with the ICT investment impetus and other importantmanagement practices.
The analyses discussed in previous chapters highlights that the most important influencer ofICT business value is a strong impetus to invest in ICT to achieve goals such as competitiveadvantage, efficiency or customer service. Other strong influencers of value includemanagement practices such as engaging in formal contracts for ICT investments andintegrating ICT across business processes.
At the same time, by analysing each of the variables separately, it is possible to see thatseveral other factors do have an influence on ICT business value even though their influenceis not as strong when considered in conjunction with the more influential factors noted above.
The following sections describe the relationship between these additional factors and ICTbusiness value.
9.2 Intra-organisational factors
9.2.1 Business spending on ICT
A natural question is the extent to which business spending on ICT drives perceptions ofderived value from those investments. Table 9.1 shows weighted average responses for eachof the four types of business benefits for organisations in various ICT spending categories.The results are also summarised in the associated graph.
104 Achieving value from ICT: key management strategies
Table 9.1 Weighted average business value scores by ICT spending and benefit type26
Amount Spent Informational Strategic OrganisationalTransformation
Transactional
$20 000 001 or more 8.055 (n = 45) 7.514 (n = 35) 7.506 (n = 37) 7.668 (n = 40)
Between $200 001 and $1 000 000 7.860 (n = 94) 7.196 (n = 83) 6.877 (n = 76) 6.333 (n = 86)
Between $10 001 and $20 000 7.752 (n = 120) 6.807 (n = 105) 6.702 (n = 98) 5.968 (n = 108)
Between $10 000 001 and $20 000 000 7.580 (n = 15) 7.135 (n = 12) 6.473 (n = 12) 6.522 (n = 13)
Between $20 001 and $100 000 7.569 (n = 252) 6.889 (n = 216) 6.578 (n = 202) 6.123 (n = 220)
Between $100 001 and $200 000 7.537 (n = 91) 6.758 (n = 77) 6.640 (n = 68) 6.040 (n = 80)
Between $1 000 001 and $2 000 000 7.342 (n = 40) 7.000 (n = 34) 6.722 (n = 30) 6.927 (n = 36)
Between $2 000 001 and $10 000 000 7.312 (n = 41) 6.684 (n = 31) 6.392 (n = 32) 6.252 (n = 39)
Less than $10 000 7.027 (n = 132) 5.446 (n = 113) 5.590 (n = 112) 5.347 (n = 112)
The results show that as spending on ICT increases, perceptions of business value also tend toincrease, though not strictly monotonically. The number of responses in each category isconsiderably lower for organisations spending more than $1 000 000 and, in particular, fororganisations spending between $10 000 001 and $20 000 000; so there is some variability inthe results at the upper levels of spending.
26n refers to the number of responses within each category.
Achieving value from ICT: key management strategies 105
Figure 9.1 Mean value27 by ICT spending
9.2.2 Organisational types
The factors associated with organisational types were absent in the regression tree analysespredicting business value from ICT use, as presented in Chapter 6. Table 9.2 and Table 9.3 showthe ICT business value gained by each organisational type.
Table 9.2 Government or non-profit—weighted mean business value
Government or non-profit Other
7.246 (SE=0.201) 6.537 (SE=0.099)
27 The overall value is not a simple average of the four components. All components are scaled factor scores, not simpleaverages. Also, each line is based on a different number of data points depending upon the number of responses for each typeof business benefit.
106 Achieving value from ICT: key management strategies
Table 9.3 Weighted mean business value by organisational type
Organisational type Mean SE
Australian—multiple branches 6.822 0.138
Australian—single branch 6.543 0.117
Branch of an overseas organisation 6.495 0.293
The above tables indicate that on average, government or non-profit organisations recognisethe highest value from ICT use. This result is consistent with the earlier finding presented inTable 8.1 in Chapter 8—that organisations in the Government, Defence and Administrationindustry achieve higher overall ICT business value from ICT than organisations in otherindustries, although many of the non-profit organisations are from industry groups other thanGovernment, Defence and Administration.28
In view of this finding a comparison was made between the levels of ICT investment impetusfor government and non-profit organisations and other organisations. This analysis, however,found no discernable difference between the average levels of ICT investment impetus forgovernment and non-profit organisations compared with other organisations.
For all other organisations, Table 9.3 shows that there is not a significant difference in thevalue that is achieved by the various organisational structures. The survey questions did notdelve more deeply into various organisational structures (such as hierarchical or flatstructures), so the available data does not provide information to indicate any ‘best practice’organisational structures for gaining value from ICT.
9.2.3 ICT staffing structures
Most factors associated with ICT staffing structures were absent in the regression treeanalyses predicting business value from ICT use as presented in Chapter 6. Tree analysisindicated that moderately successful outsourcing arrangements can lead to better businessvalue in some circumstances; however, specific practices associated with outsourcing or ICTstaffing arrangements were not found to be significant influencers of business value.
Table 9.4 Presence of ICT department—weighted mean business value
Have ICT department Do not have ICT department
7.192 (SE = 0.137) 6.435 (SE = 0.110)
Table 9.4 indicates that organisations that have an ICT department are likely to achievesignificantly higher value than those who do not, although small businesses (who on averageachieve lower ICT business value) are much less likely to have an ICT department, asindicated in Table 9.5.
28 207 organisations report as being Government or Non-profit organisations, compared with 54 organisations reporting asoperating in the Government, Defence and Administration industry.
Achieving value from ICT: key management strategies 107
Table 9.5 Presence of ICT department—by organisation size
Number of employees Sample size % With ICT department
5–19 employees 363 18
20–50 employees 311 34
51–100 employees 138 60
101–150 employees 36 50
151–200 employees 27 85
201–500 employees 69 83
501–1000 employees 46 91
1001–5000 employees 40 95
5001 or more employees 7 100
Other factors associated with outsourcing or ICT staffing did not appear to have anymeaningful relationship with ICT business value, suggesting that there is no single ‘bestpractice’ approach to ICT staffing and outsourcing. The best approach to outsourcing ingaining better value from ICT appears to vary widely depending upon the individualcircumstances and settings for the organisation. Exhibit 9.1 provides some examples ofdifferent outsourcing arrangements.
Exhibit 9.1 Examples of outsourcing arrangements
Energy utility
Organisation decided that IT was not a core component of the business ... is important ... but not core to the business ... sowas outsourced.
University
Development of new components/functions with new system is all outsourced to software provider ... this mean less of thiskind of pressure on IT staff.
Electrical energy generator (different company from 1st example)
Run a completely outsourced IT service-delivery model, small team IT, manage outsource service delivery. Have technicaland application specialists, not with capacity to do, but to supervise and oversee quality control.
9.2.4 ICT usage types
ICT resources, including the types of ICT usage within an organisation, were expected toimpact business value. Tree analyses indicated that although ICT usage types were notprimary determinants of business value, some of these uses for ICT did in fact show up in theanalyses for various sub-categories of business value. These were:
• use of Internet banking;
• having an organisational website; and
• long term use of the Internet for searching.
108 Achieving value from ICT: key management strategies
When removing the effects of other variables, it was found that there is a relationship betweenthe level and types of ICT usage and ICT business value. Table 9.629 indicates the businessvalue associated with various aspects of ICT usage. The table also indicates the overallproportion of organisations using each type of ICT.
Table 9.6 Mean weighted business values for firms that use/don’t use various ICT
ICT usage type PercentageYes
Yes
Mean (SE)
No
Mean (SE)
Difference
Mean
Organisation conducts electronic sales 28.1% 7.216 (0.128) 6.343 (0.114) 0.873
Organisation integrates business processeselectronically with suppliers or customers
42.6% 7.101 (0.113) 6.180 (0.131) 0.921
Organisation has remote or mobile terminalsor devices for data transmission
37.5% 7.077 (0.124) 6.262 (0.125) 0.815
Organisation has an organisation websitethat can be viewed by the general public
71.6% 6.920 (0.089) 5.796 (0.216) 1.124
Organisation uses electronic purchasing 49.5% 6.908 (0.119) 6.325 (0.133) 0.583
Organisation has internal networkedapplications
72.6% 6.877 (0.093) 5.806 (0.210) 1.071
Organisation uses electronic banking andmake electronic bill payments
85.0% 6.795 (0.090) 5.326 (0.303) 1.469
Organisation receives electronic payments 80.7% 6.742 (0.095) 6.104 (0.257) 0.638
Organisation has email for external businesscommunications
96.4% 6.721 (0.085) 3.409 (0.650) 3.312
Organisation has a standard desktopoperating environment
87.6% 6.695 (0.094) 6.053 (0.290) 0.642
Organisation has access to the Internet forthe purpose of searching for information
97.4% 6.659 (0.089) 4.386 (0.741) 2.273
For each ICT usage type, there is a significant difference between the value realised byorganisations that use a particular type of ICT compared with organisations that do not use theparticular type. This difference is particularly apparent for the use of email for externalbusiness communications, having access to the Internet for information and, to a lesser extent,using electronic banking. Organisations that are not using these types of ICT are significantlybehind in gaining business value from ICT.
