IT Strategy at COM Air - Case Study Example

Running head: IS/IT Strategy at COM Air IS/IT strategy at COM Air s The papers aims at the analysis and evaluation of the IS/IT strategy of COM air a regional carrier airline based in US. The report undertakes the SWOT analysis and Value Chain analysis of the Information system practices at COM air and provides recommendations according to the ten principles of IT governance. The recommendations provided in the paper will a succinct summary to use as a primer, refresher, or checklist for redesigning the IT system at COM air. The report also emphasizes the alignment of the new IT system design with the IT governance system at COM Air. The second part of the report will examine different system development methodologies and will recommend the most suitable for COM air after careful analysis of pros and cons of these methodologies. 1. Introduction to COM air: The airline with an employee base of 7,000, serves approximately 30,000 passengers by providing daily flight to 113 cities. The company once an independent carrier service is now a subsidiary of delta airline. The company had a good reputation as far as its operations management was concerned. COM air was recognised for its superior performance in areas of profitability, time management, least flights cancellations and lower rates of lost luggage cases. The company faced adverse business conditions due to the failure of the crew management system at COM air. The report will analyse the loop holes in the alignment of the IS/IT strategy with the business strategy of the organisation. 2. Current Situation Analysis: In order to undertake the evaluation of the present condition of the IT and IS strategy of the company, SWOT has been undertaken which is presented in the table below: SWOT Analysis STRENGTHS Steady revenue, consistent profits. Leading position in statistical performance. Proper marketing - Installation of Delta marketing department at COM air. Enthusiastic staff. Frequent planning for upgrading of IT systems in the organisation on regular basis. WEAKNESSES Over-reliance on marketing despite the importance of upgrading in the IT system. Over-reliance on old version of crew management system Lack of proper IT efforts. Lack of co-ordination between IS, IT and business strategy. Absence of leadership in IT department. Lack of timely response to IT requirements. Lack of proper back up system. OPPORTUNITIES Proper co-ordination between the IT department and business management department resulting in shape of increased revenues. Successful implementation of SABRE software package. Design and implementation of advanced generation of crew management system. THREATS Competitors acquiring most up-to-date technology. Failure of system due to out dated technology. Current economic climate, Financial reforms with negative impact to middle and lower social classes' income - less spending on leisure activities Results to be achieved in future can be less than projected 3. Strategic Analysis: Strategy can be defined as the approach adopted by the company to look at the "big picture." As a matter of fact strategy is a complex term. A business entity persuades strategies at three levels: Functional Strategy - The value activities engaged in Business Strategy - How to fight the competition, tactics Corporate Strategy - What businesses should I be in Below we will undertake the strategic analysis of COM air at three levels: Functional, Business and Corporate. 3.1 Functional Strategy Functional strategies are those operational methods and "value adding" activities that management chooses for its business. The functional strategy adopted by COM air seems to lower costs as the company kept on using the outdated software in order to save the costs on the implementation of most advanced processing technologies. If the company felt vulnerable to be competitive in the market it has to adopt new technologies in undertaking its operations. 3.2 Business Strategy Business strategies are those battle plans used to fight the competition in the industry that a company currently participates in. They are on a higher level than functional strategies, but there is obviously an overlap between how a company operates and how it competes (Deephouse, 1999). COM air's business strategy has been to beat its competition by showing performance excellence and to undertake effective planning before crisis. The company has benefited through heavy spending on advertising. Using these strategies, the company has remained successful in preserving its market share and prevent new competitors from gaining a foothold in their industry despite the Information Technology failures faced. 3.3 Corporate Strategy Corporate strategy is the array of business opportunities available to be adopted by the management. The corporate strategy of COM air has led the company to further enhance its business by being a part of Delta airlines. The company's executives reviewed the airline industry's growth potential, the legal environment, and the increased awareness among customers and concluded that it was wise to be a part of a prestigious airline such as Delta. in more "healthful" businesses. Its purchases of General Foods, Kraft, and Miller Brewing were made with that corporate strategy in mind. Using the same strategy, R. J. Reynolds acquired Nabisco. 4. EXPANSION STRATEGIES In order to analyse the expansion strategy of a company one important theory which is used extensively is Ansoff Matrix. H. I. Ansoff created it in 1957 as a clear way to classify routes for business expansion. In order to meet the higher standards in its management procedures COM air leased software from SBS International to manage its crew. The company has a history of adopting newness in its strategy by introducing most modern aircraft named as Bombardier regional jet in 1992.of the product to the company and the firm's experience with the intended market. The "newness" of the product or market is determined by how "new" it is to the company contemplating the strategy, not by the age of the product or market itself. The power of the matrix lies in the fact that it can be used for any industry. Ansoff created a vocabulary to communicate a strategic direction in a few words. The Ansoff Matrix PRODUCT OLD NEW OLD Market Expansion Penetration (Product Development) MARKET NEW Related Diversification Unrelated (Market Development) Diversification [Source: Taken from "Strategies for Diversification" by H. Igor Ansoff, Volume 35, No.5 (Sept./Oct. 1957) ] Using a related diversification strategy, Hershey could develop a new bubble gum and sell it in the United States (new product, existing market). If it wanted to sell automobiles in Eastern Europe (new product, new market), that would be unrelated diversification. A company always has a menu of expansion options. The catch is that there has to be enough money and management time to expand effectively. If Hershey's management were to decide to expand in all four of the directions described above, they could end up with many businesses that are managed inadequately. There are only so many hours in an executive day. Even if managers could run the new ventures, the company might lack the cash to fund them adequately. 