Information Systems in Global Business Today

Chapter 1

Usman Naeem

Introduction

• Explain why information systems are so important today for business and management

• Evaluate the role of information systems in today’s competitive business environment

• Assess the impact of complementary assets

Opening Case Study

Role of Information Systems in Business Today

• In 2009, Asia-Pacific spent $153 billion on IT and Telecom, that is more than 50 % of spending

• Information technology capital grew from 35 % to 54 % of all invested capital

• By june 2008, >80 million businesses had registered dot-com sites (in US only)

• E-commerce and internet advertising is booming

• IT is the largest single component of capital investment in the United States.

• About $1.8 trillion is spent each year by American businesses.

• Managers and business students need to know how to invest this capital wisely.

• The success of your business in the future may well depend on how you make IT investment decisions.

Globalisation

• Opportunities:• Management and control in a global marketplace• Competition in world markets• Global workgroups• Global delivery systems

• Challenges:• Outsourcing processes = job loss• Obtaining/Maintaining competitive advantage

Strategic Objectives of Information Systems

• Create new services: • eBay has developed the largest auction trading

platform for millions of individuals and businesses. Competitors have not been able to imitate its success.

• Differentiate yourself from your competitors: • Amazon has become the largest book retailer in the

United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.

• Businesses invest in Information system to achieve six strategic business objectives:– Operational Excellence

• Example: Wal-Mart

– New products, Services and Business models• Online music, Apple

– Customer and supplier intimacy• Junaid Jamshed

– Improved decision making– Competitive advantage– Survival

• Example: Banks

What is Information System?Technology Perspective

• A set of interrelated software and hardware components that collect, process, store, and distribute information to support decision making and control in an organization • Data: Streams of raw facts representing events such

as business transactions• Information: Clusters of facts meaningful and useful to

human beings in the processes such as making decisions• The IPL example

Information Systems:Business Perspective

• Information systems are more than just technology. Businesses invest in IS in order to create value and increase profitability.

• Information systems are an organizational and management solution to business challenges that arise from the business environment.

• Based on information technology but also require significant investment in organizational and management changes and innovations

• IS create value primarily by changing business processes and management decision making.

Information Systems are more than just computers

Dimensions of Information System

• Three Important Dimensions of Information Systems • Organizations• Management• Technology

• You will need to understand and balance these dimensions of information systems in order to create business value.

Organisational Dimension• People

• Structure

• Business processes

• Culture

• Politics

Management Dimension• Personalities• managers must act creatively:– Creation of new products and services– Occasionally re-creating the organization

• Managers who can understand the role of information systems in creating business value are the key ingredient to success with systems, and cannot easily be replicated by your competitors.

Technology Dimension• Hardware: Physical equipment

• Software: Detailed preprogrammed instructions

• Storage: Physical media for storing data and the software

• Communications technology: Transfers data from one physical location to another

• Networks: Links computers to share data or resources

Information Systems transforming Business

• Technology– Emerging mobile digital platform– Growth of online software

• Management– Adopting online collaboration and social networking software

to improve knowledge sharing– Adopting mobile tools to accelerate decision making

• Organisations– Web 2.0 applications adopted by firms– Telework gaining momentum– Outsourcing production

Complementary Assets

• Awareness of organisational and management dimensions can help us understand why some firms achieve better results than others.

• Complementary Assets are those that derive value from a primary investment. For example, automobiles

Complementary Assets(organisational)

• Supportive business culture that values efficiency and effectiveness

• Efficient business processes, decentralization of authority• Highly distributed decision rights

• A strong information system (IS) development team

Complementary Assets(Managerial)

• Strong senior management support for technology investment and change

• Incentives for innovation by management• Teamwork environment• Training programs to enhance management

decision skills• Management culture that values flexibility and

knowledge-based decision making

Complementary Assets(Technological / Social)

• Internet and telecommunication infrastructure• IT enriched educational programs raising

computer literacy• Laws and regulations creating fair, stable

market environment (?)• Technology firms in adjacent market to assist

implementation

• Investing in information technology does not guarantee good returns

• Considerable variation in the returns firms receive from systems investments

• Factors: – Adopting the right business model– Investing in complementary assets (organizational

and management capital)

* Firms supporting technology investments with investment in complementary assets receive superior returns

Contemporary Approaches to IS

• Technical Approach:– Emphasis on mathematical models– Computer science– Management science– Operations research

• Behavioural Approach– Strategic business integration, design,

implementation, utilisation and management – Information system technology is often a stimulus for

a behavioural issue

Sociotechnical Approach

• This textbook takes on a socio-technical approach where it discusses four actors that shape up a Management Information System– Suppliers of hardware and software– Business firms making investments to obtain value– Managers and employees seeking to achieve value– Social and cultural context (firm’s environment)

Summary

• How Information System is transforming business and what is their relation to globalisation.

• Importance of information system for managing a business today

• What is an information system• What are complementary assets