I think CEOs often time forget that a potential must be persuaded to purchase a product. A sales force does add cost to the firm, but without the sales force, the company would be exclusive. As an associate in a retail company, we at times convinced customers that they “needed” the product. If the customer feels there is not a need the customer will not have interest in making. The web only encourages and adds convenience for customers because the internet more of a benefit for customers who know exactly what they need while the sales force helps convince the customer what they need.
The business of selling technology isn’t the same because organizations are no longer spending top dollars on technology. Technological companies are having to make adjustments through new initiatives including: cutting the expense, changing the selling and support models, focus on a small target and emulated consumer technology sales and support models.
In my opinion marketing tends to be one of the greatest expenses because technological companies have to advance within themselves create a must have product for customers. In order to create that product extensive research and development is required along with general and administrative costs.
The change in today’s economy poses more of a risk for technological companies, which requires an adjustment. Organizations are less willing to pay the top dollars for the technology, which therefore requires companies such as Oracle to increase the level of risk associated with the creation of a product.
Technological providers have to think beyond their corporate strategy because the industry is changing. Organizations now have to consider expansions through outsourcing or focusing on a value discipline and consider mechanism such as subscriptions and value based licensing to charge for the level of use of resources.
I feel that the change in the industry is moving towards service, which goes beyond offering higher levels of technology. The technological companies need to shift their target market and consider companies that aggressive invest in IT projects or companies that require constant innovation to maintain success within their organization. If the technological organizations are not considering shifting their markets, there needs to be a balance between buyers and sellers where both parties are at an optimal level of profits or equilibrium.
Saturday, November 24, 2007
Reaching the path of profits
In order to reach the path of profits a company needs to master cost effective IT management. This creates a competitive advantage because this will force companies to either succeed or fail at cost effective IT management. The companies that will continue to succeed are the companies who have used prior IT investment experiences by other companies as a resource.
Another point that jumped out at me was the fact that companies attempt to keep up with the technology trend. The cut back in technological products has not affected the growth in productivity. The reduction in technological spending is just the beginning of journey to the path of profits. Some companies try to jump ahead to the path of profits without overcoming their lack of discipline, lack of trust within the company, and lack of focus.
Organizations that attempt to cut their cost are ineffective at times because the CIOs are not exactly sure about what needs to be cut. To solve this problem there are three solutions, Mild medicine, which gives a 10%-20% reduction, medium strength, is a 20%-40% reduction, and extra strength results in a cut of more than 40%.
The mild medicine considers limited offshoring, strategic souring, contract management and asset utilizations as areas to cut costs of IT. Yet, medium strength considers simple, operational cuts along with inclusive offshoring, hardware management/utilization, software management/ utilization and extended technological lifestyles. Extra strength requires companies to have strong business and technology advocates who are looking not only at the levels of technology spending but also at the business benefits.
I feel in order for a company to get on the right path they must be cautious and combine each cost cutting solution including the three Cs while having an optimal level of teamwork by everyone within the organization.
Another point that jumped out at me was the fact that companies attempt to keep up with the technology trend. The cut back in technological products has not affected the growth in productivity. The reduction in technological spending is just the beginning of journey to the path of profits. Some companies try to jump ahead to the path of profits without overcoming their lack of discipline, lack of trust within the company, and lack of focus.
Organizations that attempt to cut their cost are ineffective at times because the CIOs are not exactly sure about what needs to be cut. To solve this problem there are three solutions, Mild medicine, which gives a 10%-20% reduction, medium strength, is a 20%-40% reduction, and extra strength results in a cut of more than 40%.
The mild medicine considers limited offshoring, strategic souring, contract management and asset utilizations as areas to cut costs of IT. Yet, medium strength considers simple, operational cuts along with inclusive offshoring, hardware management/utilization, software management/ utilization and extended technological lifestyles. Extra strength requires companies to have strong business and technology advocates who are looking not only at the levels of technology spending but also at the business benefits.
I feel in order for a company to get on the right path they must be cautious and combine each cost cutting solution including the three Cs while having an optimal level of teamwork by everyone within the organization.
Four paths of IT spending
According to the opening of the chapter business determine their benefits from the IT investments by comparing what will happen to what did happen following the IT implementation. It is understandable that a company uses theory to complete the budget for the project because not all IT projects are the same. However, the actual shows how close the estimations were, which is a disadvantage for the current project because it is after the fact and cost can’t be adjusted. The two measures theoretical and actual help determine an organization’s spending path. The four paths of spending can help a company direct its business strategy when spending on IT.
