Managing Global Systems

Overview
Domestic companies that are planning to operate internationally have to be effective. Managers are working in these companies must have a perception of globalization and have a clear concept of the information systems that will be used at the international scale. Every function will play the strategic role to ensure that the information system or enterprise application belong to the function is well suited to coordinate with all units of the company worldwide. As a manager in information technology, developing solutions that support the communications, coordination of people and products, and connectivity solutions to link the different technology platforms and integration between them.  

Developing an international information systems architecture
–          Understand the global environment
The architecture of any information system is always depending on understanding the environment where the business will be operating. Similarly, when building an international system one should understand the global environment as follows:

• The overall market forces, or business drivers: every business must respond to a business driver that will influence the business direction
  
• Negative factors that create management challenges: these are the factors that could stop the development of the business in the global environment.
  

–          Consider a corporate strategy
Going global is required to have a strategy how the business will compete in the global environment there are many choices such as:

• Focus on domestic competition only,
  
• Sell to the globe from a domestic base,
  
• Organize production and distribution around the globe.
  

–          Organization structure
It is very important that the organization structure of the business is pursuing the developed strategy so you could answer the following:

• How will you accomplish a division of labor across a global environment?
  
• Where will production, administration, accounting, marketing, and human resource functions be located?
  
• Who will handle the systems function?
  

–          Implementing the strategy
Executing the strategy requires management and business processes that are designed for the global environment, implementing the strategy aims at:

• Making the organization design come alive.
  
• The design of business procedures.
  
• How can you discover and manage user requirements?
  
• How can you induce change in local units to conform to international requirements?
  
• How can you reengineer on a global scale?
  
• How can you coordinate systems development?
  

–          The technology platform
Developing an appropriate technology platform

Business Drivers
The global business drivers are divided into two groups as shown [Table-1]:

–          General cultural factors
There are multiple cultural factors that helped to drive the internationalism but the most important factor is the global culture. The most complexity factor of mergers or acquisitions is national culture. People in different countries use different languages and perceptions even they react differently to same situation because of their different culture. Most of the time when a company go globally or is acquired, the decision is based on business opportunities but culture differences are always ignored.  For example, Daimler-Chrysler merger failed because there were culture difference between Americans and Germans and similarly the AOL-TimeWarner deal failed because of the culture and personalities differences. Today, the global communications are so easy and not much more expensive which helped in developing a global culture to share values and beliefs around the world.

–          Specific business factors
The global communication and transportation technologies made it easy to have global production and operation far from the headquarters.  Products are now consumed similarly in any place around the world that creates global market. Business can achieve global economies of scale because of lower cost factors of production can be existed wherever they emerge.

Business Challenges
Expanding in global market is very significant but it is not an easy, there are many risks and factors could disrupt international business. The most challenges to the development of global systems are shown in [Table-2]. In some countries like Saudi Arabia, laws prevent women from driving cars, staying alone in hotels or taking taxi alone. There are different religious, nationalistic, ethnic, regionalism, and geopolitical position that form the particularism as important challenge to global business. Some countries like US, people reject the market penetration by foreign products and services and they don’t expect domestic brand-names are foreign made. Different cultures by norm are producing different political regimes that complicate global business. Laws and regulations of business trade, telecommunications or privacy are totally different and it should be considered when building global system.
In contrast to US, the European don’t allow transborder data flow, such law enforces the multinational companies to develop information systems within each European country to avoid high cost and any doubt of moving data across borders.  Even the accounting practices are different which also affect the way the global system is developed. Adding to the languages are different and currencies also are different. It is also so challengeable to integrate different systems built in different languages and different years. It is worth to say that understanding the culture of countries is important and companies must merge cultures as merging business units. Organizing International Information Systems First thing to start with is to choose strategy, then to organize the business based on the strategy and finally developing a global system to fit the strategy and global business organization.  

