Strategic Use of Information Technology

1. Definitions:
1.1 Information Technology:
Information technology is the use of computers to store and process facts and figures into a
useful, organized, form. (ICDL)
1.2 Strategy:
The determination of the basic long-term goals and objectives of an enterprise, and the adoption
of courses of action and the allocation of resources necessary for carrying out these goals
(Alfred Chandler)
The pattern of objectives, purposes or goals, and the major policies and plans for achieving
these goals, stated in such a way as to define what business the company is in or should be in
and the kind of company it is or should be. (Kenneth Andrews)
2. Scope:
This report deals with role that information technology can play in a business at strategic level.
Information technology enables businesses to develop information systems at different levels
of business activities. The impact of IT on business performance and what sustainable
competitive advantages business IT can offer to businesses.
The paper covers advantage that IT can offer can be in terms of process improvements (e.g.
CNC machines, CIM etc.), enterprise wide integration (e.g. ERP systems- SAP, Oracle etc.),
better service offerings to customer (e.g. E-commerce), better market research (e.g. SPSS) and
ease of transaction (e.g. online banking).
3. Normative References:
IT facilitates continuous innovations, enterprise wide knowledge integration, process
orientation, increasing productivity, eliminating or reducing different wastes, co-creation with
customers, to achieve business differentiation in terms of cost leadership, product
differentiation, focused marketing, etc. (The evolving role of IT in Business: From Data entry
to strategic planning- Ravi Kumar Jain and Rajesh Prabhakar)
The value of a digital approach is especially clear in businesses such as banks and insurance
companies where information is central to the business. (Business at the speed of thought: Bill
Gates)
Businesses need to do another kind of work, "information work". Information work is the
processing of information by human brains or computer programs. Information work—
designing a building, making a deal, filling in tax forms—is most of the work done in developed
countries. (Business at the speed of thought: Bill Gates)
4. Functions:
The first step in answering any hard business question is to look at the facts. A company could
not develop a broad business plan or choose the right projects without building on facts and on
the understanding of the people in the company. Information technology is effective in
developing information systems which give strategic advantage to business organisations.
4.1 Operations support systems:
Transaction processing systems: Process data resulting from business transactions, update
operational databases, and produce business documents. Examples: sales and inventory
processing and accounting systems.
Process control systems: Monitor and control industrial processes. Examples: Petroleum
refining, power generation, and steel production systems, CAD/CAM processes.
Enterprise collaboration systems: Support team, workgroup, and enterprise communications
and collaborations. Examples: e-mail, chat, and videoconferencing groupware systems
4.2 Management Support System:
Management information systems: Provide information in the form of pre-specified reports and
displays to support business decision making. Examples: Sales analysis, production
performance, and cost trend reporting systems.
Decision support systems: Provide interactive ad hoc support for the decision-making
processes of managers and other business professionals. Examples: Product pricing,
profitability forecasting, and risk analysis systems.
Executive information systems: Provide critical information from MIS, DSS, and other
sources tailored to the information needs of executives. Examples: Systems for easy access
to analyses of business performance, actions of competitors, and economic developments
to support strategic planning.
4.3 Combination of Operational Support Systems and Management Support Systems:
Expert systems: Knowledge-based systems that provide expert advice and act as expert
consultants to users. Examples: credit application advisor, process monitor, and diagnostic
maintenance systems.
Knowledge management systems: Knowledge-based systems that support the creation,
organization, and dissemination of business knowledge within the enterprise.
Examples: Intranet access to best business practices, sales proposal strategies, and
customer problem resolution systems.
Strategic information systems: Support operations or management processes that provide a
firm with strategic products, services, and capabilities for competitive advantage. Examples:
online stock trading, shipment tracking, and e-commerce Web systems.
Functional business systems: Support a variety of operational and managerial applications of
the basic business functions of a company. Examples: Information system in accounting:
Tally,
5. Information Technology Infrastructure for business:
IT infrastructure consists of a set of physical devices and software applications that are required
to operate the entire enterprise.
Computing platforms used to provide computing services that connect employees, customers,
and suppliers into a coherent digital environment, including large mainframes, midrange
computers, desktop and laptop computers, and mobile handheld devices.
Telecommunications services that provide data, voice, and video connectivity to employees,
customers, and suppliers.
Data management services that store and manage corporate data and provide capabilities for
analysing the data.
Application software services that provide enterprise-wide capabilities such as enterprise
resource planning, customer relationship management, supply chain management, and
knowledge management systems that are shared by all business units.
Physical facilities management services that develop and manage the physical installations
required for computing, telecommunications, and data management services.
IT management services that plan and develop the infrastructure, coordinate with the business
units for IT services, manage accounting for the IT expenditure, and provide project
management services.
IT standards services that provide the firm and its business units with policies that determine
which information technology will be used, when, and how.
IT education services that provide training in system use to employees and offer managers
training in how to plan for and manage IT investments.
IT research and development services that provide the firm with research on potential future
IT projects and investments that could help the firm differentiate itself in the marketplace.

