How organizations can gain a strategic advantage with information systems
The usefulness of utilizing appropriate information systems (IS) for efficient management is documented. It is worth saying that the advances in the application of advanced IT infrastructure has motivated organizations to develop and adopt I formation Systems (IS) and IT strategies to facilitate the design of business strategies. This process aims at supporting organizational missions and getting them on an edge of advantage over their competitors (Ramanathan, 2009).
The nature of the contemporary business environment has necessitated that organizations design mechanisms in delivering on their objectives. Studies reveal that information systems have this potential to offer strategic advantages to organizations seeking greater performance. The following are some of the ways through which IS may lend numerous advantages to organizations.
Strategic IS helps organizations to gain competitive advantages through contributing toward organizational goals. Organizations can gain from the efficiencies offered by IS strategic placements to substantially increase performance and productivity. A firm that obtains and implement IS systems have the ability to increase productivity and quality in the production processes.
Computer applications such as cloud-based data systems have the capacity to reduce costs of IT that account for an increased expenditures of an organizations. The impact of digital economy is enormous and firms should take advantage of the strategic cost-effectiveness of applying relevant IS strategies.
Innovation and creativity is critical in delivering intended objectives. Firms can achieve this element by investing heavily in research and development (R&D). studies on firms that invested substantial resources in R&D recorded steady growth compared to firms that lagged behind in terms of application and use of IS enabled research and development.
Organizations can reap from the usefulness of IT infrastructure in reaching a wide market. Supply chains remain the true examples of businesses that have gained profitability through the implementation of the best of breed IS strategies. Similarly, the intention of organizations is to remain a market leader in respect of price, quality and reliability.
IS and IT systems have proven successful in leveraging organizations against increased operational costs. Using this intrinsic advantage, organizations can model their pricing structures in order to exercise price leadership. In addition, IS systems have the capacity of assisting firms to reach best quality customers who have the potential of moving firms to higher levels of returns and profitability
Contribution of an IS sourcing strategy toward gaining a strategic advantage
Research documents that organizations with strong and efficient IS systems posses within themselves the ability to explore various market fundamentals that remain unexploited by firms with weak or no proper IS infrastructures. IS sourcing has far-reaching influence on a firm’s ability to create competitive advantage over and above its competitors in the industry. Businesses seek to gain competitive intelligence through informational search (Hira & Hira, 2008).
Informational advantages aim at enabling an organization to gain market knowledge. In ensuring that organizations achieve this goal, the management can adopt strategic IS. When an organization has enough information regarding its customer needs, supplier information, and information about their immediate competitors, they are likely to benefits from informational benefits compared to firm with little information about their respective market elements.
Development of efficient and robust information system may be an expensive attempt to get things in place. Therefore, organizations that project to utilize such IS strategies may source IT services from vetted vendors. An excellent example could be the use of vendor-based cloud computing and data warehousing. Research estimates that organizations can cut on operational costs by about 30% with sourced IS systems.
This draws from the fact that firms do not incur costs related to maintenance of IS infrastructure, labor and data security costs. Clearly, organizations end up with reduced costs translating to reduced market prices for their products.
In this sense, firms implementing outsourced IS have the strategic advantage of modeling lower prices compared to firms that have extended IT costs. In return, firms can achieve to implement cost-leadership strategies capable of resulting in increased market share, image as well as building a strong brand image.
Review of Literature on Offshore IS Outsourcing
In today’s business operations, offshore outsourcing has become the most popular form of business information outsourcing. The application of offshore information has Working Papers on Information Systems have the potential in moving organizations to higher levels of strategic business position.
The application of IS offshore outsourcing demands a detailed comparison of various capabilities in order to achieve several objective. Firms engaged in offshore forms of outsourcing have the challenge of facing the barriers of language, cultural diversities, and differences in time zones as well as varied organizational cultures (Windle, 2005).
Studies reveal that the firms using offshore outsourcing in gaining strategic IS experiences changes in the internal arrangements of business departments or units.
It is worth noting that engaging in offshore outsourcing means getting together with other firms to overcome the challenges of limited IT and IS elements. Ranganathan & Balaji (2007) noted that in the process of acquiring an offshore IT infrastructure, an organization faces the challenges of strategic cultural orientation in order to align itself to the differences in culture (Chaffey, 2002).
