It is also necessary to critically analyse the IT investment strategies of HSBS and Citigroup. Finally the authors will analyse how companies should go about assessing the value of their IT investments and determine in their opinion, which of the two banks in clever in its IT investment. Carr (2003) stated that as information technology’s power and ubiquity have grown, its strategic importance has diminished. His article “IT doesn’t matter” created huge controversy within information technology circles.
He stated that in order to make a resource truly strategic and to gain sustained competitive advantage then the resource should not be omnipresent but in short supply. He believed in order to achieve and maintain a long term strategic advantage from IT, proprietary technology needed to remain protected. Regarding infrastructural technologies, more value could be gained when these were shared rather than used in isolation. The clear advantage is having a superior insight into the use of new technology.
As IT systems are now incorporated within the majority of business functions a large proportion of corporate spending could be incurred on IT. Unfortunately to remain competitive and on par with their rivals a majority of companies will require large IT investment just to remain in business. It is essential for organisations to separate the essential element of IT from the discretionary and counterproductive. Carr (2005) reiterates again how IT has become commoditised.
The Business plan on Traditional Investment Appraisal Techniques
... pp. 51–69. Shank, J. (1996), “Analysing Technology Investments–From NPV to Strategic Cost Management”, Management Accounting Research, June 1996, ... 2, Jonsson 2000, p. 1466). Other strategic benefits might be creating competitive advantage, improve organizational learning or the ... evidence that the risk analysis methods are still remaining intuitive and simple, suggesting that risk evaluation is ...
Steinert-Threlkeld responds to Carr (2005) by stating that even if the infrastructure is commoditised, it is how you compute, how you embody your strategic thinking in code and how you get your instructions executed will be the source of competitive advantage. Hugos cited in Carr (2005) equally agrees that a lot of the elements involved within IT like installing and supporting packaged software are no longer strategic to most organizations and have become commoditised. He questions hy it would be more beneficial to outsource them to an IT utility provider, just as we outsource the production and delivery of electricity to an electric utility provider. Carr (2003) strongly argues that greater IT spending rarely leads to improved financial performance. An Alinean survey in 2002 concluded that the companies with larger economic returns spent on average 0. 8% of revenues on IT, compared to the industry norm of 3. 7%. The key to success, for the vast majority of companies, is no longer to seek advantage aggressively but to manage costs and risks meticulously.
Maintain discipline of spending parsimoniously and think pragmatically even when economic conditions are more favourable. Szygenda (2003) cited in O’Brien & Marakas (2008) concurred with Carr’s (2003) recommendation to spend less in IT. Szygenda believed that precision investment in core-infrastructure and process-differentiation IT was required in an intensely cost conscious environment and more caution is required versus the “shot gun approach” (p. 46) which was used in the past. Carr (2003) advocates Moore’s Law where it guarantees the longer you wait to make an IT investment the more you will get for your money.
Collins (2001) partly agrees with Carr’s (2003) argument. He asserts how thoughtless reliance on technology is a liability not an asset. An essential driver in accelerating forward momentum is to have clear, simple and coherent understanding of technology. Great companies respond with thoughtfulness and creativity driven by the compulsion to turn unrealized potential into results. Collins (2001) recommends that companies should “crawl, walk, run” (p. 163) in relation to investment in IT and this can be a very effective approach, even during times of rapid and radical technological change.
The Essay on Advantages and Disadvantages of Technology 2
The advantages of stun guns and patrol car video surveillance are a critical tool in law enforcement. Officers are given the option of Tasers, which are extremely effective when pursuing an offender that might have had the upper hand to fight for a long time, resulting in the officer gaining injuries. Currently, patrol car video is a necessity as video records will enhance an officer’s ...
Porter & Millar (1985) explain the concept of the value chain where this model divides the company’s activities into technological and economically distinct activities that it performs to do business. In order to gain competitive advantage over its rivals the company must perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium price. Technology is likely to affect every activity within the value chain. As information technology has become more widespread the opportunities to take advantage of a new competitive scope has ncreased. Turban et al. (2001) avow that experience indicates that information systems by themselves can rarely provide a sustainable competitive advantage but a modified approach is required. Rackoff et al. (1985) used such a model where Strategic Information Systems (SIS) were used to support or shape an organisation’s competitive strategy and highlight the organisation plan for creating and maintaining such advantage. Through the development of Theory of Strategic Thrusts this enabled the identification of SIS opportunities.
