This report describes the need for on-demand computing which would enable the ABC Company to cut its costs on IT. It was requested by the company’s executive management team for strategic management planning. ABC has been facing cost pressures from high energy prices and lower level of automobile trade. Moreover, in operation of its IT infrastructure, the company expends more than 50% of its IT budget. This implies that ABC has to keep prices inline with its competition and the firm’s value change. Keeping costs low and services to customers are very big priority; hence the objective of this report is to present the need for the implementation of utility computing in order to reduce the unfavorable expenses.
Any feasible Information System plan must be able to include the provisions for operating and upgrading the IT infrastructure to support the changing needs. Since many aspects of IT infrastructure involve technical issues that seem far removed from business issues; as in the case of ABC, it is often difficult for executives to participate effectively in discussions about long-term strategy for IT infrastructure (Cadle & Yeates, 2007). Firms also need to implement flexible infrastructure that can endure high increases in computing loads and common threats from hackers and in peak loads and viruses. Because customer and worker anticipations for service are increasing, companies need to increase their service levels to meet customer demands.
Therefore, the scope of this report is to analyze and present the specific solution to the challenges facing ABC Company in relation to IT infrastructure within the next three years. It does not examine the whole business model because of the confined requirements.
In general, the findings showed the organizational and technological problem that the ABC Company faces in its strategic business process. And thus, there was need for a sustainable solution that would solve the business issues experienced in the company; the findings examined the on-demand computing as a favorable solution. In essence, the technologies that could be used to generate the solution, the implication on the organizational process and the overall management policy required were investigated.
It was found that ABC cost pressures for the high prices of hardware and software that support the information dissemination in the firm. Because ABC operates in three cities, it finds it very challenging to integrate the computing and telecommunication platforms at a reduced cost. Moreover, the company’s IT infrastructure is maintained by more than 20 workers who posses technological expertise. Although the company’s core business is not on providing technological solutions; the fixed IT costs are on the rise. This presents a combination of managerial, organization and technological problem.
Previously, the managers of ABC Company invested in information technology and systems because such strategies provided real economic value to the business (Richardson, personal communication, May 29, 2009). According Laudon and Laudon (2007), the decision to implement or sustain an information system presumes that the profits on this investment will be higher than of other assets.
These higher profits can be expressed as increases in productivity, as increases in revenues which will improve the firm’s market value, or perhaps as better long-term tactical positioning of the firm in certain markets which produce superior returns in the future. Despite of all the information system’s capabilities, ABC has not been able to realize the full potential; the cost of computing services has increased dramatically, the cost of software remains high, and the intensity of computing and communicating has increased as other costs have declined. Thus, it was found that the management does not keep much emphasis on the running of IT infrastructure because it is not the core business operation.
In some cases, ABC was required to invest in information systems simply because such investments were required to stay in business. For instance, the company was forced to implement an intranet for managing the information flow between the components of production system to make motor manufacturing information more accessible to different parts of the organization, increasing precision and lowering costs. Therefore, the following are various major managerial, organizational and technological challenges that contributed to the problem of high IT costs within the ABC Company:
- The company experiences the challenge of obtaining meaningful returns on the information systems investment. The senior management finds it difficult to evaluate the information system investment as they do with other manufacturing investments. From the managerial perspective, the ABC Company finds it difficult to have a clear-cut- decision making process for coming up with an alternative that would be profitable to the organization.
- Despite heavy information technology investments, the company is not realizing significant business value from its systems, because the appreciation of complementary assets required to make the technology asset work is somehow lacking. This presents a strategic business challenge.
- ABC Company is experiencing a globalization challenge of understanding the business and system requirements for the global economic environment. Because ABC’s objective is to position its automobile products in an international market, it is faced with a challenge of developing systems that can support both producing and selling products in various countries.
- Since the business conditions and technologies changes rapidly, ABC finds it difficult to develop an information technology infrastructure that supports their strategic business goals. The company houses an IT platform that may not fully adapt to innovation and change.
- Sometimes the company faces a responsibility and control challenge. The decision of designing applications that can be used in an ethically and socially responsible manner seems to bring about controversial thoughts. Furthermore, the security of information is a major issue that contributes to the high costs of maintaining an IT infrastructure.
The research findings indicated that a strategic solution is required to solve the problem explained in the previous section. There were several alternative solutions researched in the context of dealing with the high information technology costs. Therefore, the various hardware and software trends that could be implemented in the organizational process to address this challenge are:
- The integration of computing and telecommunication platforms: this implies that computing operations may be performed over the internet through the integration of hardware platforms. At the client level, communication devices such as handheld computers and cell phones integrate all the information system capabilities including phone, camera and computer in one device. At the server and network level, it is becoming a common practice to integrate the telecommunication and computing platforms into a single network; the internet (Stallings, 2006). If this alternative is followed, the firm will be able to increase its computing power at a very little cost.
- Grid Computing: it involves linking geographically distant computers into a single network to make a virtual mainframe by combining the processing power of all the systems on the grid (Laudon and Laudon, 2007). This approach ensures that the computing resources like the processors of the remote computers are utilized incase of idleness. The business implication of this strategy involves cost saving, speed of computing, and agility. However, grid computing requires a high speed internet connection for the benefits to be realized.