Table 9.7 and Figure 9.2 show that organisations that use more types of ICT gain moderatelybetter ICT business value, indicating that as ICT is used for more functions and processeswithin an organisation the associated value increases.30
29 Sorted in order of value gained for organisations that use the feature.30 The total number of organisations using either 1, 2, 3 or 4 applications is small, standard error is high as business valueresults for these categories are variable.
Achieving value from ICT: key management strategies 109
Table 9.7 Mean weighted business values by number of ICT usage types
Number of ICT usagetypes reported
Mean ICT businessvalue
Standard error
1 3.024 0.651
2 4.859 0.722
3 3.837 0.579
4 5.527 0.632
5 6.12 0.29
6 6.057 0.285
7 6.704 0.188
8 6.784 0.203
9 7.033 0.146
10 7.187 0.199
11 7.61 0.305
Figure 9.2 Weighted mean business value by the number of ICT usage types
110 Achieving value from ICT: key management strategies
9.3 External environmental factors
There are many remote or external environmental factors that influence organisationalperformance. Of these, several environmental factors were expected to influence ICT businessvalue, including government policies, macroeconomic conditions, global competitiveenvironments and other external pressures.
Not all of these factors were investigated in this study but the study did include:
• being forced by trading partners to deploy ICT; and
• pressure to invest from changes to regulatory and other government requirements.
The two external environmental factors studied were absent in the regression tree analyses,indicating that these factors were not strong influencers of business value when considered inconjunction with the organisational level influences. By analysing these variables separately,however, it is possible to see that external environmental factors do have some influence onthe value gained from ICT use.
9.3.1 External pressures for investing in ICT
As presented in Chapter 6, tree analyses showed that the level of ICT investment impetus wasa strong predictor of business value. This factor combined a number of strategic drivers forinvesting in ICT, but did not include two ICT investment drivers that are external to theorganisation. That is:
• being forced to do so by trading partners; and
• changes to regulatory and other government requirements.
When analysed separately, the importance of these two external factors as a driver forinvesting in ICT has a clear relationship with the value gained from ICT. Figure 9.3 showsthis relationship.
Achieving value from ICT: key management strategies 111
Figure 9.3 Relationship between external ICT investment drivers and business value
The study found that these factors do not have a significant impact on value when all aspectsare considered however, organisations that clearly recognise external pressures as drivers forinvesting in ICT are more likely to gain ICT business value from their ICT investments.
9.3.2 Environmental factors not examined
Macroeconomic conditions
The effect of macroeconomic conditions on value gained from ICT use was not exploredthrough the large scale survey. The scope of the research study limited investigation in thisarea, particularly as the study was limited to Australian organisations and Australian branchesof overseas organisations. Also, the study was not longitudinal—organisations across allindustries and sizes were surveyed once only, over a six week timeframe. This means thatimpacts associated with economic change or global economic conditions were not assessed.
112 Achieving value from ICT: key management strategies
Market—globalisation and competition
The effect of globalisation and competition on value gained from ICT use was also notexplored through the large scale survey. It is expected, however, that this aspect would havesome impact on value, particularly in industries where global competition is high. Somemanagers had concerns regarding globalisation and competitive factors, as described inExhibit 9.2.
Exhibit 9.2 Influences from globalisation and competition
Ship broker
Globalisation—we rely on information about the Australian/Asian market place. Challenge is if this information is no longerwanted due to relocations of major customers because of external factors.
Provider of online information to customers of automobile manufacturers
Facing international competition—the segment that we operate in is a multinational business/global (automotive)
Our competitors (off shore) may be operating within larger automotive markets ... cost advantages.
9.4 Inhibitors to gaining value from ICT
A number of factors were identified as being potential inhibitors to organisations achievingvalue from ICT. To assess this impact, managers were asked to identify whether each of theissues listed in the survey was an inhibitor for the organisation in gaining ICT business value.
None of the inhibitors tested were found to be significant influencers on business value in thetree analyses presented in Chapter 6. However, further analysis to determine the effect of eachpotential inhibitor on business value is shown in Table 9.8 below. The table also shows theproportion of managers who identified the issue to be an inhibitor for their organisation.
Achieving value from ICT: key management strategies 113
Table 9.8 Effect of inhibitors on perceived business value
InhibitorsPercentage who
stated as aninhibitor
Value if stated asan inhibitor
Value if stated asnot an inhibitor
Concern about computer virus and securityattacks
69.3 6.749899 6.404666
Lack of education and training in ICT 57.7 6.704450 6.554101
Cost of ICT 56.1 6.708578 6.605134
Increasing complexity from ICT change 55.9 6.878753 6.501565
Entrenched work practices and structures 50.7 6.797083 6.507321
Insufficient information about technologyopportunities
46.4 6.775201 6.580742
Lack of good technical support 45.5 6.682065 6.692198
Lack of an overview of ICT across organisation 42.5 6.780036 6.608318
Lack of adequate telecommunicationsinfrastructure
41.9 6.697984 6.656156
Lack of compatible systems amongst tradingpartners
36.9 6.911791 6.611569
Lack of co-operation between competitororganisations
36.2 6.943408 6.572841
Customer unwillingness to use ICT (Y/N) 35.0 6.825502 6.614960
Overall, stated inhibitors did not appear to have any discernable relationship with the valuethat organisations can achieve from ICT use, regardless of the overall number of inhibitorsfacing a particular organisation.
Interestingly, however, for every issue the mean business value of ICT is higher31 for those
that stated the issue was an inhibitor to value. This finding is consistent with the earlierdiscussion in Chapter 7 that ICT-aware organisations gain higher value from ICT. Managerswho identified a particular issue as an inhibitor are apparently more aware of the challenges,and therefore may be better able to manage the issue to minimise the impact on businessvalue.
Although there is no apparent impact on business value, it is interesting to note that concernabout computer virus and security attacks was cited by more organisations than any otherissue as an inhibitor to achieving value. Exhibit 9.3 provides examples.
31 While the differences reported are not statistically significant, the direction of the results is consistent across all potentialinhibitors.
114 Achieving value from ICT: key management strategies
Exhibit 9.3 Concerns about computer virus and security attacks
Video rental chain
Security of data and systems. There are threats from all sides. The number of patches, etc, we get from Microsoft is growingdaily. It means we all get bogged down when we’d rather be doing other things, we just continue the business as is ratherthan give time to improvements.
Country retailer
Security and viruses are an issue everyone talks about, disappointing that they interfere ... haven’t had many problems, buthave a few layers of security.
Energy utility
The one most important challenge facing our organisation today? Security ... viruses, patch management, effectivelysecuring our environment from internal and external users.
A second Energy Utility organisation also expressed concerns
We are doing OK on security, never suffered infiltration. Have discovered things we want to improve. The more I read themore I hear the more I think I don’t know. Concerned about left-field. My role is to worry about the unexpected. I wish it wassomething we could say have totally under control, it’s a major concern.
9.5 Discussion
There are many factors that impact the value that an organisation can gain from ICT. Factorssuch as ICT investment impetus and ICT management practices have been found to beimportant influencers of ICT business value, as discussed in previous chapters. Clearrelationships between ICT business value and several other factors investigated in this study,have been also been found, although their influence is not as strong when considered inconjunction with ICT investment impetus and other important management practices.
Intra-organisational factors were found to relate to ICT business value to varying degrees.
• Clear links between business spending on ICT and perceptions of business value derivedfrom ICT were found, with stated value generally increasing as ICT spending increases.
• No significant differences were found between organisational types, other than for non-profit organisations, which were found, on average, to realise more value from ICT.
