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.
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After reading this chapter, I was pleased to see that the author finally suggested the path of pennies to be a weak approach. In past chapters, he provided success stories of how companies spent the bare minimum on technology and enjoyed much success from this ultra conservative approach. In past chapters, spending the least was kind of implied as the best approach, but this chapter finally claims that “cheap can cost” and that this approach could end up being the most expensive in the long run.
Next, I agree that following the path of profits can be the hardest because companies must exercise caution with how they spend on IT but aggressiveness with how they use it. What shocked me most was that JetBlue was the example this chapter used for a company that followed the path of profits successfully. First, the overall airline industry has struggled for years with many airlines going bankrupt. Next, JetBlue spends much less than traditional airline carriers, so I was skeptical if they could maintain competitiveness. Finally, JetBlue uses Microsoft as their key supplier, and as a past chapter pointed out, Microsoft works best with smaller companies, which JetBlue is not. Therefore, combining all these challenges I predicted that JetBlue was doomed for failure, but this chapter proved me wrong. First, by focusing on business goals, JetBlue could operates at a cost model 40% below other airlines and still enjoy greater returns. Next, their partnership with Microsoft provided significant savings in cost and standardization in technology that is simple to use. So while I was skeptical towards the author’s claim alone that spending less on IT can get you more, providing a real life story along with this claim reduced my skepticism and made me a believer.
I thought it was interesting that there are companies who have been able to leverage their use of IT and partnerships to profit within the age of technology. There have been so many failures and it makes me feel that technology use in major organizations isn't a loss cause because it's not impossible to find a balance between the benefits and cost, though it is very difficult.
In my opinion, I want to say. Even if the author in this chapter introduces us these four paths of IT spending, I don't think it is a very strict way for us to observe. But he really provides us a very good methods on our IT spending. What is the most important paths of them? I believe that most of the companies pursue the last one, the path of profits. That is every company's destination. However, this path is the most difficult one because it is not easy to combine the strategic technical vision with an understanding of business and operations.
That's true, the ways introduced in the text are not outline to be strict methods to be followed but observed. I feel that without the complete outline of the company's method such as "BlueSky" of getting on the path of profits, it will be difficult to accomplish. The book does give survival guide tools for companies.
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