An Empirically Derived Taxonomy of Information Systems Integration

Information systems integration (ISI) represents the degree of cooperation in information system practices between business functions within a firm and between a firm and its trading partners. Although the establishment of information systems integration objective has been reported as one of the key concerns of top management because ISI enhances the firms’ competitiveness and growth, the classification of the information system practices and its managerial implications are still vaguely developed. The two objectives of this paper are: (1) to develop a taxonomy of information systems integration (ISI) called ISI-Matrix, and (2) to report managerial implications for matching each information system class with business process applications. By using a systematic research investigation approach, two ISI structures are identified: Internal ISI (IISI) and External ISI (EISI) from the responses of 220 firms. The ability to identify and understand the implications of the ISI-Matrix is of critical importance to both academic and management practitioners. INTRODUCTION The rapid changes in perspective toward globalization of markets and manufacturing has forced management to re-configure the traditional views of business functions and replace them with business processes. The process view of organizations embraces cross-functional teams which penetrate networks of inter-organizations and intra-organizations. Within the process, a project team performs many tasks across functional barriers (with a firm and between a firm and its trading partners) to meet corporate goals in a more seamless way. This increased emphasis on improving business processes has triggered the need for placing information systems (IS) in a strategic role of corporate strategy as opposed to a supportive role in the traditional view (Raghunathan & Raghunathan, 1990; Chan et al., 1997; Goodhue et al., 1992). A review of the empirical literature reveals that one issue, the linkage of IS practices with organizational objectives, has been among the top problems reported by information systems (IS) managers and business executives (Reich and Benbasat, 1996; Computerworld, 1994; Lederer and Mendelow, 1986; Earl, 1989). Information Systems Integration (ISI) is the degree of cooperation between business functions within the firm and between a firm and its trading partners on an internally consistent set of strategic, operational, and infrastructural information systems practices using information systems (IS). In a broader sense, ISI often represents as a pressing concern of misalignment of information system practices between two business processes (King and Teo, 1997; Segars and Grover, 1998). In this context, information system practices, which are utilized to accomplish process tasks at each end, lack degree of congruence when certain processes/tasks involve cross-functional boundaries at the other end. Consequently, the first objective of this paper is to identify a set of IS practices that is shared by process team members. Therefore, ISI represents the degree of cooperation in information system practices between business functions within a firm and between a firm and its trading partners. ISI has been reported to facilitate the possibilities of increased productivity, customer responsiveness, and the synchronization of diverse organizational settings. It has been documented that the introduction and utilization of ISI enhance firms’ competitiveness and growth, product quality, productivity, machine utilization, space management, and logistics efficiency and flexibility (Gross, 1984; Kaltwasser, 1990; Noori and Mavaddat, 1998). A higher degree of ISI creates information visibility and captures the moments of information which enable T. Jitpaiboon, T.S. Ragu-Nathan & M. Vonderembse 2005 Volume 15 Number 2 18 collaborative members of the supply chain to manage their business processes and share information better (Lummus and Vokkurka, 1999; Gunasekaran and Ngai, 2004; Bourdreau and Couillard, 1999; Williams et al., 1997; Gangopadhyay and Huang, 2004). Although ISI has been reported to positively impact firm performance, the classification of the information system practices and its managerial implications are still vaguely developed. The classifications of ISI in the current literature are extremely broad and fragmented. There is no consensus on what constitutes an ISI taxonomy. Our goal is to develop a comprehensive ISI taxonomy to aid organizations whose ability to harness the power of IS practices is critical to their success. Development of valid and reliable instruments to be used in large-scale surveys is an important first step toward this goal. The resulting taxonomy should help organizations to match information system class with their current business process applications which should enhance a firm’s internal and external integration. In a narrow sense, focusing on the survey approach, this study arguably classified ISI into two main categories namely Internal Information Systems Integration (IISI) and External Information Systems Integration (EISI). In each category, ISI construct is also clustered into three levels namely Strategic Integration, Operational Integration, and Infrastructural Integration. Infrastructural integration is also subdivided into two sub-constructs: Data Integration and Network Integration. Table 1 shows the components