Information Technology in the Digital Economy: Business in the Digital Economy
Information Technology has thoroughly revolutionized the business process. Many multinational giants are changing their business tactics like Siemens. Fierce global competitions made companies reduce costs and increase productivity, and e-business is a good solution of this problem.
E-commerce mainly happens with the help of internet and other electronic networks. The basic infrastructure of E-commerce requires a network of interconnected computers, which helps users to access and share information from a number of sources and collect and collaborate with others. Intranet and extranet are other two type of processes. Almost all the concerns of developed countries are using this process. The causes behind this are simple:
- Improve productivity
- Reduce cost
- Improvement in decision making
- Enhance customer relationship
- The development of new strategic applications
An economy based on digital factors is digital economy (or internet or new economy).Digital computer networks, internet, intranets, VAN, computers, software are very important in this business. “Thaigem” is a gem company based in Thailand, who really effectively used the EC to grow their business.Web-based business enhances competitiveness and create strategic advantages for a company and this is really helpful for any company, how large or small it may be. From ordering to supply to transportation of a good that has been ordered, the E-Commerce is doing wonders for all the parties involved. Now one can go shopping and do not wait in the long queue to pay the bill rather present a blank check where the amount will automatically debited. Moreover one can shop in internet where he will have thousands of stores and choices to choose from and the product will be shipped in his doorstep. These improvements have made business may be thousand times simpler, also affordable and hassle free for the customer.
The business models for digital economy are many. In a model a buyer is allowed to quote his or her price for a product (priceline.com). One can bid for items and as happens the highest bidder online gets the product (gxs.com).In “Affiliated Marketing” the makers place an advertisement in a website and every time a customer clicks the advertisement to buy the product via the website they get a percentage of the profit. Generally if a group jointly buys some products it is customary to get concessions. In etrana.com or usa-llc.com a group of purchasers can buy things in discount.
The problems of companies are to perform under tremendous pressures with lesser resources day-by-day. So innovative techniques must be adopted which are termed as “critical response activities”. Government rules and regulations, powerful customers and ever changing technologies are some of the problems. To get away from these factors the companies need to improve continuously and focus on the customers. The advertisements are useful to promote a companies business. Another important aspect is alliance with other companies, like General Motors and Ford jointly explored e-commerce applications. Keiretsu type collaboration is a Japanese model where manufactures, suppliers and finance corporations link signing long term partnership.
A computer and IS are different. To successfully conduct business in IS, one has to learn many things. Computer is only a part of the complex system. IT is a subsystem of IS, and millions of different IS are used throughout the whole world. There are many success stories, but sometimes IT fails too. By applying Moore’s Law one can say that the computer of 10 years later that will cost the same of today will be 50 times more powerful. Self healing technology, nanotechnology is advancing along with mobile communications. M-commerce is up and coming. Banking, finances are getting more and more concerned with it. Globalization is really affecting the companies to learn, adopt and change fast. But the service providers have to responsible about the customer’s privacy and if any thing wrong happens they will solely be accountable for that.
Every company that does e-commerce has their different needs as their business is different. The success of any company in this field remains on the factor that how well they adopt IT expertise, innovate new processes and if necessary, outsource some works to focus on the core-business of the company.
The basic function of IS is to collect, process, store, analyze and disseminate information for specific purposes. Generally there are dozens in each functional area of a company, like the applications in HR department are collectively called as Human Resources Information System. If the entire company is networked and people can interact seamlessly, this arrangement is called Enterprise wide Information System. An Interorganizational Information System helps to communicate between two different companies. The smallest unit is called data, and a collection of data is called database. The data that has meaning to somebody is information and collection of information is called knowledge. IS cab be classified in broadly two types like Enterprise Information System and Interorganizational Systems. Other types of IS are there classified according to the work and ranks of the employees. For example, Transaction Processing System is for all the employees while Business Intelligence is only for the decision makers of the organization. Mobile computing is there for the mobile employees and business partners.
As the result of the ever developing IT support systems, price setting is undergoing a radical change. Price optimizing program is a program that combines all the support systems to recommend prices for all the products. And this increased the volume of both sales and earnings from 2% to 10% in different cases. As all the companies are trying to make similar soft wares ultimately the prices will be cheaper which will be beneficial to the commuters.
