VTU EDUSAT PROGRAM - 17

IT FOR MANAGERS
MODULE 7
What is Strategy? Strategy is a long term plan formulated and executed over a period of time by firms such that their resources are best utilized and output of the firm is optimized. What is usually expected out of such optimal performance is profitability and competitiveness. Usually firms in the present day choose a five year time period for formulating and executing strategy. That is to say, firms see five years ahead of time and plan for what needs to be done during these five years. Then, they execute the plan withing the time frame of five years. Firms answer three important questions when formulating their strategy. They are: (a) Where are we right now? (b) Where do we want to go? (c) How do we get there? The first two questions usually are answered in terms of specific measurable terms such as Market Share, Profitability, Return on Investment, Sales Revenues, Margins, Share of retail space, etc., The second question requires the ability to forecast by estimating the environmental conditions five years from the present period. The third question requires the ability to think what needs to be done such that our goals are met inspite of the challenges that the environment might throw at us during the execution. In other words, we would be thinking how can the resources of the firm be adjusted in such a way that all the external environmental challenges that might come up during the execution are adequately met with while still being able to reach to where we want to go! For example lets say a firm, say, Hindustan Unilever Limited, wants to formulate its strategy for the next five years for its cosmetics product line. So here's how they would try and answer these three questions. Note that all data is fictional. (a) Where are we right now? We have 62.3% of the share of the market. Our margins stand at 5% of the revenues. We have about 80% of shelf space dedicated to our product lines in 90% of retail outlets in North India and 70% of shelf space dedicated to our product line in 75% of retail outlets in South India. (b) Where do we want to go? We want to achieve 80% of the market share. Margins should stand at 8% of revenues. We must have about 85% of shelf space dedicated to our product lines in 85% of retail outlets across India. (c) How do we get there? Decrease the prices of our products by atleast 5%, which might attract 10% of additional users in the market for our product line. Various sales promotions in various regions of the country depending upon the value perceptions of the customers in those regions to target 10% of additional sales across the country. These two steps would impact our margins and pull them down. Marketing expenses need to be controlled and

budgeted. Heavy advertising will take a back seat and social network marketing on the internet will be a priority. Trade promotions such as contests across distributors and awards for best shelf display, best shelf space allocation can be given. Training for distributors, fun events and holiday travel organization will continue as they were earlier. So, having said that, it is now relevant to take this concept a bit further and introduce a simple variation. If the firm is a lone player in the market, then the situation is the simplest. However, the market is a large and complex entity and hence cannot be served by an individual business firm for long. Thus, we can expect several others joining the competition. We can expect that there will be several firms that will be operating in the market, each with its own strategy. Let us switch over to the consumer's point of view. If the consumer had only one choice, the situation is the simplest. However, we have seen that the market comes up with a number of players which have a similar offering, each trying to get the attention of the consumer in its own way. Thus, the consumer has a variety of offerings to evaluate and choose from. Thus the market gets divided amongst the players. The one which has the most consumers buying its offering is said to be the best and is said to have an advantage, over competing offerings. This is also termed formally as the Competitive Advantage of the firm. The question that we now have to address is how can firms gain competitive advantage. More specifically we will have to address how IT helps firms in gaining competitive advantage over others. There are eight different ways of gaining strategic advantage. Lets list them down and explain one by one. Eight ways to gain strategic advantage 1. Reduce Costs: If a firm can operate at a reduced cost the impact will be there on the Margins. It is a well known fact that if we take away / substract costs from the revenues made by the firm, then we are left with surplus of money which is the margin of the firm. Reduced costs will result in increased margins. If the margins are higher they can be used for two purposes. First, they can act as savings for future investment. Second, the reduced cost can result in lower prices. As the law of demand states at lower prices more units of the product/service can be sold and hence more revenues result. IT, through extensive automation can help reduce the labor costs where labor intensive technology is used for producing goods. For example, the Japanese car makers made use of extensive robotics technology to carry out manufacturing of automobiles. This usage resulted in a two fold cost reduction process. First, precision in fixing the parts led to reduced to lesser mistakes. There was no need now for doing extensive quality checks and hence there was reduced cost of quality. There was also no need for reworking on the same car and hence lowering the labor cost and improving the time to market. Second, less and less of labor was needed and hence the overall cost of labor came down. With this, Japanese auto companies could claim higher quality cars, shorter delivery schedules and both of these at lower prices. The result was that during the 1980s the Japanese car makers flooded the US Market with new models of cars and gave a stiff competition to established car makers such as Ford and General Motors.

