The Strategic Role of Global Information Systems - Literature review Example

The Strategic Role of Global Information Systems In today’s world, information has become a critical agent of enabling an integrating competitiveness in the enterprises in the global market. Global networks connecting workstations in the world allow people to work, communicate, and form partnership with other people and organizations of similar interests regardless of their geographical location. Therefore, organizations and other businesses can pursue their interests globally with concern of the well-being of particular states. Information technology is changing the way of living, learning, entertaining, and on a global scale (Ciborra, 2000:75). This paper seeks to present a critical evaluation of the strategic role of information systems for organization, as well as discuss the management issues of such strategies in planning, leading, and designing. Introduction The relationship between corporate strategy and information systems functions was not a central interest for the top management of organizations for some time. Information systems were primarily synonymous with corporate data processing and regarded as back-room operations to support the day-to-day operations (Ezingeard, McFadzean, and Birchal, 2007:99). However, the 80s and the 90s saw a growing realization of strategizing information systems for the organization. Interestingly, information systems have been present since the beginning of time, but the integration with information technology is a newcomer to the field. The functions of IT-based information systems have had significant impacts to organizations and people such that only a few (if any) company can afford the risk of ignoring these functions despite the fear and frustrations they evoke sometimes (Currie and Galliers, 2002:76). Some organizations regard information systems as unavoidable to remain in business, while others perceive the systems as a strategic opportunity that may proactively identify strategies to gain a competitive edge against competitors. Regardless of an organization’s stance, embarking of investment on information systems proves to be a non-reversible decision. Information technology has become powerful and cheap, and its use in organizations has spread at a rapid rate. Different management levels are using IT-based information systems in contrast to the earlier application at the operational level only. However, more organizations are focusing on improving efficiency and maintaining business effectiveness, as well as strategically manage organizations (Irani, Love, and Hides, 2000:23). The increasing complexity of managerial tasks translated to the complex nature of information systems required: from routine, structured support to unstructured, complex, ad hoc enquiries at the peak level of management. Information systems has the potential to change the way organizations work and the very nature of their business. In the information technology world, there has been introduction of electronic markets, where buying and selling occurs in a matter of seconds, disrupting the conventional distribution and marketing channels (Lacity and Willcocks, 2000:31). The advent of Electronic Data Interchange has not only increased transaction speed but also ensures subscribers of accuracy of information they receive from buyers and suppliers and perhaps reap cost reduction benefits using automated reordering processes. On higher strategic level, an organization may pass information to its customers or suppliers to provide or gain better service. Providing higher quality services to the customers than the competitors may result to the differentiation required to gain a competitive edge on a short term. However, continual improvement to the quality of services offered may enhance the competitiveness of an organization on a long-term basis (Magdaleno et al., 2008:305). However, the unprecedented and rapid change in information technology has profound impacts on IT-based information systems, causing the already uncertain business environment to become more unpredictable. The ability of an organization to identify the relevant information required for optimal decision-making is not hindered by the manual systems in organization. IT-based information system can collect, record, analyze, synthesize, and produce information faster than previously in history (Ryan and Harrison, 2000:13). An organization can collect data from different parts of the organization and the external environment and integrate that data to produce timely, relevant, precise, and concise information at all levels of the organization, enhancing its efficiency, effectiveness, and competitiveness. Organizations can strategically deliver information to the right people on a timely basis, thus enhancing the decision-making functions. The limited information-gathering capabilities of organizations in previous decades meant that decision makers could rarely rely on up-to-date information but rather base important decisions on past results and personal experience. This is no longer the case. Organization with the right technology to collect the necessary information automatically is able to access up-to-date information when such needs arise. However, the use of IT-based information systems introduces the possibility of abuse. Data security and integrity is very important in ensuring privacy and validity of the held information. Managing information often involves complex and difficult decisions on what to keep, how to organize, who to hold, and who to access it (Serafeimidis and Smithson, 2001:95). Therefore, the quality of the management will largely determine the quality of decision-making and ultimately the performance and survival of the organization. The growth in usage of information systems in supporting information provision in organizations has brought the political nature of information into sharper focus. Gatekeepers of such information have become powerful people: determining when and if to disseminate vital information and to whom. These people are likely to hold a higher respect among fellow workers, or alternative earn despise for the powers they hold at their fingertips. Traditionally, such gatekeepers have been middle level managers in organizations (Walsham, 2001:24). Their primary role has been facilitating information flow between the lower and higher levels of management. However, the introduction of IT-based information systems enables all individuals regardless of their organizational rank to access such information readily at any time. This is another reason why there has been resistance to introduction of information systems, as they have the potential to change the power balance in an organization. Until loss of power has a substitute of equal or higher value, then implementation of information systems will be subject to considerable obstruction. The development of IT-based information system has literary revolutionized individual organizations and the society as a whole (Elliott, 2002:217). To understand the implications, there is need to understand and reflect on these development and their impacts on a global scale. The main feature of a society embracing information systems is that it is global, not national. Global digital networks promote rapid communication across nations, providing individuals and organizations with the opportunity to form global alliances and partnerships with an aim of