Questions
Task One
The case study gives an overview of J.P Morgan Chase’s move back from outsourcing. Discuss their Information Technology and Information Systems Strategy in relation to their business requirements.
Task Two
From your own knowledge of System Theory and System Development practice, discuss methods, which might be used for developing new systems following the merger with Bank One.
Task Three
Effectiveness of the Information System for the organisation and its users should be considered.
Introduction
J.P Morgan Chase is a financial holding company. It is the second largest financial services firm in the United States. The firm operates in more than 50 countries. Its principal banking subsidiaries include J.P Morgan Chase Bank National Association, which is a national banking association with location in 17 states; and the Chase Bank USA, National Association. J.P Morgan Chase also operates
a principle non-banking subsidiary, J.P Morgan Securities Inc., which is an investment-banking firm in the United States. The firm runs additional set of businesses including its Private Equity and Treasury Businesses, corporate support companies, leasing companies, e-commerce companies, and a host of other financial services businesses.
In 2002 J.P Morgan Chase made a major strategic decision. The firm struck a deal with IBM to outsource a significant portion of its IT infrastructure. In September 2004 J.P Morgan cancelled the remainder of the outsourcing contract with IBM after only 21 months seem expected.
J.P Morgan Chase’s decision to reverse its IT Strategy, “Back-sourcing” its information technology, was triggered by a merger with Bank One Corporation in July 2004.
Analysts predict that J.P Morgan Chase would look offshore for outsourcing arrangements in the future but would follow a diverse multi-source model rather than agree to a mega deal with a single vendor.
Information Technology and Information Systems Strategy
All organisations operate within an environment that influences the way in which they conduct business. Strategy development is strongly influenced by considering the environment the business operates in. Environmental influences are broken down into two categories, firstly Microenvironment which is the immediate competitive environment, and the secondly the Macro-environment which is the wider environment.
For Information Systems and Information Technology strategy, the most significant environmental influences are those of the immediate marketplace, which is shaped by the needs of the customers and how services are provided to them through competitors and intermediaries and via upstream suppliers.
Information Systems have become essential for helping organisations deal with changes in the global economies and the business enterprise. Information Systems provide firms with communication and analytical tools for conducting trade and managing business on a global scale. Information Systems are the foundation of new knowledge based products and services in knowledge economies Such as J.P Morgan Chase and help firms manage their knowledge assets. Information Systems make it possible for businesses to adopt flatter, more decentralised structures and flexible arrangements of employees and management. Organisations are trying to become more competitive and efficient by transforming themselves into digital firms where nearly all core business processes and relationships with customers, suppliers, and employees are digitally enabled, just as J.P Morgan Chase tried to do.
There are five main key management challenges in building and using Information Systems. The first is designing systems that are competitive and efficient. The second is understanding the system requirements of the global business environment. The third is creating an information architecture and IT infrastructure that supports the organisations goals. The fourth is determining the business value of Information Systems and the fifth is designing systems that people can control, understand, and use in a socially and ethically responsible manner.
The Seven R’s
Paul Lickert refers to seven modern management imperatives as the seven R’s. The seven R’s highlight how an organisation must compete by using Information Systems strategy to respond to its external environment.
1. Reach – IS/IT both allow global competition and is required to compete; organisations need information and the tools to process it to allow quick, accurate response, anytime and anywhere; global competition implies information networks and inter-organisational systems
2. Reaction – IS/IT is needed to access and interpret customer feedback. Ti can be used to keep track of customers, products and projects – it is particularly important to bring order to data to facilitate fast and accurate response to so that managers will be able to anticipate customer needs to be flexible and quickly developed.
3. Responsiveness – there needs to be a rapid movement of product ideas to the market. Organisations need IS/IT to help manage this process: efficiency and speed as well as accuracy and reliability are required and information needs to be relevant and well formatted.
4. Refinement – More customer sophistication means increased turbulence in the market, so more information and the tools to manage and manipulate it are needed. Customers are better at communicating precise requirements, which means that niche market appear, grow and disappear rapidly. As a result increased breadth of information is required to create and market products. Also, customers respond well to systems that respond well to them.
5. Reconfiguration – As business processes need to evolve and adapt to market needs, there is a big impact on information resource requirements needed for organisational learning. Complex work structures generate complex data, and management support systems are needed to help manage continually evolving work patterns and structures. Also new architectures allow decentralisation of IS/IT and greater customer responsiveness.