The basic thrusts included differentiation, cost, innovation, growth and alliance. Porter (1996) expanded his 1985 model to include strategies such as improving internal efficiency and customer oriented approaches which would further facilitate sustainability. Ross et al. (1996) take the view that long-term competitiveness can be achieved through the careful management of IT assets, which are: * A highly competent IT human resource * A reusable technology base * A strong partnering relationship between IT and business management.
Due to the on-going challenge of implementing IT-dependent strategic initiatives like business process re-engineering, customer intimacy, organizational learning and even organizational transformations makes an IT capability very valuable in meeting business goals. The effective management of the IT assets can be difficult for competitors to imitate. Thus an IT capability has the potential for delivering long-term competitive advantage. Naik and Chakravarty (1992) cited in Gunasekarana et al. (2001) identi? ed issues associated with organisational ? ancial positioning that should be raised. These include: * Is the company in a position to make the required investment? * What are the sources of ? nance for capital budgeting? * Does the investment ? t in with the company’s overall strategy? * What is the overall outcome of the investment in IT? A good business strategy includes IT strategy as an integral element, as general business strategy emerges from the organisation’s competitive environment and usually reflects the need to differentiate its products and services from that of its rivals (Rapp 2002).
The Business plan on Data Warehousing Warehouse Business Information
Data Warehouses MGT 327 April 13 th, 2004 In the past decade, we have witnessed a computer revolution that was unimaginable. Ten to fifteen years ago, this world never would have imagined what computers would have done for business. Furthermore, the Internet and the ability to conduct electronic commerce have changed the way we are as consumers. One of the upcoming concepts of the computer ...
Therefore, in the current face of rapidly changing business conditions, competition and continuously evolving new information technology, organizations should ensure reasonable justification of investment in an effective information technology strategy. Peppard (1993) said, an appropriate investment in information technology offers new management and business opportunities, which can be applied strategically in the following ways: * Gain a competitive advantage * Improve productivity and performance * Facilitate new ways of managing and organising Develop new businesses Generally, the importance of strategic investment in information technology has been widely recognized for some time. Porter (1980, 1986) cited in Rapp (2002) where as part of his overall analysis of strategy, refers to using information technology to increase entry costs and raise competitive barriers and to alter other organisation’s competitive environment. The IT strategies that organisations invest in and follow can be classed by how the organisations treat IT and what they expect from using it.
Basic attributes that define this strategy is the extent to which IT is integrated into the organisation’s overall business strategy. In order to create functional benefits a mix of customized and packaged IT is used to enhance the organisation specific advantages to create value and competitive barriers that are difficult for rivals to emulate. A financial institution risk management company (Sheshunoff Consulting) said, outside of human resources, technology is one of banks most significant investment.
The Term Paper on How Technology affects business
1.0 Introduction Technology is an improvement over what was available in the past. People and organizations often seek technology because it eases tasks and facilitates production. With the appropriate technology, complex tasks are simplified. Man has used technology to achieve previously insurmountable tasks: walk on the moon; create test tube babies; treat life threatening diseases; predict ...
This means that information technology is seen as a means to a real end: the success of the business. So, banking corporation defines its information technology investment strategy on the return on investment (ROI), which comes from reduced operating costs, increased market share and cost effective risk management and regulation compliance. Banks information technology needs to be managed, secure and aligned properly in order to meet its business objectives and keep the organisation’s most important information secure.
Most banks invest in IT strategy to ensure the technology supports the organisation’s current and future goals as well as generating a greater than expected ROI. Today, the ability for any bank to use information technology in its business is fundamental. Thus, IT should be integrated not just into the corporation business strategy but also into its operation and organisation. Inputs into corporate strategy need to be linked to the objectives of the business. Firstly, it provides the basis for establishing clear strategic direction for the business, and demonstrates both the strategic awareness and strategic willingness, which are essential to corporate success. Secondly, it will de? ne the boundaries and mark the parameters against which the various inputs can be measured and consistency established, thus providing the hallmarks of a coherent corporate plan. It is essential that the strategy is: * Well thought through * Held logically together * Should provide the necessary direction for the business HSBC IT Strategy
HSBC put technology amongst its seven pillars for success in 2006 and said that technology was one of its key competencies in achieving its targets. HSBC IT strategy has been leveraging on its international network of technologies with the slogan “The World’s Local Bank” to emphasize the group’s global experience and understanding of a great variety of markets and cultures. HSBC pursue the strategy which focuses on meeting the unique needs and preferences of its customers in different national environment.