The path of propaganda represents a get rich quick scheme by vendors and those involved with the purchase. It promotes the IT as the more expensive the better and the better the higher the return on the investment. This path of spending encourages companies to heavily invest to recognize that ROI within six months or less. Many companies are victim of this path because the implementation ends up costing more to fix the bugs not considered when purchasing the product. Those benefited the most by this path is the vendor and seller. The companies see a descent return but not extremely high in comparison to the initial outlay.
The path of problems represents companies who do know when to stop spending on an IT project. This is common to many companies, which illustrates their failure. I think that companies tend to lose focus of their main objective of successfully implementing the project. Companies are more concerned with just completing the implementation and figuring out the bugs in the system after implementation.
The path of pennies is a path that focuses primarily on the cost. Companies have come to one of two conclusion according to the author; they have spent too much on technology and see great opportunities for cost reduction. The second is technology is a simple commodity and should be considered a tactical cost of doing business and kept to a minimum. Companies within this path suffer because either they have too much or not enough, which hurts the company from a business perspective either way.
The last strategy is a strategy attempted by JetBlue Airways, the path to profits. The path to profits is the hardest because there needs to be a strong link between the cost of technology and the benefits received. The companies at this level align their investments with their business strategy, which has greatly benefited JetBlue Airways.
To be on the path of profits there must be a combination of strategic technical vision with an understanding of business and operations. It is important for a company to focus on eliminating IT waste.
The path of propaganda represents a get rich quick scheme by vendors and those involved with the purchase. It promotes the IT as the more expensive the better and the better the higher the return on the investment. This path of spending encourages companies to heavily invest to recognize that ROI within six months or less. Many companies are victim of this path because the implementation ends up costing more to fix the bugs not considered when purchasing the product. Those benefited the most by this path is the vendor and seller. The companies see a descent return but not extremely high in comparison to the initial outlay.
The path of problems represents companies who do know when to stop spending on an IT project. This is common to many companies, which illustrates their failure. I think that companies tend to lose focus of their main objective of successfully implementing the project. Companies are more concerned with just completing the implementation and figuring out the bugs in the system after implementation.
The path of pennies is a path that focuses primarily on the cost. Companies have come to one of two conclusion according to the author; they have spent too much on technology and see great opportunities for cost reduction. The second is technology is a simple commodity and should be considered a tactical cost of doing business and kept to a minimum. Companies within this path suffer because either they have too much or not enough, which hurts the company from a business perspective either way.
The last strategy is a strategy attempted by JetBlue Airways, the path to profits. The path to profits is the hardest because there needs to be a strong link between the cost of technology and the benefits received. The companies at this level align their investments with their business strategy, which has greatly benefited JetBlue Airways.
To be on the path of profits there must be a combination of strategic technical vision with an understanding of business and operations. It is important for a company to focus on eliminating IT waste.
Cutting the IT budget down to size
IT innovation contributes greatly to a company’s ability to grow, aside from the employees and external operations. Organizations tend to spend beyond their budget, especially when they are trying to maintain competitive advantage within their industry. However, if a company does not either cut the cost or balance the IT budget, the cost within that company are only going to increase. Many CIOs when considering an IT investment have “cutting the cost” at the top of the list. Budgets are being slashed between 40% and 50% by some companies to increase their ROI while growing the company.
It is interesting how companies have witnessed the failure of companies such as Hershey’s, and continue to make if not the same, very similar mistakes. Lack of financial analysis has contributed to the failure of cutting the budgets of IT projects. According to the chapter, the U.S. Department of Defense spent over $1 billion on IT through redundant IT systems. The overspending in this situation relates to the lack of effective planning and analysis of the current system.
As companies are realizing the need for reducing the IT budget, technological providers need to prepare for a decrease in revenue. Companies such as Verizon was able to cut the cost of server hardware, internal employees, external services, global sourcing, storage and their 2002 IT budget. The possible sufferings by technological providers are lower hardware sales, varied losses in all software categories, more competitive pricing for service providers and consultants, renegotiations with current customers and niche vendors grabbing the loose change.
The economic conditions is also affecting IT spending because the economy has been declining which gives uncertainty to purchasers of their possible returns on their investments. However research predicts that IT spending will increase by at least 5% once the economy improves. In my opinion I feel that IT spending will continue to decrease because as technology increases, the cost will continue to decrease. Even though companies have all the research, statistics, and information on the pros and cons of IT implementation, not every company will effectively use the information. Although companies can save up to 30% by cutting cost, it is predicted that they will only cut by 6%.
I agree with the author when he says, “Companies can continue their status quo spending or embrace a new way of doing IT.” It is up to the companies to decide which is more important taking on IT that hurts their companies or cutting cost and making the best of existing technology.