The end-users of the acquired IS system usually report the problem of working with the offshore team consisting o completely different cultures. Although the utilization of offshore IS has great potential in shifting the productivity of an organization toward a sustainable phase, such an organization should put up structures necessary to cushion itself against the challenges of diversity.
Currently, firms have focused on the concept of strategic intelligence through developing plausible informational frameworks. The thinking behind this move has been that organizations wishing to perform over and above the industry average must gain intelligence of the market in order to safeguard themselves against the vulnerabilities of lack of particular information concerning their operational environment.
Ranganathan & Balaji (2007) noted that firms might develop though two strategic ways in order to design their organizational capabilities. In a bid to obtain organizational capabilities, a firm may do so through making use of its past outsourcing experiences (Knaus, 2007).
Proponents of capability thinking assert that companies that utilize their long-term past experiences have the capacity to outperform their immediate competitors because these set o accumulated experiences wilt be challenging or difficult to model of imitate by other participants in the same industry.
On the other hand, capabilities may also be achieved not only through internal modalities but also through deliberate investment through organizational frameworks and routine (King, 1996). In relating critical capability thinking and IS offshore outsourcing, significant advantage would be gained though using the past outsourcing experience. It follows that organizations may gain substantially from the extreme importance of their past knowledge and skill with various vendors.
Ranganathan & Balaji (2007) illustrates how organizations that used platforms of other firms to build their capacities. Regardless of the approach used, IS executives must be cautious about the necessary tools and resources necessary for creating strategic advantage through outsourcing. Distinct and specific advantages can be sought after by skillful analysis of the available vendors whose market positioning can help to yield multiple advantages.
Although strategic outsourcing via offshore outsourcing has proven advantageous over a long period, studies have displayed challenges associated with this kind of IS sourcing.
In his studies, Windle (2005) explores some of the potential problems that might accompany offshore outsourcing. He notes that often, firms that used this form experienced routine disruptions in general workflow, thus bringing about operational inefficiencies. Besides creating routine disruption to the organizational work practices, end users also experienced problem arising from the operational problems.
In a separate study conducted by Callon (1996), firms utilizing offshore outsourcing to gain strategic advantage inevitably faced problems of layoffs and imbalance in staff functions. Problems associated with sourcing for experienced staff to serve in foreign subsidiaries due to strategic partnership with offshore vendors afford numerous challenges (Hemmatfar, Salehi & Bayat, 2010).
A research conducted by Ahlemann (2009) reveals that firms that excel in offshore outsourcing have the capacity to design and advance high-level strategic processes. In this study to explore the relevance of strategic thinking, Ahlemann (2009) attempt to designate the concept of capability, as a systematic thinking on the facets of IS offshore.
This systematic process involves the ability to identify relevant and plausible items in offshore outsourcing and assessment of the existing state of a firm in order to establish an appropriate route toward transition. Systematic thinking enables firms to routinely explore their connections and the desired strategic IS elements to formulate the most appropriate responses to the outsourcing needs (Sarker & Sarker, 2009).
The most important element of offshore outsourcing is systematic thinking aimed at ensuring that only applicable components applied in a bid to discover sustainable strategies (Callon, 1996; Lacity & Rottman, 2008). Relationship Governance- it refers to the process of managing the relationship between the offshore vendor company and the firm seeking strategic offshore services.
Usually managers from both ends must be willing to examine themselves against the contractual relationship sought after in order to realize a proper position without limiting the organization’s operational elements such as key success factors (CSFs), professional values, and organizational values and culture. Problems set in where organizations failed to manage relationships leading to the creation of the offshore alliances.
In a study conducted to investigate the successful application of offshore management strategies, Hemmatfar, Salehi & Bayat (2010) found that less effective firms in coordinating failed to invest adequately in the off-shoring structures and routines.