achieving political or economic objectives, essentially bypassing the institutions of nations (Ciborra, 2000:124). Our current economic and political structures are undergoing changes by high-speed global information systems. In recent times, the globalization of competition is more of a rule than an exception for many industries. Organizations need to coordinate activities on a global basis to remain competitive (Hirschheim et al., 2009:221). Most global organizations have an explicit business strategy on a global level, but only a few have strategy for managing their information technology internationally. Globalization trends often demand evaluation of skills that an organization requires to participate in the changing markets. According to experts, coordination of complex networks of activities on a global scale is becoming a source of competitive advantage (Serafeimidis and Smithson, 2001:108). Global strategies involve coordination with subsidiaries and coalition partners. The benefits of such coordination do not depend on the policies and practices of a country. Rather, they rely on the performance of value chain activities on the global system of the organization. The increase in global competition in recent times has led to an avalanche of strategic association among organization. There are numerous consortia formed across national boundaries and even continents (Lan, 2005:133). Information technology has enabled the connection of decision nodes to computer networks in such alliances enhancing their response to external changes. The manufacturing, design, and marketing of products usually occurs across several nations, taking advantage of factors such as available cost of investment, labour, components, skills, and energy imposed by local culture and regulations. Organizations tend to position production as close to the consumer markets as possible, thus bypassing import restrictions. A prime example is Japanese carmakers. In addition, organization may achieve significant cost cutting by allowing employees to work from their homes, further reducing the costs associated with freelances on short-term contracts. There are many forms of distributed business, with some based on single key players supported by many small participants such as Nike. Others have characteristics of distributed ownership like the Airbus. The latter is a clear example on the importance of international collaborations facilitated by IT-based information systems: a European consortium competing in manufacture and design of aircrafts with established American companies that dominated the world since their formation (Ezingeard, McFadzean, and Birchal, 2007:107). It is evident how information technology changes the competence of businesses. Thus, it is imperative that we look at information systems as vital competitive networks. Information systems are strategic means of organizational renewal. In essence, the strategic role of information systems includes the use of information technology to develop services, capabilities, and products that gives organization significant strategic advantages over competitive forces in the global marketplace. This leads to the creation of strategic information systems, which are information systems that shape and support the competitive strategies and position of an organization. Therefore, a strategic information system refers to any information system that allows an organization to gain competitive advantage, reduce competitive disadvantage, and meet strategic objectives of the organization (Currie and Galliers, 2002:108). Michael Porter argues that an organization can succeed and survive in the long-term if it develops strategies that confront the five competitive forces that are the pillars of competition in that particular industry. These forces include rivalry of competitors, threat of new entrants, threats of substitutes, bargaining powers of suppliers, and bargaining powers of customers. There are a number of competitive strategies that an organization may adopt, including cost leadership, differentiation, innovation, growth, and alliance strategies. Cost leadership strategies include becoming a low-cost producer of services and products, increasing costs of competitors, and finding ways to assist customers and suppliers reduce their costs (Elliott, 2002:176). Differentiation strategies include developing different services and products from competitors and reducing the differentiation advantage of competitors. On growth strategies, organization may expand into the global market, diversify into new services and products, expand the organization’s capacity to produce services and products, and integrate related services and products. The organization may also undertake innovation strategies, including identifying new methods of producing and distributing commodities, developing new commodities, and establishing new business alliances (Reponen, 2006:56). Alliance strategies include establishing new alliances and linkages with suppliers, customers, consultants, customers, and other organizations. Organizations may use a number of ways to implement competitive strategies, these includes the five major competitive strategies (cost, growth, alliance, differentiation, and innovation), as well as other strategic ways of gaining competitiveness. Examples include lower costs, differentiation, growth promotion, developing alliances, innovation, building an IT platform, and improving efficiency and quality. Other strategies include creating switching costs using inter-organization information systems thus locking in suppliers and customers, building barriers against new entrants into the industry using IT investment, making the substitution of competing products unattractive by using IT components (Benson, Bugnitz, and Walton, 2004:23). An organization may enhance the efficiency of its operational processes using the investment in information systems, as well as improving the efficiency of its management processes. Therefore, an organization may be able to achieve dramatic cuts in costs, improvement in customer service and quality, and development of innovative commodities for the new markets. Information systems may also result in the development of new business process, services, and products (Barko and Nemati, 2009:723). This may then create new business opportunities, enable organizations to venture into new markets as well as new market segments in existing markets. Information systems also enable organization to lock in suppliers and customers and lock out competitors by building valuable relationships with them. This may occur through deterring both suppliers and customers from abandoning an organization for other competitors or intimidating that organization into engaging in less profitable relationships. In addition, a business may achieve this by offering better quality of services to customers, thus differentiating their services from those of competitors (Irani, Love, and Hides, 2000:76). Alternatively, a business may create an inter-organizational information system that links all telecommunication networks to computers and terminals of businesses with their suppliers and customers, resulting in new business partnerships and alliances. One of the emphases of strategic information systems is integrating switching costs into the relationship between the suppliers or customers and a firm. In other words, investment in information system enables an organization to make suppliers