Transaction Processing System is the system that provides all the data for the basic operations of a company. As they support the core operations they are extremely important to any company having e-business. Strategic activities are those that help a company to deal with any unexpected situation. It can be both of long and short ranges. Strategic response is the process of dealing with the situation.Also one company can be the initiator of change before any competitor company. These innovative strategies are regularly supported by IT.
Every one in an organization has different duties to perform. Knowledge workers create information and knowledge, clerical workers support managers. Others are line managers, middle managers and top managers. The supply chain consists of three parts:
- The Upstream Supply Chain(it basically is the activities of the manufacturing process, involves TPS and other corporate supply systems)
- The Internal Supply Chain(contains all the in house processes that are used to transform the goods into the products)
- The Downstream Supply Chain(the final stage of delivering the product to the customers, customer support systems, call centers are part of the process )
Distributive computing, co-operative processing are other processes. Internet, intranet, extranet etc are web-based systems along with mobile computing all are developed for the IT systems of a company. Now Utility Computing is becoming promoted and if it becomes successful, it will change the way software is sold. Experts say that software will become a service one day. But the progress is slow. Other concepts like grid computing and pervasive computing are coming out fast. Grid does the computing in a low cost.
Actually IT is based on web-services, which is a self-contained and self-describing business application, designed to make business easier and faster. They have successfully transformed the organizations thoroughly, but also made the competition in the professional market a lot stiffer. But finally it can be said that both from the side of companies and customers they have made life a lot easy.
Strategic Information System for Competitive Advantages
Every company in order to use Information Technology most effectively in the advantage of the company has to work out some strategies, which will give them competitive edge over other companies, help them to get more profit and all. And as each company have different needs and also different types of businesses all of them have different strategies. But in general case, we can discuss the factor by a common model. There are four factors that determine the intensity of rivalry for a company. They are substitutes, new entrants in the market, the suppliers and the buyers. The substitutes are the other companies and their prices and range of performance is a real factor. The new entries in the market are also a potent threat as they will try to get a foothold in the market by all the means. The suppliers and buyers are always in the most important scheme of a company. The strength of the forces is determined by the structure of the industry. It is to be noted that there is a few influences on a company after it becomes digital and web based. In a nutshell, the influences of internet on a company are:
- The threats of new entries in the market(every now and that a new company enters into the market, and all the existing companies have to be well aware of the companies strategies, techniques of catching the market, as the new company will try very hard to catch the market)
- The bargaining power of the suppliers(the suppliers will always want that their amount of profit would grow up, and the company has to manage this)
- The bargaining power of the customers (customer is king, but the bargaining power of them is a cause of worry of the companies. They have to make products in such a way so that the customer cannot bargain about that)
- Threat of substitute powers and services
- Rivalry among existing firms
To be very precise, Encyclopedia Britannica, which was a brand name for generations, s facing stiff competition for web based services. Porter proposed some solutions and strategies like:
- Cost Leadership strategies
- Differentiation strategies
- Niche Strategy
- Growth Strategy
- Alliance Strategy
- Innovation Strategy
Porter also proposed a value chain model which is divided into two parts, primary and support activities are the two activities of any manufacturing company. The primary activities are:
- Inbound logistics(inputs)
- Operations(both manufacturing and testing)
- Outbound logistics(storage and distribution)
- Marketing and sales
The primary activities are supported by support activities. As:
- The firm’s infrastructure
- HR management
- Technological Development
To gain and sustain competitive advantage the support of IT requires the whole understanding of the value system. The applications of Porter’s models are still valid in the digital age with some adjustments for the digital age. Though there are some managerial issues in the work like risks in implementing strategic information systems, planning and sustaining competitive advantages. But one has to really admit that SIS has really helped modern day businesses like anything.
