External IT Environment: Dimensionality and Measurement

Transcription

1 Association for Information Systems AIS Electronic Library (AISeL) ICIS 2000 Proceedings International Conference on Information Systems (ICIS) December 2000 External IT Environment: Dimensionality and Measurement C. Ranganathan Southern Illinois University Carbondale Vijay Sethi Nanyang Technological University Follow this and additional works at: Recommended Citation Ranganathan, C. and Sethi, Vijay, "External IT Environment: Dimensionality and Measurement" (2000). ICIS 2000 Proceedings This material is brought to you by the International Conference on Information Systems (ICIS) at AIS Electronic Library (AISeL). It has been accepted for inclusion in ICIS 2000 Proceedings by an authorized administrator of AIS Electronic Library (AISeL). For more information, please contact

2 EXTERNAL IT ENVIRONMENT: DIMENSIONALITY AND MEASUREMENT C Ranganathan Department of Management Southern Illinois University, Carbondale U.S.A. Vijay Sethi Nanyang Technological University Singapore Abstract Although the importance of the external IT environment has been recognized in the literature, there has been little effort to conceptualize the theoretical dimensions of this construct and develop operational indicators to measure it. Our research addresses this gap and seeks to develop the theoretical dimensions and operational measures for external IT environment and empirically validate them. We use qualitative data obtained from interviews with 27 senior IT executives to identify three broad dimensions of external IT environment namely, IT munificence, IT dynamism, and IT activity intensity. Operational measures for these dimensions were also developed from qualitative research. Subsequently, an instrument was developed to empirically measure the dimensions of the external IT environment. The validity of the dimensions and its operational indicators are being tested with data collected from a survey of 223 IT executives. Keywords: External IT environment, dimensionality, measurement issues, IT munificence, IT dynamism, IT activity intensity 1. INTRODUCTION External environment is the set of relevant physical and social factors outside the boundary of an organization that are taken into consideration during organizational decision making (Duncan 1972). CIOs and IT executives are required to deal with two broad constituents of the external environment namely, external business environment and external IT environment. External business environment consists of competitors, suppliers, customers, regulatory bodies, and other industry related components. The technological environment supplying the hardware, software, telecommunication, and specialized human resources comprises the external IT environment of an organization. Both business and technological environments place pressure on IT organizations, and if the IT departments are to survive and succeed, they must respond effectively to these pressures. Several IS researchers have examined how the external business environment affects various IT management processes (Grover 1993; Reich and Benbasat 1990; Sabherwal and King 1992). In contrast, relatively little effort has been devoted to understanding the external IT environment and its impact on IT management processes. Although dealing with the external IT environment has been identified as a crucial issue facing IT executives (Benmati et.al 1997; Carey 1992; Computerworld 1995; Paul 1994), there has been little research on understanding the dynamics of the external IT environment. The external IT environment has been characterized using terms like high-velocity, fast-changing, rapid, volatile, clockspeed, etc. But there has not been any systematic attempt to conceptualize external IT environment in theoretical terms and empirically derive its constituent dimensions. Lack of such a conceptualization has limited our understanding of the interrelationships between external IT environment and IT organizations. There is little knowledge on the impacts of external IT environment on IT strategies, IT unit structures, IT management processes, or outcomes. To this day, we do not have clear answers 594

