The delivery of Information technology services:
The cases of the united states and the netherlands
CIMS Working Paper Series 99-10
by
Judith R. Gordon
Associate Professor of Management
Boston College
Chestnut Hill, MA 02467
and
Steven R. Gordon
Associate Professor of Information Systems
Babson College
Babson Park, MA 02457
October, 1999
The delivery of Information technology services:
The cases of the united states and the netherlands
Abstract
This paper describes the delivery of information technology (IT) services in a sample of companies in the United States and The Netherlands. It compares the sample companies in these countries along four dimensions of IT services – setting of priorities, standard setting, development, and operations. It also examines how the delivery of IT services has been changing in recent years and how these companies have dealt with such change. Finally, it addresses the implications of these results for the delivery of IT services in a global environment and offers directions for future research.
The delivery of Information technology services:
The cases of the united states and the netherlands
The complex and dynamic environment most organizations face today has had significant implications for their structure. Overall, organizations have shifted from mechanistic, bureaucratic, structures with highly formalized reporting relationships and centralized decision making to organic, flexible structures with less formalized reporting relationships and decentralized decision making (Stebbins & Shani, 1998). As organizations restructure to respond to their unique environments, the way that they deliver information technology (IT) services also changes, and the organizational units responsible for the delivery of IT services change as well.
The organization structure of the IT function also reflects its leadership. Each executive brings an individual view on issues of control, locus of decision making, project management, and standard setting. IT executives may differ in their experiences of interacting with parts of the organization outside of the IT function. Some may have successfully involved business units in all facets of decision making, whereas others may have more effectively retained control of IT decisions.
Restructuring of the IT function, therefore, has become more common. For example, Procter & Gamble Company’s plans to replace regional business with global organizations devoted to individual product areas likely will mean increased centralization of IT staff (Scheier, 1998). In such restructuring, IT executives must consider questions such as the following:
· What structures do organizations implement to facilitate their response to today's dynamic market conditions?
· Do the structures differ for companies depending on their location?
· How have these structures changed over time?
· What structures work best for organizations?
Several years ago we began a study to help practitioners answer these questions. The first part of the research involved a pilot study of eight multinational companies. We interviewed the chief information officer or another top-ranking IT executive in each company to try to understand the interaction between IT and business units in the delivery of IT services. The data reported in this paper have been collected as part of this ongoing study of the delivery of information systems services.
Early research on the IT structure and delivery of IT services in multinational companies mainly focused on whether to locate the IT function at corporate headquarters or within geographical units (Alavi & Young, 1996; Burn & Cheung, 1996; Gibson, 1994; Karimi & Konsynski, 1991; Roche, 1992). The advantages of placing the resources directly into the geographical units provided an early model for locating resources into business units. Complementary research looked at the interaction of the IT function with the business units. It has focused primarily on issues of centralization versus decentralization of the IT function (Adhikari, 1996; Alter, 1990; Alter, 1996; Burn & Cheung, 1996; Dearden, 1987; Kim, 1989; Meyer, 1991; Moad, 1989; von Simson, 1990). (Alter, 1996), for example, concluded that the need for standardization and data sharing has prompted a return to more centralized IS organization, but one that involves business units in standard setting and spending decisions. (Burn & Cheung, 1996) similarly concluded that key to IS differences among firms in centralization and decentralization are the degree of data sharing among subsidiaries, the degree of corporate-wide data standardization, and the difference in maturity among subsidiaries. Research about the nature of the IT architecture (Gibson, 1994; Gibson, 1996; Sabherwal & Kirs, 1994; Sankar, Apte, & Palvia, 1993; Targowski, 1990) further elucidated issues related to the delivery of IT services. For example, (Gibson, 1996) and (Gibson, 1994) develop a statistically validated typology of global IT architectural structures by applying cluster and discriminant analyses to 63 global firms.
