IT Does Matter

Group 1
Anindhita Chandriana (1040001696)
Annisa Nurrachman (1040002023)
Arya Perdana (0800781886)
Yohanes Ronaldy Polla (0900790222)
• 1968  Ted Hoff  circuits onto a tiny piece
of silicon
• Transformed the business world
• Backbone of commerce
• Underpins operations of individual companies
 Spending habits of IT
(Capital expenditures)

1965 1980 1990 1999

5% 15% 30% 50%
 IT function
Core function of IT
- Data storage
- Data processing Available & Affordable
- Data transport

Transform : Potentially Strategic Resources 

Commodity Factors of Production
 Reshape industry
• Increasing availability
• Decreasing cost
• From strategic standpoint  Invisible
The Commoditization
of IT
• IT  a transport mechanism, carries a digital
information, more valuable when shared
• IT in business  increase interconnectivity and
interoperability
• Progression stage:
- Greater standardization of the technology
- Greater homogenization of its functionality
• Application customization  overwhelmed by the
costs in isolation
Standardization of the Technology
• IT is highly replicable
• Infinite scalability of IT function
combined with technical
standardization  most
proprietary application to
economic obsolescence
• Generic application  generic
process
• Cost savings & interoperability
benefits  unavoidable
scarification of distinctiveness
Homogenization of IT capabilities
• Internet  accelerate the
commoditization of IT by
providing a delivery channel for
generic applications
• IT requirements  by purchasing
fee-based “Web Services”
• The business technology vendors
 will control the provision of a
diverse range of business
application (IT utilities)
• IT  subject to price deflation
• Gordon Moore  free fall in the price of
computer functionality, the cost of data
storage and transmission
Year 1978 1985 1995

The cost of processing

power (MIPS) $ 480 $ 50 $4
 IT’s evolution
• Q4 of 20th century  the computational power
increased by a factor of 66,000
• 1989 to 2001  internet connection grew from
80,000 to more than 125 million
• Over the last ten years  World Wide Web has
grown from 0 to nearly 40 million
• Since 1980s  more than 280 million miles of
fiber-optic cable has been installed
 American Hospital Supply
• ASAP (Analytic systems Automated
Purchasing) was innovate in 1976.

• AHS was the only distributor offering

electronic ordering.

• 1978-1983, AHS’s sales and profits rose at

annual rates of 13% and 18%. Above industry
averages.
• 1990’s, AHS’s had merged with Baxter
Travenol to form Baxter International.

• Myriad gained important advantages through

innovative deployment of IT :
– American Airlines with Sabre reservation system
– Federal Express with package-tracking system
– Mobil Oil with automated Speedpass payment
system
– Ebay auctions
– Etc
 IT Buildout
• IT’s power is outstripping most of the business needs
it fulfills

• The price of essential IT functionality

• The capacity of the universal distribution network.

• IT vendors are rushing to position themselves as

commodity supplier
 The Vendors
• IT vendors are adapting to compete in a
world where IT hardware and software are
largely commodities.

• Microsoft’s push to turn its Office software

suite from a packaged good into an annual
subscription service .
 Transformation of IT

• Transformation of IT into a commodity.

• The winners will do very well, The losers will

be gone
 INFORMATION TECHNOLOGY

“The technologies used for processing, storing, and

transporting information in digital form”

Facts:
• IT is attached to so many business functions
• IT has become the dominant capital expense for
most businesses
• IT will be continuously innovative and growing
• Companies continue to roll out hardware and
software upgrades across-the-board
 Where The Money Went
Average dollar breakdown of IT budgets
 
2002 2003

New product or technology purchases 19.5% $62.2M 17.0% $60.2M  

I.T. consulting or outsourcing 18.0% $57.4M 14.7% $51.7M  

Research and development 2.5% $7.9M 3.3% $11.7M  

Salaries and benefits 27.9% $89.3M 32.1% $113.2M  

Applications 21.0% $67.2M 20.0% $70.5M  

Everything else 11.1% $35.5M 12.9% $45.7M  

Note: In 2002, the average total IT budget was $356.6 million; in 2003, it was $353.0 million.
Data: InformationWeek Research survey of InformationWeek 500 executives
 IT Does Matter in Competitive Advantage

• IT still can provides competitive advantages

– IT continues to be developed
– IT can help differentiate company in the market, when it
is properly planned
– Any company that fails to invest in IT is doomed to fall
behind
– IT investments should be spent to not just to support
company but also can help company innovate

THE SOURCE OF COMPETITIVE ADVANTAGE in business is

how companies use the INFORMATION that TECHNOLOGY
gives us access to
IT Does Matter even though has Become
Commoditized
– However, even for certain technology that is
already becoming a commodity, IT still can
provide business flexibility
– Adopting IT tools for company’s information
processing
Software  Processing power  Storage
– IT has impacts on business-process
improvement, optimization, and business
success. Those things do matter, and they aren’t
commodities
 IT Does Matter in Productivity
– Businesses  grow and changes  IT
infrastructure
– Business Strategy + IT Infrastructure  innovate
the business growth
– Investing IT to fit the business plan
• E-commerce company  company needs to
spend expenses to build website
• Sales-oriented company  investing IT for
mobile technology to support the sales staff
 IT Does Matter in Company’s
Data-Information Security
• New rule in IT management  Focus on
vulnerabilities, not opportunities
• Corporations delegate their IT applications and
networks to vendors (outsource)  the threats will
proliferate: technical glitches, outages, and security
breaches
– Protective methods: SSL, public key infrastructure
w/ certificate authority, etc
– Protective strategies: virus-detection software,
multiple logons, passwords, content filters, etc
IT SECURITY
Thank
You