This presentation is prepared by Author for Perbanas Institute as a part of Author Lecture Series. It is to be used for educational and non-commercial purposes only and is not to be changed, altered, or used for any commercial endeavor without the express written permission from Author and/or Perbanas Institute. Appropriate legal action may be taken against any person, organization, or entity attempting to misrepresent, charge, or profit from the educational materials contained here. Authors are allowed to use their own articles without seeking permission from any person, organization, or entity.

1. © 2017 Arianto Muditomo All Rights Reserved
Copyright Notice:
This presentation is prepared by Author for Perbanas Institute as a part of Author Lecture Series. It is to be used for educational and non-
commercial purposes only and is not to be changed, altered, or used for any commercial endeavor without the express written permission from
Author and/or Perbanas Institute. Appropriate legal action may be taken against any person, organization, or entity attempting to misrepresent,
charge, or profit from the educational materials contained here.
Authors are allowed to use their own articles without seeking permission from any person, organization, or entity.

2. arianto.muditomo@2017
Referrences:
1) Baltzan, Paige 2014. Business Driven Information Systems. 4th Edition. New York: McGraw-Hill.
2) Pearlson, Keri E. And Saunders Carol S. 2013. Managing and Using Information Systems: A Strategic Approach. 5th Ed. Danvers:
John Wiley & Sons.
3) Turban, Efraim, Volonino, Linda, and Wood, Gregory 2013. Information Technology for Management. 9th Edition. Hoboken: John
Wiley & Sons. Chapter 12
4) Turban, Efraim, Strauss, Judy, and Lai, Linda 2016. Social Commerce: Marketing and Technology Management. Hidelberg:
Springer.
5) Xu, Jun and Quaddus, Mohammed 2013. Managing Information Systems: Ten Essential Topics. Amsterdam: Atlantis Press.
6) Turban, Rainer: Introduction to Information Systems Enablig and Transforming Business 2nd Ed., John Wiley & Sons.2009
7) Kenneth C. Laudon and Jane P. Laudon, Management Information Systems, Managing The Digital Firm, Pearson: Prentice Hall
2006
1
• Session #1: Information System in Business
• Session #2: IT Strategic Planning
• Session #3: Business Information System
• Session #4: Business Intelligence & Decision Support
• Session #5: Ethics, Privacy and Security
• Session #6: e-Business and e-Commerce
• Session #7: Knowledge Management
• Session #8: Enterprise Information System

3. arianto.muditomo@2017
LEARNING OUTCOME
2
§ Describe how the IT strategy supports business strategy, the strategic planning process,
and the role of IT steering committees.
§ Explain the importance, potential impacts, functions, and challenges of IT governance.
§ Explain the value of aligning the IT and business strategies, and how this alignment can be
achieved.
§ Describe IT operating plans, how sourcing strategies can improve performance, and the
risks and challenges of sourcing and offshoring relationships. Identify major types of
outsourcing, reasons for outsourcing, and the risks and benefits.
§ Explain the IT vendor selection and management processes, and how to achieve successful
relationships through the use of contracts and service level agreements.

4. arianto.muditomo@2017
3
§ What is the FOCUS of IT Strategy?
§ What are the differences between in-house and sourcing IT
strategies?
§ What are the major reasons for sourcing?

5. arianto.muditomo@2017
4
à Can an effective business strategy exist today without IT?
à Could nonprofits or government agencies fulfill their missions without a technology
strategy?
Succeed
• Substantial reductions in
operating costs and
• Improvements in agility.
Failure
• Failing to align IT to real
business needs and, as a result,
• Failing to deliver value to the
business.
....must be an integral part of the business strategy

6. arianto.muditomo@2017
Main Points:
1. Improve management’s
understanding of IT
opportunities and limitations
2. Assess current performance
3. Identify capacity and human
resource requirements
4. Clarify the level of investment
required
5
Deployment Strategy:
1. In-House Development
Systems are developed or other IT
work is done in-house, possibly
with the help of consulting
companies or vendors.
2. Sourcing
Systems are developed or IT work
is done by a third party or
Vendor (on-shore (domestic)
sourcing, offshoring, cloud
computing, and SaaS.)
Support the
business strategy
and objectives.
The focus of IT
strategy is on how IT
creates business value

7. arianto.muditomo@2017
= According to a survey of business leaders by Diamond Management & Technology
Consultants (diamondconsultants.com/ ), 87 percent believe that IT is critical to their
companies’ strategic success, but relatively few business leaders work with IT to achieve
that success.
§ Only 33 percent of business leaders reported that the IT division is very involved in the process of
developing business strategy.
§ Only 30 percent reported that the business executive responsible for strategy works closely with the
IT division.
§ When the IT strategy is not aligned with the business strategies, there is a high risk that the IT project
will be abandoned before completion.
§ About 75 percent of companies abandoned at least one IT project, and 30 percent abandoned more
than 10 percent of IT projects for this reason.
6
Several possible reasons why a high
percentage of IT projects are abandoned
• the business strategy changed,
• technology changed,
• the project was not going to be completed on
time or budget,
• the project sponsors responsible did not work
well together, or
• the IT strategy was changed to cloud or SaaS.

8. arianto.muditomo@2017
7
Business Strategy
sets the overall
direction for the
business.
IT strategy defines what
information, information
systems, and IT architecture
are required to support the
business and how the
infrastructure and services
are to be delivered.
IT–business alignment refers to the degree to
which the IT division understands the priorities of
the business and spends its resources, pursues
projects, and provides information consistent with
these priorities.