4.1 Principal Competitors: Major Competitors of the company include: AirTran Holdings, Inc.; AMR Corporation; ASA Holdings, Inc.; Continental Airlines, Inc.; Mesa Air Group, Inc.; Mesaba Holdings, Inc.; Southwest Airlines Co.; TransWorld Airlines, Inc.; UAL Corporation; US Airways Group, Inc. 5. Opinion In conclusion, the takeover strategy of COM air does not seems to be sound. Delta airline although implemented new marketing techniques and updated the existing marketing techniques but on the other hand it failed to align the IT strategy of the company with the business strategy Olam have considered the global demand for cotton and can see that enveloping QCH into their business will help fulfill that market demand. Also, by getting a foothold into the Australian market, Olam can then expand into other agricultural areas. The environmental conditions in Australia are expected to improve in the next year or so, which will increase share prices of Australian agribusinesses and therefore, Olam. By diversifying into more products in more countries, Olam can use the better profit making areas to buffer lower income producing areas, which will make Olam more sustainable in the future. All factors considered, Olam have done their homework and will soon be able to reap the rewards. 6. Further analysis of the IT strategy of organisation is undertaken below: 6.1. Inactive governance design: It can be observed that the IT governance system established at COM air was incongruent as it has been designed two decades ago. The designing activity of the governance system reduced the synergy level and limited the opportunities for strategic impact from IT. 6.2. Untimely system redesign: It's evident from the case study that the COM air did not timely replace or updated the software it initially leased from SBS named as SBS legacy system. The system programming language was FORTRAN, which was outdated at that time and the company did not had any expert available in house. Although the planning for the replacement was undertaken twice but it was delayed due to some unusual circumstances. 6.3. Lack of Involvement from senior managers: The involvement of the senior management of the organization is an important factor in the effective governance of IT in an organization. The organisation lost its leadership in the way to undertake change in the IT system of the company as Dublikar left the organisation. The leadership decisions became further complicated as COM air was acquired by Delta leaving the Chief Information Officer's functions undefined. The employees of the IT department failed to contribute as they didn't have the knowledge of the area where they had to play their part. 6.4. Lack of proper choices according to the Organisational strategy: The successful IT system requires to be designed according to the strategic choices of the company. In the case of COM air there was very slight co-ordination in the IT system and strategy of organisation. Although Dublikar kept in view the interest and needs of the organisation when exploiting technology and contracting the suppliers but he failed to maintain the continuity of the plans which led to disaster for the company. The IT and IS planning became ineffective as organisation persuaded conflicting goals. 6.5. Lack of exception-handling process: Every organisation experiences exceptions which eke the process of learning in the organisation. COM air did not have back up plans to handle the exceptions. This lack of back up support for exception handling badly affected the reputation of COM air which was created in years but destroyed in three days. 6.6. Lack of evidence regarding the incentives provision: According to Weill and Ross the incentive and reward system in an organisation should be aligned with the aims and objectives of designing the IT system. The case study does not provide any evidence regarding the alignment of HR function with IT strategy. 6.7. Lack of proper ownership and accountability for IT governance: As mentioned by Weill and Ross (2004) like any major organizational initiatives, IT governance must have an owner and accountabilities. According to the case study COM air stood to the point that the failure was the result of the harsh weather conditions. The company did not accept the fault of the two decades old system. It might be due to the delegation of responsibility or accountability IT governance design, implementation, and performance to significant person or group. 6.8. Lack of Governance design at multiple organizational level: The separated governance processes in different departments of the organisations does not seem to be connected with each other through different layers of IT governance. 6.9. Lack of transparency and education regarding the IT strategy: There is a lack of proper education and training according to the crew management systems being implemented at COM air as once it lead to the failure of the new system implementation of crew management. 6.10. Implement common mechanisms across the six key assets: the organization does not seem to have mechanisms which can govern any of the six key assets. The governance procedure in the organisation also failed to create synergy between all the processes. 