The Implications of Information Technology Infrastructure Capabilities for Business Process Change Success

Although business performance has long been theoretically hypothesised to be dependent on the level of underlying Information Technology capability, there is a distinct lack of empirical studies to support this claim. In this paper we discuss preliminary results of ongoing research into the knock-on effects of computer network support to business process performance indicators. Based on a real-life case study of business process change, we develop simulation models that depict operations at three different levels of abstraction (business processes, Information System applications, and computer network support). Experiments with different levels of network utilisation generated by increased business workload provide empirical support to the hypothesis that IT capability can be a critical enabler (but equally a critical disabler as well) of business performance improvements. The Relationship between IT Capability and Organisational Performance Since it became acknowledged that organisations can be studied and analysed according to the business processes they perform (Scott Morton 1991), process-based organisational analysis and design has become a prominent matter of study in both the management science and Information Systems (IS) fields (Davenport 1993, Hammer and Champy 1993). Apart from the focus on processes, perhaps the most distinctive characteristic of contemporary change management approaches is the heavy importance they generally place on the role of Information Systems in enabling process change. For example, Davenport (1993) asserts that ‘by virtue of its power and popularity, no single business resource is better positioned than information technology to bring about radical improvement in business processes’. Many other researchers (for example, Galliers 1993, Grover et al 1994, Raymond et al 1995, Fielder et al 1995, Fuglseth and Gronhaug 1997) have dedicated significant amounts of work in addressing the critical role of IS in enabling and facilitating process changes in contemporary organisations. ∗ Corresponding Author: Tel: +44 1895 203259, Fax: +44 1895 251686, E-mail: [email protected] The reasons for such a heavy emphasis on Information Systems are not difficult to understand. During the last two decades, an unprecedented rate of development in computer hardware and software has created new opportunities for organisations to collect and analyse data, convert them into useful information, and utilise this information as a strategic resource able to bring competitive advantages (Porter 1985). This has given rise to new methods of conducting business that would have been unthinkable only a few years ago, for example electronic commerce (Kalakota and Whinston 1996). In practical terms, the proliferation of IS has resulted in enormous investments in such systems by most organisations (Business Week 1987). However, not all businesses have always been able to enjoy commensurate financial returns. Indeed, the widespread use of IS has coincided with lower macroeconomic figures of productivity and profitability in both the manufacturing and service sectors (Baily and Chakrabarti 1988, Roach 1991). Brynjolfsson (1993) has used the term ‘IT productivity paradox’ to describe the alleged inability of IS to deliver in practice the benefits they promise in theory. In an effort to explain this paradox, some researchers have pointed that IS have been mainly used to automate existing processes rather than as an opportunity for business process change (Hammer and Champy 1993). In other words, business processes are seldom structured with the possibilities of new technologies in mind and therefore the full potential of IS cannot always be realised. These observations have spawned significant amounts of research towards addressing the alignment of business process change and Information Technology introduction in organisations. The term ‘business engineering’, introduced by Meel and Sol (1996), has been used to refer to this dual design strategy. Business engineering can be defined as the integral design of organisational processes and the Information Systems to support them. According to Davenport and Short (1990), although business process design and Information Technology are natural partners, their relationships have never been fully exploited in practice. The authors define this relationship as a recursive pattern. On the one hand, it is naturally expected that the choice of a particular way of conducting business in an organisation will influence the design and structure of the Information Systems to support this process. On the other hand, advances in Information Technology can generate completely new opportunities for organisations and hence influence the design of specific business process layouts. For example, the proliferation of the Internet in recent years has given rise to a multitude of new, previously unthinkable, ways of conducting business (on-line shopping, virtual marketing/advertising, and electronic distribution of products, to name but a few) (Bakos 1998). Such recursive relationships imply that organisations should align the design of Information Systems with the design of the corresponding business processes if maximum benefits from their synergy are to be achieved (Meel et al 1994, Grover et al 1994, Teufel and Teufel 1995). Although the benefits of aligning the design of business processes with the design of their corresponding Information Systems should be apparent in theory, such integrated design strategies have rarely been the case in practice. There seems to be very limited support for predicting the consequences that changes in one organisational facet (business processes or Information Systems) will have on the other (MacArthur et al 1994). IS development is mostly concerned with technical system details, ignoring (rather taking as granted) the organisational context in which the proposed system will operate. Galliers (1993) asserts that current practices in most organisations reinforce this isolation: ‘[managers] are often happy in the mistaken belief that information technology can be left to technologists, and many of the latter [would be] happier to have information systems planning and development more concerned with technological issues than business imperatives, with as little as possible involvement from business executives’. However, it is well known and widely publicised that changes in IS infrastructure often lead to failure and disappointment (Farbey et al 1993, Willcocks 1992, Brynjolfsson 1993). The reasons for this disappointment in investment are however unclear and may be due to the fact that the business processes are inefficient, or the underlying IS applications are poorly designed. Alternatively, it has recently