The Business plan on Impact of Technology on Business
Every functioning business in the world today uses some sort of technology in order to help them accomplish their goals. Before the age of technology, it was much harder for businesses to thrive because it was harder for them to advertise to their customers, communicate with their business partners, store information, and much more. Today businesses have all those things, and it has never been ...
The bank perceives the imperative of national responsiveness as critical to its operational success. They maintain a broad portfolio of products whereby emphasize investment in information technologies that are context specific and focus on marketing research to identify unfilled customer needs. HSBC through its “build once, deploy many” programme otherwise known as HSBC Universal Banking System (HUB) has been successfully deployed in 63 countries. This has improved the bank competitive position via cost reduction, product differentiation and revenue enhancement.
The direct banking aspect of the business is HSBC. com which has a single global centre of excellence for e-commerce IT, made up of co-located businesses and staff. HSBC. com’s IT strategy is the development of second-generation internet technologies designed to provide a common presentation and browser capability to offer all of HBSC’s services to any of its customers. The online bank exposes customers to intelligent, personalised content and better targeted marketing.
This development and deployment of targeted online technologies has allowed HSBC to develop a sales campaign management tool to test the effectiveness of its web marketing strategies by helping the bank in recognising and talking to different people in different ways online. It also provides relevance through intelligent targeted content and thereby save time for customers by showing what they want to see and also avoid repetition of tasks by pre-filling in application forms. Overall, making it easier to do business with the bank.
HSBC based it’s multi billion annual IT investment strategies on the overall corporate strategy of expanding its global reach by more effectively unifying the company by country. It increased its distribution channels and customer groups to enable it to become a global business. HSBC invested in infrastructure and transactional technologies to allow it to harness the power of new technology, to deliver new and better customer services, to improve operational efficiency and to link the various parts of the organisation to create a unified offer for its customer.
This unified offer was to be made available to all its customers no matter what business they were in or in what part of the world they lived. This was reinforced by Ken Harvey, Group CIO in 2006 when he said that technology allowed them to support their claim to be the world’s local bank which is core to the business strategy. They also acquired companies and used external resources, primarily through strategic alliances and outsourcing.
The Business plan on Mcdonald’s Business Strategy
, Inc. 11410 N. E. 124th Street #223 Kirkland, Washington 98034 USA O: 425-822-3106 C: 206-257-9839 com Table of Contents Page 3 Page 5 Page 6 Page 9 Page 11 Page 12 Page 16 Page 18 Page 21 Executive Summary Our Business Plan The Market Defined World View Pilot Program (Ethiopia) Projected Market Share Market Strategy Promotion Competition The Bottled Water Industry Product Development - Four Keys ...
The banking group was very precise in measuring its success and only used two key measures to assess IT performance and system reliability, these being the number of customer transactions processed and the reliability and resilience of the groups systems. HSBC has a very clear allocation of responsibility – as budgetary decisions were left to local managers, who were given responsibility and accountability for their own balance sheets. Managers were given the responsibility and authority to make local decisions but these decisions had to be in line with corporate objectives.
HSBC was able to successfully harness the power of information technology as a strategic tool for growth. Customer and user focus was used to provide new and better services for its customers and improved its operational efficiency by applying a decentralized approach, by allowing regional IT services to meet the local needs. Annesley (2006) outlined with total assets of US$1. 74 trillion, HSBC’s growth had been based on the strategic IT investment and management decisions that the organisation had undertaken. Capell & Clifford (1999) comment that HSBC was the pioneer of screen-based stock-trading in Hong Kong.
HSBC through becoming the first-mover enhanced its technology advantage. Citigroup IT Strategy Citigroup aimed to penetrate into new markets and deepen their presence in existing markets around the world and invested in transactional technology and strategic investments. This investment was made to allow the group to operate as one company by integrating its products and services and by transferring expertise. It invested in infrastructural technologies to that would provide its customers with a world-wide standardised platform to make it easier to do business with the bank.
Their strategy was to have more group-wide common systems and standards to ensure the best services to customers, no matter where they are or what services they wanted. Its investment in infrastructure and transactional technologies enabled its global expansion. Citigroup was very concise in its prerequisites for IT investment and this was to maximize returns and growth opportunities through effective use of its capital. However, Citigroup also used mergers and acquisitions as a way to penetrate into new markets and facilitate business growth.