Network Computing: Discovery, Communication and Collaboration
Network computing is a group of computers working together in a network. The concept is different than to stand alone computers like laptops and home computers as the general people works with. A company having a lot of employees doing a vast number of businesses can have network computing. Sometimes it happens that a project undertaken by a company is performed simultaneously by a number of people stationed in different countries. Then this network computing helps to synchronize the works of the employees better and it is also really cost effective. It helps the company in all the ways from cost reduction to employee satisfaction and ultimately to gain the customer satisfaction.
Some key features of this process are reduced cost; it is also device and location independent. Multi-tenecy is another feature by which a number of users can work simultaneously. Reliability, security, scalability are some the important parts. The most important aspect is that the users’ agility increases with the use of network computing.These are easy to maintain than most of the other computer programs. Here the resources usage is measurable. It can be metered on every client, in certain cases daily, weekly or even on a monthly basis, and this metering process helps to keep a watch on the company’s expenditure. This is very good for both the client and customer in the cases of cost and reliability. This is easier to support and the clients will be happy if the services are fast.
E-learning is a method of study online lately adopted by a number of universities. Now-a-days, a number of companies using this process to train their employees. It actually reduces training time and ultimately saves a lot of money for the company. And e-learning is totally based on network computing. Electronic performance support systems (EPSS) is a computer based support system that is used to train the employees inside a company and it also helps to increase productivity. Actually e-learning is the future of distance learning. In distance learning students are not there on the teaching site and they are provided the study materials. Along with network computing this can be much more interactive and due to this the study can be much more effective. There are a lot of benefits in this. Most of all as it is earlier said, it is cost effective, and it can expand the access for those who are providing it. The expansion of market is one of the very important aspects too. New technologies, like network computing etc are making distance learning much easier. Telecommuting is also very cost effective process. By this process the expenditure of sending employees to places are saved. On the contrary the employees sit in an office with computer and telephone and solve the queries of the customer over the telephone or using the internet. It helps to expand the talent pool of a company and also reduces the costs. It also helps to improve morale of the employee with offering a continuity of strategies taken by the companies. It also helps the Multinational Companies s to effectively handle their businesses spread across multiple time zones throughout the World.
This chapter really offers a detailed inside of a new avenue of business management by the means of network computing, which can easily be termed as the future of the business world.
E-Business and E-commerce
In the ever changing global economy, e-commerce and e-business have increasingly become one of the most necessary components of business strategies for all the big business houses. It can also be termed as a strong catalyst for economic development for any company and it provides a unique competitive advantage for the company using it. Strategic positioning of e-commerce provides a unique edge for the company. E-commerce refers to a wide range of online business possibilities and as the name suggests the business is always done through internet, where parties interact digitally. But e-commerce and e-business are two different concepts. As in e-commerce, information and communications technology (ICT) is used in inter business or in cases inter-organizational; transactions while ICT is the tool for enhancing e- business. The primary processes of e- business are production processes, customer-focused processes, and internal management processes.
E-commerce is based upon our day to day activities and can be very well executed by these factors. Some of the e-commerce execution tools are emails, enterprise content management, instant messaging, online shopping, online order tracking, online banking, and online office suites, teleconferencing etc. Domestic and international payment systems can also be performed by this process. There are different forms of e-commerce. One of the fundamentals is the process m-commerce or mobile commerce. Another important aspect is C2C or consumer-to-consumer. Similarly, B2G or business-to-government and B2C or business-to-consumer is all important process. However, the most important is B2B or business-to-business e-commerce process.
E-infrastructure and e-market are two primary segments of B2B e-commerce. Electronic paying system or EPS is one of the widely used applications of B2B e-commerce. Governments should be one of the lead-users of e-commerce. The existences of governments have created a very positive influence on e- commerce and it is called e-government. E-government can be like online transactions such as registration, taxation for companies, applications for a variety of employee- and business-related requirements, and the like of other government works. Digitalization will smooth the work of government. Government can use e-commerce in tax procurements, e-procurements, and customs clearance. Reduction in marketing costs and other miscellaneous costs, low-cost in the maintenance of infrastructure is found here.
As with all the business, it also has some ethical aspects. The business managers deal with a lot of personal knowledge of the consumers. And they must be utterly careful in using that. The safety of the customers’ finances and other important details is presented in form of useful data. Withstanding this risk, this can be safely said that this is the future of business.
