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Changes in the Business Environment

brought by Technology

T. Shakthi FernandoMay 2014Sabaragamuwa University of Sri LankaDepartment of Accountancy and FinanceBSc. Financial Management (Special)-Undergraduate

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Abstract

This study is basically about the changes occurred in business environment as a result

of technology. Changes occurred in business organizations are described under three

categories as change in technology, change in management and change in

organizations.

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Content

Introduction 04

Change in Technology 05

Change in Management 08

Change in Organizations 11

References 14

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Introduction

There is no any controversy that the business environment has been rapidly modified

with new discoveries and updates in Information Technology. Information technology

plays a vital role in current business environment. Even the spending habit of

companies has been critically amended with the progress of Information Technology.

In 1965, less than 5% of the capital expenditures of American companies were

invested to Information Technology, according to a study by the U.S. Department of

Commerce’s Bureau of Economic Analysis. It rose to 15% after the introduction of

Personal Computers in the early 1980s. It reached more than 30% by the early 1990s

and it represented nearly 50% by the end of the decade. It is identified that businesses

around the globe presently spend over 2 trillion$ a year on Information Technology.

A momentous relationship between business environment and Information

Technology commenced with the invention of microprocessor. Ted Hoff, who was a

young Intel engineer, initiated a way to put the circuits essential for computer

processing onto a tiny piece of silicon in 1968. It was the foundation of important

technological inventions such as local and wide area networks, enterprise software,

the Internet and desktop computers, which have altered the business world upside

down. Today no one will clash that Information Technology has become the spine of

commerce. Information Technology aids to the whole process of businesses starting

from the inauguration of operations till transferring the final product to the customers’

hand.

This scrutiny is based on adjustments and modifications in business environment

brought by Information Technology. It is chiefly identified how the new discoveries

and updates in Information Technology has influenced to the business environment

under three core classifications. Those are change in technology, change in

management and change in organizations.

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Change in Technology

Cloud computing platform emerges as a major business area of innovation

In 21st century, it has been categorically effortless to manage Information Systems in

companies. Basically, Information System can be identified as a set of correlated

components that collect, retrieve, process, store and distribute information to assist

decision making, coordination and control in an organization. Evidently, it can be

recognized that the development in technology within last few years has critically

supported to the function of managing Information Systems.

Cloud computing can be made out as one of key innovations in technology which has

been advanced. In here, a flexible collection of computers in the Internet has

inaugurated to perform tasks traditionally performed by corporate computers. Cloud

solutions have been rapidly adopted by the market with companies outsourcing and

creating their models directly into the cloud architecture. Here the point is issue of

physical computers which was compulsory to maintain the business has been solved

by cloud.

As an example, suppose number of clients of a business is escalating day by day as a

result of a new product release. Then if it is not properly executed, the failures which

can be occurred due to not providing the structure to support such sudden change can

evidently destroy the growth of the business. Basically the massive growth is not a

problem for the cloud architecture. Company can just commence with few servers and

grow as needed.

Small and midsized businesses can achieve potential benefits from cloud computing,

since they can tap Information Technology infrastructures, platforms and software

that could be deployed only by big companies earlier. Companies can utilize world’s

largest supercomputers without purchasing and maintaining it with the succor of

cloud computing. When the computing resources are provided by another

organization over a wide-area network, cloud computing is parallel to an electric

power utility. It enables the providers to reduce individual usage costs and centralize

infrastructure costs. User only pays for what they consume. A cloud customer can

spend more time investing in core business rather than spend for managing

complicated Information Technology resources with a cloud computing approach.

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Growth in Software as a Service (SaaS)

Software as a Service (SaaS) can be described as a software distribution model in

which applications are hosted by a service provider or a vendor and made accessible

to customers over a network, basically the Internet. Major business applications are

currently delivered online as an Internet service rather than as boxed software or

custom systems. SaaS has become a general delivery model for many business

applications such as office and messaging software, Data Base Management System

software, CAD software, Accounting software, etc. It has assisted for plummeting

Information Technology support costs by outsourcing hardware and software

maintenance.