of ISI classifications. By deploying this classification scheme, the second objective of this paper is to propose a classification matrix (ISI-Matrix) which will be used to provide managerial implications for both researchers and practitioners. The next section of this paper defines and discusses the ISI taxonomy. The following sections describe the research design and discuss the candidate measured used to evaluate the degree at different ISI levels. The subsequent section presents the results, and the final section discusses the implications of our findings for researchers and practitioners. Table 1: Information System Classifications. Internal Information System Integration (IISI) External Information System Integration (EISI) • Strategic Integration – Internal • Operation Integration – Internal • Infrastructural Integration – Internal o Data Integration – Internal o Network Integration – Internal • Strategic Integration – External • Operation Integration – External • Infrastructural Integration – External o Data Integration – External o Network Integration – External INFORMATION SYSTEMS INTEGRATION TAXONOMY A description of previous taxonomies The rapid changes in the role of information systems (IS) are presenting firms with significant challenges and dramatic opportunities. Revolutionary advances in hardware and software capabilities coupled with reduced prices have shifted numerous applications from infeasible to feasible, changed the structure of organizations, and forced management to rethink the classification of IS. The terms taxonomy and framework are sometimes used interchangeably in the literature (Doke and Barrier, 1994). However, a clear distinction between the two is identified: taxonomy is generally used to describe a classification scheme for “things” such as IS. Although framework is sometimes used as a synonym for taxonomy, it is more often used to describe models that organize and group “concepts and relationships” (Doke and Barrier, 1994). The taxonomy is derived from the characteristics of the measured subjects, so the categories are both exhaustive and mutually exclusive (Fiedler, Grover, and Teng, 1996). This method is especially useful when one is examining unexplored phenomena because both methods must be empirically examined to evaluate the representativeness and generalizability of the classifications to the population they are mean to describe. Unlike the predetermined, idealized categories of a typological methodology that lend themselves to prescriptive hypothesizing, taxonomy’s classifications emerge from analysis so that the classification is derived (Doty and Glick, 1994; Hair, Anderson, Tatham, and Black, 1998). Developing a taxonomy An Empirically Derived Taxonomy Journal of International Technology and Information Management 19 can be viewed as a multistep process including the classification scheme, measurement development, multivariate analysis of the classification criteria to produce the item groupings, and the evaluation of the classification groupings (Fiedler, Grover, and Teng, 1996). The classification systems should “mirror the real world...describe organizational reality in a way that is recognizable to and consistent with the vision of practitioners and researchers alike as a viable reproduction of the diverse world in which we live in” (Rich, 1992). Since the focus here is the classification of ISI, a taxonomy will be used to classify these models Dimensions of a Taxonomy Integration is “to make into a whole” (Oxford English dictionary). The study of ISI classifications started as early as 1985 by Mudie and Schafer. They analyzed ISI in process terms, as they believed ISI should not only facilitate the process of development and use of data, applications, and other processing technology, but also should provide the flexibility to meet the future business demands in workstations, processing types, and applications. Wyse and Higgins (1993) defined ISI as the extent to which data and applications through different communication networks can be shared and accessed for organizational use. They defined ISI into two components: data integration and technical integration. Data integration refers to the relevancy of the information that is collected, processed, and disseminated throughout the firm. Technical integration concerns the physical or formal linkage of information systems and subsystems that are used by the firm. Webber and Pliskin (1996) defined ISI in the merger or acquisition context as the extent of the integration of IS and data processing functions with financial systems, which are usually a critical component of the IS. The findings point to a positive relationship between ISI and effectiveness only when controlling IT intensity and organizational culture differences between the joining firms. Stylianou et al. (1996) also studied an ISI framework in the merger and acquisition context. The framework examines the relationships between the measure of ISI success and the components that affect it. ISI success was measured using a multidimensional attribute as: 1) IS-assessment of the success of the integration process and integrated systems; 2) the ability to exploit to avoid opportunities arising from a merger; 3) the ability to avoid problems stemming from the merger; and 4) the end-user satisfaction with the integration process and integrated systems. Following this study, Robbies and Stylianou (1999) modified the