Benefits of IT Strategies to a Business - Assignment Example

The significance of Information Technology/Information Systems (IT/IS) strategy in business organizations Name Course Instructor’s Name Date Five major benefits of IT/IS strategies to a business Information systems strategy is the analysis of the role that can be played by information systems to help a firm define a route that can enable it to be competitive. An IT strategy is a plan, which is used to develop information system in attaining a future vision of a firm toward achieving the general business strategy. The IT strategy helps in identifying strategic information systems, support level systems, and ICT infrastructure for the medium and long terms (Hirschheim et al 67). There are three types of IT strategies: firm IT strategy, business IT strategy and the industry IT strategy. The firm IT strategy enables a firm to maximize its internal processes and resources. IT/IS strategies have several benefits to a business. First, IT/IS strategies enables an organization to have operational focus to information systems. Information systems are used in production operation systems and in the support of the activities involved. This makes an organization to be quite sophisticated as compared to those, which lack an IT, or IS strategy (Kennedy & Sharma 66). Most firms direct their IT/IS strategies towards the improvement of operations with little appreciation of strategic information value. In addition, IT/IS strategies enable firm managers to measure the success of their businesses. Moreover, by focusing on operation of information systems, the firms are able to monitor the performance of the firm through, say monitoring of customer satisfaction, consideration of innovation and a review of employee satisfaction. The second benefit of IT/IS strategy is that it makes a firm to be competitive. Competitive advantage is achieved by using IT/IS strategies to keep costs low, producing better products, developing new products, and retaining customers. Most organizations are usually under the pressure of customers to produce quality and low priced products (Paladino 67). A good IT strategy can enable a firm to implement an information system that can enable the firm to reduce cost of production, and at the same time, produce quality products that can be sold at relatively low price. Several strategic planning can be used for generation of ideas for use of IT to support a business. They include competitive forces model, competitive strategies model, strategic opportunities matrix and value chain model. The IT/IS strategies also enables firms to plan their systems for management of future growth. In such firms, information systems are integrated in the running of the organization’s business (Kennedy & Sharma 34). Good IT/IS strategies can enable the firm to optimize interaction with customers in addition to building market share (Schniederjans, et al, 43). During the designing of IT/IS strategies the future growth of an organization is visualized by planners and the anticipated challenges are addressed in the design and thus management of future growth made easy. Information system strategy helps organizations to bring about changes that can improve the business processes. Some of the changes that are proposed in the IT strategy are usually critical to the survival of the firm. This is because financial resources may be involved in the IT strategy (Hirschheim et al 87). Thus IT/IS strategies enables firms to make recommendations which can bring about organizational changes in the information systems that are in existence for better transmission of information in the firm. Information system strategy enables firms to manage their resources in better ways. Since the financial resources of many organizations are limited, visionary owners of firms are usually compelled to implement information systems (Tanner). Thus, managers usually use these IT strategies to spend available financial resources to support management systems for improving daily operations of the organization. Four major barriers to implementation of IT/IS strategies Implementation is carrying out what you had planned to do. It is a process that carries out the planned changes in IT/IS strategies and the applications, which were developed during strategy formulation. The first major barrier to implementation is the learning and growth aspect that is related to the resistance and involvement of the end user since most people dislike change. In most cases, end users resist changes when they are not properly educated and trained (Kennedy & Sharma 221). In addition, poor communication between the end user and information systems professionals can result in resistance to the implementation of IT/IS strategies. When the end user is not involved in the development and implementation process of new system, they are likely to resist such changes and hence implementation is likely to fail (Paladino 78). Finally, when the top management and other stakeholders are not committed and involved to the IT/IS strategies, their implementation may be difficult. The resistance by end users thus arises from the lack of assumption of ownership of the system that has been designed to meet their needs. The second barrier to implementation of IT/IS strategies is the process aspect (Longenecker et al 43). This results from three areas. First, the consideration of the maximization of the profits of the firm limits the willingness of process change (Tanner). Thus, the costs that may be involved in the implementation process are seen