Lecture 18 - Strategic uses of information technology. After studying this chapter you will be able to understand: Strategic uses of IT, historical overview, cheap revolution, definitions review, e-business drivers, how IT still matters, working inward,...
Strategic Uses of Information Technology Lecture 18 Summary of Previous Lecture In the previous lecture we have learnt about, Information System Job Concepts Old role versus new role IT head responsibilities Information System management Framework Terminologies Escalating benefits of IT Waves of innovation SABRE system international, a case study Traditions functions of IS Summary of Previous Lecture IS LITE, a new concept CIO responsibilities CIO roles Leading Governing Investing Managing CIO Office Today’s Lecture Strategic uses of IT, Historical overview Whither the internet revolution? Cheap Revolution Profitability of IT revolution GRAINGER Case Study Definitions review E-Business Drivers Does IT Still Matter? Nicholas Carr Today’s Lecture How IT still matters Working inward Working outward Working Across Working Inward B2E, Intranet Intranet Applications General Electric Case Study Today’s Lecture Fostering a sense of belonging Working Outward B2C Electronic Tenders Getting closer to customers Amazon.com web example Problems and Advantages of Working outward The E-Business Model Today’s Lecture Working Across B2B model Coordinating with co-suppliers Levels of system integration What is a Value chain? DELL Computer case Example Summary Introduction Use of the Internet by businesses in mid/late ’90s set off a revolution in the use of IT Utilizing the Internet to conduct business became the strategic use of IT • Strategic = having a significant, long-term impact on a firm’s growth, industry and $$ Introduction Strategic Uses of IT Short History 1st edition Mid 1980s, hot topic = end user computing (working inward) • Personal computers were invented • Organizations were helping employees learn about PCs • In this sense they were “Working Inward” to gain advantages Introduction Strategic Uses of IT Short History 2nd edition Late ’80s strategic use focused outward to gain competitive advantage PC has became a common among organizations Organizations worked to improve their customer relationship using a computer Working Across Working Across: Business-to-Business Streamlining processes that cross company boundaries is the next big management challenge Companies have spent a lot of time and effort streamlining their internal processes, but their efficiencies often stop at their corporate walls Working Across Working across business takes many forms including: Working with ‘co-suppliers’ Working with customers in a close mutually dependent relationship Building a virtual enterprise, in fact, one that might evolve into an e-marketplace Working Across: Business-to-Business Businesses have long used IT to reduce costs and time of inter-organizational transactions, for example: – Inter-organizational Systems (IOS) Reservation systems • Electronic funds transfer systems • – Sabre (American Airlines) Online transaction from one bank to another Electronic Data Interchange Systems (EDI) Transmission, in standard syntax, of data for business transactions between computers of independent organizations Working Across: Business-to-Business Coordinating with Co-suppliers Collaborating with non-competitors is a type of working across Example – two food manufacturers might have the same customers (supermarkets and other retailers) but not compete with each other Lack of convenient ways to share information quickly and easily has prevented co-suppliers from working together Internet solve this problem Working Across: Business-to-Business Establishing Close and Tight Relationships Strategic use of IT and the Internet has moved to the most difficult area = working across companies Having relationships with various players in one’s business ecosystem Banks, advertising agencies, suppliers, distributors, retailers, even competitors Such relationships often have accompanying linking information systems Working Across: Business-to-Business Establishing Close and Tight Relationships cont Need to determine what level of systems integration they want: Loose = provide ad hoc access to internal information Business processes remain distinct Such limited integration requires little risk or cost Levels of System Integration… Close = two parties exchange information in a formal manner Leads to greater benefits, so there is greater force to make the relationship work Risks increase because confidentialities are shared Costs are also higher Tight = two parties share at least one business process Most risky – business critical and the most costly to integrate Critical question is, “Where does one organizational boundary begin and the other end”? WORKING OUTWARD: Business to Business Working Across: Business-to-Business Becoming a Customer-Centric Value Chain A company’s value chain consists of: Upstream supply chain Working with its suppliers of raw materials and parts Downstream demand chain Working with its distributors and retailers to sell its products and services to end customers Value Chain Traditionally most companies make-to-stock build products / create services and then “push” them to customers This is called Supply-Push world Today, we are seeing the rise of the reverse a demand-pull world where a customer’s order triggers the creation of a customized product or service the customer has defined DELL COMPUTER Case Example: Demand - Pull Dell is the foremost example of the demand-pull business model Customers configure their PCs on Dell’s Website, and once an order is initiated, Dell’s suppliers can see the ordering information and production schedule on Dell’s extranet In fact, their production systems grab this information automatically; as a result, Dell’s extranet has become a private exchange Dell is even working to give suppliers two tiers down access to customer order information, so they can react to changes even faster DELL Computer Portal Summary Over the years a few innovative companies have used IT for strategic advantage –Their exists ‘Models’ but many companies did not have the resources or skills to follow their example –With the growth of the Internet and development of e-business, IT has become a strategic tool in every industry Summary Organizational information and resources can be structured and shared using Intranet and Portals Increasingly customer centric approach has been adopted in Working Across Value chains are looking to shift from supplypush to demand-pull As IT continues to evolve, so its strategic uses ...Summary of Previous Lecture In the previous lecture we have learnt about, Information System Job Concepts Old role versus new role IT head responsibilities Information System management Framework... Telecommunications – Voice-over-IP… Introduction Episode Two: Profitability Strikes Back Dot-coms became dot-bombs because they couldn’t generate profits Episode One: The Dot-Com Menace Episode... absolutely necessary for competitive parity Being used strategically: Inward Outward Across Strategic uses of Information Systems Figure 3-1 Strategic Uses of Information Systems Introduction