Changes in the business environment brought by technology

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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".

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Changes in the business environment brought by technology

  1. 1. 1 Changes in the Business Environment brought by Technology T. Shakthi Fernando May 2014 Sabaragamuwa University of Sri Lanka Department of Accountancy and Finance BSc. Financial Management (Special)-Undergraduate
  2. 2. 2 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.
  3. 3. 3 Content Introduction 04 Change in Technology 05 Change in Management 08 Change in Organizations 11 References 14
  4. 4. 4 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.
  5. 5. 5 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.
  6. 6. 6 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.
  7. 7. 7 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.
  8. 8. 8 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
  9. 9. 9 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.
  10. 10. 10 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.
  11. 11. 11 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
  12. 12. 12 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%.
  13. 13. 13 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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