6. Redeployment – Rapid redeployment of resources is required to meet the customer’s needs. An Organisation needs to able to visualise complex arrangements for resources and models to manage them. Therefore, it is necessary to maintain detailed, relevant information on resources at all times and be able to redeploy them. Information itself has become a competitive resource, as well as allowing more control over other resources.
7. Reputation – IS/IT can be used to support product development, testing, marketing and customer post-sale service. It can also help to reduce the gap between expectation and performance. Organisations need to enhance the quality and reliability of the product, and the Information Systems can help in such areas as quality benchmarks, measurement and group-based control techniques.
There are four tools used to provide a firm foundation for further analysis of the IS/IT strategies. Each tool examines in the context of the way in which it can be used to help derive an IS Strategy that is an integral part of an organisation’s business strategy.
1. Porter and Miller’s Five Force Model
Porter and Miller’s five-force model is a model for analysing the different external competitive forces that affect an organisation and how information can be used to counter them. These five forces can exert a profound influence on how business is conducted. If the model is to be used successfully, it will require a thorough analysis of the industry under consideration. Of itself, the resulting information will not automatically generate a business strategy for the organisation. However, it will create a vivid picture of the market environments within which the organisation is operating and provide some pointers towards avenues of further investigation.
The five forces are:
• Rivalry between existing competitors.
• Threats of new entrants.
• Threats of substitutes.
• Power of the Buyers.
• Power of the suppliers.
The value of this model is that it encourages an organisation to look inside itself in the context of the external environment.
Porter and Miller’s Five-Force Model
2. Porter’s Competitive Strategies
Related to his work on the five forces, Porter proposed three different competitive strategies that could be used to counter these forces, of which the organisation may be able to adopt one. Once a competitive strategy has been identified, all marketing efforts can be applied to achieving this and IS can help support the aim. The three competitive strategies are:
• Overall Cost Leadership – Firm aims to become the lowest-cost producer industry
• Differentiation – creates a product perceived industry-wide as being unique.
• Focus or Niche – This involves identifying and serving a target segment very well
There is also a possible undesirable outcome:
• Stuck in the middle – the firm is unable to adopt any of the above approaches arid, therefore, it is ultimately at the mercy of competitors that are able to offer these approaches.
3. Value Chain Analysis
This is an analytical framework of decomposing an organization into its individual activities and determining the value added at each stage. In this way, the organization can assess how effectively resources are being used at the various points on the value chain.
Value chain analysis makes a distinction between primary activities, which contributes directly to getting goods and services closer to the customer and support activities to take place.
Primary activities can be broken down into five areas:
• Inbound Logistics
• Outbound Logistics
• Operations
• Marketing and sales
• Service
Secondary activities fall into four categories:
• Corporate administration and infrastructure
• Human resource management
• Technology development
• Procurement
It is probably easier to see how IS can be applied within this model than in the five forces model.
4. Critical Success Factor
Critical Success Factors are measures that indicate the performance or efficiency of different parts of the organization. Good performance of processes measured by these factors is vital to the business unit or organization. This technique is one of the most useful for an organization in pinpointing what is its precise information needs.
Critical Success Factors will exist in every functional area of the business and they indicate those things, which must be done right if that functional area is particular, and the organization as a whole are to flourish. Critical Success Factors will also relate to the level within each functional area.
Once the Critical Success Factors have been determined across process and hierarchical levels, it is possible to consider the key decisions that have to be made if those Critical Success Factors are to be achieved.
Systems Theory & Systems Development Practices
There are nine principles of the dynamic systems development methodology.
1. Active user involvement is imperative
2. DSDM teams must be empowered to make decisions
3. The focus is on the frequent delivery of products
4. Fitness for business purpose is the essential criterion for acceptance of deliverables
5. Iterative and incremental development is necessary to converge on an accurate business solution
6. All changes during development are reversible
7. Requirements are baseline at a high level
8. Testing is integrated throughout the life cycle
9. A collaborative and cooperative approach between all stakeholders is essential
SSASM and the Waterfall Model
Although complex, SSDAM as a methodology only covers part of the system development process, as the name of methodology suggest, the emphasis is on the analysis and design. However, given the importance of having system requirements determined correctly before further developments take place, this is perhaps understandable. The attention is now turned on what the traditionalists would regard as very antithesis of a proper structure of methodology that is rapid application development.
