Impact of Strategic Information Systems in Abu Dhabi

SIS and Competitive Advantage

SIS is used to support an organisation’s strategic decision making and for driving, formulating, supporting, and implementing strategy (Doyle, 1991). And in practice, the strategic use of IS has been found to create competitive advantages by linking organisations with their customers and suppliers through efficient information sharing between them (ibid). Further, SIS has created higher information processing capabilities for industry collectively which any member firm in the industry could not achieve on its own (Norris & Demeter, 1999). This is because SIS can strongly influence the way in which an organisation performs its individual activities and can improve the linkages both within and between the organisations (McFarlan, 1984; Wiseman, 1984).

The terms ‘Strategic IS’ and ‘Competitive IS’ appear to be confusing in the literature (Cavaye & Cragg 1993, p.126). This is because IS applications are used for developing internal strategy for the purpose of improving an organisation’s internal operations which in turn contribute to the development of the organisation’s competitive strategy (ibid). From a study of fourteen SIS-based organisations Neo (1988) concluded that many SIS that are internally oriented evolve eventually have a competitive orientation. Cavaye & Cragg (1993) assert that SIS that is internally oriented can lead an organisation to enhance its product and service offerings which in turn would lead the organisation to become much more competitive. Furthermore, many empirical studies indicate that SIS applications are used at the internal strategy level and at the competitive level as well as at the overall business portfolio level (King & Sabherwal, 1992). SIS thus has both an internally strategic role and a competitive strategic role (Cavaye & Cragg 1993).

Modern organisations today develop and use SIS to obtain and gain a comparative competitive edge over other firms (O’Brien, 2004). And competitive edge may be gained through rendering better services than the competitors at lower costs (Reponen, 1993, cited in Turunen & Kämäräinen, 1999).

Although the competitive advantage can be sustained only till the competitors build a better or similar SIS, yet a firm can still obtain significant differentiation from its competitors through its distinct organisation structure or superior management of institutional context (Turunen & Kämäräinen, 1999). The public sector organisations, in particular, have unique structure in terms of group-organisation structure and common integrated organisational functions (ibid). The presence of these unique elements in the public sector organisations generally helps them to sustain competitive advantage (ibid). When the information system of the public sector organisation is integrated with these elements it not only lead the firm to gain sustainable competitive advantage, but also would make it extremely difficult for the competitors to replicate the IS (ibid).

From their study of eighty-one SIS, King and Sabherwal (1992) found that Strategic Information Systems can successfully provide cost advantages and differentiation. Likewise, there are sufficient evidences available to show that SIS has provided sustained competitive advantages (Cavaye & Cragg 1993).

Use of SIS in public sector enterprises can lead to gaining competitive advantages (Turunen, 1998). Instances of use of SIS for competitive advantage are when the information systems in organisations are (Ward & Griffiths, 1996):

Linking the organisation to its customers.

Creating effective integration of the use of information resources in the value-adding process and value-chain activities.

Giving the management useful information to help in developing and implementing appropriate strategy for the organisation.

It is imperative for the public sector organisations to sustain competitive advantage since the budgetary allocations are made by the Government to which other public organisations compete as well (Turunen, 1998).

The major goal of developing an SIS is to manage information systems effectively for improving operational efficiency, promote and deliver high quality products and services, and build strategic information resources to enhance organisation competency (Ward & Peppard, 2003). As a result, the key objective of SIS is to improve competitiveness by changing the nature or conduct of business through investments in IS/IT for obtaining competitive advantage (ibid). This key SIS objective is directly related to the organisation’s success as SIS can significantly contribute to successful organisational performance and further improvements can be obtained as well with the enhancements to IT capabilities that can lead to cost reductions (Wiseman, 1985).

In the context of the public sector, the major focus of the application of SIS is to serve the vital purposes of providing high quality goods and services for the citizens for promoting the economic development of nations and international trade to sustain socio-economic welfare (Palvia, Palvia, and Zigli, 1990). As a result, the use of SIS is indispensable for today’s organisations to support, shape, and implement organisational vision and missions as well as organisational policies and direction (ibid).

Strategic Information Systems Planning

An integral part of business planning and a subsystem of SIS, Strategic Information Systems Planning (SISP) is concerned with the efficient and effective use of organisation’s IS resources (Lederer & Sethi, 1996; O’Brien, 2004).

SISP is defined by Lederer and Sethi (1996, p.105) as, “the process of identifying a portfolio of computer-based applications to assist an organisation in executing its business plans and realizing its business goals”.

Research indicates that the top two major goals of SISP are to (Earl, 1993):

Align IS with the organisation’s needs, and

Search for opportunities for use of IT to create competitive advantage.