Generally SaaS providers do pricing of applications using a subscription fee, most

probably a monthly fee or an annual fee, unlike traditional software which are sold as

license. At the same time the initial setup cost for SaaS is significantly lower than the

enterprise software. SaaS providers basically price their applications based on certain

usage parameters such as number of users utilizing the application. On the other hand

there is a chance to charge per transaction, event or other unit of value, since

customers’ data retained with SaaS provider. As well as a free service is provided

with limited functions in this model. Fees are charged for further enhancements in

functions. There are some SaaS applications which are completely free, since revenue

is being earned from alternative sources such as advertising.

There are some key benefits of SaaS model. It is categorically easy for administration

purposes. As well as automatic updates and patch management is available. On the

other hand it is globally accessible. At the same time there are some criticisms against

SaaS model. It is considered the use of SaaS is a violation of the principles of free

software. Here the users of SaaS do not have a copy of the executable file. It is in the

server. Then it is not conceivable for user to change it. As well as SaaS is like a

spyware. It gives an excessive power over the user to server operator.

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A mobile digital platform emerges to compete with the PC as a business system

Emerging mobile digital platform can be identified as a latest innovation in

Information Technology, introduced in last few years. Basically it is about accessing

the Internet through highly portable netbooks and smartphones instead of using

traditional desktop or laptops. Currently mobile Internet is the fastest developing form

of Internet access. It has been ascertained that mobile Internet users have been grown

to 63% of all Internet users by 2013.

The fastest growing segment of the computer and cell phone markets are smart

phones like the RIM Blackberry, Apple iPhone, Samsung Galaxy. They can access to

the Internet through broad band cellular telephone networks and Wi-Fi wireless local

networks. It is identified that more than half of all cell phone sales in the U.S. by 2013

are smartphones. Smartphone sales are growing at 15-20% per year.

In this era, there is a straight influence to businesses from mobile digital platform. As

a result of that working activities of employees can be performed anywhere, unlike

the traditional way, where employees used to work in offices. The new mobile

workforce is consisted with workers who work at their homes, coffee shops, airports

or on trains. As a consequence of that PC sales shipments and Desktop shipments

have been dropped in last few years. At the same time portable laptops and smaller

netbook shipments have climbed promptly.

The mobile digital platform increases the speed of information flow, the velocity of

decisions, the efficiency of decisions and it improves the quality of decision making.

In that case, it has taken many functions including transmission of data, surfing the

web, transmitting e-mail and instant messages, displaying digital content and

exchanging data with internal corporate systems.

The major effect of mobile digital platform commenced with the release of Apple

iPhone. Apple opened its iPhone software to developers, and then opened

anApplications Store on iTunes where business users can download hundreds of

applications to support collaboration, location-based services, and communication

with colleagues.

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Change in Management

Managers adopt online collaboration and social networking software to improve

coordination, collaboration, and knowledge sharing

Not only the technology has altered, which was used in business organizations as a

consequence of development in Information Technology, but also the traditional

methods of management have been ignored and management function has now

become trouble-free with the aid of Information Technology. On the other hand

management has been excessively innovative, since Information Technology has

offered thousands of paths, which can be used for better implementation of

management functions.

Currently managers are using social networking software and online collaboration

with the intention of improving coordination, collaboration and knowledge sharing.

Google Apps, Google Sites, Microsoft’s Windows SharePoint Services are more

frequently used by over 100 million business professionals worldwide in order to

support blogs, project management, online meetings, personal profiles, social

bookmarks and online communities.

People have got the possibility for making a platform for their activities in web,

editing and adding content to web pages and sharing knowledge with others.

Applications and services that enable for collaborative activities via the Internet are

described as social software. It enables people to interact with others. It has made the

web an online meeting place where anyone can connect and collaborate with others.

Principally those are used for management purposes in organizations.

There are lots of plus points, which can be concluded. People can share their ideas

and experiences with others and get their comments on them. As well as it can be

used for building online communities. It can be used in organizations in order to

strengthen the management system. It would increase the effectiveness. At the same

time, team spirit of management teams can be improved with the intention of getting

the highest potential out of them toward the management process. On the other hand it

is possible for sharing problems, processes and outcomes with global community and

conceivable to get the assistance from experts. Currently social media networks such

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as Facebook, Twitter and MySpace are highly contributing toward management

process by supporting for coordination, collaboration and knowledge sharing.