• No clear relationships between ICT business value and ICT staffing structures werefound, other than that organisations that have a specialist ICT department are likely toachieve higher value than those who do not. The lack of any other clear relationshipsbetween ICT staffing structures, outsourcing and business value from ICT indicates thatthere is no single ‘best practice’ approach to ICT staffing and outsourcing.
• Organisations using more types of ICT clearly gain more value from ICT overall Also, thestudy found that organisations using the particular type gained more value on average,than organisations not using the particular type of ICT. This is particularly apparent forthe now fundamental uses of ICT such as email and the Internet.
External factors were also found to relate to ICT business value to varying degrees.
Achieving value from ICT: key management strategies 115
• Organisations that clearly recognise external pressures as important drivers for investingin ICT are likely to gain business value from these investments. This includes pressuresfrom trading partners and changes to regulatory and other government requirements.While these factors are not as influential to business value as ICT investment impetusdrivers discussed in other chapters, it is interesting to note that organisations can still gainvalue from ICT when forced to invest by external pressures.
• Various potential inhibitors to gaining value were investigated, many of which areexternal to the organisation. Overall, no discernable impact on business value was foundfor any of the stated inhibitors.
116 Achieving value from ICT: key management strategies
10. Conclusions
The aims of this study were to examine the circumstances and settings in which ICT isimplemented in Australia and to describe the best practice strategies and organisational formsthat accompany successful achievement of business value from ICT implementation.
Data was gathered from 1050 organisations using telephone interviews. The sample wasstratified by business size, with organisations with fewer than five employees excluded.Organisations were interviewed from 15 of the ANZSIC industry classes. Additionalqualitative data was gathered from 50 of the organisations in longer structured interviews.
10.1 Key findings
The study addressed six research questions. The findings concerning these questions follow.
1. What are the circumstances and settings of ICT implementation within Australian
organisations?
The study showed that the use of ‘fundamental’ ICT applications such as email and electronicbanking is extensive across Australian organisations of all sizes and in all industries.However, more advanced applications of ICT such as electronic selling and business processintegration with suppliers and customers are not widely used.
As expected, ICT spending is related to organisational size and the industry in which theorganisation participates.
ICT outsourcing is widely practised, both for support and for software development, but thereis considerable variation within and between industries in the extent to which outsourcing ischosen as a business practice. Offshore outsourcing for ICT has been taken up by only a smallnumber of organisations, almost all of which are very large. ICT outsourcing is now generallyregarded as successful by those organisations who engage in this practice.
2. How does the use of ICT contribute to the overall performance of an organisation? What
is the nature of the value gained?
Overall, the organisations surveyed indicated that ICT contributed positively to organisationalperformance.
Managers were asked to assess four forms of benefits that their organisations gained fromICT—strategic benefits, informational benefits, transactional benefits, and organisational
Achieving value from ICT: key management strategies 117
transformational benefits. ICT was judged to add value most often in terms of informationalbenefits and least often in terms of transactional benefits.
The pattern of perceived benefits was similar across all organisational sizes and all industries.In all cases, informational benefits were rated more highly than other benefits. Informationalbenefits were defined to include faster and easier access to internal and external information,more useful, accurate and reliable information and increased flexibility for manipulation ofcontent and format of information. It seems that once users become accustomed to a newsystem informational benefits are readily apparent to them every day. They can shareinformation with their colleagues more easily, they have greater awareness of customer needsand wants and they are better able to make decisions and manage their organisations. It istherefore not surprising that organisations of all sizes recognised this category of benefit mostfrequently.
Strategic and organisational change benefits were recognised about equally in the survey andthe interviews illustrated some of the many benefits that ICT can bring in these areas. Thesebenefits would be expected to arise some time after implementation—a few of the interviewsexplicitly noted this time lag.
Transactional benefits were recognised least frequently, even though these benefits aregenerally the easiest to quantify in advance and to recognise after a new system has beenimplemented. This finding is somewhat surprising, although it may be that transactionalefficiencies are to a large extent taken for granted when implementing ICT and are nottherefore seen as a ‘benefit’.
3. What factors most influence the value an organisation realises from ICT?
Regression tree analyses showed that the factors that were most clearly linked to the gainingof value from ICT use were:
• ICT investment impetus—choosing to invest in ICT for strategic and efficiency reasons;
• frequency of integration of ICT into and across existing business processes of keyfunctional areas;
• the industry group within which the organisation operates;
• frequency of establishment of formal contractual arrangements for ICT investments;
• frequency of being able to recognise and achieve significant additional benefits from ICTthat were initially unanticipated (opportunism); and
• frequency of achieving valuable increases in ICT skill levels within the organisation.
A number of factors that might have been thought to affect the value from ICT a priori werenot found by this study to be of primary importance. In particular, perceived value was not asstrongly related to organisational size, expenditure on ICT, use of specific applications orperceived inhibitors to ICT implementation when compared with the factors above.
118 Achieving value from ICT: key management strategies
4. What management practices are most strongly associated with the recognition of benefit
from ICT?
The study found that most value from ICT is gained in organisations where managers are‘ICT-aware’. That is, they must understand the important reasons for investing in ICT to gainadvantage and not just react to external drivers of investment from government regulations orindustry partners. This factor was the most significant factor for value-add from ICT acrossall business sizes and all industries.
Critical ICT related management practices for realising value for the organisation areengagement in formal contractual arrangements for ICT and the ability to recognise andachieve significant additional benefits from ICT apart from those initially anticipated.
Our examples show many managers who are extremely conscious of the opportunities thatICT can give and take a keen interest in how ICT is implemented and managed well in theirorganisation. It is these organisations with ‘ICT-savvy’ management who are gainingappreciably, in many different ways, from ICT use.
These findings encourage the recommendation that further work be done to identify the meansthat are most effective in assisting managers to increase their knowledge of effective ICTpractices.
5. What is the relationship between organisational transformation and the realisation of
benefit from ICT?
Organisational transformation occurs when ICT contributes to increase in employee skills,expand the capabilities of the organisation, create new business plans and models andimprove organisational structures and processes.
Organisational transformation was found to be an important part of effective ICTimplementation. Some transformational aspects of ICT are particularly critical:
• ICT should be integrated into existing business processes; and
• ICT skills should be gained.
The study also shows that many organisations are also discovering new ways of doingbusiness and finding new business plans.
In achieving transformational value from ICT, managers must be aware of a possible time lagbetween investment in ICT and the realisation of the full benefits from the investment. Timeis required to learn about a new system and how to use it in the most advantageous ways.Time is also required for the new system to be integrated with other organisational processes.
Achieving value from ICT: key management strategies 119
6. Are there important differences between industries in the manner in which value is
realised from ICT?
There are variations in the ICT business value achieved by various industries. Industries suchas Government, Communication Services and Electricity, Gas and Water Supply report thehighest value from ICT while industries including Accommodation, Cafes and Restaurants,Construction and Agriculture, Forestry and Fishing recognise least value from ICT.
The outcomes of the analysis of various influencing factors by industry group are consistentwith the overall analysis, and there do not appear to be any particular differences betweenindustry groups in the strategies and practices that should be implemented to achieve higherICT business value.
Industry groups engaging least in these strategies and practices achieve least value from ICT,compared with industries achieving highest value from ICT, which more often engage inthese key strategies and practices. These differences are particularly apparent for thefollowing factors:
• industry groups recognising the least value from ICT rate ICT investment impetussignificantly lower than industry groups recognising the highest value;
• industry groups recognising the least value from ICT engage in ICT managementpractices such as formal contracts, ICT planning and strategic planning significantly lessoften than industry groups recognising the highest value; and
• industry groups recognising the least value from ICT record a significantly lower numberof ICT usage types than industry groups recognising the highest value.
Other factors, such as inhibitors faced by organisations, appeared to have no significantrelationship on ICT business value when analysed by industry group.
10.2 Study findings and previous research
Our findings have parallels in previous work, which is significant considering the differentapproaches adopted in other studies. This study complements work carried out both at a moredetailed level, as in the case studies in the Ovum Report (NOIE 2003b) and the higher leveleconomic analyses where the internal workings of an organisation are generally not examinedin any detail.
A key finding from the Ovum Report was that organisations can gain significant productivitygains from ICT use, when ICT implementation was effectively managed. The findings of theOvum study regarding what constitutes effective practice with regard to ICT managementhave striking similarities with what has been termed ‘ICT-aware’ management in the currentstudy. Key findings of the Ovum study were as follows.
