case study _student copy Teaching case Reshaping the IT governance in Octo Telematics to gain IT–business alignment Giovanni Vaia1, Erran Carmel2 1Department of Management, Ca’ Foscari University...

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case study _student copy
Teaching case
Reshaping the IT governance in Octo
Telematics to gain IT–business alignment
Giovanni Vaia1, Erran Carmel2
1Department of Management, Ca’ Foscari University Venice, Cannaregio, VENEZIA;
2Kogod School of Business, American University, Washington, DC, USA
Correspondence:
G Vaia, Department of Management, Ca’ Foscari University Venice, San Giobbe, Cannaregio, XXXXXXXXXX, VENEZIA.
Tel: XXXXXXXXXX;
E-mail: XXXXXXXXXX
Abstract
The case shows how a technology services company shaped and reshaped – and reshaped
again – its IT governance structure to better integrate the IT function with business clients.
The company is a large Italian telematics provider – Octo Telematics – which is specialized in
the provision of telematic services and systems for the insurance and automotive markets.
During the period described in this case, the company was growing and globalizing rapidly.
The desired alignment between IT and the business units is needed to promote behaviors
consistent with the organization’s mission and strategy. As Octo experimented with new
processes, committees and reorganizations the company ‘traveled’ through several
governance archetypes.
Journal of Information Technology Teaching Cases XXXXXXXXXX, 88–95. doi:10.1057/jittc.2013.8;
published online 12 November 2013
Keywords: IT governance; IT–business alignment; IT organization
Introduction
O cto Telematics S.p.A. is a large telematics providerspecialized in the provision of telematic services andsystems for the insurance and automotive market. Octo
based its growing business on partnerships with large auto
insurers in Italy and in other countries. This approach yielded
a new and profitable customer value proposition for insurers
based on a customer’s driving and risk profiles.1
The heart of the system is a small telematic device (OBU –
On Board Unit) installed in a vehicle, which captures and
transmits data about where, when and how the vehicle is being
driven. Telematic information has reduced auto insurance
premiums for drivers, reduced claims and fraud for the
insurer, while at the same time creating other social benefits.
The technology has created an entirely new ecosystem of
various stakeholders, including installers of tracking devices,
security operation centers, data analyzers, government, info-
mobility providers, telco providers and other third parties
providing value-added services. This ecosystem restructuring
creates opportunities for new value innovation as a result of
alignment of data, functions, price and cost positions.
Octo developed IT infrastructure and software to support
the telematics business, and since 2003, when it set up a pilot
program for its first 2500 OBUs,2 Octo has continuously tried
to align the information architecture and services to its stake-
holder needs, to generate and distribute the large amounts of
data that form the basis of value-adding analytics. Technology
is at the heart of a new ecosystem of services, resources, data
and stakeholders. Different stakeholders have joined forces to
design the technology, share information and work as a
dynamic meta-business system to build a valuable asset –
without having to merge.
In this case, the systems integrator – Octo – played the role
of market facilitator and enabler; it set up and refined the
Italian network of installers, OBU manufacturers, telecom
providers and insurance companies.
In managing this role of system integrator Octo has had to
reshape the organization and the link between the IT function
and the business, in terms of decision rights, committees,
processes and roles. To date, the alignment between the IT
function and the business, which should be a critical capability
for Octo, is still not stable.
When 10 pioneers set up the company in 2002, IT was
almost the entire business. But today, with the success in
international market and the growing power of other
internal functions such as Sales, Finance and Operations,
the IT function is seen more as a provider of specialized
technology, emphasizing the vision of IT as being separate
from the business and the role of the CIO as that of a
technical expert.
This teaching case describes the continuing attempt of the
CIO to forge a dual identity: the IT function as a strategic
partner of the business, critical for value creation, and the CIO
as a business problem solver. The case describes the challenges
faced by the CIO and the organization in designing a new IT
Journal of Information Technology Teaching Cases XXXXXXXXXX, 88–95
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Highlight
governance model to align changing business needs with IT
delivery.