3 External IT Environment to many critical questions: (1) How does the rapidly changing external IT environment affect IT adoption, diffusion, and assimilation in firms? (2) How should organizations respond to the challenges posed by changes in the external IT environment? (3) What mechanisms should be deployed to create a fit between external IT environment and IT management processes? While few will deny the importance of external IT environment, it is indeed surprising that this construct has received little attention in IS research. This study addresses these issues by working toward developing measures for the external IT environment. Our research has two primary purposes : (1) To conceptualize the external IT environment and develop its constituent dimensions. (2) To identify operational indicators for these dimensions and validate them. Given the exploratory nature of our study, we deployed a two-stage research design. We spent over 18 months collecting qualitative data, and designing and conducting a survey. The qualitative research gave us valuable information on the external IT environment through interviews with 27 senior IT executives, and the survey yielded responses from 223 IT executives on various characteristics of the external IT environment. In this article, we explain our on-going efforts and present some preliminary findings from our research. 2. RESEARCH DESIGN Our research is being conducted in two broad phases: The first phase is exploratory, identifying potential dimensions of the external IT environment through qualitative research. In the second phase, an empirical survey is used to validate the dimensions identified from qualitative research and to identify the impact of dimensions on IT decision processes. The overall research design in presented in Table 1. Table 1. Overview of Research Design PHASE I: Qualitative Research 1. Literature review to identify all pertinent characteristics of the external IT environment. 2. Qualitative research to gather data on characteristics of the external IT environment. 3. Grouping the characteristics to identify broad dimensions of the external IT environment. 4. Literature review from MIS and reference disciplines (strategic management and organization theory) to validate the dimensions identified. 5. Propose a model of the external IT environment and its constituent dimensions. PHASEII: Quantitative Research 6. Creation of an instrument to measure the dimensions of the external IT environment. 7. Pilot study. 8. Empirical survey to gather data on the measures of the external IT environment. 9. Statistical validation of the dimensions of the external IT environment. 3. DEVELOPMENT OF CONSTRUCT AND ITS MEASURES The primary objective of our research is to conceptualize the external IT environment, identify its dimensions, and arrive at a set of operational indicators for each of these dimensions. 3.1 A priori, Posteriori Versus Hybrid Approaches There are two ways to develop the dimensions of the external IT environment. The first one is a priori approach, by which theoretical perspectives from literature guide the development of dimensions, which are further validated by testing against data. The second way is posteriori, where the dimensions are empirically derived from data using techniques like factor analysis or multi-dimensional scaling. The latter is used in cases where theory development is low. Although little theory exists on the 595

4 Ranganathan and Sethi external IT environment, our knowledge and research perspectives on the external business environment can serve as a foundation for developing theoretical notions on the external IT environment. We decided to use a hybrid approach to develop the dimensions of external IT environment by iterating between a priori and posteriori ways. We used qualitative research to identify operational indicators of the external IT environment, categorized and developed them into distinct environmental dimensions using theoretical perspectives derived from organizational theory research, and subsequently validated these dimensions using the empirical survey. 3.2 Objective Versus Perceptive Measures One of the on-going debates in organizational theory centers on whether environment should be treated as an objective or perceptive construct. Many organizational theorists have advocated treating environment as an objective construct. Dess and Beard (1984) identified three dimensions of the external environment, namely complexity, dynamism, and munificence, and argued for rigorous procedures and objectives measures for measuring these dimensions. This work formed the basis for several research studies that examined the relationship between the external environment and other organizational constructs (Keats and Hitt 1988). In contrast to this approach, many researchers have argued that it is the managerial perceptions of the external environment that shape up the behavior and response of organizations to the environment, and hence environment should be treated as a perceptual construct. According to this school of thought, external environment is how managers view it and it is appropriate to measure environment through perceptual indicators. Several recent studies in organizational theory and strategic management treat environment as a perceptual construct. Boyd et al. (1993) recommended that objective measures are valuable for studying external factors, such as competition, that are imposed on a firm, and perceptual measures are appropriate for studying managerial behavior and decision making. In line with their recommendation, our study treats the external IT environment as a perceptual phenomenon and measures its dimensions using perceptive, subjective indicators. 3.3 Identifying Operational Indicators of External IT Environment In an effort to identify the components of external IT environment, an exploratory research was carried out using in-depth interviews with 27 senior IT executives during the first phase of our study. The interviewees held senior positions in the IT departments and were participants in key IT decisions. The semi-structured interviews focused on the nature of the external IT environment as perceived by the IT executives, and their opinion on how the external IT environment affected their IT decision processes. The data from the interviews were analyzed to identify frequently cited characteristics of IT environment, which were tabulated and summarized. Samples of quotations obtained from the interviews are provided in Appendix A. The final list of external IT environmental characteristics identified from our interviews is shown in Table 2. Table 2. Operational Indicators of External IT Environment 1. Government regulations concerning IT and telecommunications (state laws, legal issues concerning IT, telecommunications, trans-border data flow, etc.). 2. Number of technological options available in the market (availability of hardware, software, proprietary systems, and telecommunications). 3. Number of sources available in the market for acquiring IT products and services (availability of vendors, consultants, expertise of vendors, quality of vendor support, etc.). 4. IT activities of competitors (competitive intelligence on IT related activities). 5. Use of IT by suppliers, customers, and other agents with whom the organization interacts. 6. Rate of obsolescence of IT products (IT product life, maintenance issues, etc.). 7. Difficulties in hiring and retaining IT staff (IT staff turnover, training IT staff, etc.). 8. Rapidity of changes in the IT industry (IT industry trends, declining costs, ease of integration, globalization, mergers and acquisitions, etc.). The next step was to group the characteristics, identify commonalities, and fit these characteristics into some broader dimensions of the external IT environment. The issues listed in Table 2 were grouped as those focusing on resource availability (characteristics 1, 2, 3, and 7), IT usage by key industry players (characteristics 4 and 5), and change-related factors (characteristics 6 and 8). 596

