Developments in the Role of Information Systems - Case Study Example

Running head: Development in ICT and strategic opportunities offered for competitive advantage in organisations Development in ICT and strategic opportunities offered for competitive advantage in organisations [Writer's Name] [Institution's Name] Table of Contents S. No. Title Page no. 01. Introduction 03 02. Cisco Systems(Brief Introduction) 03 03. Developments in the role of Information Systems 07 04. Cisco's Internet business Model 09 05. Transformation of traditional business into e commerce framework 11 06. Porter's five forces 14 07. Complexity theory at Cisco systems 16 08. Reach and Richness 16 09. Conclusion and Recommendations 17 10. References 19 Introduction: The main purpose of the assignment is to outline the changes ICT has brought in the business environment. The report examines the Cisco systems core business, its Internet business model. A brief discussion of the ICTs used by the company is also undertaken. Emphasising the needs of the Porter's five forces the strengths and weaknesses of the company are also discussed. The company successfully implements the complexity theory has also been taken into consideration. In the last section of the paper recommendations on the overlooked areas of concern are presented which can prove helpful for the organisation in order to improve its management process. Cisco Systems: Founded in 1984 by Leonard Bosack and sandy Lemer, a husband and wife team of academics from Stanford University, as a means of sending data between computers. Cisco has grown to be the company that, according to David Stauffer in Business the Cisco Way, is the company that makes the Internet. From their first router to distribute data, assembled at home, Cisco now develop and manufacture the routers, servers, switchers, and software that support the Internet. Cisco's networking products are designed to connect people, computing devices and computer networks, allowing access or information transfer regardless of differences in time, place or type of computer system. Cisco provides end-to-end networking solutions that customers use to build their own unified information infrastructure or to connect to and outside network. And end-to-end networking solution is defined as one that provides a common architecture that delivers consistent network services to all users. The broader the range of network services, the more capabilities a network can provide to users connected to it and thus the more effective it is. Cisco serves customers in there major market areas: Large organisations with complex networking needs, spanning multiple locations and with many types of computer systems. Such customers include major corporations, government agencies, pan-governmental organisations, public utilities and educational institutions. Service organisations that provide information services including telecommunication carriers, Internet Service Providers (ISPs), cable companies, and wireless communication providers. Other commercial organisations with a need for data networks of their own, as well as connection to the Internet and their business partners and customers. Cisco operates in over 115 countries using a direct sales force, distributors, value-added resellers and system integrators. The company is headquartered in San Jose, CA. With major operations in Research Triangle Park, NC, and Chelmsford, MA; as well more than 225 sales and support offices in 75 countries. As a company that is in tune with the individual needs of its customers Cisco does not take a rigid, product-led approach that favours one particular solution regardless of the fit with customer requirements. Cisco's philosophy is to listen to customer needs and then develop solutions for discussion to ensure that those needs are met- a customer driven approach. Cisco's strategy: This high-tech company has the strategy of being a one-stop shopping provider of networking equipment. Operating models include a well-honed model for acquiring technology-rich companies to add to Cisco's portfolio of products. An out sourced manufacturing model supports the production of Cisco's diverse product line, with an asset-light approach. Practices include supplier electronic connectivity and distributed order management that enables Cisco to co-ordinate very complex fulfilment activities. (Andrea & Dana, 2004) Introduction to ICT: The information technology (IT) revolution began in the middle of the 20th century and has since expanded in scope and influence during the latter half of the century. Laboursaving equipment such as the photocopier gave way to a creation of new computer and communications equipment in the 1970's, which, while saving man-hours and improving accuracy, influence improvements in business structure, operation and performance. By then, business communication could be done almost immediately with the use of facsimile machine, making personal contact unnecessary. Inventory could be done more precisely and competently by computer. With the advent of pagers and cellular phones, managers and employees alike could be reached regardless of time or location (Piech, 1999). From then on, computer and communications technology continued to evolve and merge. This merger created powerful computer networks within and amongst businesses and consumers that were destined to change the way the world worked; the Internet, Intranets, and extranets were born. Instantaneous information transfer with the speed of light, broad dissemination of information and more became possible and, perhaps more significantly, comparatively simple and inexpensive. Thus from the IT revolution, "digital economy" flourished. Digital economy is an economy based on goods and services whose development, production, sale, or provision is essentially dependent on information and communication technology (ICT) (Piech, 1999). Developments in the role of information systems: Swift changes in information and communication technology (ICT) over the last decades have had a revolutionary impact on how today's business organisations work, co-operate and compete. Information systems, Telecommunication and the Internet challenge the thinking on organisational structures and industry boundaries and fuel the debate on globalisation. The growth and following rupture of the dot-com bubble shows how businesses must continue to struggle how to best take advantage of the new technological possibilities. (Impact of e-economy, 2004). At microeconomic level, the e-Economy is heading towards essential changes in organisational market structures. The rapid pace of technological change, for which the widespread use of ICT is a catalyst, is having a great influence on the structure and lifecycle of enterprises. Firstly, ICT reduces the economic impact of distance and the cost of access to information, thus