- On-demand computing: also known as utility computing. This technological solution would allow the firm to provide computing resources when there is demand for the data processing operations. In this case, ABC can reduce its investment in IT infrastructure by investing just enough to handle average processing needs and paying for as much additional computing power as the market demands. A firm dealing with computational services can be consulted to provide services for information system procurement and security, and a service desk for resolving issues with all the providers of the company’s IT service. This business computing model is further explained in section 3.2.2.
- Autonomic Computing: This computing model encompasses a corporate effort to build systems that are able to configure themselves and even guard themselves from threats like intruders or viruses; this is because of the complexity of the computer systems hence difficult to manage. Autonomic computing frees system administrators from many system management and operational tasks so administrators can employ a lot of their IT skills in fulfilling the core business needs. To implement this model, ABC Company will require spending excessive resources to ensure that the systems do not fail.
- Edge Computing: this technology is inline with web-based applications, in that the most important contents, logic, and operations from the web site are acted upon by a smaller, less expensive servers located nearby the user. Like the grid computing and on-demand computing, it uses the internet as a platform to balance the workload experienced by a company across many workstations remotely located on the network. This approach increases the flexibility of the firm’s operations (Novell, 2009).
From the above alternatives, on-demand computing was preferred as the best alternative as it addresses the challenges faced by ABC Company. Therefore, the next section examines on-demand computing in the context of its strategic implication for the next three years and the values that it could provide to the company.
This computing model reduces the hardware and software expenses that a company may incur in its information systems maintenance and management. A firm can outsource the IT operations to another firm so as to concentrate on the core business plans and only request for computational operations when there is demand (Schauland, 2009). The objective of on-demand computing is to enable a company like ABC to address the business issues related to the costs of IT infrastructure. In light of this, the following points outline the ways in which on-demand computing would solve the challenges that the company faces and thus a strategic business implication for the next three years;
- The information system challenge: By minimizing the IT operations to the general required tasks like data entry and routine maintenance, ABC can be able to obtain business value from the minimized IT management. On-demand computing may only be requested when there is need for application development and maintenance.
- The strategic business challenge: through on –demand computing, ABC will be able to reinforce its assets for the automobile manufacturing, since the assets needed to use information technology will be handled by another firm, hence realization of the business values.
- The globalization challenge: utility computing will help ABC company to tackle the globalization challenge by shifting the firm’s infrastructure from a fixed capacity to a flexible infrastructure. This will enable the firm to launch entirely new business process that fits in the global economic challenge.
- The IT infrastructure challenge: this is the main challenge that faces ABC Company. Through the utility computing, ABC can acquire hardware and software that are up to date through a firm that offers on-demand computing. This will enable the company to develop IT infrastructure that can support their mission when there is a changing business conditions. It was clear that ABC’s IT infrastructure consumes 50% of its IT budget, hence the need for on-demand computing; these expenses can be reduced to 20% for the next three years.
- Responsibility and control challenge: Since a company offering on-demand computing will be much involved in IT operations, ABC management will have to worry less on the use of the information systems. The small remaining infrastructure owned by the company would be properly managed by system administrator.
Implementation of on-demand computing
In order for ABC Company to have a full potential in the implementation of on-demand computing, the research indicated that the organization processes should be redesigned so as to benefit from IT. ABC has to make fundamental changes in the IT infrastructure, develop new models for business, and eliminate out-modeled business process and organizational structures.
In the context of IT infrastructure, the company should rationalize its computational procedures by having standard policies that enables its employees to recognize the need of corporate responsibility that governs the use of information systems. Therefore, companies like IBM, Sun Microsystems, Microsoft, and HP can be consulted to offer on-demand computing. These companies have departments that handle change management for application development and maintenance, and migration of applications from testing to production status. Such companies also provide security and a service desk for solving issues with all the providers of the firm’s IT services.
The general conclusion that can be derived is that the ABC Company has been operating on a fixed information technology infrastructure that presented it with a high information technology budget. The challenges that the strategic management team experience as a result of the information systems plan include the information system investment challenge, the strategic business challenge, the globalization challenge, the IT infrastructure challenge, and responsibility and control challenge. The various solutions for the problem of high IT infrastructure cost include: the combination of computing and telecommunications platforms, grid processing, edge computing, utility, and autonomic computing. In essence, on-demand computing is the most appropriate, since it addresses the business issue presented by ABC.
In this light, it is recommended that ABC should implement on-demand computing in its business operations so as to realize its strategic objective and hence a competitive advantage.
As per the conclusions, I recommend that ABC Company should adopt the on-demand computing model for its business success. Since the company experiences a lot of expenses in its information technology infrastructure, it is appropriate for the strategic management to opt for a more flexible infrastructure that could enable the firm to launch new business process that they would never attempt with a fixed infrastructure. In addition, a redesign of the organizational process could enable the new business computing model to save 30% percent of the IT expenses that are incurred through the maintenance of hardware and software.
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Laudon, K. C., & Laudon, J. P. (2007). Management information Systems: Managing the Digital Firm. (10th Ed).Upper Saddle River, NJ: Pearson Prentice Hall Inc.
Novell, Inc. (2009). Make the move from UNIX to Linux. Edge computing and Infrastructure services. Web.
Schauland, D. (2009). What is On-Demand Computing?. Web.
Stallings, W. (2006). Business Data Communications. (5th Ed). Upper Saddle River, NJ: Pearson Prentice Hall.