It is interesting how companies have witnessed the failure of companies such as Hershey’s, and continue to make if not the same, very similar mistakes. Lack of financial analysis has contributed to the failure of cutting the budgets of IT projects. According to the chapter, the U.S. Department of Defense spent over $1 billion on IT through redundant IT systems. The overspending in this situation relates to the lack of effective planning and analysis of the current system.
As companies are realizing the need for reducing the IT budget, technological providers need to prepare for a decrease in revenue. Companies such as Verizon was able to cut the cost of server hardware, internal employees, external services, global sourcing, storage and their 2002 IT budget. The possible sufferings by technological providers are lower hardware sales, varied losses in all software categories, more competitive pricing for service providers and consultants, renegotiations with current customers and niche vendors grabbing the loose change.
The economic conditions is also affecting IT spending because the economy has been declining which gives uncertainty to purchasers of their possible returns on their investments. However research predicts that IT spending will increase by at least 5% once the economy improves. In my opinion I feel that IT spending will continue to decrease because as technology increases, the cost will continue to decrease. Even though companies have all the research, statistics, and information on the pros and cons of IT implementation, not every company will effectively use the information. Although companies can save up to 30% by cutting cost, it is predicted that they will only cut by 6%.
I agree with the author when he says, “Companies can continue their status quo spending or embrace a new way of doing IT.” It is up to the companies to decide which is more important taking on IT that hurts their companies or cutting cost and making the best of existing technology.
Thursday, November 22, 2007
Offshoring: the new trend
When I first started business school and heard the term “offshoring” I assumed that a new business strategy was discovered. After reading this chapter, off shoring began as far back as 1992 MIT and Stanford University. The use of offshoring by organizations is growing, in fact it is possible to have 70% of all work offshored. I feel this is very beneficial to companies from a cost saving perspective, however the biggest question is what about the labor force of the U.S.?
Offshoring resulted in the loss of over 200,000 jobs in computer and mathematical fields with an overall loss of 560,000 jobs between 2001 and 2002 based on a study by the U.S. Bureau of Labor. This impacts the U.S. economy by lowering consumer spending due to a decrease in wages paid to employees. However, the trend of offshoring has cause the development of low cost marketing within foreign countries to provide IT services at 20% to 50% less than it cost in the U.S. Indian companies are in fact upgrading their systems to emulate IBM processes to offer better services for offshoring.
When I think of a business process being sent to another country, the question that is raised is how does the level of quality change? After reading through the chapter, it was mentioned that the quality was in some cases better offshored than here in the U.S.. Companies can actually save up to $ 300 million and receive good quality in comparison to having IT in the U.S. Aside from the potential loss in IT jobs, what are the risks of offshoring? I agree with the book that offshoring can result in sabotage because the U.S. is in a vulnerable where the U.S. governments no longer back them. There is also the over dependence of the domestic companies on foreign governments.
Based on the book the growth within the labor market is still rising and though jobs are being offshored, the jobs that are most affected are the IT jobs. With technology advancing I feel that offshoring will not be considered a trend but a way of doing business by domestic companies.
Offshoring resulted in the loss of over 200,000 jobs in computer and mathematical fields with an overall loss of 560,000 jobs between 2001 and 2002 based on a study by the U.S. Bureau of Labor. This impacts the U.S. economy by lowering consumer spending due to a decrease in wages paid to employees. However, the trend of offshoring has cause the development of low cost marketing within foreign countries to provide IT services at 20% to 50% less than it cost in the U.S. Indian companies are in fact upgrading their systems to emulate IBM processes to offer better services for offshoring.
When I think of a business process being sent to another country, the question that is raised is how does the level of quality change? After reading through the chapter, it was mentioned that the quality was in some cases better offshored than here in the U.S.. Companies can actually save up to $ 300 million and receive good quality in comparison to having IT in the U.S. Aside from the potential loss in IT jobs, what are the risks of offshoring? I agree with the book that offshoring can result in sabotage because the U.S. is in a vulnerable where the U.S. governments no longer back them. There is also the over dependence of the domestic companies on foreign governments.
Based on the book the growth within the labor market is still rising and though jobs are being offshored, the jobs that are most affected are the IT jobs. With technology advancing I feel that offshoring will not be considered a trend but a way of doing business by domestic companies.
Business-lean and simple
One of the points that jumped out at me was the different forms of standardization recognized by companies. Internet protocol along with SQL and COBOL seems foreign to me because the technological advancements that have been made were on a constant growth which amazes me that there isn’t a global standard, instead it has only become more complex and chaotic.
I feel that the biggest misconception is “the more expensive and complex, the better quality.” Time and time again, history with technology has shown that simple and cheaper tend to work better while producing good quality. Not only is simple always better but “going with what commonly works” is better than investing in assets because of newness. The “newness” of technology tends to complicate current systems because the questions organizations must address is how will the new system work with the current technology and will it require the company the throw out its existing system. Another point made by the author is 70% of the world’s transactions is being ran on a 20 year old COBOL systems effectively.