Governing the alignment of business and IT: methods and
approaches
Aligning IT and its business has been a top concern of IT
managers for 30 years. Alignment is understood to be essential
as a competitive weapon and a way to get a superior perfor-
mance. Alignment considers the strategic fit between strategy
and infrastructure as well as the functional integration between
business and IT (Luftman and Brier, XXXXXXXXXXThe 2012 annual
survey conducted by the Society for Information Management
(Luftman and Derksen, 2012) on the key issues facing IT
executives finds that IT and business alignment, ranked 2nd of
all issues – and has been quite stable since 2003 (after dropping
to 3rd place in 2010, it was #1 in 2011, and in 2012 is #2).
Alignment is considered as a continuous process that evolves
through a search of a dynamic equilibrium, among the many
variables of strategy, technology, organization architecture, pro-
cesses and skills (Henderson and Venkatraman, XXXXXXXXXXLuftman
and Brier XXXXXXXXXXsuggested six enablers that help the alignment:
senior executive support for IT; IT involved in strategy develop-
ment; IT understands the business; business/IT partnership;
well-prioritized IT projects; IT demonstrates leadership.
In Weill’s XXXXXXXXXXframework, pictured in Figure 1, firm
performance is the result of a combination between the
typology of decisions and models of governance.
Weill describes five major IT decisions (include IT principles,
IT architecture, IT infrastructure strategies, business application
needs, and IT investment and prioritization) and three perfor-
mance measures like asset utilization, profit and revenue growth.
Rather than considering the traditional centralized, decentrali-
zed and middle ground designs, he suggests that there are, in
fact, six governance classifications available to IT organizations
based on the ideal of political archetypes. They are as follows
(Brown and Grant, 2005):
● Business Monarchy – IT decisions are made by Chief
Officers (CxOs).
● IT Monarchy – Corporate IT professionals make the IT
decisions.
● Feudal – Decision by autonomous business units.
● Federal – Hybrid decision making.
● IT Duopoly – IT executives and one business group.
● Anarchy – Each small group makes decisions.
While the Business Monarchy and IT Monarchy archetypes
represent a centralized decision making structure, Feudal
archetype reflects a decentralized structure where business
unit owners are the primary decision makers within their
dominion of control. The IT Duopoly archetype, instead,
represents a two-party arrangement between a business
partner and a technical partner and is more restrictive and
specialized than the Federal model.
Weill found that high-performing companies typically use
the IT Duopoly model. This seems to allow for creative
business solutions within agreed-upon constraints. Lowest-
performing companies typically use federal or feudal arrange-
ments (Weill, 2004).
Therefore, combining performance measure with type of
decisions and governance we have three different approaches
as follows:
● Leaders in asset utilization typically use ‘IT Duopoly’
governance for all five IT decisions and the IT group plays
an important coordinating role. To become high perform-
ing companies have to: set IT principles; empower business/
IT relationship managers; establish a technical core of
infrastructure and architecture providers who plan and
implement the enterprise’s technology platform; involve IT
architects on business unit projects to facilitate IT education
of the business leaders; and develop a simple chargeback
system and a regular review process.
● Leaders on profit have a more centralized IT governance
approach making decisions on principles, architecture and
investments. These firms use senior business management
committees. They have to: staff an enterprise-wide IT
steering committee with capable business executives and
the CIO, with a strong cost control; manage the firm’s IT
and business architectures to drive down business costs;
designing a clear architecture exception process to mini-
mize costly exceptions and enable learning; create a cen-
tralized IT organization designed to manage infrastructure,
architecture and shared services; use transparent processes
to make decisions on investments; implement simple
chargeback and service-level agreement mechanisms to
allocate IT expenses.