• All of their exemplar organisations approached ICT implementation with clear goals,matching our finding that ICT investment impetus was the primary determinant ofwhether a high rating was given to the value obtained from ICT.
120 Achieving value from ICT: key management strategies
• ICT allowed goals to be achieved beyond productivity alone, including organisationalchange, improved services, changes in skill capabilities and improved communication.The Ovum study suggested that there is a wide range of potential benefits from ICT.There are clear parallels here with the inclusive nature of perceived overall benefits fromICT in the current study—involving all of informational, strategic, transformational andtransactional benefits.
• Attention to ICT project management was important—again, an important factor foundin the current study.
• Flexibility in achieving unexpected benefits was important—found in the current studyalso and referred to as ICT opportunism.
• The exemplar organisations studied were as much directed to organisational change andtransformation as they were to productivity. In the current study, organisational
transformation factors were found to be closely related to perceptions of ICT value as anoutput measure. The current study also found that several factors treated as predictorvariables, namely the integration of ICT across existing business processes and thegaining of vital ICT skills, were significantly related to a composite measure of ICT value.These predictor variables are additional indicators of the importance of organisationalchange and learning with ICT.
The current study also adds to evidence from a growing weight of literature that has usedeconomic analyses to study the link between ICT and productivity. Early studies questionedthe contribution of ICT to productivity in what was termed the Productivity Paradox.
Further studies (for example Brynjolfsson 1993; Brynjolfsson & Hitt 2000a, 2000b) havesuggested that this apparent paradox can be explained by a time lag between investment inICT and the achievement of potential benefits. Organisational change and transformation isrequired over time in order for benefits of substance to be achieved. The close relationshipbetween organisational transformation measures and other forms of benefit in the currentstudy add to the findings from these studies with different methodologies.
10.3 Final summation
To sum up, the results of this study suggest that achieving business value from ICT is largelywithin an organisation’s control. The achievement of value from ICT is not significantlydependent on what industry the organisation is in, or what size it is.
What is required most importantly is ‘ICT investment impetus’ derived from ‘ICT-aware’management with a good understanding of the possible benefits that investments in ICT canbring about and the manner in which the realisation of transformational benefits can occurover time. The study reveals that organisations that treat ICT as a serious management matterwill achieve better value from ICT.
Achieving value from ICT: key management strategies 121
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Achieving value from ICT: key management strategies 127
Annex A: Summary ofsurvey instrument
Section 1—Business details
Structure of organisation
• An Australian organisation with only one location
• An Australian organisation with more than one location
• A branch or a part of an overseas organisation
• Other
Respondent position in the organisation
• Owner/Partner
• Senior Executive
• Manager
• ICT Director/Manager
• Other
Industry within which the organisation operates
• Agriculture, Forestry and Fishing
• Manufacturing
• Electricity, Gas and Water Supply
• Construction
• Wholesale Trade
• Retail Trade
• Accommodation, Cafes and Restaurants
• Transport and Storage
• Communication Services
• Finance and Insurance
128 Achieving value from ICT: key management strategies
• Property and Business Services
• Government Administration and Defence
• Education
• Health and Community Services
• Cultural and Recreational Service
• Other
Number of full-time equivalent employees working in the organisation (in Australia):
• ____________
Would your organisation fall in the category of a government or not-for-profit
organisation? __________
• Yes
• No
• Don’t know/Not sure
In which category would your organisation’s total sales in the last financial year fall in?
• $500 000 or less
• Between $500 001 and $1 000 000
• $1 000 001 and $5 000 000
• $5 000 001 and $10 000 000
• $10 000 001 and $50 000 000
• $50 000 001 and $100 000 000
• $100 000 001 and $500 000 000
• $500 000 001 and $1 000 000 000 or
• $1 000 000 001 or more
• Don’t know/Not sure
In which category does your organisation’s total budget for the last financial year fall in?
• $500 000 or less
• Between $500 001 and $1 000 000
• $1 000 001 and $5 000 000
Achieving value from ICT: key management strategies 129
• $5 000 001 and $10 000 000
• $10 000 001 and $50 000 000
• $50 000 001 and $100 000 000
• $100 000 001 and $500 000 000
• $500 000 001 and $1 000 000 000 or
• $1 000 000 001 or more
• Don’t know/Not sure
Does your organisation use computers?
• Yes
• No
• Don’t know/Not sure
Listed below are categories of your organisation’s spending ability. Could you give an
indication as to know how much your organisation spent in the last financial year on
information and communications technology? Could you also include all the costs of
buying, using and maintaining computer and telephony hardware, software and
communications including all bills such as telephone bills.
• Less than $10 000
• Between 10 001 and $20 000
• $20 001 and $100 000
• $100 001 and $200 000
• $200 001 and $1 000 000
• $1 000 001 and $2 000 000
• $2 000 001 and $10 000 000
• $10 000 001 and $20 000 000 or
• $20 000 001 or more
• Don’t know/Not sure
130 Achieving value from ICT: key management strategies
Section 2—ICT resources
Would you know approximately the number of years your organisation has been using
computers: ______________
• Don’t know/Not sure
Can you indicate the number of devices or terminals with screens for data use across the
whole of your organisation? Could you also include PCs, laptops, and other devices used
for data transmission to and from business application: ________________
• Don’t know/Not Sure
Listed below are processing categories for usage of ICT. Would you say that your
organisation has the following ICT or uses ICT for each of the following processes:
• Have a standard desktop operating environment, which would include consistent versionsand types of desktop systems, applications and security across the organisation: (Yes___/No ___/Don’t know)
• Have remote or mobile terminals or devices for data transmission. An example couldinclude handheld mobile meter reading devices, but would not include laptop computers:(Yes ___/No ___/Don’t know)
• Have internal networked applications, such as an Intranet, ERP, CRM, or other specialistbusiness applications: (Yes ___/No ___/Don’t know)
• Have email for external business communications: (Yes ___/No ___/Don’t know)
• Have access to the Internet for the purpose of searching for information: (Yes ___/No___/Don’t know)
• Have an organisation website that can be viewed by the general public: (Yes ___/No___/Don’t know)
• Use electronic purchasing: (Yes ___/No ___/Don’t know)
• Use electronic banking and make electronic bill payments: (Yes ___/No ___/Don’t know)
• Conduct electronic sales: (Yes ___/No ___/Don’t know)
• Receive electronic payments: (Yes ___/No ___/Don’t know)
• Integrate business processes electronically with suppliers or customers: (Yes ___/No___/Don’t know)
If you have answered with a ‘yes’ to the categories in the previous question, can you
indicate how long ago your organisation first implemented this?
• Less than 6 months ago
Achieving value from ICT: key management strategies 131
• Between 6 months and 1 year ago
• Between 1 year and 2 years ago
• Between 2 years and 3 years ago
• More than 3 years ago
• Don’t know/Not sure
Using a scale of 1 to 10, where 1 is ‘strongly disagree’ and 10 is ‘strongly agree’, how much
do you agree or disagree that your organisation has met all its expectations for e-business.
• Your score is ______
• Don’t know
Does your organisation have an internal unit or department specialised in ICT? This
question includes organisations that have an employee who is recognised as being
responsible for ICT within the organisation thus it does not include employees who are
occasionally or informally asked for ICT advice.
• Yes
• No
• Don’t know
How many full-time equivalent staff are there in your specialised internal ICT unit or
department? _________
• Don’t know/Not sure
On a scale of 1 to 10, where 1 is ‘strongly disagree’ and 10 is ‘strongly agree’, how much
do you agree or disagree that your ICT staff have an adequate understanding of business
issues for your organisation?
• Your score is ______
• Don’t know
Where do users in your organisation get day-to-day ICT support from? Consult the
categories listed below and indicate accordingly.
• An internal unit or department specialised in ICT
• Other staff specialised in ICT
• Staff member(s) who is/are not specialised in ICT
• A consultant, contractor or organisation or outsourced provider
• Other
132 Achieving value from ICT: key management strategies
Can you indicate from the categories listed below, what proportion of your organisation’s
total spend on ‘day-to-day ICT support’ across all its Australian locations is outsourced,
that is, provided by people employed by another organisation. You will note that this
question refers to ICT ‘support’—i.e. computer help lines but does not include contractors
who are employed as virtual full-time employees.
• Nil
• Between 1 per cent and 20 per cent
• 21 per cent and 40 per cent
• 41 per cent and 60 per cent
• 61 per cent and 80 per cent, or
• Between 81 per cent and 100 per cent
• Don’t know/Not sure
Can you indicate from the categories listed below what proportion of your organisation’s
total spend on ‘ICT software development’ across all its Australian locations is outsourced?