5 External IT Environment 3.2 Identifying the External IT Environment Dimensions We searched the organizational theory literature to identify the dimensions of the external business environment to see if any of these dimensions could be adapted to our context of external IT environment. A review of the literature is presented in Table 3. Table 3. Dimensions of External Business Environment: Literature Review Study Dess and Beard 1984 Sharfman and Dean 1991 Thompson 1967 Child 1972 Koberg 1987 Miller 1987 Milliken 1987 Castrogiovanni 1991 Boyd and Fulk 1996 Dimensions of External business environment Munificence, Complexity and Dynamism Dynamism, Complexity and Competitive threat Heterogeneity, Dynamism Complexity, Variability and Illiberality Resource Scarcity, Uncertainty Dynamism, Heterogeneity, Hostility Uncertainty : State, Effect and Response Munificence Complexity, Variability Although labeled differently, there is considerable overlap in the definitions and the operationalizations of the different dimensions of the external business environment. For example, the constructs munificence (Dess and Beard 1984; Castrogiovanni 1991), resource scarcity (Koberg 1987), and illiberality (Child 1972) refer to the extent of resource availability in the environment. Similarly, dynamism (Dess and Beard 1984; Miller 1987; Sharfman and Dean 1991), variability (Boyd and Fulk 1996) and uncertainty (Milliken 1987) reflect the extent of unpredictable environmental change. Complexity (Child 1972; Dess and Beard 1984; Sharfman and Dean 1991) is similar to heterogeneity (Thompson 1967), and market diversity, but it also encompasses some elements of dynamism and munificence. Placing the external IT environmental characteristics identified from our qualitative research (Table 2) within the nomological net with the external business environment (Table 3), we find the resource availability and change-related factors in the external IT environment to be similar to the munificence and dynamism dimensions in the external business environment. We, therefore, adapt these two dimensions to our research context of the external IT environment and label them appropriately as IT munificence and IT dynamism respectively. IT munificence refers to the extent to which external IT environment provides adequate resources to the organization. The dimension captures the extent to which the external IT environment is resourceful, friendly, or hostile toward the organization. The environmental characteristics that constitute this dimension are Government regulations concerning IT and telecommunications Number of technological options available in the market Number of sources available in the market for acquiring IT products and services IT dynamism refers to the extent to which the changes in the external IT environment are volatile and rapid. The measures of this dimensions are Rate of obsolescence of IT products IT personnel turnover and difficulties in hiring and retaining IT staff Rapidity of changes in the IT industry Our qualitative research revealed a new dimension of the external IT environment which we label IT activity intensity. This refers to the extent to which a firm s competitors, suppliers, customers, and other stakeholders use IT. The IT executives we interviewed felt that their IT management activities were affected by the way the other industry players used IT. Hence, we conceptualized IT activity intensity as our third dimension of external IT environment with the following measures 597