● Leaders in revenue growth try to balance the entrepreneurial
needs of the operational units with the firm-wide business
objectives. More often a ‘Business Monarchy’ or a ‘Feudal’
approach is used to set mainly the IT principles. Successful
firms in this category have to: empower the business units to
drive IT investment; place IT professionals into operational
units to focus on customers’ needs; create operational-unit-
based IT infrastructure capabilities tailored to local needs;
enable a technical core of infrastructure providers.
In conclusion, managers have to minimize situations that
inhibit alignment and, conversely, maximize activities that
booster alignment. All this towards the high-performing goal:
improving the relationships between the business and IT
functional areas enables visibility, efficiency and profitability.
Octo Telematics: company background
Two former senior managers of Viasat founded Octo Tele-
matics in 2002, an Italian company specialized in car satellite
security. Fabio Sbianchi and Giuseppe Zuco, the founders, are
today, respectively, Octo’s CEO and CIO. They haveFigure 1Weill’s framework of analysis on IT governance.
“Octo” and “Telematics” G Vaia and E Carmel
89
maintained 10% of the stocks to date. Fabio and Giuseppe are
the two central characters in our case. We will refer to them by
their first names as they are known in the company.
Since its startup, Octo Telematics has been considered by
the financial press ‘a machine to make money’ with a strong
orientation to financial markets, with EBITDA around 50%
and a growth rate exceeding 25% XXXXXXXXXXin Italy, its home
market, as well in some international markets.
In 2010 the biggest private equity funds became interested
in the high-growth sector of telematics and Charme II, a
private equity fund managed by Montezemolo & Partners,
took over 65%, and Amadeus Capital Partners Limited and R
Capital Management 25%. In mid-2013 several private equity
firms were reported looking at acquiring Octo. Reports of the
sale prices ranged from 500 to 600 million euros. The value of
the company increased about 500% from 2009 to 2013.
Octo can be considered, using Weill’s framework from
above, a leader on profits. Managers have had the capability
to balance – over time – investments, costs and revenues,
assuring high margins and dividends to investors.
Octo Telematics started in 2003 with a pilot program to
install telematic devices in Unipol’s customer vehicles. After
the successful pilot program, Unipol decided to design a
specific insurance policy for telematics users. The new insur-
ance policy was named Unibox. The company offered a 10%
discount on premiums for accidents, and 50% on premiums
for theft. This was the first telematics insurance policy in
Europe. Since 2005, Octo Telematics has offered its telematics
infrastructure to other big players in the insurance industry,
bringing in new customer segments. Drivers have benefited
from lower premiums and other services, such as assistance
after an accident.
During the second phase of the program, around 2008,
Octo based its own value proposition on three services: (1)
Stolen Vehicle Tracking, (2) Automatic Crash Notification
and (3) Profiling. Octo also started to deliver services to
carmakers and companies with big fleets (for details of Octo’s
client acquisition, see Figure 2). These companies benefited
from e-Call, stolen vehicle recovery services and vehicle
diagnostics. e-Call has the ability to detect an accident and
evaluate crash history data in the most efficient way by using
crash recorder technology; while an in-vehicle tracking system
has become a strong weapon to fight car theft. The car itself
may detect a failure and/or the need for a maintenance service.
The tele-diagnosis system informs the dealer of the failure; in
turn, the dealer can proactively call the customer and order the
necessary parts.
In 10 years Octo acquired 50 corporate clients, over 1.2
million global customers XXXXXXXXXXand is installing an average of
1500 OBUs per day. Octo has subsidiaries and partners in over
20 countries across Europe, the US, South America and Asia.
The infrastructure and services
Figure 3 presents the telematics infrastructure. The OBU is
able to collect specific driving data (e.g., location, crash
statistics) and transmit them to a server for further processing.
The data flow into the data exchange repository, which is the
heart of the telematics infrastructure. This repository is
maintained by Octo Telematics. Machine to machine (M2M)
infrastructure allows the sharing of data about driving, con-
tracts, policies between the insurance company and Octo via
different IP protocols or via file exchange. This M2M data
exchange is required when volumes are significant (hundreds
of mobile terminals), while an exchange via web is cheaper
and does not involve any direct investment.