• Nil
• Between 1 per cent and 20 per cent,
• 21 per cent and 40 per cent,
• 41 per cent and 60 per cent,
• 61 per cent and 80 per cent, or
• Between 81 per cent and 100 per cent
• Don’t know/Not sure
Does your organisation currently outsource ‘any’ of its ICT activities ‘off-shore’?
• Yes
• No
• Don’t know/Not sure
Taking into account all aspects of your outsourcing arrangements, including scope, cost
and service, how successful or unsuccessful are your organisation’s outsourced ICT
arrangements? Please answer on a scale of 1 to 10 where 1 is completely unsuccessful and
10 is completely successful.
• Your score is _____
• Don’t know/Not sure
Achieving value from ICT: key management strategies 133
Section 3—Environmental influences
This question concerns the industry influences impacting your organisation. Can you
indicate from the categories below, on what basis, do your competitors mainly compete in
your industry? You may rank your answer in order of importance.
• Price of products or services
• Functionality or products or services, including the range and features
• Reliability of products or services, including the quality
• Convenience of products or services, including the accessibility and timeliness
• Don’t know/Not sure
• Not applicable (i.e. government or monopoly)
Section 4—Organisation and management
When your organisation plans, implements or invests in ICT, does it do any of the
following (as listed below). In answering this question, please use the following codes—
Never (01), Rarely (02), Sometimes (03), Often (04) or Always (05).
• Use a formal project management methodology
• Develop formal business cases for ICT investments
• Have post-implementation reviews of ICT investments
• Employ external change management specialists
• Have the capacity to recognise and achieve significant additional benefits that wereinitially unanticipated
• Achieve valuable increases in ICT skill levels within the organisation
• Engage in formal business strategic planning
• Engage in formal ICT strategic planning
• Seek to be an industry leader in adopting new ICT
• Establish formal contractual arrangements for ICT investments
• Integrate new ICT into existing business processes across key functional areas
Listed below is a list of reasons for investing in ICT. On a scale of 1 to 10, can you specify
how important or unimportant each was as a reason for your firm investing in ICT over the
past 12 months. Using the scale, 1 is extremely unimportant and 10 is extremely important.
• Keeping up with competitors
134 Achieving value from ICT: key management strategies
• Being forced to do so by trading partners, such as suppliers
• Customer expectations
• Changes to regulatory and other government requirements
• Establishing or enhancing a competitive advantage
• Taking advantage of an unplanned opportunity
• Reducing costs
• Gaining efficiencies
Who makes the key decisions about expenditure when your organisation plans for ICT
investments?
• An internal unit or department specialised in ICT
• CEO, Managing Director or Owner
• The manager or director from the relevant business or department where ICT will be used
• A cross functional committee or team
• Board of senior managers
• Other
Section 5—Business value of ICT use
Your answer to this question is required by using a scale of 1 to 10, where 1 is strongly
disagree and 10 is strongly agree. Would you agree or disagree if over the last 18 months,
your use of ICT has contributed to strategic business benefits including the following
categories.
• The creation of competitive advantage
• Aligning ICT strategy with business strategy
• Establishing useful links with other organisations such as suppliers
• Enabling the organisation to respond more quickly to change
• Improving customer relations
• Providing better products or services to customers
Would you agree or disagree, if over the last 18 months, that your use of ICT contributed to
informal business benefits including the following categories.
• Enabling faster access to information
Achieving value from ICT: key management strategies 135
• Enabling easier access to information
• Improving management information for strategic planning
• Improving information accuracy
• Providing information in more useable formats
Would you agree or disagree, if over the last 18 months, that your use of ICT contributed to
transactional business benefits including the following categories.
• Savings in supply chain management
• Reducing operating costs
• Reducing communicating costs
• Avoiding the need to increase the workforce
• Increasing return on financial assets
• Enhancing employee productivity
Would you agree or disagree, if over the last 18 months, that your use of ICT contributed to
benefits associated with organisational change including the following benefits.
• An improved skill level for employees
• Developing new business plans
• Expanding the capabilities of your organisation
• Improving business models
• Improving your organisational structure and processes
Section 6—Inhibitors to effective ICT use
From the list of issues below, do you feel that any of the ones mentioned significantly limits
the value that can be obtained by ICT for your organisation?
• The cost of ICT
• A lack of education and training in ICT use across your organisation
• A lack of good technical support
• Insufficient information about technology based opportunities
• A lack of an overview of ICT used across the whole organisation
• A lack of adequate telecommunications infrastructure
136 Achieving value from ICT: key management strategies
• Concern about computer virus and security attacks
• A lack of compatible systems amongst trading partners (such as suppliers)
• Increasing complexity from ICT change
• Entrenched work practices and structures
• A lack of co-operation between competitor organisations within your industry
• Customer unwillingness to use ICT
Can you describe if there have been any issues that have limited the value of ICT for your
organisation?
• __________________________________________________________________
Section 7—For organisations without computers
What is the main reason for your organisation not using a computer?
• I don’t know how a computer could help me in my organisation
• I don’t believe a computer would help me in my organisation
• I think computers cost too much to purchase
• I don’t have the skills or training to be able to use a computer
• It would take too much of my time to learn to use a computer
• Other
Would you be interested in receiving a copy of this survey?
• No
• Yes
If you wish to receive a copy of this survey, could you please list your personal details
below. In the first instance, a copy of the report will be provided to you electronically;
however, a paper copy will also be mailed to your address:
Further to the completion of this series of telephone interviews, we are planning to conduct
a number of in-depth interviews to further explore business use of ICT. Could you give an
indication as to your interest in participating in the said interviews.
• No
• Yes
Achieving value from ICT: key management strategies 137
If you are interested in participating in the in-depth interviews, we ask that you provide us
with your details which will be recorded separately from your answers to ensure
confidentiality.
138 Achieving value from ICT: key management strategies
Annex B: Summary ofstructured interviews
Introduction
This section of the interview deals with the factors that lead to successful implementation of
ICT (information communications technology) in Australia. Do you have any questions or
queries you wish to raise at this time?
• __________________________________________________________________
We would like to have some detailed information about the background of your
organisation. These details will take the form of the questions that follow.
Organisation background/context information
What does your organisation do?
• _______________________________________________________________
What is your current role within the organisation? How long have you worked in this role
and how long have you worked for the organisation?
• _______________________________________________________________
Can you describe your organisation’s management structure? Can you specify if whether it
is centralised, decentralised or federated?
• _______________________________________________________________
Can you describe your organisation’s management practices? To answer this question it
might be easier to gauge your answer towards the following: Is performance orientated
management used? What leadership practices are in place? Are there flexible structures in
place? Are people working in the same location? Are collaborative projects/ventures used?
• ________________________________________________________________
Achieving value from ICT: key management strategies 139
We are interested in your organisation’s values and how things are done there. Can you
describe the work culture in your organisation?
• ________________________________________________________________
ICT use or implementation example
These questions will be repeated for a second example of ICT use or implementation, if
time permits.
The next few questions are about ICT uses or implementations that have been significant in
your organisation. Can you tell me about one implementation or use of ICT that had a big
impact within your organisation.
• ________________________________________________________________
In regards to the implementation/use you described above—can you specify how this was
managed and organised. Can you describe the actions taken.
• ________________________________________________________________
Was your organisation ready for the implementation or use of this technology? Can you
specify in what ways was it ready or not ready and why?
• ________________________________________________________________
How was the use and/or implementation of this technology managed within the
organisation? Can you specify if whether Governance, Project Management or Change
Management was used.
• ________________________________________________________________
Can you describe what happened, what actions were taken and how that was achieved?
• ________________________________________________________________
How has that use/implementation impacted the organisation? Do you know what results
were achieved from implementing/using this technology?
• ________________________________________________________________
Why were these results important to your organisation? What value did they provide?
• ________________________________________________________________
140 Achieving value from ICT: key management strategies
Do you believe that management practices affected the outcome?
• ________________________________________________________________
What was learned from this experience?
• ________________________________________________________________
What would you do differently?
• ________________________________________________________________
How did the organisation change as a result of this use/implementation of ICT? Did it
assist the organisation to change? If so, how?
• ________________________________________________________________
Were the changes planned before the ICT use/implementation, or did it bring about the
changes? Would you know if it facilitated or enabled the change?