6. Applications:
The Information (Technology) should be able to answer following questions
What do customers think about your products? What problems do they want you to fix? What
new features do they want you to add? What problems do your partners have as they sell your
products or work with you? Where are your competitors winning business from you, and why?
Will customers' changing demands force you to develop new capacities? What new markets
are appearing that you should enter? (Bill Gates: Business at the speed of thought)
6.1 General Motors- CAD/CAM/CAE Journey:
GM started using CAD/CAM/CAE software to reduce Vehicle Development Period from
42 months to 24 months. GM entered into an agreement with Unigraphics Solution. The new
software enabled GM's worldwide product team to simultaneously access a lot of digital vehicle
information. The new system also helped eliminate redundancy, adopt best practices, decrease
training costs and offer more reliable technology. The cost saving was estimated at 30 percent
during development and 10 percent during validation. (World Class Manufacturing: Cases –
ICFAI University)

6.2 Use of IT at YASHNA, China:

YASHNA is the largest retail chain in in China. They faced challenge of surviving with
competition from local and foreign competitors. YASHNA developed a new type of SCM
platform using Service-oriented Architecture. This platform enables YASHNA and its supplier
to monitor real time performance information to provide transparency into supply chain
business processes setting new standard of efficiency. This system helped YASHNA to reduce
order lead time from 2.5 days to 4.5 hours and reduce order error from 9% to 1%. This gave
YASHNA a competitive advantage over its competitors.

6.3 Implementation of Core Banking at State Bank of India

The State Bank of India faced several extraordinary challenges in implementing a centralized
core processing system. These challenges included finding a new core system that could
process approximately 75 million accounts daily. SBI along with Tata Consultancy Services
implemented FNS Bancs core banking at SBI to integrate 17,385 branches and over 20,000
ATMs. Lower cost, more flexibility, consistent processes, and centralized control were are
benefits of the new system. Corporate accounts group (CAG) was able to implement a
nationwide corporate salary packet and connect directly to corporate customers such as
Hindustani Petroleum Corporation. The SME group was able to create Power Jyoti. Retail
consumers could easily transfer funds to home villages. Microfinance was available via
customer service point (CSP) agents. The migration to a new core system has enabled a more
competitive State Bank of India

6.4 Domino's Pulse and Pizza Tracker System:

Domino’s, which owns the largest home-delivery market share of any U.S. pizza chain, is
finding ways to innovate by overhauling its in-store transaction processing systems and by
providing other useful services to customers, such as its Pizza Tracker. Domino’s proprietary
point-of-sale system, Pulse, is an important asset in maintaining consistent and efficient
management functions in each of its restaurants. A point-of-sale system captures purchase
and payment data at a physical location where goods or services are bought and sold using
computers, automated cash registers, scanners, or other digital devices. Pulse has become a
staple of all Domino’s franchises. Some of the functions Pulse performs at Domino’s
franchises are taking and customizing orders using a touch-screen interface, maintaining sales
figures, and compiling customer information. Along with Pulse Evolution, Domino’s rolled
out its state-of-the-art online ordering system, which includes Pizza Tracker. The system
allows customers to watch a simulated photographic version of their pizza as they customize
its size, sauces, and toppings. The image changes with each change a customer makes. Then,
once customers place an order, they are able to view its progress online with Pizza
Tracker. This system has given Domino's an edge over its competitors. Pizza Hut and Papa
John’s also have online ordering capability, but lack the Pizza Tracker and the simulated
pizza features that Domino’s has successfully implemented.

7. Economic Importance of Information technology:

Information technology gives you the data that leads to deeper understanding of your business.
It enables you to act quickly. It provides solutions to business problems that simply weren't
available before. Information technology and business are becoming so tightly linked that you
can't talk about one without talking about the other.
To become a world-class company today, you have to obtain much more data and do it much
faster. To manage with the force of facts requires information technology. Information
management and quick responses make a basic difference in industry and they will make much
more difference when they are powered by information technology. (Business at the Speed of
thought: Bill Gates)
Role of IT in business:
1. Information Technology is used to lower business cost by substantially reducing the cost of
business processes and lowering the costs of customers or suppliers by integrating with
suppliers and customers. Automation of processes results in reduced labour requirement for
manufacturing organisations, enterprise wide systems such as SAP, Oracle systems automate
back-office operations thereby reducing the need of extra resources and adding capacity to
organisations.
2. Information Technology is also used to differentiate product and services by adding IT
features which adds value to products. It creates new products and services that include IT
components and develop unique new markets or market niches with the help of IT.
3. Information Technology promotes growth by managing regional and global business
expansion and to diversify and integrate into other products and services.
4. IT is used by business organisations to create virtual organizations of business partners. They
develop interenterprise information systems linked by the Internet and extranets that support
strategic business relationships with customers, suppliers, subcontractors, and others.

References:
1. Business at the speed of thought: Bill Gates
2. Management Information System: Laudon and Laudon
3. Management Information System: O'Brien and Marakas
4. World Class Manufacturing-Cases: ICFAI University
5. The evolving role of IT in Business: From Data entry to strategic planning- Ravi Kumar Jain
and Rajesh Prabhakar