Does A Relationship Exist Between IT And Business?
How Effective Is The Relationship For Companies?
In business strategic management, a technique of business unit divestiture is mostly employed. Basically, one organization’s acquisition is another one’s divestiture. There are lots of reasons for divestiture. However, some of the reasons include organizational focus changes, economic performance being weak and also capital needs. Other reasons as to why business organizations sell business units may also include contractual obligations or antitrust regulations. Up to now, as many as 20,000 divestitures have been conducted globally (Repko & Szostak, 2017). The total value of such processes exceeds an approximation of $900 billon. With regards to many acquisition and merger research projects, the IT function’s role in a “carve-out” process could be rather complex. The same function is likely to be of serious strategic and financial implications for the buyers and the sellers. Let’s take a case study of a company known as Roche Pharmaceuticals which experienced the same financial implications (Jones, 1991). In its case, the company was involved in the selling of vitamins division. During the process, it happened to have underestimated the IT disentanglement cost. The factor of underestimation was about twenty. Using our described case study and several other cases of risks business organizations undertake to achieve its objectives after activities of divestiture, we will discuss some of the responses business organizations make to curb the same challenges faced in such processes of carving-out. The responses we are interested in, in this case, are those that are focused on IT components.
This paper will have to describe the milestones and phases of an IT structured divestiture project as one means of meeting the objectives of the research. The description is then followed by outline of challenges by business organizations during divestiture contracts. The final step is sharing lessons learned with regards to proper IT structured carve-out project design and management. The identified issues of concern will be solved after the identification of IT divestiture project phases. Regarding the same, there are four IT carve-out project phases in a typical organization. As shown in figure 1 above, the first phase is Pre-Signing. This phase is whereby all preparations and negotiations are performed before signing of the divestiture contract. In the same phase, a “data room” is established. The room contains a large volume of files and folders. The folder or files have confidential information like contracts, financial data and information regarding employees and customers. The purpose of this room is to give the buyer a chance of conducting due diligence so as to have a basis for the contract at hand. The second phase is PreClosing. It is at this point that separation jobs get planned followed by the preparation of systems. The third phase is the Transition. This is the phase in which the bulk of separation activities get done. The post cutting phase is then the last in the hierarchy. This is the step in which the physical separation gets done (Sudhakar, 2012).
Research Questions and Research Aim
As mentioned before, this research proposal paper has discussed a typical carve-out project case study in the introductory section. However, the main activity involving the discussion of learnt lessons concerning IT management in divestiture of business units is yet to be done. The main objective of this paper is to solicit the feeling that business organizations have the potential of creating IT environments which are divestiture-ready through the preparation of IT-structured carve-out projects. All in all, the paper will prove that there exists a relationship between business and IT. By doing so, the paper shall have answered the following research question:
- IT Work Stream in Divestitures
The work stream of IT, in this case, is made up of four other sub-streams. These sub-streams include:
- IT Infrastructure
This sub-stream is made up of networks, desktop PC, voice, access issues of business partners and data centers.
- IT Applications
It is made up of data pertaining to GC applications, IPS applications, local and financial reporting applications.
- IT Organization
This sub-stream is made up of HR issues like key personnel.
- IT Contracts
This section is responsible for the assessment and identification of legal issues and licenses with regards to hardware and software transfer. However, there is another sub-stream that came to be added after complexities associated with IT sites. The sub-stream is:
- Country Coordination
It is associated with the management of carve-out impacts.
- IT Infrastructure
In the closing phase, the WAN separation, back-office services and voice operations are essential in the satisfaction of compliance requirements. The same are also vital in the delivery of IT services to buyers in the entire Transition phase. In the current business world, most organizations use SAP and Microsoft technology for groupware, e-mail and resource planning. Having the support services transferred is less problematic. As match as there could be separation difficulties at times, standard applications usage makes the system able to be moved with ease. The same also creates an easy integration route for IT support staff of any transacting companies (Limbach & Jong, 014).