to impact negatively on the profitability of the firm. Therefore, the management may be unwilling to bring about process change (Hirschheim et al 44). Second, the inflexibility and inefficiency of standardized IT/IS strategies may hinder their implementation. Finally, supporting systems for the IT/IS strategies may be lacking hence hindering the implementation process. The third barrier to implementation of IT/IS strategies is financial aspect. When solving a problem is over emphasized while the cost of solving the problem is ignored may bar the implementation of the IT/IS strategies (Kennedy & Sharma 96). In addition, the inability of IT/IS strategies to reflect revenue directly in the quality improvement may constrain the implementation process since the management team may be opposed to it. Finally, the difficulty for defining clearly the timing of quality improvement via implementation of IT/IS strategies often present a barrier to their implementation. The final barrier to implementation of IT/IS strategies is the customer aspect. The existing gaps between customer’s perceptions and quality improvement to be brought about by IT/IS strategies often bar the implementation of these strategies. In addition, the fact that improvement of customer satisfaction is not completely based on IT presents a challenge to the implementation of IT/IS strategies (Paladino 58). In addition, the time to be taken to implement the strategy may be prolonged and this may delay customer satisfaction. As a result, the employees involved may be distrusted. Thus, these consequences may bar the implementation process of IT/IS strategies. Outsourcing IT services for business organization a) Definition of outsourcing of IT services Outsourcing is the process by which a third party is contracted by a firm to provide or perform a certain business function. Thus, two firms usually enter into a contractual agreement where services and payments are exchanged. In information technology, outsourcing has two meanings. First, outsourcing of IT services is the process where a firm contracts another organization to develop an application. Second, outsourcing of IT services is a process where a firm contracts another organization to manage part or all of the services that could have been provided by an IT unit of the firm. b) Financial considerations of outsourcing IT services Outsourcing IT services enables a firm to lower its overall costs. This is achieved through reduction of scope, definition of quality levels, re-negotiation, re-pricing and restructuring of costs. Outsourcing IT services also enable the firm to focus on its core business. Outsourcing IT services enables firms to move from fixed costs to variable costs and it makes the variable costs to more predictable. Furthermore outsourcing IT services enables a firm to improve its IT and business services which drive the firm to more profitability (Kennedy & Sharma 76). Since in Outsourcing IT services, the services are provided on contractual basis, there is a legally binding contract with legal redress and financial penalties. The Outsourcing IT services enable the firm to access operational expertise, which could have cost the firm lots of cash to develop in house. The outsourcing enables a company to access talented manpower that could otherwise be costly to hire on permanent basis. Hosted services are important considerations and are usually associated to outsourcing. Hosted services incorporate Internet service provider and application service provider (Kennedy & Sharma 80). Some advantages of hosted services include getting more, low initial cost; they are more trustable, easy purchase decision, high security, and availability. Some disadvantages of hosted services include difficulty in IT control and accountability, challenges in quality and availability of service, issues with integration, and integration (Tanner). c) Disadvantages of outsourcing of IT services Outsourcing IT services increases the quality risk. The IT service outsourced may be defective because of operational related issues. Reduction of quality human capital is common in some IT shops. Detection of such practices by outsourcing firm is usually hard (Levy & Powell, 71). This will in turn lead to a drop in customer satisfaction. Thus, a company may be caught by surprise in such cases. In most cases, the detection of the problem is often too late and may be difficult to dispute the legal contract with the outsourcing firm. Thus, the outsourcing company may become worse of than without outsourcing the IT services. There is no measure of service level agreement (SLA) or quality in poorly defined contracts between outsourcing firms (Hirschheim et al 56). Even in cases where SLA exists, the level of quality in outsourced services may deteriorate with time. Outsourcing IT services may result in increased staff turnover especially in the IT department of the firm. Thus, the company that outsourced may lose its talented and skilled manpower (Schniederjans, et al, 45). The replacement of entire workforce by outsourcer firm in its call center inhibits build up knowledge and hence quality is compromised. Outsourcing results in loss of managerial control (Paladino 18). This is because the management of the company is not capable of managing the provider of IT services. This is also because managers tend to skip the potential costs hidden in outsourcing. Thus, there is usually an underestimation of outsourcing costs. Outsourcing IT services can threaten security and confidentiality of a firm (Longenecker et al 43). Outsourcing