Why are information systems so
important in business today?
(Sajeel Ahmad 23/2/2015)
Six reasons why information systems are so important
for business today include:
1. Operational excellence
2. New products, services, and business models
3. Customer and supplier intimacy
4. Improved decision making
5. Competitive advantage
The emegence of a global economy, transformation of industrial economies,
transformation of the business enterprise, and the emergence of digital
firm make information systems essential in business today. Information
system is a fondation for conducting business today. In many businesses,
survival and the ability to achieve strategic business goals is difficult
without extensive use of information technology. There are six reasons or
objectives why businesses use information system:
1. Operational excellence:
Business improve the efficiency of
their operations in order to achieve higher profitability. Information
systems are important tools available to managers for achieving higher
levels of efficiency and productivity in business operations. A good
example is Wal-Mart that uses a RetailLink system , which digitally links
its suppliers to every one of Wal-Mart's stores. as soon as a a customer
purchase an item , the supplier is monitoring the item , knows to ship a
replacement to the shelf.
2. New products, services, and business
Information system is a major tool
for firms to create new products and services, and also an entirely new
business models. A business model describe how a company produces,
delivers, and sells a product or service to create wealth.
Example: Apple inc transformed an old business model based on its iPod
technology platform that included iPod, the iTunes music service, and the
3. Customer/supplier intimacy:
When a business serves its customers
well, the customers generally respond by returning and purchasing more.
this raises revenue and profits. The more a business engage its suppliers,
the better the suppliers can provide vital inputs. This lower costs.
Example: The Mandarin Oriental in Manhattan and other high-end hotels
exemplify the use of information systems and technology to achieve
customer intimacy. they use computers to keep track of guests'
preferences, such as their preffered room temperature, check-in time,
4. Improved decision making:
Many managers operate in an
information bank, never having the right information at the right time to
make an informed decision. These poor outcomes raise costs and lose
customers. Information system made it possible for the managers to use
real time data from the marketplace when making decision. Example: Verizon
Corporation uses a Web-based digital dashboard to provide managers with
precise real -time information on customer complains, network
performance.. Using this information managers can immediately allocate
repair resources to affected areas, inform customers of repair efforts and
restore service fast.
5. Competitive advantage:
When firms achieve one or more of
these business objectives( operational excellence, new products, services,
and business models, customer/supplier intimacy, and improved decision
making) chances are they have already achieved a competitive advantage.
Doing things better than your competitors, charging less for superior
products, and responding to customers and suppliers in real time all add
up to higher sales, and higher profits. Example: Toyota Production System
focuses on organizing work to eliminate waste, making continues
improvements, TPS is based on what customers have actually ordered.
6. Day to day survival:
Business firms invest in information
system and technology because they are necessities of doing business. This
necessities are driven by industry level changes. Example: Citibank
introduced the first automatic teller machine to attract customers through
higher service levels, and its competitors rushed to provide ATM's to
their customers to keep up with Citibank. providing ATMs services to
retail banking customers is simply a requirement of being in and surviving
in the retail banking business. Firm turn to information system and
technology to provide the capability to respond to these.
Information systems are the foundation for conducting business today. In
many industries, survival and even existence without extensive use of IT
is inconceivable, and IT plays a critical role in increasing productivity.
Although information technology has become more of a commodity, when
coupled with complementary changes in organization and management, it can
provide the foundation for new products, services, and ways of conducting
business that provide firms with a strategic advantage.