There are a lot of revolutionary changes that have influenced the manner in which the business organizations employ IT in their operations. The major concern for most IT managers is the integration of IT in the development of strategies (Hammer & Stanton, 1995). To ensure success, many business organizations have strive to breach the gap of IT and business alignment through the application of different IT frameworks. One such framework is reengineering of business processes. Such processes are business activities with direct effects on customers. Almost every organization in the current business world has such a processes integrated in the company system. Some of these business processes include:
- Processing of orders
- Generation of invoices
- Payment of bills
- Provision of customer service
All the named processes can also be reengineered. The steps associated with efforts of reengineering of business process are outline in the table below:
During the activity of process reengineering, the business organization’s processes that require reengineering need to be identified. Some of the outcomes associated with processes of reengineering include:
- Profit increase
- Costs reduction
- Quality improvement
- Provision of better services.
For this particular activity, a reengineering team is needed. The process of reengineering also requires commitment from the management body. To ensure that the engineering process is smoothly executed, the engineer in charge is required to have a profile that includes:
- Perspectives that are holistic
- Team Player
- Communication Skills.
All the highlighted skills are what would ensure that the engineer performs successful process reengineering execution.
IT Role in Processes Implementation
In the whole business process reengineering activity, IT gets introduced in the implementation stage. Take for instance, companies dealing in the manufacture of automobile. Most of these companies had centers for design activities in a given location and canters for manufacturing activities in a different location. There was also a different location for marketing offices. In such a case, information had to be drafted from one center of operation to the other. The sending of information back and forth took a lot of weeks before the final process of manufacture commenced. However, the introduction of communications technology and IT has ensured that the transfer of information is faster than it used to be (Hammer & Stanton, 1995).
Information is sent to the Internet where every center requiring the same picks it from. In real sense, the turn-around time happens to be reduced through the employment of IT. It is the reengineering assignment output that then becomes the input for IT implementation. The above illustration shows that the integration of IT reduces the cycle time required to attend to customers. Other advantages associated with IT integration in reengineering processes include:
- IT being used to reduce turn-around time
- Reducing the chances of fraudulent activities
- Reducing corruption chances
- Assurance of increased precision and accuracy in case the IT systems are properly implemented
- Increased work quality in a reduced timeframe
- Increased work results quality
- Quick communication
- Faster information dissemination between stakeholders and customers
- Efficient tracking of progress using IT tools
However, for an organization to have all the highlighted benefits achieved, the employees have to be properly trained regarding the use of IT applications or any other technology likely to be employed. Upon determining that processes are able to automate, IT tools, software and hardware are able to be employed in the implementation of processes. It is the duty of IT project managers to supervise this stage. In case the IT systems happen to be ready, they are made available to employees and users within the organization. Some of the tools used in the implementation of IT systems in this stage include:
- Tools for project management
- Database technologies
- Voice and data communication technologies
- Networking technologies
- Web and ecommerce technologies
- Data Collection
The main aim of this paper is to outline a professional research proposal that gives a projection on the existing relationship between business and IT. From the same, the report will then answer the research question of whether the relationship between IT and business is effective for companies as it seems or not. To solicit the required response the paper bases its research activity on Australian data. According to the obtained information, there are key indicators regarding IT implementation in business processes. They include:
- Internet access
- Broadband usage
- Web presence
- Presence of social media
- Internet commerce
- Data Analysis
According to the above table:
- More than 50% of Australia’s business population reported a web presence.
- With regards to industrial report, a total of 76% of organizations with a web presence reported the availability of recreation services and arts. This was the highest proportion.
- Forestry agriculture and fishing industries gave 12% of organizations having a web presence. This happened to be the lowest proportion.
- Thirty-eight percent of Australian businesses reported presence of social media presence. However, sixty-three percent of business organizations with a social media presence happened to have recorded a range of 200 employees or more. Those organizations with twenty to two hundred workers represented sixty three percent.
- By the end of 2016, fifty-seven percent of business organizations used the Interne to placed orders.
- Another thirty-seven percent use the internet to receive orders. The income generated from such orders totaled to approximately $321 billion (Bhattacherjee, 2001).
According to the information provided in the table above:
- Forty-nine percent of businesses happened to be innovation-active in 2015-16 financial year.
- Fifty-eight percent of businesses in the retail trade, manufacturing and recreation/arts industries were innovation-active. This happens to be the highest proportion.
- Forty-three percent of business organizations came up with at least one kind of innovation.