Mobile, Wireless and Pervasive Computing Environments
In very short we can say that mobile computing is the process of taking a computer and all the necessary files and software out to do the works. There a number of mobile computers like wearable computer, smart phone etc in use presently.
There are a lot of benefits of mobile computing. Mobile computing offers significant benefits for organizations that choose to use it into their fixed organizational framework. This is also reasonably cost competent for consumers. This technology enables one to create, access, process, store and communicate information from anywhere. It increases any company’s fixed information system. The mobile computing is made of computer hardware, system soft wares, and some form of communicating medium, preferably the internet. MSDOS, Windows 98, Pendos, UNIX etc are some soft wares used. The applications of mobile computing are generally divided into two categories, like Horizontal (e-mailing, browsing, scheduling, word processing etc) and Vertical (retailing, utilities, shipping, etc).
Through mobile computing the outfitted efficiencies of sales human resources are considerably improved and it is a proven fact in diverse cases. In remote insurance and financial planning mobile computing is really effective and increases the sales percentage enormously. From transportation and shipping, to news reporting, hotel operations, this application is making wonders. It can also be functional to a miscellaneous and versatile assortment of troubles and assist to accomplish increase in operational good organization.
It can be easily said that it is versatile as it can be used in aspects like:
- process reengineering
- reducing operational and administrative staff so saving the company a lot of money
- improved communications immensely
- improve customer services as it is much more accessible
- it reduces manufacturing costs of the products
- business cycle becomes short due to mobile computing
Advertising is also affordable here. Mobile shopping is somewhat similar to the process of e-shopping and hence we can say that the benefits are somewhat similar too.
But there are some barriers in this case too. Sometimes the key business processes of a company are failed to accomplish while using the technology. Sometimes other expanses like traveling, location operations cost can become stiffer. And also a lot of companies lack the required infrastructure needed for mobile computing which becomes a real problem for the companies in future.
Analysis estimated that in near future almost 1 billion users will use mobile B2B services. Pervasive computing is referred as the computers stored in moveable objects like cars. The devices can also contact each others and is really wonderful for business. Location based services have specific requirements. They can be as follows:
- Browsing of information.
- Navigation: the user must be able to acquire directions and guidance for reaching a specific point of interest.
- Access to catalogue data.
- Location-based access.
- Personalized access.
- Fast access.
Though there are barriers of mobile computing like expanses and all but with the fast developments it will surely be overcome by the companies. This is one of the futures of businesses and one of the technically advanced one too. Mobile computing will do wonders later in business world.
Transaction Processing, Functional Applications, CRM and Integration
Transaction processing is the information processing system by which information is divided into individual operations. It is made to maintain databases and ultimately ensures that the processes that are going under this thing are either completed successfully or in certain cases cancelled completely. By this system multiple operations can be linked together to perform as one system. It makes sure that all the operations complete without a single error, but if one error occurs in any of them it cancels all of them. There is a lot of transaction processing software available. IBM’s Information Management System is one of the first transaction processing software which was developed in the 60s, and today a number of software are developed which can work in both inter-program levels and also in very large systems like Mainframe. There are some benefits of transaction processing like:
- Through it the computer resources can be shared among a number of users.
- The processing can be done when the systems are less busy, so that the company does not have to spend more.
- The resources do not get stagnant as it continuously stays in the information flow.
- Becomes an atomic unit of processing.
- It is also cost efficient
The systems help in production management and the other operations done by a company smoothly. By the digital interface the different parts of the process works simultaneously and ultimately complete the works correctly most of the times. The production logistics is also helped by it. The work of program logistics is very simple. It has to make it sure that in a certain time a machine has to be fed with the right information to make out the right information. Another essential part is keeping track and tracing the products until delivery to ensure the products safety. Here it also helps in the issues of product reliability. Functional management is one of the most common types of organizational managements and it looks after all the aspects of the different functional areas like finance, marketing, transportation, shipping etc.
