Information Technology for Management
-An Introduction
Decision Making and Managerial Effectiveness
Decision Making is the prime
responsibility
Effectiveness Depends upon awareness
of Internal and External Environment
Pervasiveness of Information
Changing Decision Making Scenario
Changing Decision Making Scenario
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Why Information Systems Matter
There are four reasons why IT makes a difference to the success
of a business:
• Large amount of capital expenditure
• Foundation of doing business
• Impacts Productivity
• Offers Strategic opportunity and advantage
WHY INFORMATION SYSTEMS?
Capital Management
• Besides Manufacturing Plant and Machinery, IT is the
largest single component of capital investment in most of
the companies
• About $1.8 trillion is spent each year by American
businesses. India is also catching up with the global trend
• Managers and business students need to know how to
invest this capital wisely
• The success of the business in the future may well depend
on how IT investment decisions are made
WHY INFORMATION SYSTEMS?
Foundation of doing business
• Most businesses today could not operate without
extensive use of information systems and technologies
• IT can increase market share (Think, how?)
• IT can help a business become a high-quality,
low-cost producer
• IT is vital to the development of new products
WHY INFORMATION SYSTEMS
Productivity
• IT is one of the most important tools managers have to
increase productivity and efficiency of businesses
• According to the Federal Reserve Bank, IT has reduced
the rate of inflation by 0.5 to 1% in the last decade. For
firms this means IT is a major factor in reducing costs
• It is estimated that IT has increased productivity in the
economy by about 1% in the last decade. For firms this
means IT is a major source of labor and capital efficiency
WHY INFORMATION SYSTEMS
Strategic Opportunity and Advantage
• Create competitive advantage: IT makes it possible to
develop competitive advantages
• New Business Models: Dell Computer has built its
competitive advantage on an IT-enabled customer –
segment-focused business model that other firms have
not been able to imitate
• Tata Motors has been able to reduce the cost of input
by creating more competitive environment in
procurement online
• Mazda has been able to build its competitive advantage
by customisation of vehicles
Strategic Opportunity and Advantage:
• 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 U.S. on the
strength of its huge online inventory and recommender
system. Competitors have not been able to imitate its
success
How Much Does IT Matter?
• Commoditization of technology is typically a spur to
innovation and new business models, products and
services
• Competitive advantage derives not from the
technology, but on how businesses use the technology
• Innovations in business processes, management and
organization are not easily copied from one firm to
another
Why IT Now? Digital Convergence and
the Changing Business Environment
Growing impact of IT in business firms can be assessed from
the following five factors:
• Internet growth and technology convergence
• Transformation of the business enterprise (Flat
organizations)
• Growth of a globally connected economy
(integration of markets)
• Growth of knowledge and information-based
economies(IT enabled services)
• Emergence of the digital firm
Internet growth and
technology convergence
• Growth of the Internet: 120 million on line in the U.S.,
1500 million global users
• The Internet is bringing about a convergence of
telecommunications and computing: VOIP telephones.
Growth in e-business, e-commerce, and e-government
• Internet is bringing about rapid changes in markets and
market structure: financial services and banking
• The Internet is making many traditional business
models obsolete: the corner music store and video
store
Transformation of the Business Enterprise:
• Flattening
• Decentralization
• Flexibility
Rise of the Information Economy:
• Knowledge and information-based economies
• New products and services
• Knowledge as a central productive and strategic asset
Rise of the Information Economy:
• Time-based competition
• Shorter product life
• Turbulent environment
• Limited employee knowledge base
Emergence of the Digital Firm:
• Digitally enabled relationships with customers, suppliers,
and employees
• Core business processes accomplished using digital
networks
• Digital management of key corporate assets
Data, Information & Knowledge
One of the primary goals of Information Systems is to
economically process data into information or knowledge.
• Data items refer to an elementary description of things,
events, activities, and transactions that are recorded,
classified, and stored, but not organized to convey any
specific meaning.
• Information is data that have been organized so that they
have meaning and value to the recipient.
• Knowledge consists of data or information that have been
organized and processed to convey understanding,
experience, accumulated learning, and expertise.
