changes in the business environment brought by technology
DESCRIPTION
This document is about changes which have occurred within business environment due to technology. Layout of this report is based on the Table 1-1 of the Laudon’s book "Management Information Systems: Managing the digital firm".TRANSCRIPT
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Changes in the Business
Environment brought by Technology
T. Shakthi Fernando
Sabaragamuwa University of Sri Lanka
Department of Accountancy & Finance
BSc. Financial Management (Special)-Undergraduate
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Content
Page
Introduction 01
Change in Technology 02
Change in Management 05
Change in Organizations 08
References 11
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Introduction
There is no any controversy that the business environment has been rapidly modified
with new discoveries & 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
& 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 & 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 & wide area networks, enterprise software, the Internet &
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 & modifications in business environment
brought by Information Technology. It is chiefly identified how the new discoveries
& updates in Information Technology has influenced to the business environment
under three core classifications. Those are change in technology, change in
management & 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 & distribute information to assist
decision making, coordination & 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 &
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 &
grow as needed.
Small & midsized businesses can achieve potential benefits from cloud computing,
since they can tap Information Technology infrastructures, platforms & software that
could be deployed only by big companies earlier. Companies can utilize world’s
largest supercomputers without purchasing & 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 & 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 & 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 & messaging software, Data Base Management System
software, CAD software, Accounting software, etc. It has assisted for plummeting
Information Technology support costs by outsourcing hardware & 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 & 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 & 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 & 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 & 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 & Desktop shipments have
been dropped in last few years. At the same time portable laptops & smaller netbook
shipments have climbed promptly.
The mobile digital platform increases the speed of information flow, the velocity of
decisions, the efficiency of decisions & 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 & instant messages, displaying digital content & 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 & 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 & online collaboration with
the intention of improving coordination, collaboration & 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 & online
communities.
People have got the possibility for making a platform for their activities in web,
editing & adding content to web pages & sharing knowledge with others.
Applications & 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 & 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 &
experiences with others & 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 & outcomes with global community & conceivable to
get the assistance from experts. Currently social media networks such as Facebook,
Twitter & MySpace are highly contributing toward management process by
supporting for coordination, collaboration & knowledge sharing.
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Business intelligence applications accelerate
Recently it has been realized that Information Technology can be used to enhance
decision making process. More powerful data analytics & 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 & maintain the business
process without messing it up. Basically business intelligence applications pull data
from the whole entity & present information to users in a meaningful way to improve
decision making. It assists to organizations for optimizing corporate profits &
performance.
Today companies have realized that the information is highly valuable for decision
making. It is an essence for accessing & understanding the information in order to
improve the companies’ ability to manage costs & grow margins. At the same time
companies need to access & 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 & identify most profitable opportunities. A supply chain analytic application can
optimize inventory levels & 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. Then the organization should ensure
that the alternative they selected is the best at pulling data from multiple systems
around the enterprise & delivering useful information to decision makers.
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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 & video, chat tools & 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 & web conferencing technologies in
business environment is the reduced travel cost & 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 hand it 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 & family life, since it will not be disturbed by after-work
routines & activities.
Many organizations in the world, which belong to various industries such as finance,
communication, education, health, etc. are using virtual meetings & getting it’s
benefits. It has offered them the opportunity to achieve organizational goals &
objectives in a more effective & simple way. It has reduced costs, increased
productivity & efficiency in business entities.
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Changes in Organizations
Web 2.0 applications are widely adopted by firms
When the globe steps forward with modern inventions & 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 &
methods related to organizations have been neglected & 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 & 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 & services, better access to knowledge & 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 &
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 & idea sharing. It makes the company’s pool of knowledge
deeper. On the other hand Web 2.0 applications are strengthening bonds with
customers & developing communications with suppliers & 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 & communication
with the assistance of Web 2.0 technology. As well as it has decreased the time to
market for products & had the effect of improving employees’ satisfaction. On the
other hand, it has increased customers’ awareness & consideration of companies’
products & has improved customer satisfaction.
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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 & cloud
computing. In modern world it has been possible to work away from traditional
offices with the support of net books, iPads, iPhones, BlackBerrys & the Internet.
Basically telework provides benefits such as reduced office costs, greater work &
family life balance, reduced staff turnover & increased productivity. Moreover
teleworking saves a lot of travelling time, fuel costs & brings flexibility to the
workplace. Organizations can get the service from professionals & 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 &
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 & nonprofit organizations tend to offer more telework at
least one day per month, when compared to private held companies & public
employers. Researches show that employers who allow teleworking more often &
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%.
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.
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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 & product development are more global
& collaborative than in the past. As well as customers help firms to define new
products & services.
The process of value creation is rapidly shifting from a product & firm centered view
to personalized consumer experiences. As value shifts to experiences, the market
becomes a forum for conversation & interactions between consumers & 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 & 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 & expectations. Suppliers also can access to any information
of organization from its website.
Online auctions for hotel rooms & airline reservations can be considered as examples
for this growing concept. Auctions are serving as the basis for pricing goods &
services online. The concept of online auctions is mostly used by eBay & 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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