Investment in IT is Strategic to a Firm's Survival

 | July 28,2010 11:57 am IST

Unquestionably, these investment decisions are difficult. They are often complicated by a slew of obstacles: costs that are difficult to estimate, benefits that might or might not materialize, requirements that evolve and change midstream, all contributing to significant delivery risk.

But smart investments in IT also offer the promise of huge rewards. Not surprisingly, this has intensified the urgency to build I.T.-enabled capabilities.

 

IT is being seen by many as a necessary and strategic investment. Before taking the plunge into the incorporation of I.T. in a company, several factors need to be studied i.e. Market-driving capabilities, Role and impact of IT, Current investment portfolio, I.T. cost and investment profile etc. This gives an insight into the feasibly and potential effectiveness of the investment.

 

IT provides several tools to derive competitive advantage in the ‘Dog eat Dog’ business environment of the 21st century. These include e-commerce, ERP systems, knowledge management systems, e-procurement systems etc. Most of these systems tend to reduce operating costs, enhance productivity and efficiency, improve transparency and aid the management in taking decisions. Data warehousing and data mining may be employed to understand sales patterns, consumer behavior and map transactional efficiency. The security of the sensitive data can be ensured and threats of pilferage and corrupt practices are mitigated.

 

In an organization IT could be incorporated in the form of three models: Data model, Cost model or the hybrid model. The hybrid model is the clear choice of the managers of today. It combines the best practices of both new age theories and the conventional or traditional organizations.

 

IT can be successfully implemented in an organization only by following crucial dogmas such as internalization of IT in the organization, management of IT spending and proper prioritization, deployment of the best IT model and value management.

 

Most companies recognize that too much is at stake for any corporation to disregard the potential that I.T. represents in the emerging Information Age. While a corporation’s potential for leveraging I.T. to build competitive advantage will vary according to industry, competitive position and existing capabilities, there is absolutely no denying the fact that IT is here to stay as a major weapon for strategic and competitive advantage

 

Introduction

Every day chief executives around the world and their boards of directors make tough investment decisions. As diligent investors, they base their decisions on tangible results supported by detailed financial analyses aimed at building shareholder value. These same C.E.O.’s and directors must also, however, deal with a new category of investments that refuse to behave typically. These investments involve information technology — and they are growing in number, breadth and scope.

 

I.T. projects run the gamut from fixing the Year 2000, or “Y2K,” bug to upgrading worldwide networks, replacing legacy systems and developing Internet capabilities to order products and services. Unquestionably, these investment decisions are difficult. They are often complicated by a slew of obstacles: costs that are difficult to estimate, benefits that might or might not materialize, requirements that evolve and change midstream, all contributing to significant delivery risk. But smart investments in I.T. also offer the promise of huge rewards. Not surprisingly, this has intensified the urgency to build I.T.-enabled capabilities.

                          

 

 

                                       Fig1. Lifecycle of IT management in organizations

 

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