A greater focus on the centrality of business units in organizations has occurred during the past decade (Mazur, 1994; Sweeney, 1995; Westoby, 1996). The shifting of responsibility, expertise, and control to business units has accompanied this increased focus (Allen & Boynton, 1991; Cale, Kanter, & Saia, 1993; Cummings & Guynes, 1994). The results of our pilot study of eight U.S.-based multinationals supported the centrality of the business unit in IT service delivery (Gordon & Gordon, 1998a; Gordon & Gordon, 1998b). Business units created a vision and direction that served as a starting point for providing IT support. IT success depended on the business units feeling responsibility and accountability for IT processes.
Do business units have the same saliency for companies that are not multinationals and for companies outside the United States? How might the interaction of IT and business units be the same and how might these interactions differ in companies based in different countries? The research presented here continues to explore questions about the delivery of IT services addressed by out pilot study. We expanded our pilot study by collecting more systematic and comprehensive data about a range of companies in terms of size and industry in two countries. We chose the United States and the Netherlands for several reasons: the countries were relatively comparable in the development and use of technology; the industrial base of the two countries is relatively similar; the level of education of IT staff and executives is comparable and relatively high; and we had access to data in both countries. This sample lets us begin to evaluate structures both within and across cultures.
In the rest of this paper we first describe the study methodology. Then we discuss the results. Next we consider implications of the results for IT executives and departments and for business unit managers and employees. We conclude with some directions for future research.
The Study Methodology
We decided to use a survey to assess the nature of the interaction between IT and business units in four areas for the larger sample of companies. A survey method allowed companies to quickly describe each area along a variety of dimensions. For example, we asked about the allocation of resources and project management at both the corporate and local levels as a way of more fully understanding the setting of priorities in the company. The survey (see Appendix A) was designed to take no more than 30 minutes to complete. Respondents provided some basic information about themselves and their organization. Then they described various aspects of the allocation of responsibility in their organization for establishing IT priorities, setting IT standards, developing information systems, and conducting IT operations using both five-point Likert-type scales and checklists of responses. We also asked questions about the stability of their structure for delivering IT services, as well as its strengths and weaknesses.
We administered the survey by mail to two groups of respondents. We first mailed it to chief information officers of companies affiliated with the Center for Information Management Systems at Babson College. We asked them to complete the questionnaire themselves or to give it to another IT staff person who would better be able to respond to the questions. This group provided us with a diverse set of companies, as well as with a set of respondents who had expressed interest in research in information technology. We mailed 50 questionnaires and received 23 responses after using follow-up letters to those who did not initially return the surveys. Shortly after we completed this mailing we had the opportunity to mail the same questionnaire to a group of companies in the Netherlands as a result of our affiliation with the University of Amsterdam Prima Vera research group. We mailed questionnaires to 180 graduates of the masters degree program in Information Systems at the University of Amsterdam, but did not send follow-up reminders. We also asked them to pass it to another IT staff member if they would be better able to complete the questionnaire. We received a disappointing return – only 17 questionnaires. Because we relied on convenience samples, and the Dutch sample in particular had a low response rate, we primarily report the data descriptively in this paper and carefully draw preliminary comparisons between the two samples.
Respondents in both the U.S. and Dutch groups worked in a variety of industries, including high technology, manufacturing, healthcare, and government. They held an array of positions, including chief information officer, director of advanced technology, senior consultant, and IT manager. Table 1 presents the type of companies surveyed and
Table 1
Description of Respondents’ Companies
Percentage ofU.S. Companies (N=23) / Percentage of
Dutch Companies (n=17)
Type
Domestic / 35 / 35
Sell internationally, manufacture domestically / 9 / 0
Manufacture internationally, sell almost solely domestically / 0 / 0
Sell and manufacture internationally, but primarily domestic company / 9 / 12
International company / 9 / 29
Global company / 30 / 12
Other / 9 / 12
Revenues of Company
Greater than $1 billion / 39 / 41
$500 million to $1 billion / 30 / 0
Less than $500 million / 22 / 47
Data not available / 9 / 12
their revenues. About one-third of the U.S. companies were domestic and another one-third global, with the remainder having some international presence or activity. All but one of the U.S. companies that reported the data had revenues that exceeded $100 million. The Dutch sample also included about one-third domestic companies but only 2 companies had a global presence. Most had a more limited international presence. Revenue data were less available for the Dutch companies. Those companies that provided it more often had revenues between one and ten million dollars, suggesting that the Dutch sample included a larger percentage of small companies than the U.S. sample.
