Strategic Impact of Information Technology
Pages | 3-4 |
DOI | https://doi.org/10.1108/02635579110139288 |
Published date | 01 June 1991 |
Date | 01 June 1991 |
Author | Franz F. Selig,Jack T. Nipper |
Strategic
Impact of
Information
Technology
Franz F. Selig and Jack T. Nipper
Industrial Management & Data Systems, Vol. 91 No. 6. 1991, pp. 3-4,
© MCB University Press Limited. 0263-5577
STRATEGIC IMPACT
OF
INFORMATION TECHNOLOGY
3
T
o provide the organisational capacity to
adopt IT
successfully,
a partnership between
technology and business managers must
be established.
Introduction
From a business perspective, Information Technology (IT)
by itself has little or no value; rather its value lies in the
application of the technology to cause changes in business
performance. Such changes may come from the introduction
of new products and/or the penetration of new markets.
Change may also come from a different management style
or a new organisation structure, facilitated by the extended
functionality of IT. More importantly, new or modified
business objectives can be established, and made attainable,
through prudent introduction of
IT,
which can deliver relevant
information and services to all levels of the enterprise and
promote vertical and horizontal linkages and networking
throughout an organisational structure.
Challenges
From the beginning, IT was recognised by management as
having the potential to increase the efficiency of business
operations. Management often overestimated — or was
presented with overestimates of
—
what could be done. At
the same time, management often underestimated
—
or was
presented with underestimates of
—
time
and costs required.
This gave IT a bad name. It was rarely perceived
that management itself possibly contributed to the problem.
Many examples can be given of how a technology-based
approach to application planning and decision making resulted
in less than satisfactory contributions to the business. For
instance, a poor understanding of the business by the IT
specialists and/or a lack of appreciation of the underlying
data structures by business managers could be reasons for
disappointments. These reasons would not be technical in
nature but would represent more of
a
management problem.
A recent survey by the Northwestern University[l] revealed
that 80 per cent of American companies (based on 125
companies from the Fortune 500 list) still use IT as an
efficiency measure at best and only 10 per cent reported
that IT has become a strategic issue for their company. (For
the missing 10 per cent it seems that IT is only an
unavoidable cost factor.) This poor result can be traced back
to IT's reputation as a costly business function with a poor
rate of return on investment. This false impression is mainly
due to the lack of
reliable
IT benefit reporting, coupled with
the fact that innovations in IT are often very expensive and
difficult to justify, using short-term financial performance
measures. Strategic innovations may not be justifiable by
the traditional cost/benefit analysis and require the
understanding of the business options and the capabilities
of IT, two conditions not easily met concurrently. Senior
managers, who understand the business options very well,
are often not IT-literate, and IT professionals, who under-
stand the capabilities of
IT,
are often not business-oriented.
The challenge is real. IT is no longer optional for most com-
panies for survival. IT is certainly important for global com-
petition, it impacts on productivity and thus the share of the
world market. IT research and development efforts will
continue to change the business environment and will allow
us to work "smarter". Successful companies will use all
their resources effectively (not just efficiently) to reach the
business objectives, adopting a holistic approach towards man-
aging
financial,
human, physical, and information resources.
The necessary linkage between investments in a viable IT
infrastructure and business performance can be achieved
only through a partnership between technology and business
managers. Without this involvement or, even better, the
commitment of business management, technology
management will drive out business perspective and
awareness. What is needed is a set of concepts and ideas
that develop IT's true economic impact on the business,
both values and costs[2]. IT is a fundamental force that is
reshaping the business world and is causing the transition
from an industrial to an information service economy. For
example, the global telecommunication network can carry
more "value" than all the world's supertankers. Today's
ascendant corporations are masters not of land and material
resources but of ideas and technologies[3].
Approach
To identify the information requirement of an enterprise,
models of the business are helpful. These models document
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