Customer relationship management is the process to organize and synchronize business processes like sales, marketing, customer services etc by using technology. It is a broadly recognized and also very popular strategy. The main goals of it are to find new clients and retain the old ones, which are to expand the business. There are some benefits of customer relationship management like:
- Ensures higher sales
- improved service
- Reducing expanses of the company
- high profit
- marginal costing
But the process can be challenging to be implementing in large companies. The companies sometimes can not able to bear the required funding to implement the process and it lacks effectiveness. Another important part is the human resource management of a company as the employees and other persons directly linked with the company are its most valued assets. The HR management has to manage the organization, the personal working in it, the manpower behind the productions and the industrial management. From the recruitment, to workforce planning, to the trainings of the staffs to skill management, time management, the payment of the employees, the relation between the labors and the company every thing is being managed by them. This is also done with the help of IT, as HR department has to contact with all the departments of a company simultaneously. All these processes are really indispensable parts of the structure of the company, and successful execution of all these factors can only make the company ultimately successful (Turban, Leidner, McLean, and Wetherbe 302).
Supply Chain Management and Enterprise Resource Planning
The organization of the stream of resources, information, and finances across the complete supply chain, from dealer to manufacturer to assemblers to allocation (both in stockroom and vendor), and eventually to the clients is known as supply chain management. The chain of activities for a firm in a specific sector is known as value chain and it was first proposed by Porter.
The six value chain function and twelve components of supply chain makes up the prime factors of the system and the successful orchastraization of all these factors can really help the business grow. There are a lot of problems faced by supply chain managements. There is the problem of “Distribution Network Configuration”, where if the number of production centers, warehouses etc are increased the producers find it hard to keep balance between all of them. But now, with the help of IT enabled infrastructure this problem can be handled well. To ably handle the big business the companies has to take complex distribution strategies. Other problems include trade offs in logistical activities, the problems of cash flow and information and inventory management. MRP (Materials Resource Planning) and MRP II (Manufacturing resource planning) are also two important aspects. MRP system is made to meet three objectives. The first one ensures that raw materials and finished products are made available to producers and customers. The second one of this process is responsible for maintaining of lowest possible level of inventory and last and the third component of this process plan everything that starts from manufacturing processes and ultimately ends delivery.
Another important part is MRP II which has been implemented in most of the manufacturing processes and MRP and MRP II are both incremental information integration business process strategies. MRP II can provide better control over the inventories, scheduling to be improved, and productive relations with the suppliers. Enterprise resource planning, or popularly known as ERP is an integrated computer based system that can be used to manage both internal and external resources of a company. It controls the information flow in an organization and also merges them for the sake of outsiders who have share in the organization too. The transactional aspects of ERP are financial data, distributions, HR and the managing of the products lifecycle, and customer relationship management, supply chain management and warehouse managements are advanced functions of ERP managements. Partner Relationship Management is the business strategy of developing association between partner companies. The software enables and customizes and streamlines the tasks to both the parties available.
The global supply chains available are really working wonder for the companies, though it comes with new difficulties as it concerns many parties in different countries. But careful and meticulous planning of supply chain management can save money for the companies, and increase productivity for them.
Supply chain management is a booming sector, both in research and practice.
Environments, deal with multiple suppliers and customers, are required to manage inventories in new and innovative ways always. They sometimes need to restructure their business. SCM will continue to grow by advanced research and inputs from companies using it. And it will with the help of IT and digital economy can really able to transform business.
IT Planning and Business Process Redesigning
IT planning is the planning process for information technology investments and decision-making. IT aims to make it quicker and more flexible. In the domain of Strategic Planning it is getting a lot of importance now-a-days. There a number of arguments in the market against the IT planning as some say that it is slow and by the time a company implements the IT Planning in their schedule they may have ended up losing some offers etc. But if correct strategies are taken IT Planning can surely be a very important tool in the case of developing a company. We can discuss about some of the strategies that can be taken for IT Planning:
- the company using IT Planning must make an inventory to keep applications data there for use
- Use of graphical tools like Capability maps
- Along with capability maps gap analysis tools are also needed.
- The tools have to be capable of modeling and analysis
- Reporting tools
These factors if carefully and strategically used in an organization can surely help that organization with IT planning. Analytical processes have to be added to successfully implementing the IT Planning.