Looking at the internal structure of the U.S. and Dutch companies also suggests some similarities and differences. Table 2 reports the number of business units and the
Table 2
Structure of the Companies
Percentage ofU.S. Companies (N=23) / Percentage of
Dutch Companies (n=17)
Number of Business Units
1 / 13 / 12
2 / 5 / 6
3 or 4 / 26 / 18
5 or more / 57 / 65
Structure
Functional divisions / 35 / 29
Product line / 13 / 12
Geographical / 4 / 6
Matrix / 17 / 12
Virtual / 0 / 6
Hybrid / 13 / 18
Other / 17 / 18
structural configuration for the participating companies. Note that the largest percentage of both U.S. and Dutch companies has at least five business units, suggesting again their large size and complexity. The largest group of companies in both countries has structured their companies into functional divisions. Product line, matrix, or a hybrid of two types listed in Table 2 were equally common in the U.S. and Dutch samples. The overall picture that emerges is a sample of U.S. and Dutch companies dominated by global/international companies with revenues greater than $500 million, with multiple business units, and most often organized into functional divisions, product, matrix, or hybrid structures.
In looking at the data, we were interested in patterns that emerged to answer the following questions:
· Who was responsible – IT or business units – for setting priorities in allocating resources and scheduling projects?
· Who was responsible – IT or business units – for setting and enforcing standards?
· Who was responsible – IT or business units – for developing information systems?
· Who was responsible – IT or business units – for IT operations?
· How dynamic is the structure for delivering IT services?
The Results
Our pilot study suggested that the business unit was the focal point of the delivery of IT services in the eight multinationals we studied. Its vision served as the starting point for designing and providing IT support. Does this centrality of the business unit exist in a broader sample of companies? Table 3 suggests that business units have extensive autonomy in about one-third of the companies in both the United States and the Netherlands, not 100% as in the pilot study sample. In the broader array of companies surveyed, corporate headquarters exerts control over most major decisions in almost one-fifth of the U.S. companies and close to one-third of the Dutch companies. Decision making tends to occur collaboratively among corporate headquarters and business units in almost one-half of the U.S. companies and slightly less than one-third of the Dutch companies. Since the involvement of IT and business units in setting priorities, setting standards, developing systems, and overseeing operations occurs within the context of decision making in the company as a whole, we might expect more variation in the locus of these activities than in our pilot sample companies.
Setting IT Priorities
Our original study of eight U.S. companies indicated that business units uniformly set IT priorities. This was somewhat unexpected because historically IT’s specialized knowledge about available technology and its applications made it logical for them to set IT priorities. Within the context of the increased focus on the business unit observed in our pilot study, a change in responsibility for setting priorities seemed logical. Given the variation in the locus of decision making in the companies we surveyed for this study, unlike in the pilot, we expect that the responsibility for setting priorities may extend beyond business units. We attempted to determine who set IT priorities by having respondents assess their companies along four dimensions, as shown in Table 4: (1) resource allocation at the company-wide level, (2) resource allocation at the local level, (3) project scheduling at the company-wide level, and (4) project scheduling at the local level. We asked respondents to indicate the involvement of corporate IT and business units on a five-point scale, with 1 representing greatest involvement by the IT department and 5 greatest involvement by business units. We then grouped the responses into three categories: we classified a response of 1 or 2 as IT, 3 as mixed, and 4 or 5 as business unit.