As we saw in the Zara and Schwab cases, there comes a time in almost every organization's life cycle when it must make a decision as to whether or not to invest in or upgrade it's information technology. When that time comes, it is important for the company make a multi-factor assessment which should include itself, its customers, competitors and partners.
The company must assess itself to determine whether its employees and management are capable of implementing and utilizing the new system. It must also consider what its strategic advantages are and whether the new system will further those advantages or hinder them. As the article Putting the Enterprise into the Enterprise System explains, an IS must be customized to fit the business rather than the business process being altered to fit the IS.
Secondly, the company must consider what its current customers value most about the goods/services it provides. Will the IS further promote these factors or detract from them? Furthermore, will the new system allow the company to attract new customers by offering different or better products/services? What about current customers? Will they be continue their relationship with the company or will the new system alienate some of the them? We saw in Zara that their customers value contemporary fashions, reasonable prices and ever changing selections. If the implementation of a new IS would require the company to raise prices, how many customers would that drive away? Would the company realize other benefits to make up for the loss of customers? That was likely a very key consideration in Zara's decision.
It's also important to look at what the company's competitors are doing with their IS. Are they gaining a strategic advantage as Schwab's competitors were by offering low cost brokerage accounts? It only takes one competitor to change the face of an industry and drive its competitors into bankruptcy. This phenomenon is mostly readily evident in the retail book sales where Amazon has become the dominant player and is driving Barnes & Noble into bankruptcy.
Finally, companies need IS that are compatible with their vendors and distributors. Today, many business processes are automated and so all players in the supply chain must be have IS that can "talk" to one another. Failure to implement such systems will make it more difficult for a company to work with its supply chain partners and may mean that the company will be cut out of the chain and be forced to find other partners, or simply shut its doors.
There is another consideration that an IT Manager should evaluate when making this decision. How long before the next big release? If a company spends millions of dollars on a new system and 6 months later a competitor to your IS (or worse, the same company) releases a new, far superior product, you can't adopt it because you just spent a bunch of money on your now outdated system.
ReplyDeleteIt's a difficult thing to know, but if you assume it's likely to happen, you take on a mindset of "If this is outdated sometime in the immediate future, what features would it need for me to be OK with it." Which it seems to me is the best mindset to have.
To add on to Christopher's post, I would like to state that maybe a company which is scared of its upgrade in IS becoming outdated can do a bare minimum upgrade. This way, even if its competitor does a major upgrade in the near future, the minimum upgrade won't cost you a lot of time, money, and resources. I guess the main problem with doing the bare minimum is that you might have to constantly do it and this can rack up the bill. Also, while performing the minimum upgrade, your company will not be getting the latest and greatest in technology. So there are downsides to everything.
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