A case in example is the MarketCo, which failed to invest in offshore structures due to inappropriate governance structures. Although creating a comprehensive contract schema can offer the best relationship protection mechanisms, studies show that the inability to unite this element with proper and appropriate
Discussion of managerial challenges
The process of attaining the strategic business advantage through establishing a plausible IS strategy remains a he challenge to most management in various organizations (Torkzadeh & King, 2008). Although the application of IS systems and strategies have demonstrated to serve organizations, some firms have failed to benefit from their eminent advantages.
Challenges of implementation of the relevant IS strategies range from choice of proper strategies that suit the conditions of the firm. Additionally, firms face the challenges of resistance to change as evidenced by lack of flexible organizational cultures. Firms that lag behind in terms of designing a sustainable set of organizational core values may be vulnerable to challenges of ineffective implementation of IS strategies (Canadian Institute of Chartered Accountants, 2003)
Inclusion in the entire process of seeking up to outsourcing offshore services demands that managers remain actively engaged. Studies on offshore outsourcing have documented that organizations whose managers remained reserved during the offshoring-experienced problems of managing relationships with the external vendor businesses (Blokdijk, 2008).
Irregular meeting, uncoordinated strategies led to poor outcomes due to tendencies of withdrawing executive attention from the processes of off-shoring (Chaffey, 2002). Challenges of human resource management continue to face most firms trying to access global offshore vendor services. Since diversity among firms is eminent, firms must employ specialized tools such as software configuration management and collaboration tools to efficiently coordinate and distribute resources (Torkzadeh & King, 2008).
Managerial executives encounter challenges of identifying, acquiring, and deploying necessary HR capacities to manage internal and offshore utilities. Therefore, the management of an outsourcing firm should incorporate all the staff in the process of outsourcing to achieve unity of purpose.
Cultural divert as a basic concept in business outsourcing can challenge the stability of an outsourcing as well as the outsourced firm. Both entities must compromise on their strict organizational cultures in order t appeal to the desirable mix of cultures gained from the strategic partnership.
References
Ahlemann, F., 2009. Towards a conceptual reference model for project management information systems. International Journal of Project Management, 27(1), pp.19-30.
Blokdijk, G., 2008. Outsourcing 100 Success Secrets: 100 Most Asked Questions: The Missing IT, Business Process, Call Center, Hr -Outsourcing to India, China and More Guide. London: Lulu.com.
Callon, J.D., 1996. Competitive Advantage through Information Technology. New York: McGraw Hill, USA.
Canadian Institute of Chartered Accountants., 2003. Information Technology Outsourcing. Web.
Chaffey, D., 2002. E-business and E-C management. England: Prentice-Hall.
Hemmatfar, M., Salehi, M., & Bayat, M. (2010). Competitive Advantages and Strategic Information Systems. International Journal of Business and Management, 5(7), pp.1-11
Hira, R., & Hira, A., 2008. Outsourcing America: the true cost of shipping jobs overseas and what can be done about it. New York, NY: AMACOM Div American Mgmt Assn.
King, W.R., 1996. Achieving global strategic advantage. Information Systems Management, 13 (4), p. 57.
Knaus, M. , 2007. Macro Economic Issues of Offshore Outsourcing. New York, NY: GRIN Verlag.
Lacity, M.C., & Rottman, J., 2008. Offshore outsourcing of IT work Electronic book: client and supplier perspectives. New York, NY: Palgrave Macmillan.
Ramanathan, T.R., 2009. The Role of Organisational Change Management in Offshore Outsourcing of Information Technology Services: Qualitative Case Studies from a Multinational Pharmaceutical Company. Washingto, DC: Universal-Publishers.
Ranganathan, C., & Balaji, S., 2007. Critical Capabilities for Offshore Outsourcing of Information Systems. Working Papers on Information Systems.
Sarker, S., & Sarker, S., 2009. Exploring Agility in Distributed Information Systems Development Teams: An Interpretive Study in an Offshoring Context.Information Systems Research, 20(3), pp. 440- 461.
Torkzadeh, G., & King, W.R., 2008. Information Systems Off shoring: Research Status and Issues, MIS Quarterly, 32 (2), pp. 205- 225.
Windle, L.P., 2005. Successful Strategic Outsourcing. Retrieved from https://www.facilitiesnet.com/equipmentrentaltools/article.aspx?id=2860