increasing the scope for competition within markets. Secondly, ICT often tends to lower the cost of setting up small enterprises thus, potentially, providing for additional competition. Thirdly, ICT creates the opportunity for new co-operative means of product and service delivery; potentially leading to improved quality and cost efficiency. Finally, and perhaps most importantly, ICT gives rise to many new products and services (Impact of e-economy, 2004). Business Model: Slywotzky (1996) defines a business model (design) as: The totality of how a company selects its customers defines and differentiates its offerings, defines the tasks it will perform itself and those it will outsource, configures its resource, goes to market, creates utility for customers, and captures profits. It is the entire system for delivering utility to customers and earning a profit from that activity. Cisco describes the method of operating as a global networked business model. A global networked business is an organisation, of any size. That uses information and communications strategically to a network of strong, interactive relationships with all its key constituencies. Such a model is a natural complement to the Internet. The global networked business model leverages the network for competitive advantage by opening up the corporate information infrastructure to all key constituencies. The global networked business model employs a self-help model of information access that is more efficient and responsive than the traditional model of a few information gatekeepers dispensing data as they see fit. Cisco itself a leading example of a global networked business. By using networked applications over the Internet and its own internal network, Cisco is seeing financial benefits of nearly $1.4bn a year, while improving customer/partner satisfaction and gaining a competitive advantage. Cisco is now the world's largest Internet commerce site, with 90 percent of its orders transacted over the Web. Cisco is one of America's greatest corporate hyper-growth success stories. Since its founding in 1986, the company has grown into a global market leader that holds the No. 1 or No. 2 markets share in virtually every market segment in which it participates, an achievement shared with Carnival Corporation material. Since the IPO in 1990 annual revenues have increased from &69bn to $18.9bn in 2000. By 2001 Cisco employed approximately 43,000 staff worldwide, about 16,000 of these being in the Bay Area of California. As covered above, Cisco's IPO (Initial public Offering) was in 1990. The opening share price was 31 cents but had risen to $107.12 by the end of 1999-hypergrowth in value of a staggering 82.300 percent. (Cartwright, 2002) Internet Business Model: Cisco provides a broad range of service offerings to its clients, including award-winning technical support and advanced services. Cisco sells its products and services-directly through its own sales force and indirectly through a network of channel partners-to large enterprises, small and medium-sized businesses, service providers, and consumers. Cisco focuses on three broad areas to guide its business growth: core technologies, routing and switching; the service provider market; and Advanced Technology markets. Cisco has long been recognised as a pioneer in using the Internet for its own business practices, offering consulting services to help other organisations around the world through its Internet Business Solutions Group. In the 2003 fiscal year, Cisco saved US$2.1 billion by relying on the Internet to provide customer support, offer employee services, sell products, provide training, and manage finances and manufacturing processes. Each year, Cisco introduces new applications, enhances existing applications, and increases adoption of these applications across the company, which results in an incremental return on investment year-after-year. (Corporate Overview, 2005) Transformation of traditional business practices into an e-commerce framework: (Lee) in his article describes a five steps process for transforming traditional business practices into an e-commerce framework which are as follows: (1) Redefine competitive advantage: E commerce has changed the rules of distribution. A Company has to update its system with the change of technology. (Browning and Reiss, 1999). (2) Rethink business strategy: It is very simple to set up a Web presence but quite difficult to create a Web-based business model (Ghosh, 1998). (3) Re-examine traditional business and revenue models: Rayport and Sviokla (1995) describe participating in e-commerce as competing in both the marketplace and the market space. (4) Re-engineer the corporation and Web site. A Web site should not simply be used as a channel of providing marketing and company background information (i.e. brochureware). It should be a channel to collect customer information through interactions, transactions, and/or personalisation. The most effective Web sites are also able to foster a feeling of community among customers (Armstrong and Hagel, 1996). (5) Re-invent customer service: The strategic and fundamental changes brought by the Internet are affecting every company's relationship with its customers and the value propositions for many companies. Companies must take advantage of e-commerce's disruptive attributes and be able to build cost-effective total experience and loyalty-enhancing relationships with the most profitable customers. Using the Internet internally: Cisco is a company that has made maximum internal use of the Internet. The rapidity of communications made possible by the Internet allows Cisco managers to make and communicate decisions with a speed that would astonish many more traditional organisations. Cisco use the Internet not only for taking orders but for hiring staff-this alone means that the cost of hiring is 40 percent lower than the industry average-and then training them. Given Cisco's intimate involvement with the Internet, using the net internally sends out a powerful message to customers. Although Cisco deals in cutting-edge technology products, in many ways it is a traditional organisation as those products are tangible things, and not the more intangible services that many Internet-related companies have been set up to supply. There is considerable business sense in being the supplier of the hardware to an expanding tool such as the Internet. Stauffer claims that Cisco in 2000 was the fastest growing firm in the history of the world, having taken only 12 years to reach a market capitalisation of $100bn. Achieving this at a time when many Internet companies (especially the dote-com operations) were struggling is no mean achievement. While huge growth has been predicted for the Internet economy (in 1999 it accounted for $507bn and 2.3 million jobs) it may still be some time before the average person