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

Declining margins

Rapid

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Increased

Knowledge

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Changing Decision Making Scenario

• Large amount of Capital expenditure

• Foundation of doing business

• Impacts Productivity

• Offers Strategic opportunity and advantage

There are four reasons why IT makes a difference to the success of a business:

Why Information Systems Matter

• 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? Capital Management

• 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? Foundation of doing business

• 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 Productivity

• 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

WHY INFORMATION SYSTEMS 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

Strategic Opportunity and Advantage:

• 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

How Much Does IT Matter?

• 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

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:

• 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

Internet growth and technology convergence

• Flattening

• Decentralization

• Flexibility

Transformation of the Business Enterprise:

• 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

Rise of the Information Economy:

• Digitally enabled relationships with customers, suppliers, and employees

• Core business processes accomplished using digital networks

• Digital management of key corporate assets

Emergence of the Digital Firm:

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.

Hierarchy of Information

Charts

Intelligence

Knowledge

Information

Data Data & Information

3rd Generation (2003)

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2nd Generation (1996-2002)

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1st Generation (1990s)

3rd Generation (2003)

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2nd Generation (1996-2002)

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1st Generation (1990s)

Information as a Corporate Resource

• Value Added Resource• Has a Specific Cost• Value Depends on purpose of use and degree of

Utilisation• High Rate of Obsolescence• Requires Pruning to avoid congestion

Quality of InformationAccuracy, Promptness, Precision

Completeness, Un-ambiguity

Process of Generation of Information

Data Acquisition

Data capture

Data organisation and storage

Data Pruning

Data Transformation

Rearranging (Sorting)

Classifying

Calculating and statistical analysis

Summarising

Info Management

Communicating

Reporting

Data Visualisation

Information Needs of Business

• Operational Information– Useful in exercising control– Pertains to activities that are measurable– Sources of data are internal– Predictive element is low and has short term horizon

• Tactical Information– Useful in allocation of resources– Pertains to activities meant for implementation of top

level plans– Sources of data are partly internal and partly external– Predictive element is focused on short term trends

Strategic Information

• Useful in making strategic choices• Pertains to defining goals, priorities, policies for

acquisition of corporate resources• Sources of data is mainly external• Predictive element is very high• Focused on long term horizon and trends

USING INFO SYSTEMS AS A STRATEGIC TOOL

Levels of Management and Type of Information

Lower

Middle

TopStrategic

Tactical

Operational

Defining Business Information System

• Information: Understanding that one derives from facts about a subject, with a view to reduce uncertainty regarding elements of an environment

• System: Set of inter-related elements, designed to achieve pre-determined objectives

An Information system is a set of interrelated elements that acquire, process, store and disseminate information to support decision making, automating coordinating, control, analysis of business processes