ISI success measure to fit with the post-merger system integration context. The improved IS capability construct was added. They argued that the measure relating to improved IS capabilities that helped support the underlying motives for the merger is important and should be included. Bhatt (2000) studied the relationship between ISI and business process improvement. He argued that, at a conceptual level, ISI can be viewed as data architectures, communication networks, and support firms. He used two aspects to measure the degree of ISI: Data integration and communication networks integration. The data integration was defined as the extent to which different firms can share a number of databases for coordinating their activities. Communication networks integration was defined as the extent to which different information systems can communicate with other wide information systems to coordinate present and future activities depending on network connectivity and network flexibility. The Evolution of an Information Systems Integration Taxonomy Previous studies have discussed the role of ISI in tactical and operational perspectives suitable for the context of studies such as process development, financial research or merger and acquisition. Researchers mostly looked at only functional aspects of ISI, for instance, data integration and communication networks integration (Madnick, 1991; 1995; Wyse and Higgins, 1993; Bhatt, 2000; Wainwright and Waring, 2004; Themistocleous et al., 2004), the extent of IS and data processing functions and the extent of integration of financial systems (Webber and Pliskin, 1996). Others investigated the integration of heterogeneous information systems, databases, or application software, integration of different physical stages in business processes, and integration of subsystems into a wellcoordinated network system (Sikora and Shaw, 1998; Cohen and Lee, 1988; Fedorowicz, Gogan, and Ray; 2004). None of the previous studies focused on ISI research at the strategic level. In addition, previous studies considered ISI as a success measure, not as a practice (Stylianou et al., 1996; Robbies and Stylianou, 1999). In the inter-and intra-organizational context where integration of corporate entities can produce dynamic and synergistic opportunities, ISI should not only be viewed as traditional back office and processing support, but also as strategic support (Johnson, 1999). Porter and Millar (1985) asserted that management of information systems T. Jitpaiboon, T.S. Ragu-Nathan & M. Vonderembse 2005 Volume 15 Number 2 can no longer be the only provision of functional activities such as accounting and record keeping. The use of advanced information systems in value chain activities allows companies to enhance competitive differentiation as well as attain cost leadership and sustainable competitive advantage (Kim and Narasimhan, 2002). McFarlan and McKenny (1984) showed in their information systems strategic grid that the role of IS should change from operational supporter to strategic enabler in order to form competitive success. In this study, from a firm’s perspective, ISI is the degree of cooperation between business functions within the firm (IISI) and between a firm and its trading partners (EISI) on an internally consistent set of strategic, operational, and infrastructural information systems practices using information systems (IS). ISI can be defined using two sub-constructs – IISI and EISI. Strategic integration represents a set of strategic information system practices, which promote cooperation of various business functions within the firm or between a firm and its trading partners. Strategic integration concerns how well integration practices meet the corporate long-term goals. Operational integration is defined as a set of operational information system practices, which promote cooperation of various business functions within the firm or between a firm and its trading partners. Operational integration concerns how well integration practices between two parties meet day-to-day goals. Infrastructural information system integration represents a set of information system practices to facilitate information sharing and to coordinate work activities, which promote integration within firm. Infrastructural integration consists of data integration and network integration. Infrastructural integration concerns the improvements of information systems and information sharing to harmonize the efforts of managers from different parts of the organization and enable them to make decision consistent with organizational goals. Figure 1 displays the ISI classification framework. Figure 1: Information Systems Integration (ISI) Classification Framework. Information Systems Integration (ISI) External Information Systems Integration (EISI) Internal Information Systems Integration (IISI) Strategic Integration – Internal (SII) Strategic Integration – External (SIE) Operational Integration – Internal (OII) Infrastructural Integration – Internal (III) Operational Integration – External (OIE) Infrastructural Integration – External (IIE) RESEARCH METHODOLOGY The development of the instruments for the ISI constructs was carried out in three phases: (1) item generation, (2) pilot study, and (3) large-scale data analysis and instrument validation. First, an extensive and comprehensive literature review was conducted to identify the content domain of major constructs in the current