been hypothesised (Giaglis et al 1999a) that it may be that the IS capabilities are sufficient but inefficient use of the underlying technological infrastructure may be causing the system to falter. Most contemporary IS applications seem to rely on some kind of infrastructural support, which usually takes the form of telecommunication-based computer networks (local area networks, wide area networks, and so on). The advent of Internet/Intranets and the widespread attention that has lately been paid to their potential to support commercial transactions have also given new impetus to the problem of studying the relationships between business processes, IS applications, and computer networks in an integrated manner (Giaglis et al 1999a). This chapter reports on preliminary results of research undertaken to investigate the above relationships and to test the theoretical hypothesis that changes at the level of the underlying technological infrastructure (IS applications or computer networks) can have a knock-on effect on the performance of the organisation. If this hypothesis is verified, the results of our research can have a profound effect on our thinking of the relationships between business performance and IT capabilities. Indeed, verification of our hypothesis will effectively mean that organisations cannot generally afford to treat Information Technology as a support function that could be designed and dealt with in the aftermath of business change decisions. Instead, IT should be viewed as a strategic asset that has the potential of boosting organisational performance if designed and implemented together with the design and implementation of the organisational and human structures it is intended to support. Business Process Simulation (Giaglis et al 1999b) and Computer Network Simulation (Sauer and MacNair 1983) were used as a means of testing the above hypothesis in an empirical manner. A relatively simple and straightforward business process from a real-life case study was examined and simulated at three different levels of abstraction: business process level, IS application level, computer network level. In the following section we will outline the case study background. Next, we will present the process of simulation model development and the results of a number of experiments that were performed on the simulation models in order to test the degree of dependency between technological capabilities and organisational performance. We will conclude this chapter by reflecting on the simulation results and outlining a program for further research in the area. Case Study Background Business Process Modelling (Curtis et al 1992) techniques are oriented towards developing broad models of the way the organisation operates, of what processes it has and of how they traverse the ‘functional silos’ (Hammer and Champy 1993), in order to give an understanding of possible scenarios for improvement (Ould 1995). Flowcharting, IDEF0, IDEF3, Petri Nets, System Dynamics, Knowledge-based Techniques, Role Activity Diagrams, Activity Based Costing, and Discrete-Event Business Process Simulation (BPS) are only some examples of modelling techniques widely used in the organisational domain. In order to investigate the effect that IT capabilities have on business performance, simulation modelling was selected as the most appropriate tool. Simulation is an excellent tool for experimenting with ‘what-if’ scenarios (Law and Kelton 1991) and with the use of simulation it should be possible to indicate the effects that changes at the computer network level will have on the business processes and vice versa. There are a number of simulation tools available which can be used to model different aspects of a business, but the tools chosen were CACI’s SimProcess for modelling the business process perspective, and CACI’s COMNET III for modelling the computer network aspect. The business process used as a basis for simulation model development and experimentation was part of a wider business process re-engineering initiative (the wider project is described in detail in Giaglis et al 1999c). Here we will only briefly document the part of the process that was simulated for this research. An organisation receives orders from its customers, checks the orders against its inventory, and dispatches the goods to the customers. However, due to inefficiencies in the production and inventory processes, a percentage of the orders received (say, 30%) require some products that are currently out of stock. For these orders, the organisation dispatches the goods that are in stock and creates a backorder for the out-ofstock goods. It is anticipated that a new computer system will improve the overall business process, thereby reducing the number of backorders, and hence the workload required. The new computer system will operate on a computer network infrastructure that will link the various sites and departments involved in the process (sales, warehouse, and so on) and will be used as the underlying platform for all data exchange requirements (for example, orders, invoices, etc.). The problem is to investigate the dependency between the computer network capabilities and the ability of the organisation to fulfil orders in a timely fashion. To this end, simulation models of all system aspects will be developed and experiments with different network workloads will be performed to determine the potential knock-on effects of network congestion of business performance. Simulation Model Development A model of the business processes was built along with a model that represented the computer network perspective. However, it soon became apparent that the two models were working at two completely different levels of abstraction, and could not be integrated directly. For instance the business process level would deal with tangible entities such as orders and invoices while the computer network model would be concerned with intangible information such as the databases of the products that make up the order. To overcome this problem a third model was introduced that represented the information system that links these two domains. This allowed data to be transferred from the computer network model to the business process model, via this third model, which represents the information system level of the system. Figure 1 illustrates a small part (referring to the ordering procedure) of the business process outlined in the previous section. The left-hand column depicts the business process perspective. The centre column illustrates how one of the business process activities (‘Enter Client Code’) can be broken down to a lower level of detail to represent the information system perspective. The right-hand column further breaks down one of the IS activities (‘Check Client database’) to a high level view of the computer network perspective.