feels comfortable with making a majority of their purchases online. Security of payment is often quoted as being a major barrier. The companies that are trading successfully online- Amason.com is one of the bet known-do not find that getting into profit is easy. However, as a supplier of the resources necessary for Internet operations, Cisco does not face that problem. If Internet trading has been slower than predicted, Internet use is growing at a fantastic rate. With over 2000 new Web sites being registered each month there is ample evidence that little, if any traditional companies are ignoring the Internet. While a Web address on business cards, letter heading, or on the side of a delivery truck would have been rare even as late as 1996, now there might be comment if it were not present. (Cartwright, 2002) Porter's five Forces: A Company's particular combination of opportunities and constraints often dictates the processes it chooses. Cisco, Autodesk, Lego, and Yahoo! Began with strategies in which product innovation was dominant, but their emphases diverged. Cisco's new opportunities lay in the many new networking technologies that were emerging, but the company lacked the time and engineering talent to develop them all. In contrast to technology-rich and stock-price-poor Autodesk, which focused on spinouts, Cisco-with high market capitalisation-found that acquisitions was the way to go. The company wanted to exploit content and commerce opportunities but needed a lot of partners. Many were too big to acquire, so it created partnerships. (Eisenhardt et al, 2001) Vision It is rare to fine a growing company that is not populated by people with vision and a sense of mission. Chambers certainly finds this important. Part of the importance is the internal motivation that mission and vision provide, but they also transmit good feeling to customers and potential customers. They may well, as an added bonus, scare competitors. The CEO needs to be the one who holds the vision tight and disseminates it through the organisation. Once the buzz starts it can be quickly transmitted both to employees and those out with (a much-used Scottish word that is very appropriate here) the organisation. Customers No organisation can exist without customers and hyper-growth is impossible without the co-operation of the customer base. Cisco works hard at maintaining its customer loyalty- a loyalty that no organisation, however large, can ever take for granted. Putting the needs of the customer first is a key to growth. The only sustainable growth is through the customer. Neglect the customer and growth cases. Chambers is one of those who believe passionately in listening to the customer. Acquisitions: Some companies acquire others in a haphazard manner. It some times does not seem to matter whether the acquisition fits into the core business or not. Cisco (and chambers) acquired those companies that had similar visions to that of Cisco. Integrating a new company can be very difficult if it has a different philosophy and culture. If they are similar, however, the task of integration and thus an earlier contribution to profits is much easier. Cisco has grown by acquisition there companies were acquired in 1994, four the next year, seven in 1996, size in 1997, nine in 1998, no less than 18 in 1999 and size more in 2000. Added to the original Cisco, this made for a group made up of 54 components by the millennium. Strength: Putting people first No matter how advanced the technology, ultimately success and growth depend on people. Cisco has adopted this maximum from its earliest days. The company looks for people who will be more than satisfactory: they demand and get the best. Anybody who does not make the mark does not stay. Having acquired the best Cisco makes them part of the team provides the necessary training and recognises excellence. In this way people pass on the vision. By listening to customers, ensuring that the company delivers and that it is staffed by the right people Cisco has shown a degree of hyper-growth that has astonished industry analysts. As the Internet grows even more rapidly, companies like Cisco that remain at the cutting edge are likely to continue to grow with it. Complexity theory: The company successfully implements the Complexity theory and recognises the importance of information and monitoring for the success its success as a technology based organisation. 'Complex management' entails democratic problem-solving and decentralised experimentation rather than central control and conformity. It does not use feedback to serve an audit culture of coercive accountability but instead to inform a discursive democracy. The Management is based on complexity theory is also a 'whole systems' approach and includes within its frame of reference the wider environment, so that organisational performance is seen not just as a function of organisational capability but also of the types of environment in which organisations work. Concept of Reach and Richness at Cisco: In the digital present, the "total-customer-experience" must be executed at Internet speed. Companies that make it easier for customers to do business with them will exist five years from now and the others will be left behind. In the traditional economy, there has been a trade-off between reach and the "richness" of information. The Internet has deconstructed this relationship, allowing rich information to reach a wide audience. Leaders must capitalize on this before the competition does. (Adams, 2000) Cisco has a strong network of information provision for the customers which not only provides the customer with a rich amount of information but also make it reachable for them through the e based services offered by the company. The company has a cutting edge in providing its customers with easy to access and cheap availability of product and service related knowledge provided by Cisco. Conclusion & Recommendations: Despite the wonders of technology, people are still the most important resource available to an organisation. The strong emphasis on the importance of people is the cutting edge advantage of Cisco systems. The developments of the Internet and e-commerce do not relieve organisations from the traditional management tasks but those tasks can be accomplished in different ways and more quickly. In order to keep the pace with the volatile business conditions in e-commerce, a company must keep on evaluating its strength and weaknesses and re inventing its strategy. This is the only way to keep and increase the market share. Those companies that are the cutting edge can use technological advances for maximum benefits. High technology developments leave no place for the "me too" organisation. Being innovative is the best policy for the growth of business. References Adams, C., (2000). 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