The traditional waterfall or SDCL model as described previously was discussed in the context of a system that acquired using a bespoke development approach. For Package software, that application of the SDCL stages would be:
• Initiation
• Feasibility
• Analysis
• Design
• Build
• Implementation/changeover
• Maintenance and review
The RAD Approach
Avison and Fitzgerald (2002) outlined and approach to rapid application development, which embraces many of the principles outlined in the principles of the dynamic systems. For them, the RAD approach:
• Is based on evolutionary prototyping rather than the traditional lifecycle approach
• It identifies key users and involves them in workshops at the early stages of development
• It obtains commitment from the business users
• It requires the use of CASE (computer-aided software engineering) tools for system building.
Typical RAD activities include:
• Joint requirements planning (JRP) to determine high level management requirements
• Joint application design (JAD) using prototyping tools to explore processes, interface, screens, reports, dialogues, etc., which are then developed and modelled using entity modelling, dataflow diagrams, action diagrams and function decomposition diagrams
• Transformation of user design and code generation, often with the assistance of CASE tools
• A cut over phase involving more testing, functional level training, training for organisational change and adaptation, conversion, parallel running and, finally, live running.
The result of the rapid application development approach should be new information systems that more closely meet the requirements of the intended users, not least because the requirements will not have changed significantly over a relatively short development timescale.
For this reason I would recommend that J.P Morgan Chase use the RAD Approach to develop new systems following the merger with Bank One.
Effectiveness of Information Systems
Abrupt changes in the economic environment are forcing businesses to absorb and integrate new ways of delivering value to their customers. The opening of new markets, the increase in globalization, and the growth in cross-border mergers and acquisitions have focused the attention of many companies on how best to deliver their products and services across a complex network of suppliers, manufacturers, and intermediaries. Greater differentiation of products and services through an emphasis on customer service combined with the emergence of new technology has provided an incentive for many companies to rethink their business models.
At the same time, many companies are recognizing that, in order to provide global reach and local responsiveness, the traditional vertically integrated business model requires re-evaluation. To meet these growing challenges, more and more companies are looking to co-operate with their supply chain partners. In order to gain supply chain efficiencies, companies need to exchange large amounts of planning and operational data, ranging from information for annual contracts and periodic progress reporting to real-time delivery and invoicing data. The emergence of the Internet and new software applications has provided an opportunity for some companies to move towards an extended enterprise business model-one that enhances value across traditional corporate boundaries.
To support the transfer of information between supply chain partners there is a requirement to utilize technology in an effective way. But in the last decade, business information systems development has focused on internal process integration of traditional functions, such as sales, production, and materials management. The prime driver of this trend has been the implementation of Enterprise Resource Planning (ERP) systems, such as SAP R/3, Baan, and Oracle.
Managing Treats
In general terms, threats to information systems can be managed using basic approaches and techniques:
• Firewalls – Firewalls act as a barrier between an information system and the Internet. The software attempts to monitor and control all incoming and out going traffic in an attempt to prevent outsiders gaining access to the information system.
• Intrusion detection software – this type of software monitors activity on the network in order to identify intruders. Typically the software will look for characteristic patterns of behaviour that might identify the fact that someone has gained assess to the network
• AI software – many organisations have begun to develop applications that use artificial intelligence in order to detect intrusion attempts or unusual activity that might indicate a breach in security.
Bibliography
Bakos, J. Yannis, “Dependent Variables for the Study of Firm and Industry Level Impacts of Information Systems”, Proceedings of the Fifth International Conference on Information Systems, 1995 pp. 10-23
Barki, H and S.L. Huff, “Implementing Decision Support Systems: Correlated of User Satisfaction and System Usage”, INFOR, Vol. 28 No. 2, May 1990, pp. 89-101
Crowston, Kevin and Michael E. Treacy, “Assessing the Impact of Information Technology on Enterprise Level Performance”, Proceedings of the Sixth International Conference on Information Systems, 1986, pp. 299-310
Hirschheim, Rudy and Heinz K. Klein, “Four Paradigms of Information System Development”, Communications of the ACM, Vol. 32 No. 10, October 1989, pp. 1199-1215
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