It is critically important to ensure that the strategic goals, aims, and objectives of the organisation should drive all the plans; and all the plans of the organisation should support the same strategy and goals to ensure alignment of IS with the organisation’s needs for creating competitive advantage (Grover & Segars, 2005). Since information systems have a strong potential to change the way a firm performs its activities it is imperative that any changes to IS must be aligned with the goals of the organisation (Li & Chen, 2001).

In many organisations today SISP is directly parallel to their business planning processes and it supports and facilitates the formulation of corporate strategy and in doing so SISP contributes to successful organisational performance (Earl, 1993; Grover & Segars, 2005).

According to King (1988) IS planning as used in todays organisation has evolved through three stages (see Figure 2):

Systems planning

Strategic Information Systems Planning

Information age.

Figure 2: Three-Stage Evolution of IS Planning

(Source: King, 1988)

King was the first researcher to model IS planning which paved the way for further researches (Teo & Ang, 2000; Li & Chen, 2001). King’s IS planning model is based on ‘input – process – output – impact’ shows organisational goals and organisational resources as inputs to the system that creates IS plan which is composed of the organisation’s IS mission, IS goals, and IS resource requirements which together is intended to produce positive impact on organisational performance (see Figure 3).

Figure 3: King’s IS Planning Model

(Source: King, 1988)

SISP today addresses planning not only at the strategic level but also at the tactical and operational levels and thus it handles information in many different ways (Grover & Segars, 2005). As a result more and more organisations are integrating their planning activities with SIS for effective information generation and dissemination for obtaining successful organisational performance (ibid).

SISP and Organisational Performance

Organisational performance covers the broad range between the organisation and management system for obtaining information for the purpose of driving strategy. The extent to which information systems actually contribute to obtaining the desired organisational goals and their effects on organisational performance, determines SISP effectiveness (Hamilton & Chervany, 1981).

Organisational performance, according to Huselid (1995), is the final outcome of the organisation’s effective use of its resources which produce improved financial benefits and contribute to organisational growth. Furthermore, organisations that possess distinctive competence have a higher likelihood of achieving successful organisational performance and organisational growth (Snow & Hrebiniak, 1980). Organisational performance can be ascertained from appropriate measures established for directing and monitoring activities in order to obtain desired outcomes (Huselid, 1995).

SISP processes are a vital component for organisational performance (Li & Chen, 2001). Since SISP is composed of systems and IS processes which are interconnected with the organisation it directly influences organisational performance (Ward & Peppard, 2003). Additionally, SISP processes include how an organisation performs its activities which in turn affect organisational performance (Grover & Segars, 2005).

Facing an ever changing external environment which also warrants internal organisational changes, organisations increasingly depend on SISP to rationalise their decision making with IS processes to provide strategic information. This is because IS processes establish communication networks to inform effective organisational decisions and to keep the organisation’s operations going on successfully (Neo, 1988). Management must design and develop SISP to ensure that the organisation’s operations are focussed toward customer-orientation in order to implement strategy effectively for a positive organisational performance (King & Sabherwal, 1992).

Higher likelihood of successful organisation performance is possible when the IS has been appropriately aligned with the firm’s competitive capacities and the management should ensure that their SIS incorporates this (Henderson & Sifonis, 1988).

Measuring Organisational Performance

Formal assessment processes are required to evaluate organisational performance. The Balanced Scorecard (Kaplan & Norton, 1996) is a widely used tool for planning and managing the performance of organisations and laterally for developing the business strategy (Ward & Peppard, 2003). Many organisations are using Kaplan and Norton’s Balanced Scorecard (BSC) framework to manage effectively and measure their IS/IT efforts (Keyes, 2005). Kaplan and Norton assert that traditional performance evaluation based on financial accounting parametres is insufficient and weak as they are historical. They argue that the traditional financial measures can be augmented by four key evaluation processes (see Table 1) which integrate a firm’s strategic goals with tactical and operational actions for improved assessment of organisational performance. The four interrelated evaluation measures for examining and assessing organisational performance are (Kaplan & Norton, 1996; 2000):

Financial

Customer

Internal Business Process

Learning and Growth.

Table 1: The Four Perspectives in a Balanced Scorecard

(Source: Kaplan & Norton, 1996)

For each of these four perspectives objectives can be established and key performance indicators (KPIs) assigned for each objective which leads to the information needed to measure organisational performance.

Given the current business strategy, the outputs from the construction of the Balanced Scorecard can enable organisations to carry out a rigorous assessment of their IS/IT requirements and prioritised IS/IT opportunities and thus facilitate SISP as well as assessing and evaluating organisational performance. This is because the KPIs within a BSC framework help monitor the feed-forward measurements to determine whether the objectives and work processes contribute to desired outcomes (Kaplan & Norton, 2000).