• ________________________________________________________________
Closing remarks
This section relates to your organisation in general. Over the past two years, would you
describe the performance of your organisation in one of the following categories.
• Improved _________
• Declined _________
• Remained static _________
Using the categories below, in your opinion how has this performance been affected by
ICT?
• Improved or enabled __________
• Detracted from __________
• Had no effect __________
Achieving value from ICT: key management strategies 141
Current challenges
What do you believe is the one most important challenge facing your organisation today?
• __________________________________________________________________
How could ICT help with this challenge?
• __________________________________________________________________
Finally—the wrap-up
We thank you for your valuable time and assistance. Your comments and opinions are
greatly appreciated. Finally, do you have any other questions in relation to the information
we have already covered?
• __________________________________________________________________
142 Achieving value from ICT: key management strategies
Annex C: Regression treesmethodology
Classification and Regression Trees are a modern, non-parametric alternative to classicalstatistical modelling techniques, such as logistic regression. Their advantages include the lackof a required a priori choice of model structure for the predictor scales and interactions, theease of incorporation of observations with missing covariate values and the simplicity of theresultant prediction formulae.
Classification trees are commonly used in statistical discrimination problems, for predicting towhich of several groups a particular observational response will belong based on the values ofother measured covariates. Regression trees, based on a similar partitioning of the covariatespace, can be used to predict a continuous response on the basis of other covariates(predictors). Like simple parametric regression techniques, regression trees attempt to obtain agood fit to the data by minimising an overall distance between the observed data and the fittedvalues, but unlike standard parametric regression models, regression trees do not provide asmooth function fit but rather a ‘rectangular tiling’ response surface. While such a responsesurface may seem unnecessarily ‘rough’, it can provide a good fit to the data and it has clearadvantages over classical regression procedures in finding and assessing the importance ofinteractions between explanatory variables in explaining the response. Regression tree modelsmay be visualised very easily using a tree structure, while classical regression models may bevery difficult to visualise for high-dimensional data. Moreover, regression trees are easy to fitand interpret with almost any combination of nominal, ordinal and continuous explanatoryvariables.
A regression tree determines a ‘sequential binary partition’ for relating a continuous responsevariable to various predictors by recursively partitioning the predictor space into rectilinearregions within each of which the response is predicted to be constant, the overall fitconstrained to minimise a sum of squared residuals. Suppose we have observed data
11 21 1 1 12 22 2 2 1 2( , , , , ), ( , , , , ), , ( , , , , )d d n n dn nX X X Y X X X Y X X X YL L K L , n observations of the
explanatory variables 1 2( , , , )dX X XL and a response variable Y. At the initial step, the
regression tree algorithm assumes the regression surface to simply be constant over thesample space:
1
1
1ˆ( , , ) ,
n
d i S
i
g x x Y In =
=K
where 1, , dx xK represents a vector of predictors, I is the indicator function, and S represents
the entire sample space of covariates. Next, the regression tree algorithm chooses one of the
covariates, say kX , on which to split. If kX is continuous or ordinal, a constant a (either a
real number in the case of continuous data, or one of the ordered values of x in the case ofordinal data so that the concepts x a and x a> are well-defined) is chosen, and the
Achieving value from ICT: key management strategies 143
covariate space is partitioned into two subspaces, { }1 1, , ;d kS x x S x a= K and
{ }2 1, , ;d kS x x S x a= >K . If kX is nominal with possible values { }1, , qC CK , then some
subset { }1, , qI C CK is chosen and the covariate space is partitioned into two subspaces, ,
{ }1 1, , ;d kS x x S x I= K and { }2 1, , ;d kS x x S x I= K . In either case, within each
subspace 1S and 2S , the regression surface is estimated as a constant,
{ } { }1 2
1 2
1
: :1 2
1 1ˆ( , , ) ,
#( ) #( )i i
d i S i S
i x S i x S
g x x Y I Y IS S
= +K
where #( )R denotes the number of elements in a set R. The variable kX chosen as the
splitting variable is chosen so that the residual sum of squares
{ }2
1
1
ˆ ˆ( ) ( , , )n
i i di
i
R g Y g X X=
= K ,
is minimised. Now, the algorithm continues by further splitting 1S and 2S and fitting
constants to the resultant subspaces either until the number of data points in each subspacebecomes too small or until the residual sum of squares becomes too small. The result is arecursive partitioning of the covariate space into rectangular tiles, and the fitted responsesurface is like a series of flat planes fit to the tiles.
Since the partitioning scheme is recursive, each successive split of the predictor space isconditional on all those made previously, so that interactive or non-linear structures in therelationship between the predictors and the response can be captured automatically. Inaddition, since the splits are simple bifurcations along predictor axes, the process is invariantto monotonic re-scalings of the predictors (so that whether a predictor or, say, its logarithm isused has no effect on the resultant analysis). The structure of a decision tree is easilyinterpretable, leading to insights into the data that are not as easily gleaned from classicalparametric analyses without a more detailed mathematical understanding of their modelstructure.
Of course, regression tree procedures such as those described above have some obviousdrawbacks. Notably, they have a tendency to over-fit the observed data. As such, it isimportant to effectively ‘prune’ the originally constructed tree, in order to reduce its size andincrease its applicability outside the set of observed data on which it was based. Such pruningalso acts as a de facto variable selection phase of the tree modelling process, as somepredictors may not appear in the determination of the partition once the tree is suitablypruned. Pruning is generally accomplished by trading-off the degree of fit (as measured by theresidual sum of squares) within each of the individual elements, or ‘leaves’, of the treepartition against the complexity of the final tree model. Specifically, for all possible sub-treesof the original tree, a cost-complexity measure:
ˆ ˆ ˆ( ) ( ) ( )R g R g g= + l
144 Achieving value from ICT: key management strategies
is calculated, where ˆ( )gl is the number leaves of the tree corresponding to the fit g . The sub-
tree that minimizes ˆ( )R g is then selected as the final pruned tree. The complexity parameter,
, is chosen so that the resultant tree has a pre-specified size, and its selection is best carried
out via cross-validation.
Cross-validation proceeds by fitting trees of various sizes using, say, 90 per cent of theobserved data, referred to as a training set (represent the set of indices of data points in thisset by T), and then testing the adequacy of their fit using the remaining 10 per cent of the data,the validation set (represent the set of indices of data points in this set by V). As the size ofthe fitted trees increases, the problems of over-fitting the training data will become moresevere, and this will be reflected by poorer predictive performance in the validation data, asmeasured by the prediction sum of squares statistic:
{ }2
1( ) ( , , ) ,i i di
i V
R g Y g X X=% % K
where g% represents the response surface fit using the regression tree algorithm on the training
data. As the size of the tree models increases, this prediction sum of squares will initiallydecrease, but eventually begin to increase, and this turning point represents a reasonableestimate of the optimal choice of tree size. The most common implementation of cross-validation is termed random 10-fold cross-validation. It proceeds by splitting the full set ofobservations into ten randomly allocated equal-sized groups and then using each of the 10different collections of 9 groups (i.e., the 10 different datasets arrived at by dropping onegroup in turn) separately as training sets with the appropriate remaining group used as thevalidation set. Prediction sums of squares are then totalled across the ten different analyses.Such an approach mitigates the effects of unfortunate choices for the training and validationsets, whereby artefactual aspects of the data appear only in either the training or validation set.Another advantage of this implementation of cross-validation is that it gives a useful measureof external assessment of the tree model. Each of the ten trees of the size eventually chosen asoptimal can be used to predict for their appropriate validation sets to arrive at measures ofaccuracy that are independent of the fitting process.
Finally, another major advantage of regression tree models is their ability to readily handlemissing data. This can be accomplished in various ways (Venables & Ripley). The method ofchoice for this analysis is the use of surrogate splits. A surrogate split is a secondary decisionrule, to be used if an observation has a missing value for the primary covariate that determinesthe split associated with any particular node (Ripley, B 1996). Surrogate splits are chosen tomatch the outcome of the primary split as closely as possible among those observations forwhich the primary covariate value is not missing.
