Why are organisations investing in IS?

3 Feb

If we look at the increasingly diversed ways business is being conducted around the globe today, information system and technologies have became a vital component for successful businesses and organisations. Though it is obvious that firms need to invest in order to complete, the big question is how important is it to understand the role of IT into an organisation.

When we talk about information system we think of databases, relationship, management, business models, process, computers/technologie, interface and more importantly people. All organisations have information supply chain, which they used it to manage, intergrate and analyze data. Organisations should be interested in leveraging their data, so that they can provide top quality.

Many organisations today see information system as a foundation for conducting business and also survival. Existence can even be difficult without extensive use of information technology. IS has became essential for helping organisations to operate in a global economy. To become more competitive and efficient, most organisation tries to transform themselves into digital items as almost all core business processes and relationships with customers, suppliers, employees are digitally enabled[1].

The ability to achieve strategic business goals can be difficult without extensive use of information technology. Organisations invest in information systems for various reasons:

  • Operational excellence: in order to achieve higher profitability, firms need to improve the efficiency of their operation. IS provides managers with the means to achieve high level of efficiency and profitability in business operations. A typical example can be seen from Wal-mart that uses a Retail Link System, which digitally links its suppliers to every one of Wal-mart’s stores. Once an item is sold, the supplier monitors the item, and knows a replacement shipment to the shelf is needed.
  • Customer/ Supplier intimacy: through surveys organisations have noticed that when customers are well serves, they generally respond by returning and purchasing more. The more a business engages its suppliers, the better the suppliers can provide vital inputs, thus lowering costs. We can see this in the case of the Mandarin Oriental in Manhattan and other high-end hotels how they exemplify the use of information system and technology to achieve customer intimacy. They use computers to keep track of guest preferences such as their preferred room temperature, check-in time, television programs etc.
  • Improve decision making: Personally, decision making is a very important factor that should always be examine seriously. Depending on the competitive nature of any industry, a wrong decision can easily lead to the down fall of an organisation. The lack of the right information at the right time to make an informed decision has resulted in costs raising and lose of customers. We can see this in the case of many managers who operates in an information bank, never having the right information at the right time. IS has made it possible for the managers to use real time data from the marketplace when making decision.
  • Competitive advantage: Naturally, every organisation aspire to have a competitive advantage. When an organisation achieve one or more of the above business objectives ( ie operational excellence, new products/services, business models, customer/supplier intimacy and improved decision making) the chances are they have already achieved a competitive advantage. Doing things better than your competitors, charging less for superior products and responding to customers and suppliers in real time increases sales and profit. IS has made this possible. If we look at the Toyota Production System, which focuses on organizing work to eliminate waste, making continuous improvement. Infact, the System is based on what customers have actually ordered. [2]

Considering the above reasons for investing in IS from an organisational point of view, a major issue is does managerial end users knows clearly how an information systems can be successfully employed in a business environment?

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