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Strategic Uses of Information Technology

Strategic Uses of Information Technology. Topic 2. What is a “Strategic IT System”?. IT Evolution. Innovate. Knowledge?. Re-engineer, Learn. Value. Informate. Information. Analyse. Automate. Data. Cost Substitution. Time. Some Examples of Strategic IT Systems.

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Strategic Uses of Information Technology

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  1. Strategic Uses of Information Technology Topic 2. What is a “Strategic IT System”?

  2. IT Evolution Innovate Knowledge? Re-engineer, Learn Value Informate Information Analyse Automate Data Cost Substitution Time © R. Barnes, 1999

  3. Some Examples of Strategic IT Systems • American Airlines (Sabre) • Fedex • Dell Computer • Baycorp What makes their systems “Strategic”? © R. Barnes, 1999

  4. American Airlines (Sabre) • Pioneer in Electronic Reservations (1963) • Pioneer in hosting other airlines • Pioneer in related reservations • Hotel, rental car, etc Now separate company, earning (2000) $US200M on revenues of $2600M. American Airlines is one of world’s 10 largest airlines Pan American no longer exists 2.1 © R. Barnes, 1999

  5. Federal Express • Fedex - became #1 courier company, • 50% of market • largest freight airline in the world by focussing on quality • on-time delivery (undamaged of course) • Key IT system - track packages • Quality monitoring so detailed, customer is often unaware of quality failures! 2.2 © R. Barnes, 1999

  6. Direct Marketing.Case Study, Dell Computers • Creating a $US12Bn company in 13 years • Dell’s Model • Build on order • Close integration (virtual company) with customer and supplier. • Velocity, low inventory. • Web sales • Within a year, $US2m per day. 1999 $US18M/daynow 50$ of sales - $32bn annually ($43M/day) 2.3 © R. Barnes, 1999

  7. Baycorp • 1974 Creditman-Dun almost had a monopoly on credit information • Cooperatively owned, Profitable • Saw an opportunity to save costs through IT • but abandoned system when costs escalated • In the meantime, small Hawkes Bay company developed minicomputer system • saw it as a strategic opportunity • Today Baycorp is dominant, C-D a distant memory. © R. Barnes, 1999

  8. Characteristics of Strategic Systems - 1 • All of these IT systems were FUNDAMENTAL to the business strategy • IT strategy = Business Strategy • They changed the dynamics of their industry • competitors forced to follow • Often pushing the state of the art, either technically or in business © R. Barnes, 1999

  9. Characteristics of Strategic Systems - 2 • Data is centred on Customers, interactions with customers, not on finance and transactions • Projects instigated by sales, marketing, or customer-service departments • Requirements depend on what customers want and on competitor’s response • Example: world-class customer service © R. Barnes, 1999

  10. Organizational Change and Information Systems • Introducing a strategic system will lead to a culture change • Some elements of existing culture elements will help, some will hinder. Which? • Understanding culture clash/reinforcement is important for strategic success • Tool - Matrix of Change Brynjolfsson et al - “The Matrix of Change”, Sloan Management Review, Winter 1997, p1997 2.4 © R. Barnes, 1999

  11. Old metrics don’t apply Top Software Talent Scarce Legacy Code is a Major Risk Trends in Corporate Software Innovate Knowledge? Re-engineer, Learn Value Informate Information Analyse Automate Data Cost Substitution Time © R. Barnes, 1999

  12. Corporate Software Performance Metrics • Old metrics • System response, utilisation, availability • ROI, pay-back time • Applications backlog • Saving Money • New Metrics • Achieving business objectives, • “Alignment” • Responsiveness to Business Changes • Making Money © R. Barnes, 1999

  13. If we need new metrics - • What are our present metrics? • What should we use? • Topic 3 - “The Business Case”, • but first: - © R. Barnes, 1999

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