Business customers are becoming better informed about
telematics and location-based services. These newer ‘Smart
Services’ create an open communication channel with the
customer. Ongoing interaction can be established by using
different communications technologies, such as SMS or MMS,
via a website or within a smartphone application. Smart
services are used to enrich an existing or new telematic
offering, or as a starting point for potential or existing
insurance clients, to be rolled out successively towards other
customer segments.3
The organization and IT dilemmas
Since inception Octo had a typical functional organization in
which governance was strongly centralized. Octo used a
‘Business Monarchy’ archetype to make IT decisions that
spanned the infrastructure and services, the core of Octo’s
Figure 2 Octo’s key client acquisition history.
Source: Octo’s internal document.
“Octo” and “Telematics” G Vaia and E Carmel
90
business. The CEO held strong control of functional areas
including procurement, marketing, quality, sales, operations,
and especially of IT. Before he became CEO at Octo, Fabio
was the CIO in Viasat, so it was natural that he designed
Octo’s infrastructure with Giuseppe Zuco and other found-
ing firm members. Together they also designed the business
model. Then Fabio managed, ad interim, the Sales function
for many years.
The establishment of international branches and the arrival
of new investors led to a restructuring of the company with
a new corporate entity and different legal entity for each
country. These changes brought new managers with a more
international approach into Octo. In particular, three new
managers were appointed: for Sales (Vincent Bonnet),
Finance (Maria Enrica Angelone) and Operations (Federico
Santini). The three implemented new managerial tools with
an eye to international growth, but the functions remained
quite isolated, like silos, and decision rights were still
centralized.
By around 2009 Giuseppe Zuco, the CIO, had to face a new,
complex situation. Until then he had been in a symbiotic
relationship with Fabio, the CEO, and all business and
technological decisions were taken together. Now Giuseppe
had to respond to continuous requests from Finance about the
SAP implementation process, from Sales about the creation of
new platforms/services for international customers and from
Operations about the quality and effectiveness of IT services
delivered. Therfore Giuseppe’s role changed from being a
strategic partner to an internal (technical) provider. In a sense,
it was a step back in the name of growth and profit.
Since this reorganization, in 2009, Giuseppe started centra-
lizing IT decisions, including: architecture and rules for the
use of the IT platform and business services, priorities on
customers and projects, IT investments and development.
Thus, Giuseppe had instituted an ‘IT Monarchy’ within Octo.
This approach helped Giuseppe to maintain power and
influence inside the organization. People from Sales and
Operations were forced to negotiate tasks and priorities with
Giuseppe and he had the ability to manage different political
coalitions. Sales and Operations, the two big units inside Octo,
were rivals for Giuseppe’s resources: requirements and prio-
rities on customer’s project were defined on a direct agreement
with Giuseppe and not on the basis of an objective analysis
and a feasibility study. This approach increased the number of
customized services and changes on implemented services,
where the return on investment was not always positive.
They [colleagues in the Sales Department] convinced Giu-
seppe to develop 20 platforms for a German customer. This
huge project stopped our projects on Italian insurance
companies for months. Now these German platforms has
generated just 1000 of end users and very low revenues.
(Quote from Octo’s Sales professional)
Giuseppe and his team were considered by internal collea-
gues to be reactive. While the IT department was able to
change priorities underway and to customize services
rapidly, it was perceived as being under pressure. IT was
not controlling the agenda in terms of performance, growth
and scalability.
Giuseppe was beset by a huge series of issues. We note nine
of these issues here: rework was about 30%; lack of time to
analyze recurring issues; frequent downtime caused by unco-
ordinated releases or changes; high level of workarounds; lack
of planning for roll-out; a high number of problem tickets per
day; long response times to fix problem tickets (sometimes
months!); no formal escalation path for problem tickets;
overbooking of human resources.