and customers rely on the continued use of mutually beneficial and innovative inter-organizational information system. With time, the suppliers and customers will become reluctant to incur costs in time, effort, inconvenience, and money that it requires to revert to the competitors of the firm (Galliers, and Leidner, 2003:75). Prime examples include the APOLLO airline reserve system and the GEMNI airline reserve system. Information systems that increase operational efficiency may erect entry barriers for new newcomers in the industry as well as discouraging the firms already in the market niche. Firms may achieve this through increasing the amount of investment or the complexity of the technology required by competing firms (Ryan and Harrison, 2000:37). Alternatively, the firm may discourage other firms already in the market and prevent external organizations from venturing into the industry. Information systems also enable firms to design a strategic IT platform that takes advantage of the strategic opportunities. In essence, this means acquiring software and hardware, developing telecommunication networks, training end users, and hiring specialists in information technology. The firm may use these resources in different ways, including marketing campaigns, strategic planning, identifying better techniques of locking in suppliers and customers, and erecting entry barriers for competitors (Walsham, 2001:131). Additionally, a firm may benefit from the investment in information technology by developing new services and products. On a global scale, businesses and organizations employ information systems strategically to break business barriers. IT-based information systems equip an organization with the capability to break some of the traditional business barriers that hinder business success in the global market. These barriers include time, geography, cost, and structure. Information systems enable business to break time barriers by shortening the interval duration between critical steps in business processes. Telecommunication systems performs tacks a lot faster than other communication forms, thus improving communication and transmission of information to remote locations prior to request. Telecommunications systems also enable firms to communicate with suppliers, customers, and other associates in other parts of the globe, thus breaking geographical barriers (Wheelen and Hunger, 2002:96). Information technology and telecommunication tools allow the distribution of important business activities to optimal locations of need, where the performance is best, or where they effectively contribute to competitive advantage of the business. Businesses may also break cost barriers by employing information systems and technologies by reducing the costs of business operations in comparison to other information communication and processing. For instance, an organization may significantly reduce costs in inventory, production, distribution, or communication. Information systems also enable firms to cut costs in labour, reducing distribution centres, minimize levels of inventory, and reduce communication costs (Lan, 2005:109). In essence, information systems are creating new economies of information. The internetworking of consumers and businesses is effectively breaking the cost barriers erected by traditional economic trade-offs in information delivery and content. The communication between consumers and other organizations makes trade-offs between the reach and richness: with the rich referring to the number of information recipients, and richness to the customization, bandwidth, and interactivity of the information. Information systems help organizations to develop strategic relationships by establishing linkages with suppliers, other business entities, and customers. For instance, an information system may support innovation in service delivery, increase the penetration and scope of markets, and create alliances with suppliers, customers, and even competitors. The value chain is one of the important concepts that help the management of organizations in identifying opportunities for strategic information systems. According to Michael Porter, this concept views an organization as a chain or series or activities that add value to the products and services, thus add some valuable margin to the organization. Some of the business activities are primary and others support. This particular framework highlights areas that require application of competitive strategies (Ariyachandra and Frolick, 2008:115). In this regard therefore, the end users in the management should seek to develop strategic information systems for the activities that add value to the services and products of their organizations, and ultimately the overall business value of eth business. The functions of information systems help the management of an organization to develop competitive weapons that utilize information technology to implement various competitive strategies in order to counter the challenges of competitive forces. However, successful strategic information systems are difficult to design and implement. Often, they require major changes in the operation of the business, the relationships with suppliers, competitors, external and internal stakeholders, and customers. Successful designing, planning, and leading of strategic information systems depends on an array of fundamental and environmental business factors, as well as strategies and actions of the management team of the company (Hunter and Tan, 2006:238). Another eminent problem is aligning the objective soft eh information system with the overall business objectives. Sustainable success in using information systems strategically depends on three major factors: the environment, the foundations factors, and management strategies and actions. The important determining environmental factor is the structure of the industry. On the foundation factors, alliances, unique industry position, technological resources, expertise, and assets may enhance the competitive edge of a firm in the global market. The management of an organization must initiate and develop successful strategies and actions that shape how the information systems will be applicable in the global market (Serafeimidis and Smithson, 2001:99). Examples include creating entry barriers and switching costs, pre-empting the market by the first-mover concept and staying ahead of competitors in the strategic use of information systems, developing strategies in response to competitors, and managing inherent business risk in all strategic information system initiatives. Conclusion In the current information-driven world, information has become an important agent of enabling and integrating competitiveness in the global market for organizations. The development of information technologies and information systems is literary changing all aspects of the human life, including their way of doing business. Organizations are increasing using information systems strategically to gain competitive advantages over market competitors. Increasingly more organizations are integrating information systems into their global business map to sustain and achieve business success. Organizations use information systems in developing strategies to confront Porter’s five competitive forces, thus enhancing their competitive advantage and meet other strategic objectives (Newkirk et al., 2003:207). 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