Achieving value from ICT: key management strategies 145
Annex D: Factor analysis—business value
Factor analysis methodology
Generally, understanding and summarising high-dimensional data is a difficult task, andmethods that allow the creation of lower-dimensional analogues for high-dimensional datastructures are valuable for both understanding and visualising patterns in high-dimensionaldata. Factor Analysis and other techniques such as Principal Components Analysis arestatistical methods for effectively reducing the dimensionality of multivariate data. Suppose
we have n measurements on a d-dimensional variate 1, , dX XK . The assumption underlying
factor analysis is that the observed data can be well-described in terms of a small number ofunderlying factors common to all d variables along with a set of specific factors each uniqueto the corresponding original variable. Mathematically, for a single-factor model, one mightwrite
1 1 1
2 2 2
d d d
X
X
X
= +
= +
= +
M
where represents the common underlying factor, 1, , dK measure the extent to which each
value X is represented by the common factor , and 1, , dK represent the specific factors
unique to the original individual X ’s. If each of the original variables iX along with the
common factor , is standardised, then the variance of iX can be expressed as
2 21 ( ) ( ) ( ) ( ),i i i i iVar X Var Var Var= = + = +
and so the terms 2
i can be interpreted as the proportion of variation in iX accounted for by
the common factor . If we denote the variance of i by 2
i , then the proportion of the
variability in iX accounted for by the common factor can be expressed as 21 i , and is
called the communality of iX . The success of a single-factor analysis solution can be thought
of in terms of how well the single factor captures the total variability in the original high-dimensional space. If the total proportion of variability captured is reasonable, then the singlefactor can be thought of as a reasonable one-dimensional analogue of the original high-dimensional space, at least in a variance sense. If a single-factor solution does not captureenough of the total variability, in other words, if the original high-dimensional space cannotbe simply thought of as deriving from a single, underlying factor, then multifactor solutions
146 Achieving value from ICT: key management strategies
can be sought. The goal of such solutions is similar to that of a single-factor analysis—toproduce an ideally small set of common factors that capture well the statistical behaviour ofthe original, high-dimensional space. The multiple factor model is similar to the single-factormodel except it has a number, t, of underlying factors that together capture a reasonableproportion of the original high-dimensional space:
1 1 1
1
2 2 2
1
1
t
t t
j
t
t t
j
t
d dt t d
j
X
X
X
=
=
=
= +
= +
= +
M
for some pre-determined value of t. If a reasonable proportion of the variability in the originalhigh-dimensional space is accounted for by the t factors, then the t-factor solution might bethought of a effectively reducing the dimensionality of the original covariate space to a lower-dimensional space with similar properties to the original space, up to a set of ‘unique’ factors(represented by the ’s) that cannot be adequately explained in the context of common,
underlying factors.
The calculation of such factors addresses the major problem with high-dimensional data thatit is hard to visualise and understand by providing low-dimensional analogues that can deliversimilar information to that existing in the original, high-dimensional state. The calculation offactors in factor analyses is relatively straightforward, and is based on a similar mathematicalalgorithm to that used by Principal Components Analysis (where the total variation in a high-dimensional space is partitioned into successively smaller parts, each a linear combination ofthe original variables, and each orthogonal to all previously estimated variance components).Principal components analysis (PCA) is based on the singular value decomposition of thecorrelation matrix of the original data, R , a process that may be viewed as seeking rotationsof the original multivariate space so that the resultant directions (corresponding to newvariates called the Principal Components) successively partition the overall variance in theoriginal space. So, the first principal component reflects the linear combination of the originaldata that possesses maximum variance among all linear combinations of the data; the secondprincipal component reflects the linear combination of the data that has maximum variancesamongst all linear combinations of the data orthogonal (perpendicular) to the first; and so on.In this way, PCA can be thought of as a way of considering a small number of new variables(the principal components) that capture the bulk of the variation in the original data. Thecalculations for factor analysis are similar, except that the correlation matrix used in PCA(which has the value 1 for all diagonal elements), is replaced by a matrix R , similar to R
except that the diagonal elements are the communalities 2 21i i= rather than simply 1. The
reason for this difference is that the variance to be explained by the factors is not the totalvariation inherent in the original high-dimensional space, but rather the variation remainingonce the specific factors (those representing features of the data not attributable to common,underlying factors) have been taken into account. In assessing the required number ofcommon factors, it is usual to consider the singular value decomposition of R , and consider
Achieving value from ICT: key management strategies 147
the corresponding eigen values that are significantly different from zero.
Another critical component of factor analysis is that of interpreting the new factors thatemerge from the analysis. Ideally, each factor could be easily characterised in terms familiarfrom the original problem, though this outcome can be difficult to achieve. Part of thecalculation of factors in factor analysis is the computation of ‘factor loadings’, a by-productof the singular value decomposition, and interpretable as the correlation between the
individual variables iX and the underlying common factors. Interpreting the common factors
is usually a matter of observing on which of the original variables each factor loads highly(say 0.6 or above), and trying to find meaning in the resultant combination of variables (forexample, in a food example, where one variable is ‘saltiness’ and another is ‘sugariness’, afactor that loads highly on this pair of variables might be characterised as relating to ‘taste’issues, and so might be called, simply, Taste). Obviously, this process can be rathersubjective, but the goal is to represent high-dimensional data using a lower-dimensionalanalogue that captures the essential features of the original high-dimensional space as far aspractical.
Business value
In the analysis summarised for this project, several factor analyses were carried out tosummarise both the space on which the response variable was based, and, subsequently toparts of the covariate space in order to find meaningful constructs on which modelling couldbe based. In order to construct a response variable for the study, data was collected onbusiness ratings on 22 survey questions, and the goal was to isolate one or more responsevariables that captured the essence of these 22 original variables.
Several factor analyses were carried out in an attempt to reduce the dimensionality of themultivariate response, with both single-factor and four-factor solutions eliciting reasonableand interpretable forms. For the single factor solution, the proportion of variability in theoriginal 22-dimensional space captured by the one-dimensional common factor was 49.1 percent, a reasonably high proportion for a single-factor solution. The loadings produced for thisanalysis are summarised in the following table. Note that the factor loads highly on every oneof the 22 original variables, so that the factor is correlated highly and roughly equally witheach one of the original variables. Because the single-factor solution loaded roughly equallyon each variable, the factor might be interpreted as, simply, business value.
148 Achieving value from ICT: key management strategies
Table D.1: Factor loadings—single factor solution
Variable32 Loading
Strategic—sbccmpad 0.698
Strategic—sbcictbus 0.702
Strategic—sbclinks 0.635
Strategic—sbcchng 0.768
Strategic—sbccustrel 0.731
Strategic—sbcbetterprod 0.691
Informational—ibbfast 0.663
Informational—ibbease 0.686
Informational—ibbmgt 0.702
Informational—ibbacc 0.714
Informational—ibbuse 0.703
Transactional—tbbsav 0.655
Transactional—tbbredopcst 0.704
Transactional—tbbredcommcst 0.616
Transactional—tbbnoincwkf 0.562
Transactional—tbbincret 0.711
Transactional—tbbempprd 0.730
Org Transf—ocimpskill 0.725
Org Transf—ocnewbusplan 0.727
Org Transf—ocexpcap 0.751
Org Transf—ocimpbusmod 0.742
Org Transf—ocimpstruc 0.770
In this case, the response variable used in further analysis would be the factor scores arisingfrom this one-factor solution. For a thorough mathematical description of factor analysis andassociated factor scores, see, for example, Analyzing Multivariate Data by Lattin, Carroll and
32 Refer to Table D.3 for a description of each code.
Achieving value from ICT: key management strategies 149
Green (Thomson 2003)33. A second, readily interpretable solution to the factor analysis was a4-factor solution. The loadings arising from that analysis are summarised below.
Table D.2: Factor loadings—four-factor solution
Variable34 Factor 1 loading Factor 2 loading Factor 3 loading Factor 4 loading
sbccmpad 0.226 0.308 0.628 0.236
sbcictbus 0.278 0.325 0.565 0.226
sbclinks 0.245 0.292 0.397 0.330
sbcchng 0.413 0.325 0.532 0.249
sbccustrel 0.275 0.272 0.659 0.256
sbcbetterprod 0.216 0.230 0.707 0.234
ibbfast 0.784 0.148 0.235 0.154
ibbease 0.798 0.179 0.265 0.125
ibbmgt 0.577 0.314 0.194 0.316
ibbacc 0.704 0.278 0.154 0.293
ibbuse 0.718 0.209 0.264 0.202
tbbsav 0.148 0.526 0.305 0.346
tbbredopcst 0.200 0.750 0.262 0.216
tbbredcommcst 0.217 0.581 0.271 0.164
tbbnoincwkf 0.190 0.628 0.151 0.162
tbbincret 0.213 0.611 0.321 0.290
tbbempprd 0.365 0.523 0.276 0.291
ocimpskill 0.343 0.311 0.337 0.461
ocnewbusplan 0.222 0.289 0.342 0.644
ocexpcap 0.332 0.258 0.435 0.485
ocimpbusmod 0.240 0.333 0.281 0.679
ocimpstruc 0.409 0.316 0.266 0.565
33 Lattin, J, Carroll, J D & Green, P E (2003) Analyzing Multivariate Data. Brooks/Cole – Thomson Learning, Pacific Grove,
CA.34 Refer to Table D.3 for a description of each code.