7. Recommendations: The main issue facing the organisation is to improve the alignment between the IT strategy and the goals and objectives of the organisation. The management of the organisation should actively take part in the procedure. Without the proper support of the management the successful designing and implementation process of IT governance cannot be undertaken. Although it is not possible to actively redesign the overall governance mechanism but it is important to undertake mechanism reviews on regular basis. There is not any evidence of audit of IT strategy. It is highly recommended that the management should undertake assessment of IT governance system on regular basis in order to implement improvement processes in the crew management system. Although the challenges posed to COM air due to the lack of proper IT design and implementation helped the organisation in undertaking the improvement process but the experience cost a lot. These exceptions posed to the crew management system will help the organisation in increasing the efficiency of the IT structure. It is also imperative for Organisation to ensure the compliance of individual and corporate responsibilities according to the code of conduct provided by the US Government. All the departments across the organisation should have information regarding the accountabilities procedure. It is also recommended that the full scope of responsibility of Chief Information Officer of organisation is clearly defined. The formulation of governance procedure at higher level abets the designing the process of governance procedure at the lower level of organisation. The designing process of the governance arrangements at multiple levels will overt the connections and pressure points. The management of the organisation should provide all the stakeholders with a carefully devised manifesto explaining the governance processes undertaken in the organization. As mentioned by Weill and Ross (2004) " Transparency and education often go together-the more education, the more transparency, and vice versa". The report also follows the suit while recommending the introduction of policy and procedure for both data cleansing and data governance at Com air. The implementation of proper policies will have ramifications in shape of true knowledge regarding the data holdings and initiation of appropriate audit and compliance measures. The report goes further by recommending the identification and facilitation of good process sharing. It is also imperative for the organisation to undertake effective communication. The company should design a brief guidance manual while keeping the end user in mind. The feedback from the end users is also emphasised in order to suitably plan the future developments. The Authoritative policy documents should be supported by the description of the latest technological developments. The immediate arrangements should be undertaken in order to spread knowledge regarding the risks and mitigation procedures. In order to enhance the knowledge of employees the management should launch an awareness campaign in order to highlight the importance of information and data as a key operational and business asset, with appropriate attention devoted to exploitation and protection, within the law. The above mentioned governance principles followed in the report can improve the value of the IT governance procedure for the organisation. With all the other aspects the above mentioned principles emphasize the importance of leadership participation in IT value creation. It is also important to undertake change in the behaviour of the employees at the organisation according to the change in governance. The redesign in the governance system will although take some time but its effective implementation will lead to the final objective of making the security of data foul proof. The report recommends a change in the organisation perspective according to the direction in which the IT governance system is redesigned. Failure to do so will stultify the whole change process. Training and education all across the organisation is also suggested. A review on Data Protection and Information Management, and identifying the uptake by the relevant post-holders, in order to determine future training needs is also recommended. In order to effectively design the new system we will undertake the analysis of pros and cons of different system development methodologies. SDLC models Advantages & disadvantages Advantages of Waterfall Model 1. Clear project objectives. 2. Stable project requirements. 3. Progress of system is measurable. 4. Strict sign-off requirements. Disadvantages of Waterfall Model 1. Time consuming 2. Never backward (Traditional) 3. Little room for iteration 4. Difficulty responding to changes Advantages of Spiral Model 1. Avoidance of Risk is enhanced. 2. Strong approval and documentation control. 3. Implementation has priority over functionality. 4. Additional Functionality can be added at a later date. Disadvantages of Spiral Model 1. Highly customized limiting re-usability 2. Applied differently for each application 3. Risk of not meeting budget or schedule 4. Possibility to end up implemented as the Waterfall framework Advantages of Prototype model 1. Strong Dialogue between users and developers 2. Missing functionality can be identified easily 3. Confusing or difficult functions can be identified 4. Requirements validation, Quick implementation of, incomplete, but functional, application 5. May generate specifications for a production application 6. Environment to resolve unclear objectives 7. Encourages innovation and flexible designs Disadvantages of Prototype model 1. Contract may be awarded without rigorous evaluation of Prototype 2. Identifying non-functional elements difficult to document 3. Incomplete application may cause application not to be used as the full system was designed 4. Incomplete or inadequate problem analysis 5. Client may be unknowledgeable 6. Approval process and requirement is not strict 7. Requirements may frequently change significantly Taken from http://dobbscodetalk.com/index.phpoption=com_content&task=view&id=798&Itemid=85 7. References Deephouse, D. (1999). "To Be Different, or to Be the Same It's a Question (and Theory) of Strategic Balance." Strategic Management Journal 20: 147-166. Dyer, J.H., P. Kale, and H. Singh (2004). "When to Ally and When to Acquire." Harvard Business Review 82 : 108-116. H. Igor Ansoff "Strategies for Diversification" Volume 35, No.5 (Sept./Oct. 1957) Parmar, G., (2008). SDLC models Advantages & disadvantages, 10/20/08, retrieved as on May 8th, 2009 from http://dobbscodetalk.com/index.phpoption=com_content&task=view&id=798&Itemid=85 Peter Weill & Jeanne W. Ross, (2004). Ten Principles of IT Governance, Excerpt from IT Governance, a new book published by HBS Press. Read More