Business intelligence applications accelerate

Recently it has been realized that Information Technology can be used to enhance

decision making process. More powerful data analytics and interactive dashboards

provide real time performance information to managers in order to enhance decision

making. Business intelligence applications are used with the intention of attaining

benefits from Information Technology. The most frequently used business

intelligence applications are Oracle Business Intelligence Applications.

Business intelligence applications deliver role-based intelligence for everyone in an

organization from front line employees to senior management. That enables them to

make better decisions, implement proper set of actions and maintain the business

process without messing it up. Basically business intelligence applications pull data

from the whole entity and present information to users in a meaningful way to

improve decision making. It assists to organizations for optimizing corporate profits

and performance.

Today companies have realized that the information is highly valuable for decision

making. It is an essence for accessing and understanding the information in order to

improve the companies’ ability to manage costs and grow margins. At the same time

companies need to access and extract the right data from systems.

In order to achieve that purpose analytical applications can be used for accessing to

data. In practical use a financial analytic application can track actual performance

versus budget or measure the profitability. A sales analytic application can track the

size and identify most profitable opportunities. A supply chain analytic application

can optimize inventory levels and predict product fulfillment needs.

Today most organizations have identified the value for analytic applications. It is

widely used to strengthen the decision making process in organizations. Same as that

it enables them to implement better plans. At first, before establishing it organization

should decide whether those analytic capabilities are built in house or should be

purchased from a packaged application vendor.

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Then the organization should ensure that the alternative they selected is the best at

pulling data from multiple systems around the enterprise and delivering useful

information to decision makers.

Virtual meetings proliferate

Another more important innovative concept of Information Technology is virtual

meetings, which are highly used in business environment at present. Virtual meetings

can be simply described as real-time interactions that take place over the Internet by

using features such as audio and video, chat tools and application sharing. Participants

in virtual meetings use an application to conduct meetings. Currently most probably

used application for virtual meetings is Skype.

The key benefit of using video conferencing and web conferencing technologies in

business environment is the reduced travel cost and time. On the other hand the

process of decision making can be optimized by the concept of virtual meetings. At

the same time virtual meeting tools can be used to enhance the collaboration efforts in

entity.

The basic idea of virtual meetings is the ability of a group of people to communicate

at one time from different locations. Companies have started to use it to be more

effective. It provides the ability for participants to balance their work life. On the

other hand it senses for budget of companies.

Most probably the concept of virtual meetings is used by organizations which are

having virtual teams in different geographical locations. The key benefit they consider

is reduced travel cost. On the other handit has eased the time management function of

organizations. Employees should not be released from office work when they have to

attend for a business meeting. They will not have to waste their office hours with the

arrival of virtual meetings. Virtual meetings have also offered an opportunity to

balance professional work and family life, since it will not be disturbed by after-work

routines and activities.

Many organizations in the world, which belong to various industries such as finance,

communication, education, health, etc. are using virtual meetings and getting its

benefits.

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It has offered them the opportunity to achieve organizational goals and objectives in a

more effective and simple way. It has reduced costs, increased productivity and

efficiency in business entities.

Changes in Organizations

Web 2.0 applications are widely adopted by firms

When the globe steps forward with modern inventions and updates of Information

Technology, it can be noticed that organizations throughout the world also have

started to change without operating in traditional way. Some of traditional concepts

and methods related to organizations have been neglected and some have been bound

with Information Technology. One of changes which have been applied in

organizations is using of Web 2.0 applications. Web 2.0 is simply described as World

Wide Web sites that use technology beyond the static pages of earlier web sites.

Examples for Web 2.0 include social networking sites, blogs, video sharing sites,

wikies, web applications and hosted services. It allows users to interact and

collaborate with each other in a social media dialogue.

There are lots of benefits which have been achieved by organizations that are using

Web 2.0 applications. It includes more effective marketing, higher revenues, more

innovative products and services, better access to knowledge and lower cost of doing

businesses. It has been recognized that most successful companies are strongly

integrated to Web 2.0 technologies with work flows of their employees. And also they

have created a “network company”, which is links themselves with customers and

suppliers through the use of Web 2.0 tools.

