How can organizations create business value out of IT investments?
Business value is a term used to describe the overall well-being of a business. The business needs to remain relevant to all its stakeholders. The main areas where the value of a business is felt include the customers, employee and society. Businesses are constantly renewing them following new business opportunities provided by Information technology. Embracement of IT (Information Technology) in business is an outcome of businesses realization of the potential that IT experts have; when applied properly an increase in business value can be achieved. Therefore, the assimilation of IT in business has lead to increased profitability through; raised productivity, minimized expenses, and increased quality of services despite scarce resources (Carr, 2003).
Critical factors for successful strategy
Among the most critical factors of a successful business strategy, employment of the right people is essential. This involves giving the most highly qualified people the tasks of discussing business and information technology. For a business to succeed in embracing technology, it needs to involve account managers who are experts in IT so that they can spot the business opportunities in IT (Smith, McKeen, & Singh, 2007). According to researches, most of the highly viable strategies stem from low levels of the business management. This means care must be taken in order to avoid filtering them out prematurely.
Another factor for ensuring successful business strategy is observing the business model. This helps in reminding the employees how the various components of the business are assembled. Once the business model is understood, unique strategies can be created. Uniqueness of strategies is necessary so that other similar business cannot imitate the strategies. Thus, the business managers and IT managers should be involved together when making business strategies. Traditionally, Information Technology used to be distanced from business, resulting into conflicts when the different managers have different views of how the business should be like (Smith et al., 2007).
Another factor is adopting strategic themes and making collaborations of IT and business. This includes understanding the business as a system consisting of highly crucial subsystems that must work together to achieve a common goal. Strategic themes give business and IT managers a broadened single focus crucial in driving them beyond current operations. Formulation of few key themes helps the top management visualize the business components in a clearer way.
Balancing IT investment opportunities is crucial in realizing a successful business strategy. IT investment opportunities are so many, but the resources to exploit them are inadequate. Thus, it is highly crucial to be keen when allocating the budget to IT investments. All IT investments require regular checkups, maintenance, and alterations. In order to invest more with fewer funds, the IT managers may consider some cost-effective ways like outsourcing and grid computing (Smith et al., 2007). Therefore, balancing IT investment opportunities is a crucial element of realizing business value.
Ultimate adoption of an IT system
Another way in which business can create business value using IT is by understanding the business context. A key feature of Enterprise systems such us Customer Relationship Management and Enterprise Resource Planning is that they affect the business both internally and externally. Unlike their traditional counterparts, they are more ambitious, complex, and take a broader scope. CRM systems are meant to add business value through proper customer service. In order to implement CRM successfully, the top management must know their customers thoroughly. The business should know their customers preferences and needs in order to make their products accordingly. Provision of satisfactory to customers ultimately leads to better customer relations (Kohli, 2004).
Customer Relationship Management systems do not come with customer information in their databases. The management does the work of feeding in the information. The more information is collected, the better the efficiency of the CRM system. However, a lot of information may be collected, but the business value may fail to be realized if the personnel do not know how to process it (Kohli, 2004). High speed of the system in processing information increases the customers and employees values simultaneously. Some methods of service provision like self service increases customer responsiveness and reduce service provision cost.
The business should come up with a model of implementation of IT systems in the business because; systems could be created successfully, but fail to deliver the intended benefit of improving business value. A system that does not deliver the expected profits is either modified or discarded, and this ends up being losses to the business. Therefore, creating an implementation model is necessary in avoiding immense losses (KPMG, 2010). Once the model is created, the implementation is low-risk and easy to carry out.
Creation of a business IT system may be for problem-solving or creation of innovations. Problem-based creation is meant to overcome drawbacks against competitors, end dismal performance, remove constrains, and reach business goals. On the other hand, innovation-based system creation is meant to exploit business opportunities. Usually, innovation is a combination of technical expertise of the business and technology. Innovation includes conducting online business and allowing self-billing by customers among many others.
Another strategy that a business can realize value is by reconciling the business vision and the IT system ‘vision’. The system ‘vision’ is created by the system vendor, while the business vision is created by the business’ top management. Therefore, for the business to achieve a comprehensive single vision, the business could either conform to the Enterprise System vision or the ES to make the business vision operational. Eventually, the business looks at Return on Investment implications in order to determine the profitability of the system. In the first few years, the RON curve may show little return, but after some years, it shows significant returns.
Effects of IT systems to stakeholders’ behaviour
There are different perspectives that determine implementation of an IT system in business. This is because of the different interests of the stakeholders and the delicate management of business changes. In a business organization, there are four factors that influence the perspectives of ES implementation (Ryssel, 2004). They include; role and responsibilities of the employees, employees’ access to information, technical know-how and professional background, and personal interest of stakeholders. The introduction of Information Technology systems can invoke varied behaviour from stakeholders which fall under- rational behaviour, trust, or self-interest. The management tend to adopt rational behavior, but it is necessary for them to understand that some stakeholders may have vested interest (Ryssel, 2004).
A business embraces IT with the single motive of creating business value. IT systems are not a destination but a continuous investment that requires continuous work in order to achieve its benefits. The systems create business value through the creation of a cost-effective strategy, fostering customer management strategy, integration of organization’s components, and forming strategic alliances. All these create business value through the addition of value to the customers, employees, and the society. Therefore, business organizations need to develop a culture that supports innovations in order to exploit more opportunities with fewer resources.
Carr N. (2003). IT Doesn't Matter, retrived from: http://hbswk.hbs.edu/archive/3520.html
Kohli, R., & Devaraj, S. (2004). Realizing the Business Value Of Information Technology Investments: An Organizational Process. MIS Quarterly Executive 3(1). Retrieved from:
KPMG. (2010). Technology industry executive survey - IT spending up. Retrieved from: http://www.kpmg.com/CH/de/Library/Articles-Publications/Documents/Branchen/pub_20100804_Technology_Industry_Exec_Survey_EN.pdf
Ryssel, R., Ritter, T., & Gemunden, H. G. (2004). The impact of information technology deployment on trust, commitment and value creation in business relationships. The Journal of Business & Industrial Marketing, 19(3), 197-207. Retrieved from: http://search.proquest.com/docview/222025602?accountid=45049
Smith, H. A., McKeen, J. D., & Singh, S. (2007). Developing Information Technology strategy for Business Value. Journal of Information Technology Management, XVIII(1), 49-58. Retrieved from: