Match IT Needs With Strategic Direction of Enterprise Information Sheet 1

Introduction

Strategic planning is a process that all people undertake in their day-to-day lives. When you
wake up in the morning, there is a goal that you set out to achieve. It may be as simple as getting
dressed and having something to eat; or it may be more complex, like getting to work on time
and accomplishing a set task. Most people understand the importance of goal setting and the
satisfaction that comes when set goals are achieved.

For businesses, strategic planning is a more formal process. It is the method by which a business
can set goals for its future. Strategic planning involves conducting environmental analysis in
order to understand the internal and external forces that affect the business. Goals and objectives
are set for the future of the organisation, and over time the organisation works towards these
goals. These business goals may be simple (such as updating the database software to the latest
version) or more complex (such as: restructuring the organisation to incorporate e-commerce
practices).

The topics for this unit are as follows:

Evaluate the current business strategy

In this topic you will learn how to analyze the organization’s strategic plan to gain an
understanding of the organizational goals. You will also learn to analyse operational practices to
identify gaps and opportunities and report to management on the impact of any IT development.

Evaluate the impact of changes

In this topic you will review information on current IT systems, compare and document the
advantages and disadvantages of legacy and proposed IT systems, and determine the objectives
and implications of changes to the IT system.

Develop action plans

In this topic you will develop action plans for the proposed changes (taking into consideration
the organisation’s operating environment) and forward the action plans to management for
feedback or approval.

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Evaluate current business strategy

This resource will help you to evaluate current business strategy within an information
technology environment.

In this topic you will learn how to:

 analyse the current business strategy

 explore different strategic planning models
 identify gaps in operational practice and strategic plans.

Analyse strategy
The strategic plan of an organisation sets out the goals a business hopes to achieve within a
specified period of time. It also helps the organisation understand the environment within which
they operate, and the market forces that affect them.
An analysis of the current strategic plan enables you to understand the goals of your
organisation. However, in order to analyse the strategic plan, you first need to understand the
structure and purpose of a strategic plan. This topic describes the elements that make up a
strategic plan.
What is strategy?
A strategy is a plan for action that sets out to achieve a goal or several goals. In a business
context, we define strategy as having some sort of goal for the future.
What is strategic planning?
Strategic planning, then, can be defined as follows:
‘Determining long–term objectives by analysing the strengths and weaknesses of an
organisation, studying opportunities and threats in the business environment, predicting future
trends, and projecting the need for new products and services.’
‘Strategic planning is the process of identifying long term organisational goals, strategies, and
resources. Strategic planning looks beyond day–to–day activities and focuses on a horizon that is
three, five, ten, or twenty years into the future. ‘Strategic planning is the use of strategies to
develop a plan of action.’
Strategic planning is a task that all organisations perform. For smaller businesses, this may be a
very informal process. The manager or owner of the business may decide the goals and
objectives of the business.
Example:
 The owner of a business may decide that the business needs to update its computer
hardware over the next ten months.
 The manager may decide that their organisation needs to have a presence on the internet,
either in the form of

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o a brochure site such as http://www.bigw.com.au

o an e–commerce site such as http://www.ebay.com/
The strategic plan will set out how these objectives will be achieved.
Larger organisations approach strategic planning more formally. Strategic planning will usually
be performed by management and/or the board of directors in an organisation.
Strategic planning is not something that the organisation completes once a year or once every
three years. It is an ongoing and evolving process that does not finish once the strategic plan has
been written. An organisation should constantly be scanning its environment to gather
information about new trends, competitors and its industry surroundings.
Strategies are unique
It is very important that the circumstances of the organisation be fully understood when
developing a successful strategic plan. It is not enough to simply ‘borrow’ strategies from other
organisations.
Take a few minutes to think about real life examples of where businesses have successfully
borrowed strategies from each other.
Many organisations have decided to have their own presence on the internet because that is what
their competitor has done. If the organisation is simply copying their competitor without
understanding their environment and the needs of their customers, however, then they are
wasting valuable resources.
Here is an example: PepsiMax differentiated itself from other sugar–free soft drinks by not
portraying itself as a diet drink. The success of the PepsiMax approach has resulted in attempts
by competitors to reposition sugar–free drinks to a younger, more active market through the use
of almost identical promotional strategies.
Strategic planning
Strategic planning means being prepared to respond to the circumstances of the organisation’s
operating environment.
Here are two are examples:
 Non–profit organisations must often respond to dynamic and even hostile environments
 Often businesses must respond quickly to changes in their environment, i.e. broken down
equipment, new legislation, competition (both new and old), interest rates, staffing
problems, etc.
Being strategic means
 being clear about the organisation's objectives
 being aware of the organisation's resources
 incorporating both into being responsive to a dynamic environment.

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In the strategic planning process, an organisation’s purpose, vision and values shape its mission
statement, which leads to goals, objectives, business operations, and results that affect the
stakeholders of the organisation.

Image: Strategic planning process: box with arrows from top to bottom: values, vision and purpose boxes
each have an arrow pointing to mission statement. Mission statement has an arrow pointing to goals and
objectives. Goals and objectives, stakeholders and IT each have an arrow pointing to business
operations. Business operations have an arrow pointing to business results which is pointing to
stakeholders.

Figure 1: Strategic planning process

Pitfalls in strategic planning

Strategic planning is a very important process for every organisation, but there are many pitfalls
that should be avoided.
Problems with strategic planning
The following problems are encountered in organisations where strategic planning is not
regarded as an important activity, or not enough time has been put into the process:
Inability to activate new strategy
Implementing a new strategy usually requires the organisation to change its management
systems, culture, skills, resources or structure. If all of these had to be changed at the same time,
many managers might be unable to cope with the complexity of the situation. This might lead to
them not implementing the strategy.
Inability to develop a strategic response
In some cases, even if the organisation is aware of the trend, it may not be able to respond
appropriately. This may be due to an inability or an unwillingness to change the managerial
approach of the organisation. It may also be the result of structural or organisational inflexibility.

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Allowing corporate politics to dictate priorities

Individuals in the organisation may be aware of future trends, but the information may not be
placed on the agenda because
 Managers may be too busy with operational issues to give time to significant trends.
 Managers may decide not to give the information to the organisation as a whole because
they value the power of their knowledge over others. This type of internal politics can
reduce the ability of the organisation to respond to environmental change.
Failure to see a strategic challenge
Many organisations do not look at their external environment carefully enough, and thus are
unaware of significant trends that will have an impact on future operations. This can be caused
by introverted thinking from top management or by focusing inwards too much to solve technical
or organisational problems. Such managers neglect to examine external environmental factors
such as the potential of new competitors.
Failure to understand the challenge
Although the organisation may identify the major trends in their environment, they may not
understand the magnitude of the issue or how to respond to it effectively.

Which strategic planning model is best?

Many books and articles describe how best to do strategic planning. In this resource, you will be
following a model that has four basic steps:

Image: Strategic plan model with four arrows pointing to the right. The words on the arrows are
identifying, diagnosing, conceiving, realising.

Figure 2: Strategic plan model

1. Identifying
Identifying involves looking at the organisation’s current mission and vision statements (if
available) in order to understand their core business.
Mission and vision
A mission statement is like an introductory paragraph. It must communicate the essence of the
organisation to the reader. An organisation's ability to articulate its mission indicates its focus
and purpose.
A mission statement typically describes an organisation in terms of the following:
 Purpose – why the organisation exists, and what it seeks to accomplish.

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 Business – the main method or activity through which the organisation tries to fulfil this
purpose.
 Values – the principles or beliefs that guide an organisation's members as they pursue the
organisation's purpose.
The mission statement summarises the what, how, and why of an organisation's work, while a
vision statement presents an image of what success will look like, such as how the organisation
will effectively carry out its operations.
Vision is a less specific type of aim which is usually defined as a desirable future state where
details have not yet been determined. The vision statement presents a description of how the
organisation will or should operate at some point in the future and how the customers or clients
will benefit from the organisation’s products or services.
2. Diagnosing

Assessing the situation

Once an organisation has committed to why it exists and what it does, it must take a look at its
current situation. Part of strategic planning is an awareness of the resources available to the
organisation and an idea of future trends that may occur. This will enable the organisation to
respond to changes in its environment.
Situation assessment means obtaining current information about the organisation's strengths,
weaknesses, and performance (opportunities and threats). This information will highlight the
critical issues that the organisation faces and that its strategic plan must address.
These could include a variety of primary concerns such as funding issues, new program
opportunities, changing regulations or changing needs in the client population, changes in
technology, problems with information systems, changing needs of customers, and so on.
The point is to choose the most important issues to address. The strategic plan should focus on
no more than five to ten critical issues.
Environmental analysis
Environmental analysis is the method used to perform situation assessment. The purpose of
environmental analysis is to identify significant characteristics that exist within the industry
environment. By identifying these characteristics, the organisation can make decisions regarding
which of these areas will be critical to their future success.
Here is an example:
Environmental analysis consists of two major components:
1. The external environment: An examination of the external environment will
determine outside forces that have an influence on the organisation.
2. The internal environment: An investigation of the internal environment will
establish internal factors that influence organisation strategy and sources of
competitive advantage.
One of the major tools of environmental analysis is the SWOT analysis.

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What is SWOT analysis?

Role of SWOT analysis

A SWOT analysis helps to answer key questions and create a better organisational strategy by
answering the following types of questions:
 Does the organisation have internal strengths which an organisational strategy can be
built on?
 Which weaknesses does the organisational strategy need to correct?
 Do the organisation’s weaknesses disqualify it from pursuing certain opportunities?
 Which opportunities does the organisation have resources to pursue with a chance of
success?
 What threats should the organisation worry most about?
The internal environment
What is happening within the organisation and what are the effects?
Through an analysis of the internal environment, an organisation can determine what it can do,
or the actions that it can undertake based on the resources, core competencies and capabilities
available.
Resources
Resources are inputs from the organisation’s production process. Examples of resources include
the following:
 capital equipment
 skills of individual employees
 patents
 finances
 talented managers.
Generally, an organisation has both tangible and intangible resources. Tangible resources are
assets that can be seen and quantified, including assets like production equipment, manufacturing
plants and formal reporting structures. Intangible resources include assets that are rooted deeply
in the history of the organisation and that have accumulated over time, including knowledge,
trust between managers and employees, ideas, the capacity for innovation, managerial
capabilities, and reputation. Intangible resources are difficult for competitors to understand and
copy.

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Capabilities
Capabilities are the knowledge and skills of employees. This is seen as one of the most relevant
sources of competitive advantage for any organisation. They must find ways to share this
knowledge and skills with the rest of the organisation. Only when a capability is valuable, rare,
costly to imitate, and unable to be substituted is it a core competency and a source of
competitive advantage.
Core competencies
An effective internal environment analysis includes identifying both what are and what are not
the organisations core competencies. Core competencies refer to activities of the organisation
which create unique value. These activities are not necessarily those on which the organisation
spends the most time, but which have the potential to create sustained competitive advantage.
Competitive advantage
Competitive advantage is the ability of the organisation to outperform its competitors in key
performance areas. Competitive advantages may arise through the external environment, such as
changes in customer demand, fluctuations in prices, and the impact of advances in technology.
Competitive advantages may also arise as a result of internal activities, such as the restructuring
of the organisation.
Analysis of the internal environment helps to understand the strengths and weaknesses that
face the organisation.
The following table lists some of the questions to ask to determine the strengths and weaknesses
of the organisation.

Table 1: Strengths and Weaknesses

Strengths Weaknesses

What are our advantages? What could be improved?

What do we do well? What is done badly?
What are our major strengths, and how can we What are our main weaknesses, and how can we overcome
utilise them in the future? them?
What must we do to strengthen our IT function, How should we address weaknesses in IT resources and
including our people and technology infrastructure? capability?
A distinctive competence? No clear strategic direction?
Adequate financial resources? A deteriorating competitive position?
Good contacts/relations with clients? Low profitability because...?
Good competitive skills? Lack of managerial depth and talent?
Special expertise? Proven management? Missing any key skills or competencies?
An acknowledged market leader? Poor track record in implementing strategy?
Well–conceived functional area strategies? Plagued with internal operating problems?

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Innovative programs/services? Vulnerable to competitive pressures?

Good overall reputation? What should be avoided?
Access to economies of scale? Weak market image?
Insulated from competitive pressures? Competitive disadvantages?
Cost advantages? Below–average marketing skills?
Competitive advantages? Unable to finance changes in strategy?

The external environment

How do external factors like customers/ competitors affect the organisation?
An understanding of the external environment helps organisations to understand their current
situation and predict future trends.
Industry environment
An industry is a group of companies producing products that are close substitutes. An example
of this is the Web design industry which is made up of individual web design and development
companies, including ISPs. The industry environment has a more direct affect on strategic
competitiveness.
Competitor environment
Competitor analysis enables an organisation to focus on each rival company and gather
information about them.
When doing competitor analysis, companies seek to understand the following:
 what drives the competitor, as shown by future objectives
 what the competitor is doing and can do, as shown by its current strategy
 what the competitor believes about itself and the industry
 what the capabilities of the competitor are.
Analysis of the external environment helps to understand the opportunities and threats that face
the organisation.
The following table lists some of the questions to ask to determine the opportunities and threats
of the organisation.

Table 2: Opportunities and Threats

Example

Opportunities Threats

What are our major opportunities, and how can we take full What major threats do we face, and what can we do
advantage of them? about them?
What IT plans do we have to support business What can we do to deal with potential threats to IT

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opportunities? success?
What are the interesting trends? What obstacles do we face?
Changes in technology and markets? What is our competition doing?
Expand service line to meet broader range of client needs? Are the required specifications for our job, products
or services changing?
Are there changes in social patterns, population profiles, Is changing technology threatening our position?
lifestyle?
Will local events provide opportunities? Do we have bad debt or cash–flow problems?
Serve additional customer groups? Likely entry of new competitors?
Enter new markets or segments? Slow market growth?
Changes in government policy? Adverse government policies?
Diversify into related services? Growing competitive pressures?
Complacency among rival organisations? Vulnerability to recession and business cycle?
Fast market growth? Growing bargaining power of clients?
Weak competitors? Changing client needs and tastes?
Lack of dominant competitor? Adverse demographic changes?

The outcome of the SWOT analysis is a series of lists, one each for strengths, weaknesses,
opportunities and threats. Look at the example of a SWOT analysis carried out on Telstra
Corporation in the Telstra scenario.( Telstra is Australia's leading provider of mobile phones,
mobile devices, home phones and broadband internet. Save money by buying online.)
Mission and vision statement

For an example of a corporate mission statement

Environmental analysis

An environmental analysis for Telstra may have yielded the following SWOT elements:

Internal environment

Strength

 Large customer base

 Proven record of service

 Excellent marketing campaigns

 Ownership of assets [land lines, buildings]

 Experienced employees

Weakness

 Inefficiencies in provision of service

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 Quality of service

 High cost of services to customers

External environment

Opportunities

 Increase customer base

 Recapture customers who moved to other service providers

 Incorporate new technology to increase level of service

 Wireless technology

Threats

 Changes in Government regulations

 Market open to new competition

 Competitors offering lower priced services

 Possible further privatisation

 Demands of shareholders

Critical Issue 1: Competition

Strategic analysis

Weakness

 High cost of services to customers

Opportunities

 Recapture customers who moved to other service providers

Threats

 Market open to new competition

 Competitors offering lower priced services

Strategic objectives

Cut costs for customers in order to be more competitive.

Performance targets
1. To reduce the number of customers moving to competitors

2. To match the pricing policies of competitors

3. To retain customers in the long run

Action plans
1. Review customer requests, complaints, feedback to determine service provision
possibilities

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2. Create alternative courses of action that could be implemented to improve

service to customers
 Drop prices to match competitor’s
Offer discounts on calls during off peak times for:
o STD calls
o International calls
 Offer customer loyalty rewards for staying with Telstra
3. Implement new pricing strategy

4. Inform customers [existing and potential] of new pricing strategy through

 Mail out brochures

 Television and radio advertising
5. Review status of pricing strategy periodically to determine success/ or failure.

3. Conceiving

Strategic analysis
It is important to first review the environmental analysis you conducted on the organisation. In
particular, you will need to review the opportunities and threats (from the external
environment) and the strengths and weaknesses (from the internal environment).
You are trying to find relationships between the elements of the SWOT analysis (i.e., strengths,
weaknesses, opportunities, threats) so that they can be grouped together.
Finding relationships
Relationships between SWOT elements may have two forms:
1. You can group together several strengths (or weaknesses, or opportunities, or threats) that
are about the same issue to form a single organisational strength.
2. When the elements relate to the same issue you can match:
a. Strength to Opportunity
b. Weakness to Opportunity
c. Strength to Threat
d. Weakness to Threat
Linking one of these elements may reduce the affect of the other. For example, by enhancing
weaknesses in the organisation we may be able to reduce threats.
Each of these groupings forms a critical issue that the organisation faces. The strategic plan will
have up to ten critical issues that are being addressed. The strategic objectives are created for
each of these critical issues.

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Strategic objectives
“Strategic objectives are those objectives that refer to, and affect the entire organisation and deal
with the relationship between the organisation and its environment.”
Strategic objectives - like all objectives - should be SMART objectives. That is, the objectives
should be:
 Specific
 Measurable
 Attainable
 Relevant
 Timely
In creating each strategic objective, you must come to a conclusion or response about what the
organisation will do as a result of the major issues facing them. This will be written in the form
of a goal, or what the business is hoping to achieve. For an example of strategic objectives look
at the: Telstra scenario
Performance targets
When setting performance targets, you take each strategic objective in turn and specify the
requirements which enable the strategic objective to be achieved.
The performance targets are written in the form of tasks that need to be achieved. For an example
of performance targets, look at the: Telstra scenario
4. Realizing

Action plans
An action plan carefully lays out how the strategic goals will be accomplished. You will be
specifying activities and listing the expected results which enable the strategy to be implemented.
Action planning also includes stipulating responsibilities (who needs to do what) and timelines
(when). You should also include how you will monitor and evaluate the objective using
performance indicators. For an example of an action plan, look at the: Telstra scenario
Strategic planning is an ongoing process which allows an organisation to plan for future
development and the direction in which the organisation wishes to proceed.
By analysing the strategic plan of an organisation, we can understand the goals a business hopes
to achieve within a specified period of time. It also helps us to understand the environment
within which the organisation operates and the market forces that affect them.

Compare information
An examination and comparison of the current strategic plan of the organisation and their
operational practices will enable an organisation to highlight information technology gaps and
improvement opportunities.

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Current operational practices

The current operational practices of an organisation may include the policies they have in place,
the procedures they follow to complete tasks, or the system they use to perform day–to–day
processing. The system used by the organisation may be a manual or paper–based system; a
computerised system that incorporates hardware, software and networking capabilities; or a
hybrid of the two: partially computerised with some manual processes.
Examine current strategic plan
The strategic plan of an organisation sets out the goals a business hopes to achieve within a
specified period of time. It also helps the organisation understand the environment within which
they operate and the market forces that affect them.
Examination of the current strategic plan enables you to understand the goals of your
organisation and how those goals will be achieved. The model followed in this resource presents
each critical issue with the following four elements:

Table 3: Example four critical elements

Four elements of critical issues

 Strategic Analysis: lists SWOT elements to highlight a critical issue
 Strategic Objective: the goal the organisation wants to achieve
 Performance Target: ‘To do’ list of what the organisation wants to achieve
 Action Plan: Specific activities that enable the strategy to be implemented
For an example of this, see the Telstra scenario.

IT gaps between current practices and future goals

By examining the current strategic plan and current practices of the organisation, it may be
possible to see some gaps. The gaps may be in what the organisation currently does and what
they hope to do in the future. By identifying gaps, the organisation may be able to determine
improvement opportunities.
Here is an example:
An organisation currently has a database that has a table for customers, customer orders and
customer invoices. This database has been used successfully for the last two years. The following
may represent the results of a gap analysis performed for this organisation.

Table 4: Gap analysis

Example: Gap analysis

Objectives: To evaluate the current database functionality, to determine processing

gaps.

Findings: An environmental analysis produced the following weaknesses and

opportunities:

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Weaknesses
 The database does not capture information about our suppliers or our
purchasing patterns from different suppliers.
 We are unable to adequately compare suppliers to see if we are getting the
‘best deal’ from each of them.
Opportunities
 A new supplier has approached us with cheaper prices and loyalty discounts.

Implications: There is a gap between what the database can currently do and what the
organisation would like it to be able to do. Currently, no supplier data is recorded in
the database and all information is kept manually. This makes comparison between
different suppliers difficult.

Recommendations (if required): The organisation must create and implement a

strategic goal that enables expansion of the database to incorporate new features.

By comparing current organisation practices with the strategic plan, an organisation can
highlight improvement opportunities. Planning and implementation of those improvement
opportunities can then be started.

Reporting
Reporting is an important process that allows the appropriate personnel - including line level
management or higher management - to examine the results from projects, surveys and research.
Types of reports
A report may contain all the details of a project you have been working on, or surveys or
research you have been conducting. Formal reporting may include a formal presentation to senior
management or a board of directors about your outcomes, conclusions and recommendations.
Alternatively, you may need to prepare a gap analysis, which will be included in a larger report.
A gap analysis often has the findings of your examination, the implications of the gap, and a
recommendation for alignment.
Reports are a way of presenting a set of data in a specified format. There are many different
types and styles of report. They may be written reports, or presented verbally to a group of
people, management, a client or a board of directors. The following is a brief list of different
types of reports:
 organisation policies and procedures  technical specifications
 feasibility report  user manuals
 evaluation report  strategic plans
 recommendation report  test plans
 technical report  user documentation
 research report  progress report.
 business plans

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Self-Check
1. Answer True or False:
Strategic plans set out to accomplish a specific goal through a plan of action.

2. In the IT industry, which of the following are major reasons that businesses fail to develop
effective strategies?
allowing corporate politics to dictate priorities
failure to understand the challenges ahead
failure to see a strategic challenge
all of the above

3. What are the three common ‘descriptors’ that are used in mission statements?
purpose, reasons, goals
purpose, business, values
purpose, procedure, process
none of the above

4. When preparing strategies, tangible and intangible resources are discussed. Which of the
following resources are intangible?
employee knowledge, equipment, employee relations
managerial talent, cash balance of company, employee knowledge
ideas, reputation, capacity for innovation

5. Answer True or False:

Competitive advantage is the ability of the organisation to outperform its
competitors in key performance areas.
Answers
1. The statement is True! Strategic plans set out to accomplish a specific goal through a plan
of action.
2. Some of the major reasons that businesses fail to develop effective strategies include
allowing corporate politics to dictate priorities, failing to understand the challenges
ahead, and failing to see a strategic challenge.
3. The three common descriptors used in mission statements are purpose, business and
values.
4. Ideas, reputation and the capacity for innovation are intangible resources.
5. The statement is True! Competitive advantage is the ability of the organisation to
outperform its competitors in key performance areas.

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Evaluate impact of changes

You should already know about evaluating current business strategies. This resource will help
you to evaluate the impact of changes within an information technology environment.

In this topic you will learn how to:

 evaluate the current business strategy

 carry out a gap analysis
 determine the impact of changes
 develop and document action plans for proposed changes

Review information
Most organisations have some sort of information technology system in place. In order for a gap
analysis to be performed successfully, detailed knowledge of the current information technology
system must be understood.
Current information technology (IT) systems
The current IT system may include an entire information system, or it may be made up of
components within an information system. These components may include the following:
 hardware  telecommunications
 software  information
 web page  documents
 network  files.
Changes may occur within one or more of these components of the information system such as upgrades
of hardware, modification of documents, etc. The change may also be for the information system as a
whole. For example, modifications may need to be made to the information system due to new legislative
requirements.
Most organisations will have some sort of IT system already in place. This system is often referred to as
the ‘legacy system’ of the organisation.
When performing a review of the legacy IT system, a list of system components may be generated. This
list will detail all of the current hardware, software and other network infrastructure in place in the
organisation.

Table 1: An example of a limited list of legacy system components is shown below:

Hardware Quantity held

Processor, Intel Pentium 4 2.8 GHz, 800 MHz FSB 1

Memory, 128 MB, 333 MHz DDR SDRAM 1
Hard Drive, 40 GB ultra ATA100 5400 rpm 1
3.5” 1.44 MB diskette drive 1

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Optical Drive, 20x min./48x max. CD-ROM drive 1

Video, Integrated Intel Extreme Graphics 2, 64 MB Video Memory 1
Mouse & Keyboard, PS/2 Wheel Mouse, 104+ Keyboard (QWERTY) 1
Network Adapter, Integrated Intel® 10/100/1000 Ethernet (Gigabit) adapter 1
Modem
1

Software

Operating System, Microsoft Windows XP Professional 1

Application Software, Microsoft Office Basic Edition 2003 1
LANDesk Software, Intel LANDesk Client Manager Software v6.3 1
Anti-Virus Software, Norton Anti-Virus, Norton Internet Security 2004 1

A review of a current information technology system will generally involve investigating the hardware,
software, networking, telecommunications, web pages and files in use by the organisation. Information
about the current information technology system will be documented in a detailed list showing the item
and the quantity held (where appropriate).

Compare advantages
All information technology systems will have both advantages and disadvantages. A new system will
usually seem better to some users because it is different from the system currently in place. This new
system may purport to have better functionality than the legacy system. Other users may like the
familiarity of the legacy system and may fear possible changes being introduced. Gap analysis is one
method used to compare legacy and proposed information technology systems. Gap analysis allows an
organisation to recognise the features and functionality of the legacy system when compared with the
requirements of the new system.

Gap analysis
Gap analysis is all about evaluating and improving business performance. In information
technology, gap analysis is the study of the differences between two different information
systems or applications, often for the purpose of determining how to get from one state to a new
state. A gap is sometimes spoken of as the space between where we are and where we want to
be. Gap analysis is undertaken as a means of bridging that space.

Gap analysis steps

Image: 1 review system, 2 develop requirements, 3 comparison, 4 implications, 5 recommendations.

Figure 1: Stages of gap analysis

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A gap analysis may include the following steps:

1. Review system
An initial review of the current information system or application is carried out in order to understand the
processing, features or system currently in place.

2. Develop requirements
This may be in the form of a strategic objective that the organisation wishes to implement. This strategic
objective may allow the organisation to increase their competitive advantages or improve the technology
and efficiency of their practices and procedures.
The proposed system may include the following:
 restructuring the current information system in order to become compliant with a new industry
standard or organisation requirement
 updating the hardware of the system. For example, the current hardware may be outdated,
inefficient and unable to handle the capacity needs of the organisation.
 updating the software of the system: the applications used by the organisation may not have the
functionality required. There may be a newer version of the software that incorporates added
features and is a ‘better fit’ for the organisation’s requirements.
 restructuring of documents, files or information so that they are more accessible
 an e-commerce website that enables customers to purchase products online
 new technology may become available, i.e., a new invention or reduction in the price of a
product, making it more affordable for the organisation. This ‘new technology’ may enable the
organisation to improve efficiency or productivity.
 creating new applications for use by the organisation. For example, a new database may need to
be created to contain all of the organisation’s data.

3. Comparison
A comparison of the current system elements and the new system requirements or objectives
will give an idea of whether a gap exists. If there is a gap, there will be mismatches between
what the organisation wants and what they already have in place.
The gap analysis allows us to discover how to get from one state to a new state. This
comparison may take the form of a ‘Gap - Yes/No’ column (see example gap analysis table
below) to identify where the gaps exist for each element.
4. Implications
What are the implications of introducing the item being evaluated? What are the risks and
impacts of introducing / implementing the item?
5. Recommendations
The last step in the gap analysis is to make recommendations to identify the items or solutions
needed to fill the gap, if a gap exists.
The gap analysis table shown below is an example of a template that can be used to conduct a
gap analysis.
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Table 2: Gap analysis

Currently in Requirements Gap Y/N Items needed

place

manual 'paper based' computerised Y computers

information system system (hardware)
applications
(software)
user training
Etc.

Limited gap analysis template

The template shown below is another example of a gap analysis template. This is the template
that will be followed hereon in. This template can be used to record the information gathered
from the gap analysis.

Table 3: Gap analysis

Objectives

Test/check/evaluate/confirm a specified condition or situation

Findings

The results of performing the test/check/ evaluation/confirmation

Determine objectives
Changes to any part of the information technology system will have implications. These
implications may be positive or negative. Positive implications may include increases in
efficiency and reductions in costs of using the system. Negative implications will be the risks of
implementing the changes. Risks may include end users not using the system effectively and the
new system not performing as expected.
In the Compare advantages section of this reading, we discussed the five different steps of gap
analysis which are
1. review of the current system
2. determination of requirements for the proposed system
3. comparison of the two systems to determine gaps
4. implications of the gap
5. recommendations.
The fourth and fifth steps of the gap analysis will be explored further later in this reading.
Implications
The implications of the impact / risk involved with the item being evaluated must be
determined. The item may have both positive and negative implications associated with it. The

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implications of each item may be presented in the form of a list of dot points which outline the
impact or risks of the item.

Table 4: Example of risks / implications

Example

A new piece of software is going to be introduced in the organisation.

Risks/ implications:
 The current hardware must have the capacity to allow the new software to run
effectively.
 If the software has not been used in the organisation before, then user training
must take place to ensure the end users are able to operate the software.
 A help desk may need to be put in place to support the end users of the
software.
 There may be licensing issues that need to be explored by the organisation.

Recommendations
The last step in the gap analysis is to make recommendations to identify the items or solutions
needed to fill the gap, if a gap exists. The recommendation may be a description of what is
required in order for the organisation to put the new system in place. For example, if the current
system uses a manual paper-based information system, and the requirement is to computerise this
system, a gap exists between the legacy system’s performance and the strategic objectives of the
organisation. We may recommend that the organisation needs to purchase new hardware and
software and have user training for all end users involved in performing tasks in the proposed
system.

Document findings
Documentation of findings and reporting information to management is an important process.
It allows management to evaluate all relevant information and make informed decisions about
the most appropriate course of action for the organisation.
Gap analysis template
Many different formats are used to display gap analysis information. The example gap analysis
table and the gap analysis template (below) show two possible alternatives for presenting this
information.

Table 5: Gap analysis template

Objectives:

Test / check / evaluate/ confirm a specified condition or situation

Findings:

The results of performing the test / check/ evaluation/ confirmation

Implications:

The impact / risk involved with the item being evaluated

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Recommendations (if required):

Actions or solutions to be implemented

Reporting
The results of a gap analysis are important to management of an organisation for a number of
reasons:
 management needs to have all the information about a number of possible changes to the
information technology system
 management can then evaluate all relevant information
 implications of each change are presented along with a recommended course of action
 the gap analysis allows management to make more informed decisions.
As a result of feedback from management, the organisation will generally choose a course of
action that best suits their situation. There may be financial or other resource constraints that
management takes into account when choosing a course of action.

Table 6: Example of management course of action

Example

Results from the gap analysis may include a recommendation that the organisation upgrade
their computer network and hardware to improve system efficiencies and to allow network
traffic to be processed more quickly. This will involve replacing certain network
components and other hardware.
After evaluating this recommendation, management may decide that although this is the
best course of action for the organisation to take, they simply do not have the funds to
implement it. It may be decided that the upgrade will be postponed for six months, or only a
limited version of the upgrade will take place.
This management feedback determines the course of action taken by the organisation.

Self-Check

Gather data on current information technology

1. Create a questionnaire that can be used to gather information about the organisation’s current
IT systems. Remember that an IT system is made of many elements and your questions
should reflect this.

Determine objectives
2. Review the tables below and for every objective and finding, suggest:
 what the implications would be
 make recommendations (if required).
Question 2a
Objectives Check the weather report to determine the
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temperature for today

Findings The temperature will be 22 deg. C with the
likelihood of rain in the afternoon
Implications

Recommendations

Question 2b
Objectives Evaluate customer feedback to determine
the feasibility of introducing an e-commerce
website for the organisation.
The current brochure site employed by the
organisation received many hits.
Customers complain that the ordering
process - either by phone, fax, email or in
person - is confusing and long winded.
There are often errors made in the ordering
process due to information being recorded
incorrectly.
Findings The organisation has appropriate equipment
and support personnel required to conduct
ordering on-line.
Customers want the ordering of products to
be easier.
The current ordering process is costing the
organisation money in lost sales as
customers are going to competitors to
purchase the same goods.
Competitors use an e-commerce website to
allow their customers to order goods on-
line.

Question 2c
Objectives Evaluate whether the current system
database performs the tasks required by
users.
Findings Information about current suppliers is not
being recorded in the database.
We do not keep adequate records of the
items we purchase from each supplier.
We are unable to predict the numbers of
goods required from each supplier.
A new supplier has approached us with
supposedly cheaper prices and discounts.
We are unable to compare suppliers with
each other to see if we are getting the ‘best
deal’ from each of them.

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Implications

Recommendations

1. Fill in the missing word:

The IT system already in place at an organisation is often referred to as the legacy system of the
organisation.

2. Answer True or False:

A gap is sometimes spoken of as the space between where we are and where we want to
be.

3. What are the five commonly regarded steps of gap analysis?

review of the current system, determination of requirements for the proposed system,
comparison of the two systems to determine gaps, implications of the gap,
evaluations
review of the current system, determination of requirements for the proposed system,
comparison of the two systems to determine gaps, implications of the gap,
recommendations

4. In an IT environment, why would management appreciate assessing the information collected

through the gap analysis process?
management have all the information about a number of possible changes to the
information technology system
management can evaluate all relevant information
implications of each change are presented along with a recommended course of action
all of the above

5. What happens during the review stage?

monitor job performance
review the proposed system
review employee jobs
review the current system

6. Answer True or false:

In gap analysis, the objective is to evaluate a condition or situation.

7. What might the proposed system include?

hardware upgrades
job upgrades
a new information system
restructuring procedures
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all of the above

Answers

1. Here are some questions that will help in reviewing the legacy IT system:
Client server
 Do you currently have any client / server computers?
 If yes, what type and how many?
Network
 Are your computers connected to each other?
 What is the network topology and cable type?
 Is the current network mapped?
 If yes, what type of network equipment is used and how many?
 Do you have any remote locations connected over WAN? If so, how?
 Do you have an ISP? If so, who and what is the connection type?
 Do you have a wireless network?
Data
 How is your data stored?
 How do you archive older data?
 How long does data need to be available before archiving?
Peripheral
 Do you use printers or faxes? If so, what type and how many?
 Are printers faxes connected to the network?
 Do you use smart phones or pocket PC’s? If so, what type and how many?
2. A

Question 2a

Objectives Check the weather report to determine the

temperature for today
Findings The temperature will be 22 deg. C with the
likelihood of rain in the afternoon
Implications The weather will be cooler than usual for
this time of year. I may get wet if I am
caught in the rain
Recommendations Take a coat and umbrella with you to
work/school

3. Question 2b
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Objectives Evaluate customer feedback to determine

the feasibility of introducing an e-commerce
website for the organisation.
The current brochure site employed by the
organisation received many hits.
Customers complain that the ordering
process - either by phone, fax, email or in
person - is confusing and long winded.
There are often errors made in the ordering
process due to information being recorded
incorrectly.
Findings The organisation has appropriate equipment
and support personnel required to conduct
ordering on-line.
Customers want the ordering of products to
be easier.
The current ordering process is costing the
organisation money in lost sales as
customers are going to competitors to
purchase the same goods.
Competitors use an e-commerce website to
allow their customers to order goods on-
line.
Implications Customers are not happy with the current
ordering process.
We are losing customers to our competitor
because ordering goods is easier with them.
We are falling behind with regards to
technology.· Our site is getting lots of hits,
but ordering is difficult.
We need to reduce the amount of errors
being made in the ordering process.
Recommendations Create and implement an e-commerce
website to allow the ordering of goods to be
easier for our customers. Inform current and
past customers of the new ordering process.

4. Question 2c

Objectives Evaluate whether the current system

database performs the tasks required by
users.
Findings Information about current suppliers is not
being recorded in the database.
We do not keep adequate records of the
items we purchase from each supplier.
We are unable to predict the numbers of
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goods required from each supplier.

A new supplier has approached us with
supposedly cheaper prices and discounts.
We are unable to compare suppliers with
each other to see if we are getting the ‘best
deal’ from each of them.
Implications We may be spending more money on goods
than we need to. It may be cheaper for us to
switch to a different supplier. We are not
able to make good decisions with the
information captured by the current system.
Employees are getting frustrated by the lack
of proper information.
Recommendations Expand the database to incorporate new
functionality, the recording of suppliers, and
the ability to compare different supplier
goods.

1. The IT system already in place at an organisation is often referred to as the legacy

system of the organisation.
2. The statement is True! A gap is sometimes spoken of as the space between where we
are and where we want to be.
3. The five steps of gap analysis are: review of the current system, determination of
requirements for the proposed system, comparison of the two systems to determine gaps,
implications of the gap, recommendations.
4. Management would appreciate the information collected through gap analysis for all of the
following reasons: management have all the information about a number of possible
changes to the information technology system; management can evaluate all relevant
information; implications of each change are presented along with a recommended course
of action.
5. In the review stage we review the current system.
6. The statement is True! The objective in gap analysis is to evaluate a condition or situation.
7. The proposed system may include hardware upgrades, job upgrades, a new information
system, and restructuring procedures.

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Developing action plans

You should already know about evaluating current business strategy and evaluating the impact of
changes. This resource will help you to develop an action plan within an information technology
environment.

In this topic you will learn how to:

 develop an action plan for proposed changes

 ensure action plans take account of all relevant considerations
 document action plans
 submit action plan for feedback and approval

Developing action plans

The action plan is where the recommendations made in the gap analysis are explored further.
More detail is developed so that for each recommendation a list of activities, responsibilities,
resources and a timeline is developed.
What goes in an action plan?
The gap analysis develops a range of options or recommendations for the organisation to
consider. Each of these recommendations made in the gap analysis may become an action plan.
These action plans will detail the activities that need to be carried out in order to implement each
recommendation.
Action plans take a number of forms, but generally may include the following elements:
Goal
What will be achieved by implementing the action? See the table below for an example.
Activities
What are the activities, and in what order will the activities be completed? See the table below
for an example.
Responsibilities
Which staff members are responsible for the completion of each activity? See the table below for
an example.
Resources
What resources will be allocated to each activity? Resources may include funding, time, people
and materials. See the table below for an example.
Timeline
When will each activity commence and finish? See the table below for an example.

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Evidence of success
How will you know if you are making progress? How will progress be measured? See the table
below for an example.
Evaluation process
How will you determine that the goal has been reached? See the table below for an example.
Below is an example of an action plan which utilises these elements.

Table 1: Limited example of an action plan

Goal: Cut costs for customer in order to be more competitive

Activity Responsibilities Resources Timeline

Review customer Marketing staff 35 hours staff time x Begin 22/3/04 9am,
requests, complaints, 3 marketing staff End 26/3/04 5 pm
feedback to ($700)
determine service
provision
possibilities
Create alternative Pricing department 15 hours x 1 staff Begin 29/3/04 9am,
courses of action that ($300) End 31/3/04 10am
could be
implemented to
improve service to
customers:
 drop prices
to match
competitors’
 offer
discounts on
calls during
off peak
times for:
STD and
international
calls
 offer
customer
loyalty
rewards for
staying with
Telstra.
Implement new
pricing strategy
Inform customers
(existing and
potential) of new
pricing strategy
through:
 mail out
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brochures
 television
and radio
advertising.
Review status of
pricing strategy
periodically to
determine success or
failure.
Evidence of success

Increase in customer numbers by x%

Evaluation process

Review of customer feedback or survey to determine satisfaction of customers

Action plans detail

 the activities that need to be completed
 the order of the activities
 the person responsible for each activity
 the resources available
 the timeline for the activity.

Ensure action plans

When developing action plans, it is important to consider both internal and external factors and
constraints. Failure to take these factors into account may lead to poor implementation or
problems with the action when it is implemented.
Constraints and considerations
In order to implement action plans appropriately, it is important to consider all constraints and
other relevant factors that may impact on them. These considerations may be both internal and
external to the action.
Internal considerations
Internal considerations will relate to factors within the organisation which will affect the action
plan. These include the following:
Operational
The structure of the organisation can either help to facilitate the action plan or prohibit the plan
from proceeding. If the organisation is highly structured or complex and the action plan calls for
creative thinking and development, the culture within the organisation may doom the plan to
failure before it begins. Conversely, an action plan that fits in with this highly structured type of
organisation has a greater chance of success.