services such as payroll may reveal confidential information such as salary to the service provider. In addition, outsourcing IT services may result in inflexibility to react to changing business condition. The firm may also be unable to generate talent internally since outsourcing hamper employee development since he or she is deprived of the experience he would have gained during development or provision of an IT service. d) Legal, political and social aspects of outsourcing of IT services The law that governs IT outsourcing is affected by corporate law, confidentiality, data protection law, and intellectual property laws. A good contract for outsourcing IT services should be developed through spending more time on developing a strategy and devoting more efforts to negotiate it. This helps to alleviate additional costs and other risks, which are common in relationships. This also helps reduces loss of control of the business function delegated to service provider. There is few if any legal restriction to outsource IT services. In spite this, some critical issues must be considered in the outsourcing contract (Kennedy & Sharma 36). First, the scope of the assignment and responsibilities of the contract must be clearly defined. Second, the length of commitment should be spelt out clearly. Third, the intellectual property rights should be locked down. Finally, procedures and steps should be provided on how the security and privacy of information technology systems and customer information will be ensured (Paladino 38). Socially, outsourcing threatens to result in lost wages and benefits. Internal employees of IT department of a company are likely to lose their jobs and hence the benefits associated with the job by continued IT service outsourcing. However, outsourcing of these services may result in lowered prices for products and thus the public including low income families are likely be able to afford the basic needs. Business IT alignment in organizations Business IT alignment is the capability of an organization to use effectively information technology to attain business objectives. Here the typical business objective is improvement of financial performance or competitiveness in the market place. An organization with business IT alignment is capable of demonstrating a positive relationship between accepted financial performance measures and information technologies. a) Definition of business IT strategy Strategy is the route taken by a firm to acquire competitive advantage that determines its performance. Information systems strategy is the analysis of the role that can be played by information systems to help a firm define a route that can enable it to be competitive. An IT strategy is a plan, which is used to develop information system in attaining a future vision of a firm toward achieving the general business strategy. The IT strategy helps in identifying strategic information systems, support level systems, and ICT infrastructure for the medium and long terms. There are three types of IT strategies: firm IT strategy, business IT strategy and the industry IT strategy (Longenecker et al 78). The firm IT strategy enables a firm to maximize its internal processes and resources. The business IT strategy helps a firm to maximize value process with its suppliers, partners, associates, and customers. The industry IT strategy enables an organization to either compete or combine with competitor to leverage competitive edge against other competing firms in the industry. b) The need for IT strategy An IT strategy is needed by a firm for different varying reasons. First, a firm may require an IT strategy to enable it develop a computer application to be used in business transactions such as marketing, production or selling. An organization may also require an IT strategy to enable it develop a management information system to enable it effectively control its business. An IT strategy may also be used by a firm to introduce and use computers and telecommunication in a planned way. Furthermore, a company may require an IT strategy to enable it develop an information system to used for business planning. Moreover, a company may need an IT strategy to create an overall standards and systems architecture for applications, technology, and data (Hirschheim et al 16). IT strategy may also be needed for improving productivity in computing and information systems. A company may also develop an IT strategy to develop appropriate staff resources. Finally, IT strategy is needed for the development of internal support systems such as personnel, payroll, and pensions. c) The relationship between IT strategy and business strategy An effective IT strategy should be capable of working hand in hand with other business factors. The main business strategy is usually geared toward making an organization to have a competitive advantage. To be competitive in the market place a firm has to either provide low cost products or provide innovative differentiated products. An IT strategy provides a firm with a framework that can be used in various ways to make a business attain its objective of being competitive in the market. First, the IT strategy helps in identifying common requirements, which can benefit from IT department through reduction of cost of ownership (Kennedy & Sharma 16). Second, IT strategy helps a firm to identify where integration and harmony must take place in order to support good process design and decision-making. Furthermore, IT strategy is essential in identification and sourcing for technology infrastructure that