2. Raise barriers to new entrants: The easier it is to enter into a business venture, the more will be the number of people who would try various things. That gives a lot of variety for the consumer to choose from and hence becomes difficult to differentiate one offering from the other. Raising barriers to new entrants, keeps the pie of the market open only to lesser

number of players. This makes competition manageable and gaining competitive advantage becomes easier. By gaining protection on Intellectual Property and by increasing cost of entry, one can gain competitive advantage in this situation. Amzon.com, in its early days developed a process whereby a visitor to their site can accumulate all the items he/she wanted to purchase in one place and then make the payment at one shot, instead of making separate payments for each item. This was called the One Click Purchase method. Amazon applied for a patent on this method thereby forcing competitiors who wished to use their technology to pay royalties or not to use their technology at all. Those who didnt have this, had their customers go through a miserable time and thos who had had to have their offerings at a higher price than Amazon's and hence Amazon had a clear competitive advantage for a few years. Banks by establishing ATM networks make the cost of entering into business higher. If anyone wants to open a banking service today, they have to have a network of ATMs. The cost of acquiring space for it, the cost of setting up and managing ATM networks is prohibitively high. Hence there are openings for low scale players or niche players, which doesnt disturb the main banking competitive scenario. Thus, banks in the existing network have a competitive advantage over all others. 3. Establish High Switching Costs: Switching costs are costs incurred when a customer wants to switch over to a competitors products/service. For example, a non-refundable initial deposit asked by cable TV operator is a switching cost, as customers would not want to lose this money, in case they are planning to switch over to another cable operator. Similarly fixed monthly rentals on telephone services are also an example of switching costs. IT and IT Enabled Services can be used to deliver some of the services at cheap, flexible and convenient ways to the customer, thereby increasing the reluctance to switch, even though there are many other options available. These costs are not directly related to money, but are more psychological. For instance, take the case where you are finding your mobile phone service operator to be more and more expensive. 4. Create New Products/Services: This gives companies an advantage called the First Mover Advantage. Anyone creating a new product/service would go through a phase of checking and rechecking in the market if it works on a commercial basis. The amount of time spent in understanding the market is large and hence there is a learning curve prior to establishing the new product. This, is an advantage as other competitors do not have this knowledge. They may re-engineer the product technically, but may not have the capability to steer their ship to the port when the storm hits. The rate at which new products are created and delivered to the market is greatly enhanced by IT frameworks. With the existing telecom infrastructure, the World Wide Web, converging hardware and software standards, one can collaborate and share information and knowledge making distance, time and form irrelevant totally. Thus, teams across the globe can come together and create products and services at an astonishing rate. Nokia used to produce one new model with distinctive features every three months. Television makers make one new model every six months available in the market place. The knowledge and wisdom of people (including customers) across the company the reach of which might span several continents can now be collectively utilized to do this impossible feat using IT frameworks. From a competitive advantage point of view, the time taken for an idea to get to the market as a new product is drastically reduced, making new product creation a continuous process rather than a specilaized effort. The constant ability to innovate makes the company a wanted one, since

consumers are sure that the organization is going to keep them aloft with latest offerings which are well researched and are accepted by consumers easily. The participation of the consumers right from the stage of ideation to completion of the manufacturing of the product, makes the adoption and diffusion of the innovation much easier to manage. 5. Differentiate Products/Services: In a world that is full of competition, there is no end to product variety. Thus, after a while it would be difficult to say which product is better than the other and in which way. Many products/services are rather undifferentiated in their corest form. For example, any bank that you might name does the same core services as any other. In this no bank differs from the other. But, what differs is what the banks do to customers other than doing the core services. For example, ICICI Bank might extend its banking hours till eight pm in the evening, while others might not. Since this bank does this differently, its services stand differentiated in the market. An interesting example of how differentiation is more psychological than not is demonstrated by researchers several times across the globe. These are called Blind Taste Tests. People were given a Cola Drink in a glass without any labels and were asked to say if the drink was Pepsi or Coke. To everyones surprise consumers got thoroughly confused about which drink it was. Researchers then went on to say how much of differentiation is in the consumers mind rather than in the core offering. At the heart of it, any Cola drink is the same. The difference lies in the minds of people drinking the beverage. IT helps in making the products different. Advertising on the Internet was a challenge. Majorly because people didnt find the right Ad at the right time. The advantage of Advertising on Internet is that people come to the Internet seeking for information and when information is provided to a seeker, it actually gets processed and helps him/her make a choice. Simple as the logic seems, the challenge was to get that information that is being sought after by a visitor on line. Google developed a new technology to deliver context sensitive advertising. Delivering advertisiements that were relevant to what consumers were searching at a given instance of time proved to be a more fetching strategy for advertisers, becuase the seeker of information is more likely to click on an ad that gives him more information on what he/she is seeking than not. And google really was able to differentiate its advertising model from others and hence got a huge competitive advantage. This combined with protection of Intellectual Property can help a firm be very hugely competitive. No doubt that coke holds a patent on its recipe and Google has IPR on AdSense and AdWords. 6. Enhance Products/Services: Enhancing product experience is another strategy to gain competitive advantage. Adding new features to the product/service, making the customer interface with the organization better, increased convinience of two way interactions between consumers, and the like are many tactics that firms use to enhance products/services. Lets look at Printo. Printo is a go-between business model that places itself from the bulk printing traditional but inexpensive printing services and the light weight but expensive DTP works run by individuals. By combining email, document management systems and electronic billing, it completely enhances the customer experience. Today a customer can create his/her own calendar or dairy by logging into their website, downloading a template from a catalog, personalizing it, uploading it for printing, paying for it online and getting it delivered to where it all began. Thus, many small and medium scale enterprises find this an interesting proposition. Thus, a whole new business model has come out in the name of enhanced customer experience using IT as a basic way of working. 7. Establish Alliances: Allinaces with suppliers, vendors and customers are critical to the success of any businesses. Strategic Alliances, in fact, are the order of the day. Alliances

