Firm Context and Patterns of IT Infrastructure Capability (Best Paper Award)

The importance of a firm’s information technology (IT) infrastructure capability is increasingly recognised as critical to firm competitiveness. This is particularly the case for firms in industries going through dynamic change, for firms reengineering their business processes, and for those with extensive international or geographically dispersed operations. However, the notion of IT infrastructure is still evolving and there has been very little empirically based research on the patterns of IT infrastructure capability across firms. We develop the concept of IT infrastructure capability through identification of IT infrastructure services and measurement of reach and range in large, multi-business unit firms. Using empirical case research, we examine the patterns of IT infrastructure capability in twenty-six firms with diverse strategic contexts, including different industry bases, level of marketplace volatility, extent of business unit synergies and the nature of firm strategy formation processes. Data collection was based on a combination of quantitative and qualitative methods with multiple participants. More extensive IT infrastructure capability required both more IT infrastructure services as well as more reach and range. More extensive levels of IT infrastructure capability were found in firms where (i) products changed quickly; (ii) attempts were made to identify and capture synergies across business units; (iii) there was greater integration of information and IT needs as part of planning processes; and (iv) there was greater emphasis on tracking the implementation of long term strategy. These findings have implications for both business and technology managers particularly in regard to how firms link strategy and IT infrastructure formation processes. 1. THE IMPORTANCE OF INFORMATION TECHNOLOGY INFRASTRUCTURE Information technology (IT) infrastructure is increasingly seen as a fundamental differentiator in the competitive performance of firms (McKenney 1995). New competitive strategies (Boynton, Victor and Pine 1993) and progression through higher levels of organizational transformation (Davidson and Movizzo 1996) each require major IT infrastructure investments. IT infrastructure capabilities underpin the emergence of new organizational forms (Davidow and Malone 1992), such as global virtual corporations (Miller, Clemons and Row 1993), and facilitate the development of virtual value chains (Rayport and Sviokla 1995). IT infrastructure capability is critical to globally competing firms (IS Analyzer 1991; Clemons, Row and Venkateswaran 1989; Neo 1991). IT infrastructure can be a significant barrier or enabler in the practical options available to planning and changing business processes (Grover, Teng and Fiedler 1993; Wastell, White and Kawalek 1994). The support of enabling technologies and platforms is an important contributor to successful business process change (Furey and Diorio 1994; Ramcharamdas 1994; Caron, Jarvenpaa and Stoddard 1994). Cross functional process changes require a shift in the role of the IT function from being Firm Context and Patterns of IT Infrastructure Capability 175 guardians of information systems to providing infrastructure support, particularly in the form of data management expertise (Dixon et al.; 1994, Earl and Kuan 1994). While the significance of IT infrastructure is now being recognized (Davenport and Linder 1994), this is often as a by-product or retrospective analysis of the success of strategic initiatives or process change implementations. Our knowledge of the value of IT infrastructure remains largely “in the realms of conjecture and anecdote” (Duncan 1995, p. 39). In this paper, we develop the concept of IT infrastructure capability through identification of IT infrastructure services and measurement of reach and range (Keen 1991; Keen and Cummins 1994) in large multi-business unit firms. We examine the patterns of IT infrastructure capability in twenty-six firms with diverse strategic contexts, such as firms from different industries, and with different strategic intent focus and synergies among its business units. We compare the number and nature of services and the level of reach and range to understand patterns of IT infrastructure capability and discuss the implications for both business and IT management. 2. THE DIMENSIONS OF IT INFRASTRUCTURE Over the past five years, issues associated with IT infrastructure have consistently been identified as a key concern of IS management (Niederman, Brancheau and Wetherbe 1991; CSC Index 1994; Pervan 1994; Koeller 1994; Broadbent, Butler and Hansell 1994). IT infrastructure is a major business resource and is now seen as a key source for attaining sustainable competitive advantage (Keen 1991; McKenney 1995). However, few works have had the notion of IT infrastructure as their central focus. IT infrastructure is the enabling base of shared IT capabilities which provide the foundation for other business systems (McKay and Brockway 1989). This capability includes both the internal technical (equipment, software and cabling) and managerial expertise required to provide reliable services (McKay and Brockway 1989; Weill 1993). This complex set of technological resources is developed over time and its precise description and value are difficult to define (Duncan 1995). IT infrastructure differs from applications in its purposes as a base for future applications rather than current business functionality, and in the way in which it must cope with the uncertainty of future needs (Grossman and Packer 1989). IT infrastructure is usually justified and financed differently from applications, its benefits are often hard to quantify (Parker and Benson 1988; CSC Index 1993) and such investments often require board level or executive management approval (Weill 1993; PE International 1995). The major components of IT infrastructure are hardware platforms, base software platforms, communications technology, client-server technology and other software (or embedded) components that provide common services to a range of applications, common handling mechanisms for different data types and methods, standards and tools (Turnbull 1991; Darnton and Giacolette 1992). IT infrastructure capability is usually provided by the corporate information systems (IS) group (Weill and Broadbent 1994) but can also encompass public or outsourced facilities used by the firm (PE International 1995). The purpose of building IT infrastructure is to support the commonality between different applications or uses (CSC Index 1992) facilitating information sharing across the enterprise and cross-functional integration (Darnton and Giacolette 1992) and to obtain economies of scale. IT infrastructure flexibility refers to the degree to which its resources are shareable and reusable (Duncan 1995). Building in flexibility adds cost and complexity but provides a business option that may be exercised in the future (Kambil, Henderson and Mohsenzadel 1993), widening the variety of clients a firm can handle without increased costs (Weill 1993). Firms take different approaches to IT infrastructure investments depending on strategic objectives for costs savings through economies of scale, current strategy needs or longer term requirements for flexibility (Venkatraman 1991; Weill 1993). Greater IT infrastructure capability is required where firms need to respond more rapidly to changes in the market place (Quinn 1992) and where there is higher interdependence between business units. The increasing importance of relationship-based services and cross-selling raises the stakes for information sharing across the business in order to capitalize on opportunities for cross-selling and synergy. This business flexibility requires IT capability (Duncan 1995) to share information across Shared Information Technology Services Information Technology Components Human Information Technology Infrastructure Information Technology for Business Processes IT Infrastructure Broadbent, Weill, O’Brien and Siong 176 products, services, locations, companies and countries and thus a common IT infrastructure rather than separate IT platforms and services for separate business activities is required (Keen 1991). The mortar which binds all the IT components into robust and functional services includes a specific body of knowledge, skill sets and experience embodied in the human infrastructure (McKay and Brockway 1989; Davenport and Linder 1994). This human component provides the policies, architectures (Keen 1995), planning, design, construction and operations capability necessary for a viable IT infrastructure and usually resides in the corporate IS group. 3. IT INFRASTRUCTURE CAPABILITIES Drawing on conceptual and related empirical work, we define IT infrastructure as: the base foundation of budgeted-for IT capability (both technical and human), shared throughout the firm in the form of reliable services, and usually managed by the IS group. We contend that such capability is a firm resource (Barney 1991) which is difficult to imitate as it is created through the fusion of technology and human infrastructure. The various elements of IT infrastructure are presented in Figure 1 (drawing particularly on McKay and Brockway 1989 and Weill and Broadbent 1994). At the base of this model are the IT components, such as computers and communications technologies, which are commodities and readily available in the marketplace. The second layer comprises a set of shared services such as management of large scale data processing, provision of electronic data interchange (EDI) capability, or management of firm-wide databases. The base level IT components are converted into useful IT infrastructure services by the human IT infrastructure composed of knowledge, skills and experience. This human infrastructure binds the IT components into a reliable set of shared IT infrastructure services. Figure 1. The Elements of IT Infrastructure