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There Are Four Reasons Why IT Makes A Difference To The Success of A Business

There are four key reasons why IT is important for business success: 1) capital management, as billions are spent annually on IT investments; 2) IT is foundational for conducting business operations; 3) IT increases productivity and reduces costs; 4) IT provides strategic opportunities to gain competitive advantages through new business models, services, and differentiation from competitors. The impact of IT on business is growing due to factors like internet growth, globalization, the rise of knowledge economies, and the emergence of digital firms and business processes.

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54 views4 pages

There Are Four Reasons Why IT Makes A Difference To The Success of A Business

There are four key reasons why IT is important for business success: 1) capital management, as billions are spent annually on IT investments; 2) IT is foundational for conducting business operations; 3) IT increases productivity and reduces costs; 4) IT provides strategic opportunities to gain competitive advantages through new business models, services, and differentiation from competitors. The impact of IT on business is growing due to factors like internet growth, globalization, the rise of knowledge economies, and the emergence of digital firms and business processes.

Uploaded by

Emad yassin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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There are four reasons why IT makes a difference to the success of a business:

1. Capital management

- IT is the largest single component of capital investment in the United States.


- About $1.8 trillion is spent each year by American businesses.
- Managers and business students need to know how to invest this capital wisely.
- The success of your business in the future may well depend on how you make IT investment
decisions.

2. Foundation of doing business

- Most businesses today could not operate without extensive use of information systems and
technologies.
- IT can increase market share.
- IT can help a business become a high-quality, low-cost producer.
- IT is vital to the development of new products.

3. Productivity

- IT is one of the most important tools managers have to increase productivity and efficiency of
businesses.
- According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0.5 to 1% in the last
decade. For firms this means IT is a major factor in reducing costs.
- It is estimated that IT has increased productivity in the economy by about 1% in the last decade. For
firms this means IT is a major source of labor and capital efficiency.

4. Strategic opportunity and advantage

- Create competitive advantage: IT makes it possible to develop competitive advantages.


- New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-to-
order business model that other firms have not been able to imitate.

- Create new services: eBay has developed the largest auction trading platform for millions of
individuals and businesses. Competitors have not been able to imitate its success.

- Differentiate yourself from your competitors: Amazon has become the largest book retailer in the
United States on the strength of its huge online inventory and recommender system. It has no rivals
in size and scope.

 Competitive advantage derives not from the technology, but on how businesses use the technology.
 Innovations in business processes, management and organization are not easily copied from one firm to
another.
Growing impact of IT in business firms can be assessed from the following five factors:

• Internet growth and technology convergence


• Transformation of the business enterprise
• Growth of a globally connected economy
• Growth of knowledge and information-based economies
• Emergence of the digital firm

The Internet and Technology Convergence:

• Growth of the Internet: 120 million online in the United States, 500 million global users
• The Internet is bringing about a convergence of telecommunications and computing: VoIP telephones.
• Growth in e-business, e-commerce, and e-government
• Internet is bringing about rapid changes in markets and market structure: financial services and banking
such as eTrade.com.
• The Internet is making many traditional business models obsolete: the corner music store and video store.

Transformation of the Business Enterprise:

• Flattening
• Decentralization
• Flexibility
• Location independence
• Low transaction and coordination costs
• Empowerment
• Collaborative work and teamwork

Globalization:

• Management and control in a global marketplace


• Competition in world markets
• Global workgroups
• Global delivery systems

Rise of the Information Economy:

• Knowledge and information-based economies


• New products and services
• Knowledge as a central productive and strategic asset
• Time-based competition
• Shorter product life
• Turbulent environment
• Limited employee knowledge base

Emergence of the Digital Firm:

• Digitally enabled relationships with customers, suppliers, and employees


• Core business processes accomplished using digital networks
• Digital management of key corporate assets
• Agile sensing and responding to environmental changes
• Seamless flow of information within the firm, and with strategic partners
Technology perspective: A set of interrelated components that collect (or retrieve), process, store, and distribute
information to support decision making and control in an organization

Data: Streams of raw facts representing events such as business transactions

Information: Clusters of facts meaningful and useful to human beings in the processes such as making decisions

Computer-Based Information System (CBIS)

• Rely on computer hardware and software


• Processing and disseminating information
• Fixed definitions of data and procedures
• Collecting, storing, and using information

A Business Perspective on Information Systems

Information systems are more than just technology.

Businesses invest in IS in order to create value and increase profitability.

• Information systems are an organizational and management solution to business challenges that arise
from the business environment.
•  Based on information technology but also require significant investment in organizational and
management changes and innovations
• IS create value primarily by changing business processes and management decision making.

Information systems literacy: Broad-based understanding of information systems that includes behavioral
knowledge about organizations, management and individuals using information systems as well as technical
knowledge about computers

Computer literacy: Knowledge about information technology, focusing on understanding how computer
technologies work

Major Business Functions Rely on Information Systems

• Sales and marketing


• Manufacturing
• Finance
• Accounting
• Human resources

Three Important Dimensions of Information Systems

• Organizations
• Managers
• Technology
You will need to understand and balance these dimensions of information systems in order to create business
value.

The Organizational Dimension of Information Systems


• People
• Structure
• Business processes
• Culture
• Politics

The Management Dimension of Information Systems

Managers are:

• Sense makers
• Decision makers
• Planners
• Innovators of new processes
• Leaders: set agendas

Managers who can understand the role of information systems in creating business value are the key ingredient to
success with systems, and cannot easily be replicated by your competitors.

Information technology is one of the tools managers use to cope with change:

• Hardware: Physical equipment


• Software: Detailed preprogrammed instructions
• Storage: Physical media for storing data and the software
• Communications technology: Transfers data from one physical location to another
• Networks: Links computers to share data or resources

Managers need to know enough about information technology to make intelligent decisions about how to use it
for creating business value.

Complementary assets:

• New business processes


• Management behavior
• Organizational culture
• Training

Organizational capital:

• Supportive business culture that values efficiency and effectiveness


• Efficient business processes, decentralization of authority
• Highly distributed decision rights
• A strong information system (IS) development team

Optimize systems performance:

• Technology and organization


• Organizations mutually adjust to one another until fit is satisfactory

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