The CIO’s frustration was not unusual. Other CIOs face
similar struggles. Giuseppe realized that Octo’s people and
roles were not connected to company processes and that data
were distributed in disconnected islands. Octo managed a
huge amount of information without a strong methodology
and with an overlap among functions. All this meant that Octo
has insufficient awareness about the financial and economic
impacts of decisions on projects. Business clients, such as the
powerful Sales unit had no visibility onto timing for delivery
and on project management overall.
Giuseppe, as owner of the company, was concerned about
profitability of projects and the quality of services delivered by
the company. ‘It’s time to change’ he said, ‘We have to work
on services vs technology, on quality vs costs, on proactivity vs
reactivity … . I need to rethink IT and I have to integrate my
work with corporate operations and sales, through a new
governance structure.’
From that moment the journey began.
Figure 3 The Octo’s Telematics information system.
Source: Vaia et al., 2012.
“Octo” and “Telematics” G Vaia and E Carmel
91
Getting aligned through the new governance approach
From the end of 2009 through 2013 we observed a wobbly
alignment process that could be explained in two distinct
stages. During each stage Octo implemented some governance
alternatives to reduce the gap between IT and the business, but
each time something went wrong.
In order to ease the understanding of the narrative, in the
description below each unit is noted as belonging to either IT,
Business or a bridging unit by adding one of these tags to the
text: [IT], [Business] or [Bridge]. Bridging units in all cases
here are committees or end-to-end processes staffed by both
IT and the Business –mostly Sales and Operations units. Note
that the Operations unit is responsible for service delivery to
end customers and thus has revenue responsibility (it can do
up-selling on added-value services and close contracts).
Stage 1: from ‘IT Monarchy’ to ‘Duopoly’
First step – transparency
Giuseppe, the CIO, wanted to institutionalize arrangements
with the two key business units: with Operations [Business] on
post-sales support and day-to-day quality of services; and with
Sales [Business] about requirements setting and projects plan-
ning. He wanted to reduce the re-work rate, to better prioritize
projects, to optimize projects profitability with a stronger cost
control, to make infrastructure change management more
effective.
The IT department had a simple structure: a development
team, a testing and operations team, a unit focused on the
OBU devices, and a group specialized on SAP. During the first
phase Giuseppe introduced two new functions and a new
process. He introduced Program & Service Management [I.T.]
and Demand Management [I.T.] function and the Incident
Management (IM) process [Bridge].
The scope of Demand Management [I.T.] was related to
two needs: the collection and integration of business needs
from organizational clients and the formalization of new IT
initiatives (including objectives and timelines). Demand Man-
agement was also responsible for those applications already in
operation and for the definition of areas of evolution and
transfer requests for corrective and adaptive maintenance.
Program Management [I.T.] responsibilities included: checking
for consistency between business planning and Information and
Communication Technology (ICT) planning, and the definition of
priorities for implementation; monitoring IT projects through
periodic meetings, underlining any problems or deviations from
the project baseline; submission for approval of any changes in the
scope of the project; definition of functional test planning; post-
implementation review with the client and end user.
Program Management was also delegated to define service
level agreements (SLA) tailored to the needs of business, in
terms of availability and performance of the systems. Program
Management became one of the critical interfaces with the
client for all kinds of issues, questions and complaints. The
unit set out to improve business communication and customer
satisfaction. It was also the first level of escalation for the
customer that dealt with new requests and/or about critical
downtime and recurrent problems.
But Giuseppe soon backtracked on his decision to structure
the relationship around SLAs – and this is not implemented.
He was troubled about the unit’s performance.
To strengthen the relationship with Operations [Business],
Giuseppe introduced an inter-functional process, IM, with
shared common objectives. Its scope was to record and track
all incidents/issues raised by customers due to a platform’s
downtime or a loss in the service, investigating the cause of the
incident, to find a solution (both temporary workaround and
permanent), escalate trouble tickets and to verify customer
satisfaction.