The centralized approach employed by Citigroup to provide common and standard technological platforms for easy system integration and global expansion has made its managers information technology and strategically fluent. Citigroup slogan “under one umbrella” reflects this and is a good indication of full integration of IT into a clearly conceived overall business strategy. Citigroup adopted a transnational strategy approach on their IT investment strategy. According to Bartlett & Ghoshal (1989) cited in Narender et al. 1995) this strategy reflects a strategic orientation toward enhancing flexibility and innovation on the part of the subsidiaries, on the one hand, and centralized control and coordination of activities worldwide, on the other. The bank seeks dynamic interdependence that enables it to think globally and act locally by making an effort to understand the local conditions as the only truly global requirements. This local system was capable of being efficiently linked with Citigroup’s existing systems and then adequate security arrangements could be made.
Citigroup strategy also was not to outsource its core technology and this enabled the development of an inward system. Turban et al. (2002) agree that the use of inward systems will remain sustainable and potentially provide a competitive advantage while they remain not visible to outside competitors. Moore (2005) believes that organisation should outsource their non – core, context activities but ensure that their core activities and technology are kept in house. Organisations continually make the mistake where they outsource the wrong activities.
Through management of the core activities competitive advantage can be maintained. Strategic investment in information technology is essential for companies to stay competitive and maintain or grow their market position. Globally, IT has allowed greater competition within industries which means investment in new technologies is an important strategic decision. However, the benefits are difficult to quantify. An assessment on the return on investment (ROI) is required to determine the benefits and to establish the business case to justify technology spend.
Monetary returns are just one of several financial measurement tools that can be used to support an investment decision however, for some IT projects, it is nearly impossible to measure the benefit in monetary terms. Therefore, it is necessary to assess the return on the intangible aspects of the business like competitive advantage, product differentiation and customer service. In order to justify the value of IT, one has to perform a ROI analysis of proposed IT investments (Diagram 1).
Investments are evaluated based on expenditure, cash savings, strategic benefits, and risks.
Businesses need to be able to assess which IT projects will give the greatest contribution to the business goals and strategic objectives. These projects are high risk and can often fail to meet the intended project objectives. Projects that are unsuccessful are a major source of concern for businesses therefore the management of these projects and assessment of the ROI is critical. To examine justification of IT spend, Borenstein & Betencourt (2005) comment that investment justification is one of the first stages in the process of adoption of new technologies.
IT justification has great significance since the conclusions and recommendations identified can determine the success or failure of a project. Borenstein & Betencourt (2005) believe that due to the large number of intangible benefits associated with IT justification, the process tends to be complex. Powell (1992) cited in Borenstein & Betencourt (2005) that some companies do not even evaluate their investments because they do not have stated objectives and therefore do not have any unit through which they can measure the proposed systems.
Productivity growth related to IT includes the improvement of customer service, variety and quality of products, better response time and improved tailoring of products and services to the needs of the clients, none of which are easy to quantify in terms of return on investments. There is an over tendency to concentrate on the tangible assets only, often to the detriment of the intangible ones, which can be the most important. Ballantine et al. 1996) argue that it is necessary to integrate tangible and intangible considerations in order to achieve effective investment analysis. However, they do state that more research is necessary to examine the problems which occur when evaluating IT / IS investments and establish how such obstacles can be overcome. Diagram 1: A model for investment justification in information technology projects. al (ref: Gunasekaran et al 2001) Source : International Journal of Information Management 21 (2001) 349–364
Gunaskaran et al (2001) summarises the main challenges within organisations trying to justify IT spend: * managers have found it difficult to validate the cost associated with purchase, development and use of IT in financial terms * the difficulties in measuring benefits and cost are thought to be a major constraint to IT investment * there should be methods other than financial criterion devised to investigate the IT investment justification * the current financial justification methods, like ROI are inadequate to deal with IT investment issues * intangible benefits are valuable assets but cannot be quantified in monetary terms * IT investment should be part of infrastructure investment of an organisation * Consideration must be given to the company’s organisational strategy and full support and commitment of the company must be in place before any projects commence Cline & Guynes (2001) concur with most of these points stating how an investment affects firm performance is determined by the organization’s ability to effectively plan and implement new technology.
Forces outside the firm, intra-organizational capabilities and constraints, management commitment to IT investment, and technological capabilities and costs are all factors that influence the relationship. It is critical for an organisation to adopt an organizational change perspective when assessing the impact of IT investment on firm performance. This process is best evaluated over time. According to Hochstrasser & Griffiths(1991), Swamidass & Waller (1991) cited in Gunasekarana et al. ( 2001) qualified tangible and intangible performance measures must be identified and described, such as determining: * The impact the project has on turnover. * Manufacturing lead times. * New product development. * Achievement of project deliverables.