Global strategies and business organization
[Table-3] shows the four main global strategies that form the basis of global business organizational structure.
Domestic Exporter: All the company’s business functions and activities are operated from home country of origin, and the company exports products to foreign countries.
Multinational: Headquarter office at home country executing strategic and financial management while other business functions are distributed at foreign countries.
Franchisers: some of the operations are done at the home country, the initial product is produce at the home country while other activities associated with the product are done at the foreign countries for further production, marketing and human resources.
Transnational: there is no world or regional headquarters. “One globe, one company.”

Global systems to fit the strategy
Once the global strategy is chosen, it is the time for deciding the configuration, management and development of systems will follow that strategy.
There are four types of systems configuration as shown in [Table-4]

Centralized: Systems development and operation are occurred at the domestic home base
Duplicated: Development occurs at home base while operations are located at foreign locations
Decentralized: Each foreign unit has its own unique solutions and systems
Networked: All business units regardless of their locations participate in the development and operations.

Reorganizing the business
For developing a global company and global information systems to support global business structure, these principles must be followed:
1-       Organize value-adding activities along lines of comparative advantage Business functions are operating and located where they can best be performed for least cost and higher impact
2-       Develop and operate systems units at each level of corporate activity–regional, national and international A company may maintain small information systems in each foreign country to support the country operations. Regional systems may handle telecommunications and systems development across national boundaries. Each of these systems may connected to the main system at the headquarter to coordinate the development and operations of these international systems
3-       Establish at world headquarter a single office responsible for development of international systems, a global Chief Information Officer (CIO) position.  

Managing Global Systems
When developing information systems for domestic operation, lots of problems and challenges are faced during the development, as shown in [Table-5]. These problems are more complicated when developing global information system in the global environment.

Global systems strategy
Not all systems should be coordinated on transnational basis. [Figure-1] shows the connection between the level of business processes and their associated systems. Global core business processes developed on global core systems which must be coordinated globally. Other systems should be partially coordinated because they share some key elements and finally some other systems that must be kept local for the local business processes.

Define the Core Business Processes
–          Short list of critical core business processes by conducting a business process analysis
–          Identify and set priorities to every business process
–          Identify center of excellence for these processes, which location does each process better
–          Identify critical business processes that must be coordinated, designed and implemented around the globe, and which should be regional and local

Identify the Core Systems to Coordinate Centrally
Once the critical business processes identified which to be centralized and decentralized. The decision is depending on political reasons, other decisions to be made to appease those who oppose transnational systems and other decision would be on rational basis.

Choose an Approach: Incremental, Grand Design, Evolutionary
“Don’t bite off more than you can chew”. The grand design which to develop and implement everything at once must be avoided, may be it is cheaper but there are other considerations other than cost. Many companies use an evolutionary approach by merging critical areas such as finance first, then they move to other areas such as sales and marketing, then rest of areas based on their critical priorities, the idea is not everything is at once as in the grand design or not by cutting every area to multiple pieces as in the piecemeal approach.

Make the benefit Clear
It is very important that everyone at the global business understand the benefits that will come to the company as well as individual units.
–          Global systems: truly integrated, distributed and transnational systems will contribute to maximum management and coordination
–          Global operations: because activities are located based on where it is most economically performed, improvement in production, operation and other areas will be achieved
–          Global customers and global marketing: achieving economies of scale emerge because of the global customers and market
–          Corporate funds: using global systems means the ability to manage cash effectively.

The Management Solution
Now management can handle the challenges in [Table-5]

Agreeing on Common User Requirements:- short listing the core business processes and core information systems will help in developing common language and understanding the common elements.
Introducing Changes in Business Processes:- this depends on the legitimacy or the authority that assists in convincing others for the change.
Coordinating Applications Development:- using incremental steps toward larger vision will make things more easier for coordinate the development.
Coordinating Software Releases:– using standard procedures to ensure all software updates are run at once.
Encouraging Local Users to Support Global systems:– the tactic to use to encourage local users is cooptation which means inviting the opposition to participate in designing and implementing the solution but without losing the control over the direction. Another tactic is to develop multiple centers of excellence to be used for sending out messages that all groups are involved.

Technology issues and opportunities for global value chain
After defining the global business model and systems strategy, now it is the time to select the technology to support the global business processes.  