In the beginning the control over the IM [Bridge] process
was maintained by Giuseppe, but after several months Giu-
seppe switched it to Operations [Business]. IT and Operations
together managed and organized the IM process across three
levels of support. The first level of support was managed by
corporate operations in Italy and other countries. IT staff
trained colleagues at the first level of support to manage IT
trouble tickets more easily. The second level of support was
composed of expert groups from Operations, IT and Admin-
istration; while the third level of support was typically IT
(developers).
Before the introduction of this new process, IT was the only
function involved in the management of trouble tickets with a
huge effort in terms of classification and first resolution. The
results of the reorganization were felt immediately: the
number of tickets decreased and Operations people started
learning more about IT work and its customer approach. A
bright young man within Operations was engaged as Incident
Manager [Bridge]. As owner of the process he was responsible
for the management, improvement and review of the cross-
functional IM process [Bridge].
Now there was a transparent chain from IT to the end
customer that was more informed about the time for resolu-
tion, people involved and more aware about the solutions
applied. Octo’s people had the chance to be engaged in a
structured learning process and share information through the
chain.
But both IT and Business people were not satisfied with the
reorganization. It was not effective for three reasons:
● Demand Manager [I.T.] was too isolated from the IT team.
Furthermore, sales people did not accept his support during
the negotiation with clients, so functional requirements
were not always workable;
● Program Management [I.T.] was isolated from sales people,
so the unit did not have an overall view of projects, needs
and planning. In addition, sales people were competitive
and thus, did not support Program Management defining
priorities among projects and clients.
● IM was a success except within the development team [I.T.],
which felt ‘controlled.’ The unit refused to use the proce-
dure and the tools for the management of tickets. Therefore
trouble tickets began to rise and the Incident Manager
[Business] was frustrated because he felt that Giuseppe was
not supportive.
Second step – sharing
After the first steps towards alignment with business were not
successful enough, Giuseppe decided to get more commitment
on IT from Sales for a stronger budget and cost control. Often,
Sales [Business] signed contracts agreeing on delivery dates,
effort and services without consulting with IT. IT staff were
constantly under pressure, projects were delivered past
“Octo” and “Telematics” G Vaia and E Carmel
92
deadlines, the content of the services agreed on was not always
workable and costs were not under control.
Giuseppe had to act. He created a new bridge organization,
called Change Advisory Board (CAB) [Bridge] for shared
decision making – especially with Sales. CAB was to be an
enterprise-wide committee in charge of process changes on
platforms and services, and architecture exceptions. The goals
were to minimize costs and enable learning. The committee was
determining investment needs together – both IT and Sales.
Thus, all changes affecting the Octo platform (Web, M2M
and all other business processes) had to be reported to and
coordinated through CAB. A formal change request had to be
submitted in writing via a new tool. Then CAB was to review
the request, determine and review potential failures, and make
the decision to allow or delay the request. Each change request
had to receive formal approval from CAB before proceeding
with the change. Core activities consisted of planning, con-
trolling, managing risk, minimizing disruption, communicat-
ing, implementing, measuring change, monitoring costs. For
each change request, the impact of changes on customer
business operations was discussed, as well as the effect on the
infrastructure and customer service, and on the capacity,
performance, reliability and resilience of the service.
Meetings were held on a weekly basis to review outstanding
requests. It was the first time that people had the chance to
share their own knowledge, strategies and ideas about service
and cost optimization. Cost was a key driver. Once Giuseppe
started to compute the marginal cost of each project and the
profitability of each client, the number of change requests
decreased dramatically – and then roughly 70% of those
submitted were approved.
Once the process appeared to be working, Giuseppe
delegated much of the coordination to middle managers
and capable business executives did not staff the committee.