Although IT planning is a technologically advanced sphere of digital business it also has its fair share of criticism. The first criticism is that IT planning is really time consuming. It is said that it takes too much of time and sometimes the company implementing it does not get its benefits. It also fails to provide a clear picture which can help the company to make strategies for future. Sometimes IT planning’s made of misleading information. And another one complains is that IT is often rigid. Also it does not have the option of making comparisons with different alternatives and some possible scenarios.
Business process can happen between organizations too. It can be said that information technology is the key factor in business process designing. There are some aspects that the writers enforce about a successful business process redesign and they are:
- Organizing the outcomes
- Use the outputs from the process
- Mix the information processing into producing the information that is relevant for the company.
- Making geographically diverse resources as though they are centralized
- Linking of parallel activities
- Control the process
- Capture information always.
IT always holds the key in business process redesigning. Here IS also play a crucial part. By incorporating skills of process management, analysis and redesigning, the IT and IS seamlessly intermix with business process redesign. Some experts say that it is a breakthrough innovation focused on customer needs. It was earlier viewed as a vehicle to significantly increase the financial aspects along with all the related spheres of a company. Currently it is fading but a lot of experts strongly believe that business process redesign will evolve once again in the organizations for delivering the goods.
In the 21st century, due to the various new avenues of gathering knowledge are evolved, so there started a new branch of management called Knowledge management. It is the procedure of management related to multifaceted information and comprehension smartly and conscientiously. Knowledge representation, knowledge communication, development of knowledge and use of knowledge are some of the aspects of knowledge management. In an organization there are four critical factors for implementing successful knowledge management programs. The factors are:
- Corporate culture
- Qualification of employees- The employees in an organization, their qualifications and efforts strongly effect knowledge management.
- Learning culture
- Management support-Whole-hearted support from management makes the effort successful.
The major benefits of knowledge management are:
- Greater transparency of knowledge potential and the gaps
- Value creation process based on the knowledge base
- Increase staff motivation
- Also the increase of competition
- Long term security and survival for both the company and the employees or anyone associated with it.
There are five key steps for knowledge management initiatives, and the steps are:
- The understanding of the key business drivers of the Organization
- The executive sponsorship of the company is needed
- Analysis of knowledge is one of the most important parts
- Rewards and reorganizations
- Implementation of the processes in phases.
Setting up a corporate knowledge capital is one of the aspects of knowledge management and it is a complex task. It has to be handled from both strategic level and the tactical level. At first a framework of the actions has to be made which can be termed as KM repository. Other activities like “analysis of knowledge corpse”, sharing knowledge etc are also performed.
All the knowledge is managed digitally so it can be accessible to all the employees of the organization, wherever they may be. And this is only possible with Information Technology. IT helps to keep track of the recent developments; it provides the competitive edge in a company. It is, if rightly implemented is cost effective too. There are basically three types of people there in a knowledge management system. They can be roughly termed as users, knowledge professionals and technological experts. The users are a broad term they both create and use the knowledge. They include professionals, technical persons, managers etc. The knowledge they have is specialized. It is focused on the organization’s sector. It is through their labors, actually and fundamentally, the business performs its dealing and accomplishes its objectives. With the help of this particular knowledge base any organization conducts its whole businesses. Knowledge professionals are the persons who have the necessary skills to organize knowledge into systems. Basically they represent the knowledge in a methodical way. Actually in a very corporate way to speak, these knowledge professionals are those who design and develop knowledge based products and help the company to use them when needed with reference to the context and continuity. The technology experts are those who fashion the way how the knowledge will be displayed and design the knowledge infrastructure of a company. They build applications and databases for the knowledge management process of the company.
Though there are variables, but most of the companies using KM have been successful in the efforts. From cost reduction to employees development Knowledge Management can handle all. This is also a real important aspect for the modern day companies and the authors have really discussed the factor very well ((Turban, Leidner, McLean, and Wetherbe 451)
Turban, Efraim., Dorothy Leidner, Ephraim McLean, and James Wetherbe. Information Technology For Management: Transforming Organizations In The Digital Economy. 4Th Ed. Delhi: Wiley-India, 2007.