Technology challenges of global systems
Hardware, software and networking are the special technical challenges in an global settings.

Computing Platforms and Systems Integration
It is very important to figure out how to integrate the different types of hardware and software in order to work as one system. There are multiple types of software in every unit at different country that it is configured to work accordingly to its standards, based on the selected core business processes these types of software need to be integrated and that’s where the headquarter comes into the picture to coordinate and communicate the end goal of the business in order to identify the final information systems requirements.

Connectivity
To have systems integrated, connectivity is the ability to link all systems from all locations together into a single integrated network. The private network can be used for the most critical and sensitive information however the public Internet can be used by creating Virtual Private Network (VPN) for communications, normally the Internet don’t provide any level of service. [Table-6] shows the problems of international networks when global companies is trying to establish global communication networks, because e there different level of service reliability, different rates and currency exchanges. Also there are different providers and governments regulations that are controlling the telecommunications.

Software
Different systems with different standards at different foreign units to be integrated, this is a very tough task. Also the language to be used to write the application is another tough task, even if the English is widely used language and may management used to know English but what about the data entry clerks, do they know English or they have to learn it. International systems focus on basic transaction systems and reporting systems and lately start to turn to supply chain management and enterprise applications, some foreign units may have difficulties to manage the complexities of these systems. Collaboration systems are now important for all units to collaborate, share knowledge and communicate together.

Managing Global Software Development
Offshore outsourcing could be a benefit for international companies but the risks must be evaluated correctly, and benefits, cost components, and requirements must be understood and finally a set of measurement metrics must be in place to ensure successful outsourcing. There is cost reduction in software development when outsourcing company but there are also hidden costs may increase Total Cost of Ownership (TCO).

The cost components are:
–          Contract cost
–          Vendor selection costs
–          Transition management and knowledge transfer costs
–          Domestic human resources costs
–          Costs of improving software development processes
–          Costs of adjusting to cultural differences
–          Cost of managing an offshore contract

Conclusion
In the past, there were closed markets, the technology makes it our world smaller and opened the market for companies for buying and selling both domestically and globally. Globalization removed the barriers and produced lots of opportunities to companies to compete in the global market as well as their domestic markets. Technology is providing multiple tools and solutions to make the integration and communication dreams as a reality.

Exhibits
Table-1: Business Drivers

Table-2: Business Challenges

Table-3: Global Business Strategy and Structure

Table-4: Global Strategy and Systems Configurations

Table-5: Management Challenges in Developing Global systems

Table-6: Problems of International Networks

Figure-1: LOCAL, REGIONAL, and GLOBAL SYSTEMS

Agency and other coordination costs increase as the firm moves from local option systems toward regional and global systems. However, transaction costs of participating in global markets probably decrease as firms develop global systems. A sensible strategy is to reduce agency costs by developing only a few core global systems that are vital for global operations, leaving other systems in the hands of regional and local units.

References:
Camerer, R.A.W.•.C.F., 2003. Cultural Conflict and Merger Failure: An Experimental Approach. [Online] National Science Foundation Grant (4) Available at: http://www.hss.caltech.edu/~camerer/mgtsci03.pdf [Accessed 14 July 2011].

Flynn, J.A., 1994. Global Information Systems: Problems, Solutions, and How to Manage Them. [Online] Available at: http://jise.org/Issues/06/V6N3P142.pdf [Accessed 16 July 2011].

Gene Gitelson, J.W.B.E.D..a.L.L.P.D..P.E., 2001. ITAP International. [Online] Available at: http://www.itapintl.com/facultyandresources/articlelibrarymain/the-impact-of-culture-on-mergers-a-acquisitions.html [Accessed 14 July 2011].

Ken Laudon, J.L., 2009. Chapter 15: Managing Global Systems. In L.a. Laudon, ed. Management Information Systems. 11th ed. Prentice Hall. pp.529-628.

Sujan Sarkar – CIS Instructor, S.R.J.C., 2009. Chapter 15: Managing Global Systems. [Online] Available at: http://www.santarosa.edu/~ssarkar/cs66sp09/notes/ch15notes.htm [Accessed 13 July 2011].