Reconceptualizing the Context-Design Issue for the Information Systems Function

Abstract

The authors develop theory for predicting the distribution of decision making between the corporate and business-unit levels of management for a subset of information systems (IS) resources referred to as systems development. Drawing on literature from the fields of MIS, strategic management, and organization theory, they first determine how potentially influential context factors are likely to affect the locus of the lead decision-making role from a multiple-contingencies perspective. Then they theorize how conflicting corporate and business-unit contingencies are likely to be resolved. They present a set of six propositions that predict a centralized, decentralized, or compromise design solution for a given business unit on the basis of (1) business-level strategy, (2) whether or not information technology (IT) plays a strategic role for the business unit, (3) the degree of line managers' IT knowledge at the business-unit level, and (4) the level at which opportunities for IT-related synergies across business units are being pursued at the corporate level.

Horizontal Mechanisms under Differing IS Organization Contexts

“…For studies of the IS function, the hierarchical structure of interest is the form of IS governance-i.e., the corporate-business unit distribution of IS decision-making. From the IS alignment literature (e.g., Brown and Magill 1998, Dixon and John 1989, Earl 1996), we can predict that the distribution of IS decisionmaking responsibilities in large, divisionalized companies is an important design issue for two broad resource areas: i) systems development and ii) IT infrastructure (computers and networks). Three governance forms for the IS function currently predominate:…”

“…Firms with such IS contexts are likely to be firms with highly autonomous business units (Earl 1989) that compete in unrelated businesses (Brown and Magill 1994), and thus have significantly lower opportunities for IT-related cross-unit synergies (Brown and Magill 1998). A corporate level coordination role may not even exist in such firms, and horizontal coordination initiatives may even be voluntary (DeSanctis and Jackson 1994).2…”

“…This is because companies with Centralized or Federal IS governance forms are likely to be firms that compete in single or related businesses that seek IS cost efficiencies (through economies of scale and standardized infrastructures) as well as cross-unit synergies (Brown and Magill 1998). Both of these IS goals require cross-unit collaboration.…”

“…A trend toward the adoption of new organizational designs that balance the hierarchical tradeoffs of control versus autonomy has also been documented for the IS function (e.g., Brown and Magill 1998, Earl 1996, Rockart, Earl and Ross 1996. In particular, many multi-divisional companies have adopted a Federal design for the IS organization in which IT infrastructure responsibilities are centralized in order to respond to enterprise-level pressures for connectivity and economies of scale, but systems development responsibilities are decentralized to business units in order to respond to division-level pressures for autonomy over strategic IS resources.…”

Understanding the ERP Investment Decision

“…The alignment or fit approach, which has its roots in contingency theory, has long been promoted as the way to get high returns from technology investment [8][9][10][11]. The premise of contingency theory is that organisations should take different strategic approaches, given the circumstances they face in their particular industry or market.…”