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Information Technology

for Management
Rahul Roy
Professor of MIS, IIM Calcutta
rahul@iimcal.ac.in
Agenda

 Session 1: IT Implementation Challenge


 Session 2: Information Technology and its
Impact on Organization

Session 3: Internet and the Changing Face of
Business
What management wants to know…
 Why organizations build information systems?
 Do systems always have the planned effects?
 What would ensure that failures and negative effects do
not occur, and positive effects do occur?
 Where does IT fit into the Theory of Business?
 Businesses understand their external environments
 Businesses undertake missions consistent with their markets
 Businesses develop core competencies needed to accomplish
their mission
 Where do information systems come from?
 Build or buy?
 How to implement?
Information Technology
 First coined by Europeans and quickly
adopted by Americans
 Spectacular advances during the last 50
years
 Organizations continuously reinvented and
assigned new functions to the computer as
dictated by improved economics and
organizational learning
 Eventually IT took over and changed the
way companies structured and managed
themselves
Information System

 Processes data
 Stores information
 Communicates information
 Integrates functions
 Spans boundary
Indian Railways - Computerised
Passenger Booking System
Indian Railways
 6,853 stations, 63,028 kilometers of track, 37,840
passenger coaches and 222,147 freight cars.
 Annually it carries some 4.83 billion passengers and
492 million tons of freight.
 Of the 11 million passengers who climb aboard one
of 8,520 trains each day, about 550,000 have
reserved accommodations. Their journeys can start
in any part of India and end in any other part, with
travel times as long as 48 hours and distances up to
several thousand kilometers.
IMPRESS/CONCERT - Features

 Connects 2500 terminals


 A route-based reservation system that facilitates the
issue of journey-cum-reservation tickets, which can be
issued from any station to any station.
 Passenger journey to multiple laps of reservation can
be handled from a single terminal window.
 The reservation facility is offered round-the-clock (24
hours uninterrupted)
 software can support both graphic user interface (GUI)
and character-based terminals, which act as front-ends
installed at the booking counters to cater to passenger
requests
The Web Initiative
 Launched in 2002
 The system now handles
bookings for more than 8,500
passenger trains (out of about
14,500 trains) and delivers
service to 120+ Indian cities
 in 2005-2006 an average of
7,050 tickets per day were sold
through this system
 On the 11th of April, 2006 a total
of 18,748 tickets were sold of
which 5,800 were through e-
ticketing.
Project Time-line

 Project initiated in 1985, stand-alone system


(IMPRESS) fully operational in 1987.
 Networked version (CONCERT) introduced in 1994.

 2002 Aug. 3: IR begins online train reservations and


ticketing over the Internet.
 2005: Aug.: IRCTC introduces E-ticketing for IR on
Aug. 12; ticketing by SMS begins on Aug. 26.
What management wants to know…

 Why Indian Railways built Computerised


Passenger Reservation system (CPRS)?
 Did CPRS deliver the planned effects?
 What ensured that failures and negative effects do
not occur, and positive effects do occur?
 Where did IT fit into the Theory of Business?
 Where did CRPS come from?
CRPS
 The system was built
 to address explosive growth in passenger traffic
 Primarily as a passenger amenity
 Acceptance by general public has been overwhelming. The
organisational change in railways also has been remarkable
 For the employees implementation of the system has meant
 Marginal change in business process
 Much improved working environment
 Less of paper work
 Railways did foresee
 an opportunity in increased utilisation of its physical assets
 A threat posed by other modes of transportation that would eat into its
profitable segment of the traffic
 Railways built the Centre for Railways Information Systems (CRIS)
 System was initially contracted out but later on transferred to CRIS
 Implementation has been incremental
Computerising Passenger
Operations – Primary
Challenge
To provide an efficient passenger service by
ensuring maximum uptime for its reservation
and ticketing and inquiry application. The
Railway must prepare charts that map
passengers with their seats and must post
these charts outside each coach
A manager must appreciate that …

 IS interacts with five elements of the organization:


 Its external environment
 Its strategy
 Its structure and culture
 Its business processes
 Its IT infrastructure
 IT is a tool – supportive or strategic – and not a panacea
 For a system to be ‘good’, there must be an extremely
effective collaboration between IS professionals on the
one hand and managers and users on the other
 Manager’s IT knowledge and skills can affect the
organization’s ability to deploy IT effectively
The IT Interaction Model
The External Environment
 External environment is defined by factors like:
 Competitive structure of the industry
 Relative power of buyers and sellers
 Basis of competition
 Growing, shrinking or stable industry
 Regulation
 Technological deployment
 The external environment and the firm’s position in it
influence decisions like:
 Which Information Systems to be implemented
 The design features of those systems
 The impact on the firm and the industry
Firm Strategy
Implies how a firm is creating edge for
itself to beat competition and succeed
in creating value for its stakeholders
 Differentiation
 Low-cost production
 Focus on quality and service
 Going global
 Right sizing
 Customer/Supplier intimacy
 Just-in-time inventory/manufacturing
What forces drive industry
competition?
 Bargaining power of buyers
 Seek ‘best’ quality at lowest price
 Threat of new entrants
 Demands a slice of the market share
 Threat of substitutes
 Can reduce your market size
 Bargaining power of suppliers
 Can increase your cost
 Rivalry among competitors
 Can change your market share
 “There are no longer mature industries; rather, there
are mature ways of doing business”
Porter’s Five Forces Model
Source of Competitive Advantage
 The concept of ‘Value Chain’
 The framework helps to identify and analyze the
streams of activities through which products and
services are created and delivered to customer
 Company performs its business by splitting the job
into technologically and economically distinct
activities linked together in a chain
 Each of these ‘value activities’ adds value for the
consumer
 Company is profitable only when the value created
by the chain is more than the cost for performing
the value activities
Generic Value Activities