Giuseppe made another mistake: sales people did not like
the profit margin project criteria so they started to sabotage
some projects to get more control over the process. Giu-
seppe started losing credibility when changes approved were
not put into planning, causing a large backlog in develop-
ment. As a result Sales [Business] started to complain to
Fabio, the CEO.
Stage 2: dis-integration: back to the ‘Business Monarchy’
Eight years of rapid growth forged the company culture –
characterized by agility and dynamism. But Octo’s staff
hesitated with Giuseppe’s projects. The IT department was
seen as disorganized. Giuseppe, still looked upon as a senior
developer, was not able to project personal leadership. The
first signals of this disappointment came when the Chief
Operations Manager [Business] brought under his control
the Program Management [Business] and Service Manage-
ment [Business], mirroring functions and roles.
But in the middle of 2011, Giuseppe decided to implement
a new inter-organizational process to manage new project
set-up. In order to drive business costs down and manage
the IT-business architecture, Giuseppe decided to further
centralize much of the design phase within a steering com-
mittee [Bridge] composed by IT, Operations [Business] and
Finance [Business]. Giuseppe proposed to integrate phases
from concept, design and prototype with a better definition
of requirements and the use of business cases to evaluate in
detail the profitability of new customers/projects. In that way,
the decision making process was subjected to a formal process
based on rational data and not on political decisions.
At a corporate level Giuseppe proposed to introduce three
levels of planning and three working groups, which are as
follows:
Level I: Planning during the project design stage (Design
Team – inter-functional) [Bridge].
Level II: Delivery project planning (Project Team – inter-
functional) [Bridge].
Level III: Detailed operating planning after the contract
(Functional Teams in each area of Octo).
Such a reshaping of program management would bring a
loss of power for Sales [Business], thanks to a more formal and
structured process for the authorization of projects and the
planning of activities.
When Giuseppe showed the plan to the Vice President of
Sales [Business], Giuseppe was told:
Ok, beautiful idea but business is business … and I have to
bring home as many clients as possible and all project have
to be released as soon as possible. My responsibility is to
increase profits and yours is to deliver!
Surprised by his response, Giuseppe started thinking about
profits and began to waver: Could this reorganization slow
down Octo’s performance? This hesitation led to confusion
and conflict. Sales [Business] tried to secure its independence
empowering the sales team [Business] with new authority on
business analysis.
Fabio observed the entire situation with concern. He
stepped and decided, in February 2013, to introduce a new
function – Business Integration (BI) (see organizational
chart Figure 4). It was a classic bridge unit between the
business and IT. This was the rise of Business Monarchy vs
IT Monarchy.
BI, with a strong commitment from the CEO, worked as a
bridge between Sales and Operations [Business] and the IT
department. Led by a former IBM manager, it incorporated
functions and roles that Giuseppe had created before: Demand
[Bridge], Program and Project Management [Bridge], plus the
responsibility for Change Management [Bridge]. BI was to
support business requests, organize the IT work and support
improvement of services released to customers.
The mission of the BI unit was to:
● support standardized sales and effectiveness of cus-
tomization;
● minimize time to market;
● ensure logistics and IT readiness;
● minimize planning inefficiencies;
● maximize cross- and up-selling on the existing customer
base;
● maximize IP protection;
● ensure process effectiveness and efficiency.
In sum, the new organizational unit, BI, was given broad
authority: to make decisions about the feasibility of business
projects and the design of services, driving the scheduling
of projects, and defining priorities within the IT department.
The IT department was relegated to the mere execution of
new projects and changes over operational services.
“Octo” and “Telematics” G Vaia and E Carmel
93
However, this newest of several reorganizations brought
about new difficulties, for several reasons:
● Business units have to negotiate IT projects with the BI
manager [Bridge], but then the CIO has to be negotiated
separately. Sales managers often have to persuade the CIO
to put in planning and accelerate projects.
● The BI manager [Bridge] is at the same hierarchical level as
the CIO, so he cannot impose decisions. The CEO has to
resolve conflicts between them.