will enable a business to obtain preferred business architecture at costs, which are optimized such as workflow, database, and integration tools. An IT strategy is also instrumental in developing a migration strategy that can enable a firm to realize the advantages of information systems plan. Finally, an IT strategy is essential in establishing an ongoing process for initiation, review and authorization of system proposals that are required fro feeding into the IT business plan. Thus, IT strategy generally enables a firm to combine its talents and abilities in designing a business process and solutions, which are vital for creation of greater value of the firm. Information systems strategy helps in resolving complexities in a firm and thus allowing it to increase its profits (Longenecker et al 43). This is because the strategy enables a business to target its resources more effectively since such strategy provides clarity on which route can make most contribution to the business strategy (Levy & Powell, 66). The IT strategy is also essential in ensuring efficient use of resources and thus it provides a balance between efficiency and effectiveness that are vital for profitability of a firm. IT strategy is affected and can affect business strategy changes. To strike a balance changes in business strategy must therefore be accompanied by changes in IT strategy and vice versa. To avoid harmful unintended results during the design of IT strategy, those involved must remember the business strategy. d) How Enterprise Resource Planning Systems support business goals and drivers An Enterprise Resource Planning Systems integrates different functions or departments of an organization in a centralized manner. ERP software such as Sap is capable of maintaining business and information processes for different business functions like supply chain management, manufacturing, human resources, financial and customer relationship management (Longenecker et al 67). Thus, an Enterprise Resource Planning Systems creates the foundation for an efficient firm. In addition, an ERP helps in improving the performance of an organization. This is because the system is capable of providing updated and accurate information from varied functions of an organization. Thus, ERP avoids errors and delays, which were initially associated with manual processes (Hirschheim et al 167). The ERP allows an organization to achieve low cost of ownership and savings through standardization of a single application to mange several business functions. The system also allows improved visibility since firms can track inventory levels on daily basis. This allows firms to run their enterprise in line with their business strategy. The ERP also reduces costs of operation resulting from low inventory control costs, low marketing costs and low production costs. ERP also allows standardization of business process based on best industry practices thus allowing organizations have continuous improvement of their process. Finally, ERP allows improved compliance to different regulations. Thus, ERP supports the goals and drivers of a business. References Hirschheim Rudy, Heinzl Armin & Dibbern Jens. Information Systems Outsourcing: Enduring Themes, new Perspectives, and Global Challenges, 2d Ed. New York: Cambridge University Publishers. Available at http://books.google.co.ke/books?id=5BKKlOHN2a8C&pg=PA402&dq=Information+Systems+Outsourcing:+Enduring+Themes,+new+Perspectives,+and+Global+Challenges,+2d+Ed.&hl=en&ei=qk-nTN6dJdfPjAe79InYDA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCcQ6AEwAA#v=onepage&q&f=false Kennedy Robert & Sharma Ajay. The Services Shift: Seizing the Ultimate Offshore Opportunity. London: FT Press, 2009. Available at http://books.google.co.ke/books?id=X09yaWn6UBoC&printsec=frontcover&dq=The+Services+Shift:+Seizing+the+Ultimate+Offshore+Opportunity&hl=en&ei=AVCnTMjcO9HPjAehmb3bDA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwAA#v=onepage&q&f=false Levy, M & Powell, P. Information systems strategy for small and medium sized enterprises: an organizational perspective. Journal of Strategic Information Systems, 9, (2000), pp. 63-84 Longenecker Justin, Petty William, Palich Leslie & Moore Carlos. Small Business Management: Launching and Growing Entrepreneurial Ventures, 15th Ed. London: Cengage Learning, 2009. Available at http://books.google.co.ke/books?id=39PhqYDpFT0C&pg=PR13&dq=Small+Business+Management:+Launching+and+Growing+Entrepreneurial+Ventures,+15th+Ed&hl=en&ei=KVCnTOjMNJKW4Abc1_i9DQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCwQ6AEwAA#v=onepage&q&f=false Paladino, Bob. Five Key Principles of Corporate Performance Management. New York: John Wiley and Sons, 2007. Available at http://books.google.co.ke/books?id=yh9v5mBE1G4C&printsec=frontcover&dq=Five+Key+Principles+of+Corporate+Performance+Management&hl=en&ei=V1CnTM69CcK5jAfE6ti_DA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC0Q6AEwAA#v=onepage&q&f=false Schniederjans Marc, Schniederjans Ashlyn & Schniederjans Dara. Outsourcing and Insourcing in an International Context. New York: M.E. Sharpe, 2005. Available at http://books.google.co.ke/books?id=xKjUz9JN_D4C&printsec=frontcover&dq=and+Insourcing+in+an+International+Context.&hl=en&ei=f1CnTP68EdO4jAfU3rzyDA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCkQ6AEwAA#v=onepage&q&f=false Tanner, K. Factors contributing to IS/IT Success and Failure ‘People’ Issues in Managing IS/IT Projects. Lecture Notes, 2010. p. 2-1 to 2-65 Tanner, K. Strategic Contexts of IT Management. Lecture Notes, 2010., pp. 18-2 to 18-72 Read More