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Financial
The organisation may not have the capital to invest in a new system or a system upgrade at the
present time. This may mean that the organisation must delay the implementation of the action
plan until they can afford it.
Legal
There may be legal reasons why the organisation may not implement a course of action. For
example, installing proprietary software on a number of computers is illegal without the
appropriate multiple licenses. Likewise, there may be legislation that the organisation must
follow when implementing particular actions. For example, if the organisation is going to create
and implement an e-commerce website, then elements of the Privacy Act must be considered and
followed. The organisation has a duty of care to protect all customer information.
Human relations
The implementation of an action plan may require extensive changes to the way people
communicate within the organisation. For example, if an email system is made available to
employees in an organisation for the first time, those employees will need to know about email
etiquette and acceptable use policies for the organisation.
Internal operating environment
The internal operating environment of the organisation will include the platform, hardware and
software that the organisation uses to perform operations. If a new piece of software is being
installed, then it must be compatible with the operating environment of the organisation.
The internal operating environment may also include the following: the operating
climate/culture, existing merchandise or service range of the organisation, possible future
merchandise or service range, staff, management, and management information systems.
External considerations
External considerations will relate to factors outside the organisation which will affect the
action plan. The external environment may include the following:
External operating environment
The external operating environment may include the following:
 markets such as advertising/marketing target
 customers
 local culture/environment
 new or existing products and services, suppliers and technology.
Competitors
Competitor considerations may include the competitor’s product or service range, their pricing
policies and their marketing policies. If we decide to offer a similar product to that of our
competitor, then a similar pricing structure must also be employed.

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Government bodies
Government and legislative bodies may affect employment conditions, staff, trade practices,
consumer law, and occupational health and safety.
Summary
Internal constraints include operational, legal, human relations, financial and internal operating
environment factors.
External constraints include the external operating environment, competitors and factors
relating to government bodies.
When developing action plans, all of these factors must be considered.

Document action plans

Many organisations have documentation standards and use templates for all organisation
documents. The template for the action plan details the goal, activities, responsibilities,
resources, timeline, success factors and an evaluation process for each recommendation or goal.
Action plan template
A template allows the organisation to develop documentation consistently across different
departments, levels and workgroups. Each of the headings in the template shown in the example
below was explained in detail at the beginning of these reading notes.

Table 2: Example of an action plan template

Goal

Activity Responsibilities Resources Timeline

1. 1. 1. 1.
2. 2. 2. 2.
3. 3. 3. 3.
4. 4. 4. 4.

Evidence of success
Evaluation process

Summary
Action plans allow the organisation to detail the activities that must be undertaken to achieve a
set goal or objective. The template forms a standard that the organisation can follow and enables
a consistent level of information to be created.

Feedback / approval
Management review of documentation and the provision of feedback or approval is a standard
procedure for all organisations. This process allows management to consider the information
being presented when making decisions about the organisation’s future.

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Documentation
The completed action plans will inform management about how they may implement each
option. The action plan gives management all the information about a number of possible
changes to the system or organisation.
Management will choose to implement the options that best suit their situation. There may be
further information that management will consider when approving the action plan(s). For
example, there may be financial or other resource constraints that management must take into
account or that might influence the order of implementation and the commencement dates for
each option.
This feedback from management will give the organisation the ability to create a timeline and a
list of activities for each option and perhaps allocate resources and personnel to each activity.
Management must review all documentation in order to make informed decisions. The action
plans may be compared to the business situation, ensuring that only appropriate courses of action
are pursued. Management constraints will also need to be considered before the action plans can
be implemented.
Self-Check

1. Developing action plans

This quiz will review your knowledge of developing actions plans. Click the start button to
proceed through the quiz.

Question 1: 1. Goals
2. Summaries
Action plans are a description of what needs 3. Activities
to be done, when and by whom. 4. Scope
5. Resources and Timelines
1. True 6. All of the above.
2. False
Question 4:
Question 2:
What is the purpose of a goal in an action
Action plans are like quality audits. plan?

1. True 1. Details the activities that will be

2. False performed
2. States what will be achieved by the
Question 3: action
3. States the resources for the activity
What do action plans include? 4. Lists success criteria
5. None of the above
3. Analyzing action plans

This quiz will review your knowledge of analysing action plans. Click the Start button to begin
the activity.

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Question 1: Question 3:

What are operational constraints? What does the internal operating

environment NOT include?
1. Internal considerations
2. External considerations 1. Customers
2. Existing services
Question 2: 3. Technology

What is privacy of customer information? Question 4:

1. An operational factor What can government bodies affect? (More

2. A finacial factor than one answer might be correct!).
3. A legal factor
4. A government body factor 1. Customers
5. None of the above 2. Occupational health and safety
3. Criminal law
4. Trade practices

Answers

1.

Question 1:
Answer:
True Question 3:
Answer:
Feedback if you get this question wrong: Goals
Action plans are a description of what needs Summaries
to be done, when and by whom. Activities
Scope
Question 2: Resources and Timelines
Answer: All of the above.
False
Feedback if you get this question wrong:
Feedback if you get this question wrong: Action plans include goals, summaries,
Quality audits examine compliance of activities, scope, resoureces and timelines.
activities and results to plans and objectives.
Question 4:
Answer:
Details the activities that will be performed
States what will be achieved by the action

Feedback if you get this question wrong:

The goal details the activities and states the
achievements of the activities.

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2.

Question 1: 1. Customers
What are operational constraints? 2. Existing services
3. Technology
1. Internal considerations
2. External considerations Answer:
Customers
Answer:
Internal considerations Feedback if you get this question wrong:
The internal operating environment does
Question 2: NOT include customers. It does include
What is privacy of customer information? existing services and technology.

1. An operational factor Question 4:

2. A finacial factor What can government bodies affect? (More
3. A legal factor than one answer might be correct!).
4. A government body factor
5. None of the above 1. Customers
2. Occupational health and safety
Answer: 3. Criminal law
A legal factor 4. Trade practices

Feedback if you get this question wrong: Answer:

Privacy of customer information is a legal Occupational health and safety
factor. Criminal law

Question 3: Feedback if you get this question wrong:

What does the internal operating Government bodies can affect occupational
environment NOT include? health and safety and criminal law.

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