9. arianto.muditomo@2017
8
Strategies
Structures
Technologies
Strategies
IT Function’s
Business
Unit
Business
Unit
Business Unit
.......is aligning the IT function’s strategy, structure, technology, and processes with those of the
business units so that IT and business units are working toward the same goals.

10. arianto.muditomo@2017
= aligning IT strategy with organizational strategy (plus Business Strategy and IS
Infrastructure & Processes).
9
The Strategic Alignment model ofVenkatraman,Henderson and Oldach (1993) as a
framework to aligning Business,Organization,Infrastructure,Process and IT Strategy.
Because of the inter-relationship between IT and business strategies, IT and other
business managers share responsibility in developing IT strategic plans.

11. arianto.muditomo@2017
Figure 12.3 IT strategic planning process ([3] P.362)
10
The deliverables from the IT planning
process should include the following:
• an evaluation of the strategic goals and
directions of the organization and how IT is
aligned;
• a new or revised IT vision and assessment
of the state of the IT division;
• a statement of the strategies, objectives,
and policies for the IT division; and
• the overall direction, requirements, and
sourcing of resources.

12. arianto.muditomo@2017
§ Understanding IT and corporate planning.
A prerequisite for effective IT–business alignment is for the CIO to understand business
planning and for the CEO and business planners to understand their company’s IT planning.
§ CIO is a member of senior management.
The key to achieving IT-business alignment is for the CIO to attain strategic influence. Rather
than being narrow technologists, CIOs must be both business- and technology-savvy.
§ Shared culture and good communication.
The CIO must understand and buy into the corporate culture so that IS planning does not
occur in isolation. Frequent, open, and effective communication is essential to ensure a
shared culture and keep everyone aware of planning activities and business dynamics.
§ Commitment to IT planning by senior management.
Senior management commitment to IT planning is essential to success.
§ Multi-level links.
Links between business and IT plans should be made at the strategic, tactical, and
operational levels.
11

13. arianto.muditomo@2017
§ The purpose of IT governance is the creation of a management framework that
maximizes the value that an organization derives from IT in support of its strategic
objectives.
§ IT governance is about doing things right the first time around.
§ IT governance is part of a wider corporate governance activity, but has its own
specific focus.
§ The benefits of effective IT governance are reduced costs and damages caused by
IT failures; and more trust, teamwork, and confidence in the use of IT and the
people providing IT services.
§ IT governance is concerned with insuring that IT investments deliver full value
12

14. arianto.muditomo@2017
13
Support the
Strategy
Delivers
Value
Risk
Management
Resource
Management
IT
Performance
Management
Provides for strategic direction of IT
and the alignment of IT and the
business.
• Confirms that the
IT/Business
organization is
designed to drive
maximum business
value from IT.
• Oversees the
delivery of value by
IT to the business,
and assesses ROI.
Confirms that processes are in
place to ensure that risks have
been adequately managed.
(Includes assessment of the risk
of IT investments).
• Provides high-level direction
for sourcing and use of IT
resources.
• Oversees funding of IT at the
enterprise level.
• Ensures there is an adequate IT
capability and infrastructure to
support current and expected
business requirements.
Verifies achievement of
strategic IT objectives
by measuring IT
performance and
business value.
IT
Governance

15. arianto.muditomo@2017
14
The major reasons why organizations
are increasingly sourcing are:
• To focus on core competency
• It’s a cheaper and/or faster way to
gain or enhance IT capabilities.
• To cut operational costs.
• Offshoring has become a more
accepted IT strategy.
• Cloud computing and SaaS have
proven to be effective IT strategies.
CIOs are focusing more on outsourcing to deliver business value,beyond
the traditional areas of cost savings and operational efficiencies,in
response to an increasingly dynamic environment
(IBM, 2008)

16. arianto.muditomo@2017
§ What is the FOCUS of IT Strategy?
The focus of IT strategy is on how IT creates business value
§ What are the differences between in-house and sourcing IT strategies?
1. In-house development in which systems are developed or other IT work is done in-
house, possibly with the help of consulting companies or vendors.
2. Sourcing in which systems are developed or IT work is done by a third party or
vendor.
§ What are the major reasons for sourcing?
The major reasons why organizations are increasingly sourcing are:
1. To focus on core competency
2. It’s a cheaper and/or faster way to gain or enhance IT capabilities.
3. To cut operational costs.
4. Offshoring has become a more accepted IT strategy.
5. Cloud computing and SaaS have proven to be effective IT strategies.
15

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16
Customer-Centric
& Business IT
Strategies
Fact in brief:
Consumer Banking After the Financial Crisis
Based on a 2011 survey by the IBM Institute for Business Value,
researchers conclude that banks need:
§ To move beyond existing organizational silos, infrastructure
complexities, and other constraints—and toward an operation
centered on customers.
§ To leverage information and analytic tools to better manage risk,
pricing, channel performance, and returns.
Need to Reassess Business Strategy
Consumer banks need to reassess their business strategies because of the
following pressures and challenges.
• Banks face limited growth opportunities and stronger regulatory constraints
related to risk.
• Nonfinancial services organizations and social financing sites, such as
PayPal, Mint, and
• Prosper, are eroding their customer base.
• Most banking products and services have lower operating profits.
• Fierce competition has decreased revenues.
To address these pressures and challenges, consumer banks are devising
customer-centric business and IT strategies.

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17
à Consumer Banks Reinvent with New Business and IT Strategies

19. © 2017 Arianto Muditomo All Rights Reserved