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Importance of Information Technology in Business

Essay by   •  April 30, 2013  •  Research Paper  •  2,251 Words (10 Pages)  •  1,827 Views

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What would we do in a world that does not have computers to help us out with our daily tasks in the world of work ? Would Wal-mart, ..., or have existed without information technology ?

Because information technology is taking more and more place in our world today, discussing it is really going to have a positive effect on every business today. Through this paper, we will go over an article dealing with the importance of information technology in business through the eyes of Dr. Peter Keen.

This article is an Interview of the Peter Keen in which he talks about "conversations that matters" during the 30th International Conference on Informations Systems in Phoenix in 2009.

First of all, Peter Keen begins his interview by saying that information technology enables business capabilities within the company : "Most CxOs have a growing understanding of what IT can do - the business capabilities it enables ". (G.W Keen, 2010)

I agree with his statement since IT has simplified the everyday life of hundreds of thousands of managers. The RFID is an example, as it really helped managers manage their stocks no matter their sizes. Nowadays, a grocery store can be managed by a single person with this kind of IT. He sells, do the accounting, keep track of what has been sold, reorder and manage its stock through a computer easily. He then will be able to cut expenses such as the carrying and the ordering cost thanks to these informations he gathered through IT. For bigger organizations, IT can have a bigger impact as it helps them achieve their competitive advantage. Wal-mart for example is well known for being the lowest prices retailers in the United States, all thanks to their elaborate logistic competency that allows them the reduce huge costs of inventory. That is why IT is actually play a major role in the management of enterprises nowadays. All these new capabilities that allows organizations to collect, process, and use significant amount information, in addition to integrate and coordinate operations within these organizations are helping them achieve their competitive advantage, and thus letting them to be the best at what they do.

There is a person behind all that. According to Peter G.W Keen, this CIO ( Chief Information Officer) is the head of the IT department that is responsible of the making life easier for everybody through his utilization of information technology. What this CIO does within an organization is now characterized as essential, since its skills will benefit any manager (in terms of managing inventory and cutting costs if we apply this to our previous example of the grocery store).

Nonetheless, investing in information technology at the very first time is quite tricky. The initial investment of implementing information technology is significant to begin with. But after that we see what we call IT temptations. The manager thinks that investing in IT is a good decision to make since it will improve his company's performance. Actually what happens is that you see no added value out of that IT since the manager didn't identify the needs of its company. This implementation can fail or it can encounters some major errors, but giving up in this IT is not a viable solution and then managers keep investing in it by allocating a lot of resources to maintain it alive through updates even if there will be no return from that investment. Sometimes if that IT can contribute to enhance a company's performance, we don't know to which extent. We cannot measure with precision the real contribution of that IT into the enhanced performance of a company.

A successful company that has an IT that brings tangible results is possible only when CxOs are always communicating with each other. In fact, what Peter G.W Keen (2010) meant when he says that "Most CxOs have a growing understanding of what IT can do". These CxOs are more and more involved in information technology and know that there is a lot to take from IT: it is basically creating new products, processes and even companies.

Moreover, in his interview, Peter G.W Keen states that companies outsource their information technology because of financial reasons.

Indeed, what these companies think is that it is going to cost them much more if they implement it and run it by themselves. In addition to the financial side, they also think about the "Out of sight, out of mind", where they actually rather transfer that responsibility to qualified people.

There are a lot of companies that follow that belief, and outsource all the IT as a support activity, in order to cut as much expenses as possible.

Otherwise, what every company should do in order to run its own information technology is to go through all the support activities of the value chain: Hiring the skilled technicians that are going to set up all the hardware and software after actually buying that from the right suppliers (by doing a procurement) and a lot of other steps that require huge resources such as training your employees to use that IT, to evaluate that IT ...

IBM is well known for being one of the best IT providers on earth. Since this company's business is creating and capturing value out of the sale of IT service, they obviously have the means to do it in a better way than you do because of their competitive advantage. Outsourcing, or in other words entrusting this task to a third party, in that case means taking advantage of the know-how of IBM in terms of information technology. As they already have all the skilled technicians, the right suppliers of both hardware and, they can sell you that whole service package. They can even train your employees to use and get used to that IT, and still be able to perform all these tasks cheaper than you.

As the goal of every company is to maximize profit, the managers are always looking for means to cut further costs and therefore increase profits. As the world is going more and more global nowadays, companies that offer IT services such as IBM have more competitors which mean the bargaining power of customer increases.

Another way to maximize the profit of a company, according to Peter G.W Keen is to focus more on invention than innovation. Dr Peter states that innovation "is about invention that can be turned into value". Actually, what innovation does is showing what the real tangible benefits from an invention are. As long as this invention doesn't serve us in anything, we do not need it. And that is what information technology is about. Being cutting edge does not improve a company's performance but the way we use it to take value out of it that does.

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