150 Achieving value from ICT: key management strategies
The pattern of loadings for each factor gives rise to a clear interpretation. The first factorloads highly on those variables pre-determined to be related to the construct of informationalbusiness value; the second factor loads on only those variables pre-determined to be related tothe construct of transactional business value; the third factor loads on only those variablespre-determined to be related to the construct of strategic business value; and the fourth factorloads only on those variables pre-determined to be related to the construct of value arisingfrom organisational change or transformation. Natural themes for the factors are, therefore,informational business value, transactional business value, strategic business value, business
value associated with organisational change. For this solution, the proportion of variabilitycaptured by the four factors was 61 per cent.
Table D.3: Description of codes
sbccmpad Strategic business benefits—the creation of competitive advantage (1–10)
sbcictbus Strategic business benefits—aligning ICT strategy with business strategy (1–10)
sbclinks Strategic business benefits—establishing useful links with other organisations such as suppliers (1–10)
sbcchng Strategic business benefits—enabling the organisation to respond more quickly to change (1–10)
sbccustrel Strategic business benefits—improving customer relations (1–10)
sbcnewprd Strategic business benefits—providing new products or services to customers (1–10)
sbcextcust Strategic business benefits—extending your customer base (1–10)
sbcbetterprod Strategic business benefits—Providing better products or services to customers (1–10)
ibbfast Informational business benefits—enabling faster access to information (1–10)
ibbease Informational business benefits—enabling easier access to information (1–10)
ibbmgt Informational business benefits—improving management information for strategic planning (1–10)
ibbacc Informational business benefits—improving information accuracy (1–10)
ibbuse Informational business benefits—providing information in more useable formats (1–10)
ibbpricemgt Informational business benefits—providing better information for pricing management (1–10)
tbbsav Transactional business benefits—savings in supply chain management (1–10)
tbbredopcst Transactional business benefits—reducing operating costs (1–10)
tbbredcommcst Transactional business benefits—reducing communication costs (1–10)
tbbnoincwkf Transactional business benefits—avoiding the need to increase the workforce (1–10)
tbbshrtprdc Transactional business benefits—shortening product cycles (1–10)
tbbincret Transactional business benefits—increasing return on financial assets (1–10)
tbbempprd Transactional business benefits—enhancing employee productivity (1–10)
ocimpskill Organisational transformation—an improved skill level for employees (1–10)
ocnewbusplan Organisational transformation—developing new business plans (1–10)
ocexpcap Organisational transformation—expanding the capabilities of your organisation (1–10)
ocimpbusmod Organisational transformation—improving business models (1–10)
ocimpstruc Organisational transformation—improving your organisational structure and processes (1–10)
Achieving value from ICT: key management strategies 151
Annex E: Structuredinterview coding
Several were developed to categorise the data obtained through the structured interviews.The following table shows the list of codes, and the number of examples of each categoryarising during the structured interviews.
Table E.1: List of codes and their density
Code (quotation density)
00 Interviewer (46) ICT Use—Centralised data (1) ImplementationManagement (54)
ImplMgt—IT Support (internal) (2)
00 Participant ID (48) ICT USE—Change BPR (1) Implementation Practices ImplMgt—Lessons (53)
01 Org—Core Business(50)
ICT Use—Delayed/unexpctd bnft(5)
ImplMgt—Best Practice (1) ImplMgt—Mgmnt Support (19)
01 Org—Culture (68) ICT Use—Effect of Mgmnt prctcs(2)
ImplMgt—Business Case(1)
ImplMgt—Outsourcing (38)
01 Org—Evolution (1) ICT Use—Effect of Org culture (4) ImplMgt—ChallengeExpertise (1)
ImplMgt—PjMgmnt (36)
01 Org—Managementstructure (52)
ICT Use—Effect on Customers (6) ImplMgt—ChangeManagement (13)
ImplMgt—Planning (8)
01 Org—Mgmnt Practices(38)
ICT Use—Effect on Org change (2) ImplMgt—Collaboration (4) ImplMgt—Process mapping (1)
01 Org—Personal role(43)
ICT Use—Effect on Org performnc(3)
ImplMgt—Communication(18)
ImplMgt—Risk Mgmnt (2)
01 Org—progress last 2years (42)
ICT Use—Major Example (54) ImplMgt—Consltnt/vndrsupport (17)
ImplMgt—Roles + Responsibilities(4)
01 Org—Vision (11) ICT Use—networking/connectivity(1)
ImplMgt—Cost (1) ImplMgt—Skills dev/transf (4)
Competitive forces (1) ICT Use—Next implementation (2) ImplMgt—Documentation(4)
ImplMgt—Stakeholders (2)
Competitiveness (1) ICT Use—Org Learning (11) ImplMgt—Financial (1) ImplMgt—Teams (17)
First to market (1) ICT Use—Org Readiness (56) ImplMgt—Governance (17) ImplMgt—Test Mgmnt (2)
ICT Future Use (16) ICT Use—Organisational impact (3) ImplMgt—ImplProcesses(4)
ImplMgt—Training (15)
ICT Purchasing Decision(3)
ICT Use—Reluctance to change (6) ImplMgt—incentives/rewards (1)
ImplMgt—Users Partnering (1)
ICT Use—Ad hocdevelopment (1)
ICT Use—Vendor culture (1) ImplMgt—InternalDevelopment (3)
ImplMgt—Users support (4)
ImplMgt challenge—Configuration (2)
Org Challenge—IT Convergence(2)
Org Impact—BusProcesses (17)
Org Impact—Inf Mining/reporting(33)
152 Achieving value from ICT: key management strategies
Code (quotation density)
ImplMgt Challenge—Expectations (1)
Org Challenge—Knowledge Mgmnt(5)
Org Impact—Bus-ITG gap(1)
Org Impact—Information sharing(24)
ImplMgt Challenge—infrstrc projts (1)
Org Challenge—Marketing services(1)
Org Impact—Cash flow (1) Org Impact—Meaning—imprvmnt(1)
ImplMgt challenge—Merger (5)
Org Challenge—Mergers (2) Org Impact—ChangeMgmnt (8)
Org Impact—Personnel (19)
ImplMgt Challenge—MgtPractcs (3)
Org Challenge—Mobile computing(2)
Org Impact—Co. Image (5) Org Impact—Planning/forecasting(5)
ImplMgt Challenge—Resistance (9)
Org Challenge—Opertnl excellence(2)
Org Impact—Commerc.advantage (1)
Org Impact—Profitability (9)
ImplMgt Challenge—Skills level (8)
Org Challenge—Opportunts identif.(1)
Org Impact—Communications (16)
Org Impact—Quality (9)
ImplMgt Challenge—TechIssues (4)
Org Challenge—Profitability (6) Org Impact—Competitiveness (4)
Org Impact—Rewards/incentives(1)
Org Challenge—Becoming National (1)
Org Challenge—Regltry compliance(2)
Org Impact—Confidence (6) Org Impact—Security (2)
Org Challenge—BrkngOrg barriers (1)
Org Challenge—Security (3) Org Impact—Cost (20) Org Impact—Service Delivery (10)
Org Challenge—ChangeMgmnt (3)
Org Challenge—Succession (1) Org Impact—Crossfunctionality (1)
Org Impact—Service level (13)
Org Challenge—Communication (7)
Org Challenge—Technlgy mngmnt(9)
Org Impact—Culture (9) Org Impact—Teaching/training (1)
Org Challenge—Competition (3)
Org Challenge—Training (4) Org Impact—e-comerce (2) Org Impact—Technical ICT (23)
Org Challenge—Copyrght-pcy laws (2)
Org Challenge—Workplace safety(1)
Org Impact—Efficiency (49) Org Impact—Training (3)
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