6 Ranganathan and Sethi IT activities of competitors Use of IT by suppliers, customers, and other agents with whom the organization interacts This discussion leads to our proposition The external IT environment can be characterized by three dimensions namely, IT munificence, IT dynamism, and IT activity intensity. 4. CURRENT STATUS OF RESEARCH 4.1 Instrument Development and Pilot Study We used the data we gathered from interviews to develop a series of statements that would measure our research constructs. In this process, we also looked at the similar constructs and items used in organizational environment research to maintain a degree of consistency. The items of the construct are presented in Appendix B. This instrument was reviewed by eight faculty members and then by two experienced IT consultants and seven senior IT executives. The instrument was iteratively refined on the basis of the feedback received. The final survey instrument was mailed to 1,350 senior IT executives. This yielded 223 complete and usable responses, giving a 16.52% response rate. We are currently in the process of analyzing the data collected from the survey. 4.2 Conclusions Although the external IT environment has been recognized as an important construct in IS research, there has been little attempt to identify its theoretical dimensions and operationalize them through some empirical indicators. This study identified three potential dimensions and identified a set of operational items to empirically measure the construct. We hope to validate the dimensionality and its operationalization through the data we have collected from our survey. The dimensions of external IT environment and their operationalization should be useful to IS researchers in their efforts toward understanding the relationships between environment and IT organizations. We also hope our study helps in advancing theory development in IS research. References Benamati, J. S., Lederer A. L., and Singh, M. Changing Information Technology and Information Technology Management, Information and Management (31), 1997, pp Boyd, B K., Dess, G., and Rasheed, A. Divergence Between Archival and Perceptual Measures of the Environment: Causes and Consequences, The Academy of Management Review (18:2), April 1993, pp Boyd, B. K., and Fulk, J. Executive Scanning and Perceived Uncertainty: A Multidimensional Model, Journal of Management (22:1), 1996, pp Carey, D. Rating the Top MIS Issues in Canada, Canadian Datasystems, June 1992, pp Castrogiovani, G. J. Environmental Munificence: A Theoretical Assessment, Academy of Management Review (16:3), 1991, pp Child, J. Organizational Structure, Environment and Performance: The Role of Strategic Choice, Sociology (6), 1972, pp Computerworld. CIOs Still Feel Besieged, August 14, 1995, p. 72. Dess. G. G., and Beard, D. W. Dimensions of Organizational Task Environments, Administrative Science Quarterly (29), 1984, pp Duncan, R. B. Characteristics of Organizational Environments and Perceived Environmental Uncertainty, Administrative Science Quarterly (17), 1972, pp Grover, V. An Empirically Derived Model for the Adoption of Customer-Based Interorganizational Systems, Decision Sciences (24:3), 1993, pp Keats, B. W.,and Hitt, M. A. A Causal Model of Linkages among Environmental Dimensions, Macro-Organizational Characteristics and Performance, Academcy of Management Journal (31), 1988, pp Koberg, C. S. Resource Scarcity, Environmental Uncertainty and Adaptive Organizational Behavior, Academy of Management Journal (30:4), 1987, pp

7 External IT Environment Miller, D. The Structural and Environmental Correlates of Business Strategy, Strategic Management Journal (8), 1987, pp Milliken, F. J. Three Types of Perceived Uncertainty About the Environment: State, Effect and Response Uncertainty, Academy of Management Review (12:1), 1987, pp Paul, S. European Managers Get Down Into Business, Datamation (40:4), 1994, pp Reich, B. H., and Benbasat, I. An Empirical Investigation of Factors Influencing the Success of Customer-Oriented Strategic Systems, Information Systems Research (1:3), 1990, pp Sabherwal, R.., and King, W. R. Decision Processes for Developing Strategic Applications of Information Technology: A Contingency Approach, Decision Sciences (23), 1992, pp Sharfman. M. P., and Dean, J. W. Measuring and Conceptualizing the Environment: A Multi-Dimensional Approach, Journal of Management (17:4), 1991, pp Thompson, J. D. Organizations in Action, New York: McGraw Hill, Appendix A. Qualitative Data Analysis: Sample Quotations from Interviews Quotations Technology is changing rapidly and we have to keep abreast of it. We are constantly updating our people on this front and have even employed a group of people for the same. We check out the relevance of the technology and apply it to our existing situation. I would not claim that we have state-of-the-art technology at present. But the technology is changing fast, and many options are opening up, unlike earlier days where there were only few options. We look for that technology which suits our requirements best. Hiring qualified and trained IT staff is a big problem for us. Even if we get them, it is difficult to retain them. The reliability of (telecom) lines was an important issue which was not resolved for a long time, and for which no immediate solution was in sight. We collected lots of information about machines and packages abroad in the foreign market.the IT environment within the country was not good. We had very limited options for technology here. Even if we wanted to spend more and get better technology from some other country, we couldn t...because of government regulations. Procuring a pagination software from an outside source and seamlessly integrating it with our in-house developed editorial system was very difficult and almost impossible. Competition was fast catching up. Some of our competitors were also introducing IT and tracking systems. We had to constantly improve our systems so that we will always stay ahead of competition. I visit some of the other players in the industry to see what they are doing, and how they are using IT. Most of our customers have this technology and so we also had to go for it. External IT Environment Dimension IT dynamism IT dynamism IT dynamism IT munificence IT munificence IT munificence IT activity intensity IT activity intensity IT activity intensity 599

8 Ranganathan and Sethi Appendix B. Items Measuring the Dimensions of External IT Environment Number of alternative sources for acquiring technology/ IT services was Technological options available to our firm were IT activities and practices of our competitors were Use of IT by our suppliers/customers/agents with whom we interacted were The rate of obsolescence of IT products was Problems in coping with rapid changes in the IT industry were Difficulty in hiring qualified IT personnel was Favorability of government regulations concerning IT and telecommunications was (All items measured on seven-point Likert scale: 1 = very low, 7 = very high) 600