The Web based technology has also been used within organizations at cheaper prices. The internet has allowed companies to set up websites at lower prices but the companies have aligned their expectations of the web based technology with the reality of the scope. Some of the downfalls include hype, the level of security integrity and performance, and the level of defined contextual standards.
As with today society, there are always low cost alternatives even for financial services and internet based time sharing. The financial program that comes to mind when I think of low cost financial services offered through “web based” technology is the tax cut program which allows taxpayers to save the $200-300 on tax preparation fees by following the program step by step and submitting the completed return via internet. The concern with any information going over the internet is security of information. However, this software takes out the physical one on one with a CPA and also offers customer solutions and help through the software.
I feel that companies can use the advancement in internet technology to expand their process as long as their expectations are reasonable in relation to the downfalls. Open source sharing of information is growing including software and the greatest benefit is that it is free. This can also be a resource for companies.
I feel that the biggest misconception is “the more expensive and complex, the better quality.” Time and time again, history with technology has shown that simple and cheaper tend to work better while producing good quality. Not only is simple always better but “going with what commonly works” is better than investing in assets because of newness. The “newness” of technology tends to complicate current systems because the questions organizations must address is how will the new system work with the current technology and will it require the company the throw out its existing system. Another point made by the author is 70% of the world’s transactions is being ran on a 20 year old COBOL systems effectively.
The Web based technology has also been used within organizations at cheaper prices. The internet has allowed companies to set up websites at lower prices but the companies have aligned their expectations of the web based technology with the reality of the scope. Some of the downfalls include hype, the level of security integrity and performance, and the level of defined contextual standards.
As with today society, there are always low cost alternatives even for financial services and internet based time sharing. The financial program that comes to mind when I think of low cost financial services offered through “web based” technology is the tax cut program which allows taxpayers to save the $200-300 on tax preparation fees by following the program step by step and submitting the completed return via internet. The concern with any information going over the internet is security of information. However, this software takes out the physical one on one with a CPA and also offers customer solutions and help through the software.
I feel that companies can use the advancement in internet technology to expand their process as long as their expectations are reasonable in relation to the downfalls. Open source sharing of information is growing including software and the greatest benefit is that it is free. This can also be a resource for companies.
Too much of a good thing
How is it that companies full of intelligent people spend so much money on IT and not even know. Aside from that fact, they also didn’t even realize that the assets were not even being used. The question that I raise is how many companies are experiencing this “technological overspending aftershock?” Another fact that jumped out at me was based on the statistics from the Department of Commerce, corporations purchased more than 3 trillion dollars of IT-related capital equipment over the past decade. Is this possible? It seems to me that overspending in technology is the result of asymmetric information.
I don’t understand how a company can buy software without comparing it to needed level of use within its organization. The biggest issue is cost cutting by companies, but I don’t understand how they completely throw this issue out when evaluating investment in software. Based on the example in the book, the company could have saved 5 million dollars by cutting down the number of licenses purchased. I guess the question here is what is considered in the planning stage of this software purchase when determining the level of capabilities needed?
As if the spending of capital on too much software isn’t bad, the maintenance costs isn’t even included in that $5 million figure. Maintenance of these systems can sometimes be an additional 28% of the lists price. How much are companies really paying this “good” technology that’s not fully used? I feel that companies are extensively evaluating their projects, while paying close attention to their current technology assets. Companies are learning to now get the most out their assets because as seen by many other company, what you don’t know about your assets can end up costing you more than you ever bargained for.
I agree with the closing statement that stronger benefits of IT at lower costs along with simplicity and ease of operation is ahead as we approach the future.
I don’t understand how a company can buy software without comparing it to needed level of use within its organization. The biggest issue is cost cutting by companies, but I don’t understand how they completely throw this issue out when evaluating investment in software. Based on the example in the book, the company could have saved 5 million dollars by cutting down the number of licenses purchased. I guess the question here is what is considered in the planning stage of this software purchase when determining the level of capabilities needed?
As if the spending of capital on too much software isn’t bad, the maintenance costs isn’t even included in that $5 million figure. Maintenance of these systems can sometimes be an additional 28% of the lists price. How much are companies really paying this “good” technology that’s not fully used? I feel that companies are extensively evaluating their projects, while paying close attention to their current technology assets. Companies are learning to now get the most out their assets because as seen by many other company, what you don’t know about your assets can end up costing you more than you ever bargained for.
I agree with the closing statement that stronger benefits of IT at lower costs along with simplicity and ease of operation is ahead as we approach the future.
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