Web 2.0 technologies are utilized as a powerful tool in organizations. It brings more

employees into daily contact at lower costs. At the same time it uncourageous

participation in projects and idea sharing. It makes the company’s pool of knowledge

deeper. On the other hand Web 2.0 applications are strengthening bonds with

customers and developing communications with suppliers and other outside parties.

Most companies who are using Web 2.0 applications have assured that they have

successfully attained plus points such as greater ability to share ideas, improved

access to knowledge experts, reduced costs of travel, operations and communication

with the assistance of Web 2.0 technology. As well as it has decreased the time to

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market for products and had the effect of improving employees’ satisfaction. On the

other hand, it has increased customers’ awareness and consideration of companies’

products and has improved customer satisfaction.

Telework gains momentum in the workplace

Telework is rapidly changing the business environment with development of

technologies such as National Broadband Network (NBN), web conferencing and

cloud computing. In modern world it has been possible to work away from traditional

offices with the support of net books, iPads, iPhones, BlackBerrys and the Internet.

Basically telework provides benefits such as reduced office costs, greater work and

family life balance, reduced staff turnover and increased productivity. Moreover

teleworking saves a lot of travelling time, fuel costs and brings flexibility to the

workplace. Organizations can get the service from professionals and skilled people

who are not available locally, when they are utilizing telework.

More than a third of micro businesses currently use the Internet to enable employees

to work from home which represents an 8% increase in two years. More than 75% in

larger businesses now have the facility for staff to work from home by using the

Internet. Studies have revealed that 83% of employers allow teleworking on an ad hoc

basis. At the same time 58% offer telework at least one day per month, when 57%

offer telework at least one day per week. About 37% of employers allow full time

teleworking. The dissemination of telework varies by industry, size of employer and

type of employer. Large firms normally offer more workplace flexibility than small

organizations. 55% of employers with fewer than 100 workers offered telework at

least one day per month, compared to 73% of employers with 20,000 or more

workers.

Publicly traded companies and nonprofit organizations tend to offer more telework at

least one day per month, when compared to private held companies and public

employers. Researches show that employers who allow teleworking more often and

who have established culture of flexibility have lower voluntary turnover rates.

It has been identified that employers, who have less than hundred workers offers

workplace flexibility programs for 5.8%, when employers with 20,000 or more

workers offers workplace flexibility programs for 7.3%.

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Not only that, but also it seems like telework is gaining momentum in the federal

governmentalso. Congress passed a law ordering each federal agency to designate a

Telework Managing Officer who will develop and implement a telework policy.

Co-creation of business value

In this era sources of business value have shifted from products to solutions. It is a

modern marketing concept. Its core meaning is that businesses should not be in the

industry just to produce something. That product should be a solution for customer

needs. Concept of co-creation of business value has integrated with Information

Technology now. In that case supply chains and product development are more global

and collaborative than in the past. As well as customers help firms to define new

products and services.

The process of value creation is rapidly shifting from a product and firm centered

view to personalized consumer experiences. As value shifts to experiences, the market

becomes a forum for conversation and interactions between consumers and firms.

Evidently consumers’ opinions are provided to organizations through social media

networks such as Facebook, Twitter, MySpace, etc. Same as that Audi Company has

provided an opportunity to customers to create their dream car through Audi web site.

Customers can simply create their dream car with specifications they expect by using

special software. Then Audi will assemble that car for customer as his/her

preferences. It provides a good understanding about customers’ expectations and their

preferences. It benefits to the organization, since they can have an idea about how the

products should be developed as customers’ expectations. Even a hit of Facebook is

used by organizations for product development, since they are representing

customers’ preferences and expectations. Suppliers also can access to any information

of organization from its website.

Online auctions for hotel rooms and airline reservations can be considered as

examples for this growing concept. Auctions are serving as the basis for pricing goods

and services online. The concept of online auctions is mostly used by eBay and

getting the maximum benefits out of that. The key point of auction process is that

prices truly reflect the utility to the customer from the customers’ point of view. It

means customers do making payments according to their utility rather than according

to the company’s production cost.

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