- Regarding the introduced innovations, managerial or organizational processes produced the highest proportion which was 23%.
- Twenty-four percent of businesses had ongoing innovation development processes.
- Significantly improved or new marketing methods happened to be the innovation most likely to be under development with a 12% proportion.
Findings and Analysis
Basically, the conceptual framework and the hypotheses of the study got tested using regressions. In the same way, the antecedents’ effect on the level of IT employment got examined. From the obtained results, it is clear that IT embeddedness and project risk create a positive relationship with the usage of IT. We can also conclude that the level of IT usage portray the fact that project teams largely employ IT in case the project in question is vital to the organization and thus, its failure is likely to cause a detrimental impact on the organization. With the findings, we can support IT research activities arguing that project teams would collect and disperse information through the use of various IT tools. Such would be to ensure that risks are reduced as well as to enhance processes of decision making. The findings also show that there is a great importance of having workers who are committed and enthusiastic. These individuals should also be able to support and promote the use of given IT tools. The finding is in line with previous research findings regarding the significance of innovation adoption. All in all, a positive relationship between the extent of IT embeddedness and level of usage in business processes shows how much important the integration of IT is vital. The same is significant in the maximization of advantage.
In the analysis section, the data provided was used to examine IT usage antecedents. The same was also used to determine if the usage of IT influences product performance. From the result, an empirical evidence can be solicited that the level at which IT is employed has a large impact on overall managerial performance. As much as little evidence is provided regarding the level at which IT affects market speed, much is provided regarding impacts on product performance within the marketplace. We can, therefore, note that IT usage in organizations add more value every process. It is important to note that speed to market, in this case, happens not to be the rationale for investments; but rather, IT employment in processes like production among others. According to other research activities on the same, unless an organization employs IT in its processes and employee activities, benefits shall not be realized as expected (Armstrong &Sambamurthy, 1999). Therefore, business organizations that need increase the employment of given IT tools integrate and incorporate those given tools in their processes of development. Having these tools embedded in the efforts of product development involves:
- Provision of training
- Encouragement of champions
- Supply of support
- Use of particular tools
Projects or business organizations that fail in the outlined obligations always ?nd themselves using lots of cash on IT software and hardware with no benefits from such spending sprees.
In the abstract section, we discussed the fact that global multi-business organizations use the strategy of business unit divestiture to have their portfolios adjusted. However, these business unit divestiture originate from regulatory pressures, legal pressures or rather a response towards the ever changing business strategies. On the contrary, with the current acquisition and merger projects, many business organizations find themselves going for carve-out projects. These projects critically depend on IT systems thus they are likely to be excluded from processes of due-diligence (Anderson & Gerbing, 1991). From the same piece of information, this paper presented a typical carve-out project case study analysis (with regards to a business unit divest) and also discuss the learnt lessons concerning IT management in divestiture of business units. In the paper, we learnt that business organizations have the potential of creating IT environments which are divestiture-ready. By so doing, these organizations have themselves prepared IT-structured carve-out projects. All in all, this paper has outlined a professional research proposal aimed at proving a projection on the existing relationship between business and IT. The report has also answered the research question of whether the relationship between IT and business is effective for companies as it seems or not; basing the research activity on Australian data (Anderson & Gerbing, 1991).
Limitations and Recommendations
Our proposal happens to be subject to inherent limitations regarding cross-sectional designs with focus on single informants usage. On the contrary the question under discussion; the role of IT in business processes has contributed in the mitigation of this particular weakness. As much as the measures used in this discussion are acceptable, there is a possibility that they can be improved. Research activities to be performed in the future need to refine and incorporate such measures since they have just received theoretical attention but yet to obtain empirical attention. Research activities to be done in future should also have IT usage examined as a way of determining whether the IT usage antecedents and the relationship between performance and usage are speci?c to a given organization. Further investigation should also be performed to determine the relationship between speed to market and IT usage. Also, in as much as this research paper shows the in?uences of given contextual factors with regards to IT usage, research activities that would be performed in future need to analyze the existing dependencies between IT usage and antecedent contextual factors; and also between product performance and IT usage. Such cases should then be evaluated by modeling structural equations for the purpose of generating a picture that is more complete (Aiken & West, 1991).
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