● There is still a gap between the demand of new platforms/
services for new clients and the ability of the IT department
[I.T.] to deliver. This is caused by inadequate staffing,
shortage of competencies on project management and
service management, the lack of a strong leadership in the
IT unit and related sub-units.
● Procedures, processes and templates from Sales [Business]
through BI [Bridge] to IT are not aligned and shared.
Conclusion
In Weill’s model companies that are ‘Leaders On Profit’
usually implement a ‘Business Monarchy’ approach, making
decisions on principles, architecture and investments. In
companies like Octo, however, the business drives the high-
level IT architecture and the IT team provides advice, educa-
tion and research.
At the end of the story, in 2013, we are still pondering on
the following questions:
1. Which governance option is the best for the company?
2. Why did the CIO fail in creating a dialogue with other
functions, especially with Sales?
3. Which inhibitors played a critical role in the wobbly
alignment process? Can an alignment process actually
reach some kind of steady state?
4. What mistakes did the CIO make? Which of these could
have been easier to avoid in advance?
Notes
1 This case has appeared in an article published by MISQE 2012, vol.
11, by Giovanni Vaia et al.
2 These telematic devices were part of of a contract with Unipol.
Unipol Assicurazioni is one of Italy’s largest insurance
companies.
3 Different areas of new and futures services: Information: Behavior
Based Feedback(TM), real-time weather warnings and traffic
information; Functionality: car locator, driver logbook, speed
alerting or fleet management; Entertainment, games, challenges or
interesting news (for example, playing an interactive game can
result in bonus miles or kilometers).
References
Brown, A.E. and Grant, G.G XXXXXXXXXXFraming the Frameworks: A review of IT
governance research, Communications of the Association for Information
Systems 15(1): 696–712.
Henderson, J. and J Venkatraman, N XXXXXXXXXXStrategic Alignment: A model for
organizational transformation via information technology, Sloan School of
Management (Massachusetts Institute of Technology), Working Paper
3223–3290.
Luftman, J. and Brier, T XXXXXXXXXXAchieving and Sustaining Business-IT
Alignment, California Management Review 42(I): 109–122.
Luftman, J. and Derksen, B XXXXXXXXXXKey Issues for IT Executives 2012: Doing
more with less, MIS Quarterly Executive 11(4): 207–218.
Vaia, G., Carmel, E., DeLone, W., Trautsch, H. and Menichetti, F. (2012).
Vehicle Telematics at an Italian Insurer: New auto insurance
products and a new industry ecosystem, MIS Quarterly Executive 11(3):
113–125.
Weill, P XXXXXXXXXXDon’t Just Lead Govern: How top-performing firms govern IT,
MIS Quarterly Executive 3(1): 1–17.
Figure 4 Business integration unit as introduced in early 2013.
Source: Octo’s internal documents.
“Octo” and “Telematics” G Vaia and E Carmel
94
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About the Authors
Giovanni Vaia, Ph.D. in Organization and Technology, is
Professor of Business Administration and Global Sourcing at
Ca’ Foscari University of Venice at the Department of
Management. His research interests lie in the governance of
outsourcing relationships and in the relationship between IT
and the organization. Dr. Vaia also coordinates the Executive
Master in Information Systems Management at Ca’ Foscari.
Erran Carmel studies the globalization of technology work.
He has visited hundreds of firms in over 20 countries. He has
published over 100 articles and about 10 case studies. He
recently completed his third book, which deals with how time
zone separation impacts global coordination of work. He is a
professor of the Information Technology department, Kogod
School of Business at American University in Washington,
DC, USA.
“Octo” and “Telematics” G Vaia and E Carmel
95
Answered 7 days AfterMay 17, 2021

Solution

Neha Raghav answered on May 24 2021
31 Votes

ITIL 4 for Auto Telematics
In this report we will try to analyse the work mode of the company. It is about the auto telematics which is known for a specialization for all the different services...

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