Why are Information Systems so important to the success of organisations?

5 Nov

Information systems are essential to every organization that wants to be successful.  The most obvious answer of why they are so important is reduced costs. These cost savings arise from the cost of labor being reduced due to IT doing their tasks for them, and the speed in which they are done is improved.  However, as Erik Brynjolfsson points out in his article, “Beyond the productivity Paradox”, Customer service and quality consistently rank above cost savings in reasons why IT managers invest in IT.

Almost any firm that has earned super normal profits in recent years has used IT to their advantage in different ways. Take Wall-Mart as an example. They are a supermarket that has seen huge growth in recent years. They have not done this by inventing some products to sell in their supermarkets.  They have used IS in various areas of their firm to gain sustained competitive advantage. They improved efficiency in their supply chain by ensuring all their suppliers used radio frequency identification (RFID) on all pallets. This drastically reduces the labour costs of scanning the pallets also. Wall-Mart has also a huge CRM emphasis within the company, and this has allowed for large data analytics which in turn allow for personalized and targeted marketing as well as customer care.

Toyota is another name which most consumers will be familiar with, and as thestrategicblogger pointed out in his blog, IT has played a huge part in their success, using technologies such as their Assembly Line Control System and their” Light curtain”, a beam of light that sends a signal to a computer that  can then detect any defects or problems during the manufacturing of vehicles.

Firms must use IS also just to keep up with competition. Nicholas Carr in his article “IT doesn’t matter” argues that this should be the primary reason for investment in IT, as being the first mover is an expensive and risky procedure. If Wall-Mart uses a technology you can be sure their rivals will start to use that technology or fall behind. When one airline began to use online ticket purchase, all firms quickly followed suit or faced being forced out of business.


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