Richter case – Infrastructure Essay
Richter case – Infrastructure
Looking at the current (2007) IT governance of Richter, Szücs is the IT director and is working together with around 50 people in the head department in Hungary. Those 50 people are focusing on four different areas: “IT operations (12), procurement and service (15), SAP support (12), IT strategy and projects (4)” (Mitchell et al., 2007). Altogether they develop a strategic plan which is expected to support the business processes at Richter. However, a plan is not very flexible since it first has to be approved by the CFO of Richter and then still has to be agreed on by the senior management.
This process though takes place only once a year, namely each year in June. But there is not only the headquarter of Richter in Hungary but different affiliates all over the world (e.g. Poland, India, Russia, Romania). Those affiliates have their own IT departments and IT directors. Major important infrastructure/IT decisions and decisions regarding the SAP modules have to be coordinated and discussed with Szücs and the head office in Hungary. If the affiliates develop a plan they have to present them like Szücs but to their respective CEOs.
This structure shows the level of importance of IT to Richter and has some strengths as well as weaknesses. As mentioned above IT has more of a supporting role for Richter’s business processes and there are IT directors who develop plans with a team of different specialists but cannot implement them by themselves. Looking at Broadbent and Weill (1997), Richter has a dependent infrastructure view.
Their IT as a percent of expenses are around the average relative to its competitors and they also want to achieve cost savings but still be relatively flexible. This has the advantage of staying competitive without that much risk. Due to top management requiring to approve the plans developed by the IT director they can evaluate the cost and risk exactly.
However, since top management might not have the best IT knowledge it could happen that they do not approve a plan because they think it is too expensive and risky. But if they would have enough IT understanding they might see the value this plan will add to the company. Also, the meetings are just once a year which let them lose some flexibility.
Another infrastructure view is the enabling view. Having this view, Richter would have much higher IT expenses and their IT infrastructure would always be on the edge. This view has its strengths and weaknesses as well: They would be a lot more flexible and management of IT would probably be different.
The IT directors would not have to get approval by the CFO and top management but rather work together with them looking for opportunities to be innovative and get a competitive advantage for some time. This view has its downsides, though: Investing much money and being the first to invest in something new is always connected with a lot of risk. Also, if the affiliates would be allowed to decide everything on their own failures might be discovered too late and increase the loss.
Yet, another view is the utility view with which the firm has low IT expenses and focuses on cost savings. IT is clearly used as a supporting tool. The IT director (if there even is one) gets told what is needed and just tries to find the most cost-saving solution. The firm has low risk since it does not invest much money but is not very innovative and maybe loses some profits because it probably imitates competitors later on.