 Primary activities
 Inbound logistics
 Operations
 Outbound logistics
 Marketing and sales
 Service
 Support activities
 Firm infrastructure
 Human resource management
 Technology development
 Procurement
Some features of the Value Chain
 Interdependent activities linked together
 Linkages create trade-offs in performing different
activities
 Linkages require coordination
 Value chain of a company is linked in a ‘Value
System’ to the value chains of the upstream
supplier and downstream channels
 Company can gain by optimizing or coordinating
its links to the outside world
Reaping competitive advantage
 Competitive advantage comes from
 Lowering cost
 Enhancing differentiation
 The point within a value system where maximum economies
of scale and scope are created determines the market power
 Economies of scale are achieved when a participant or a
network of participants is able to leverage capabilities and
infrastructure to increase revenues and profitability within a
single product line or market
 Economies of scope are achieved when a participant or a
network of participants is able to leverage capabilities and
infrastructure to launch new product lines or businesses or
enter new markets
Where IT can have an impact?
 Impact on core operations
 Doing things more efficiently
 Inventory management system, Production scheduling
system, Demand forecasting system, Sales force
management system, … …
 IT development priorities are targeted toward incremental,
operational improvements that may improve company’s cost
profile but do little to change its position or power in the
industry
 Impact on core strategies
 Doing things differently
 Going global, decentralizing, right sizing, being more
customer oriented, diversifying, … …
 “If this works, it would change …”; impacts company’s
position or power
Impact of IT: the Strategic Grid
High
IT impact on core strategy
Factory Strategic
IT impact on core operations

Goal: Improve performance of Goal: Transform organization


core process or industry
Leadership: Business unit Leadership: Senior executives
executives and Board
Project Management: Process Project Management: Change
reengineering Management

Support Turnaround
Goal: Improve local Goal: Identify and launch new
performance ventures
Leadership: Local level Leadership: Venture
oversight incubation unit
Project Management: Project Management: New
Grassroots experimentation venture development
Low High
Organizational Structure & Culture

 Firm’s structure and culture can influence IS design


and IS success
 Firm’s structure and culture can be influenced by
introduction of Information systems
 Some decision factors may be:
 Centralized versus decentralized
 Functional, divisional, matrix or networked organization
 Reporting hierarchy
 Risk averting or risk taking
 Values individuality or teamwork
Business Processes
 Business processes are the set of activities, often
cutting across major functional boundaries within
organizations, by which organizations accomplish
their mission
 Information Systems have been traditionally used to
automate business processes
 Automation becomes more effective when planned in
the context of larger organizational ‘reengineering’
efforts
 Information System is influenced by business
processes and business processes, in its turn, get
influenced by Information Systems
IT Infrastructure
 IT infrastructure represents the organizational
resources that give the firm the capacity to generate
new IT applications. It includes:
 The physical components or the hardware
 Software development tools and methods
 The Data and document repositories
 Telecommunications networks
 Training materials and facilities
 Users’ skills with IT
 Compatibility, connectivity, reach and range
 Management of IT environment
System Effects
 If and how a System is used
 Consequences of the system:
 Performance effects: profit, gross revenue, market share,
quality, service, customer satisfaction
 Consequences for people: shifts in power and influence, job
enrichment, deskilling
 Future flexibility: enable or constrain future Information
Systems and strategic initiatives
 Adaptations made over time to the system, other
elements of the organization or both
 A period of learning, adjustment and restructuring
may be necessary before the full return of an IT
investment is reaped
Implementation Process
 Can have three different interpretations
 “to provide with implements”: coding or realizing system designer’s
intention – view taken by the developers
 “to provide with the means for carrying into effect or fulfilling; give
practical effect to”: user oriented activities like training, support,
manual etc – view taken by the end-users
 “to carry into effect; fulfill; accomplish”: fulfillment of its promise to
improve organizational performance – view taken by the managers
 Has four generic stages
 Initiation: in the organizational context
 Acquisition: build or buy decision
 Introduction: in the context of the intended users
 Adaptation: the ongoing process of adaptation of both the
organization and the Information System
So What’s New
Internet and the World Wide Web
Convergence of Access Devices
The Network Era (mid-90s to present)
 Milestones in IT development
 1995: NSF backbone becomes commercially supported
 1995: Sun introduces Java
 Application development becomes faster due to object-
oriented approach
 “The Internet will almost certainly have a stronger impact
than PC … a reasonable guess might put it ahead of the
telephone and television but behind the printing press.”
 “The Net began to resemble a complex and highly
adaptive life form, with a personality composed of many
different interests and motivations.”
 And then came the ‘boom’ and … the ‘bust’
 After the initial euphoria died down, started cautious and
sustainable growth and development
 Computing power became ubiquitous
Organizations now in the Network Era
 IT facilitates strategic alliance partnership and efficient yet
complex outsourcing
 With reduced coordination cost, integrated horizontal
structures replaces vertically integrated structures
 Newer products, services and value-addition to existing
products become possible
 Information has become a commodity; information trading is
now a new line of business
 The ‘make and sell’ concept of the Industrial age gave way to
the ‘sense and respond’ strategy of the Information age
 Industry moves from mass production to highly tailored
products or services
 Service quality goes up while costs dwindle
 “Building an Internet Business is not for the faint-hearted.”
A new of doing business

 E-business – where some part of the business is


carried out over Internet
 In one year, 2.7% of new-car sales in US took place over
the internet, though as many as 40% involved the net at
some point, with consumers using it to compare prices or to
look at the latest models.
 E-commerce - Refers to trade that actually takes
place over the internet, usually thro’ a buyer visiting
a website and making a transaction over there.