allow the firm to gain cost advantages, without taking on backward integration through captive units. A vendor or a supplier of specific components of a manufactured product is not your supplier alone. He/she is a supplier to other competing firms as well. For example, Intel sells its processors to IBM as well as HCL and DELL. But, lets say, if IBM has a strategic alliance in which, using its own supply chain, IBM can deliver back reusable components of microchips to Intel and help it to reduce its cost, then Intel would be willing to supply microprocessers to IBM at a cheap cost. If HCL and DELL cannot follow suit, then IBM will have an advantage over them. Using IT, it is a lot more easier to collaborate with the suppliers and vendors. Usually, suppliers and vendors are smaller business entities which, sometimes, might be wholly dependent on one firm's orders for their business. Helping them to scale up their business model and helping them to have efficiencies of scale and specialization always brings about a kind of loyalty that is difficult to break. IT helps do this. For example, helping a vendor to be integrated into a firm's own ERP solution seamlessly, helps reduce information lags and leads to implementing of JIT systems that not only result in profits for the business but also for the supplier. A striking example of this if how Travel Websites collaborate with Hotels, Tour Operators, Transportation Services to deliver Vacation Packages to its customers. Whether its GoIbibo.com or TravelYaari.com, the site will help its customers to pan and execute a neat vacation at cheaper prices through their collaborations. Right from booking flight tickets to planning site visits and entertainment during the vacation, every single aspect is managed, at a cost that is a fraction when compared to what the customer has to go through if that has to be done individually. 8. Lock in suppliers and buyers: Suppliers and buyers can be locked in by asking them to collaborate only and only with the business entity and not with any competitors. For example, if Toyota puts in a condition that a person who owns Toyota Showroom cannot own any other car showroom in the city, then Toyota has attempted to lock in a retailer into its network. Gillette uses extensive trade promotions to lock in small retailers. Offers such as free merchandize and higher slotting fees often represent a huge opportunity for the retailer to make more margins and hence are a good way to lock in the retailer. Similarly training of vendors and other terms and conditions which can be legally enforced on the supplier, makes the lock in stronger. Getting to leverage on the IT expertise of the manufacturer is a huge lock in factor for many suppliers. Suppliers and vendors, being small and medium business maynot have the resource base required to deploy and work on high end software architectures such as ERP Systems, which bring in cost savings. Thus, when a company offers such a platform, the vendor gets locked in into the system. Dependence on the manufacturer in any form, is therefore, a candidate for locking in. CRM software that enables a company to know the customers better are really a great help to lock in buyers. Getit Yellow Pages has a telephone service through which we can know the locations of shops and small and medium retail outlets such as medical stores, plumbing joints etc. However, they have a system through which they can systematically track and identify patterns of searching for information based on customers queiries over a period of time. This gives them the ability to interact with customers on an intimate basis, irrespective of the human being handling the call at the given instance of time. That experience of dealing with Getit leaves the customer sometimes delighted and hence the lock in. Components of telecommunications system Telecommunication systems

Telecommunications refer to the communication of information by electronic means, usually over some distance. Telecommunications system is a collection of compatible hardware and software arranged to communicate information from one location to other. Having said that its a system, we can now go on to examine the components and functions of a telecommunication system. The simple sentences are self explanatory and hence I will not go into a detailed discussion of each item. Where relevant I have provided additional material for understanding. However, our interest lies in looking at what the telecom systme can do to us, rather than on the technical details of how it functions through its components. Components of telecommunications system Computers to process information. Terminals or any input/output devices that send or receive data. Communication channels, the links by which data or voice are transmitted between sending and receiving devices in a network. Communication processors, such as modems which provide communications support for data transmission and reception. Communication software to manage network Functions of a telecommunications system Transmits information Establishes the interface between sender and receiver Routes the messages along the most efficient paths. Since computers and terminals in a network can be connected in multiple ways, there are different paths from a sender to a receiver, the telecom system figures out a path in such a way that transmission and reception is done in an uniterrupted manner and at the same time through the shortest path consuming the shortest time. Ensures that the right message reaches the right user. Performs editorial tasks such as checking for transmission errors. Converts the messages from one speed to another. Networks use communication channels and other hardware and software that vary in their transmission and reception speeds. The telecom system is responsible for managing the speed of transmission and reception irrespective of what type of channel and which type of other hardware and software is used. Converts the messages from one format to another. Networks often have information processing hardware and software which require information to be presented for processing in a given format, when information is not in that format, its not processed and furthered on the network. Thus, converting information from one format to another is a very important function of the telecommunication system. Controls the flow of information. Having known the above, let us now review what value does telecom networks carry when being used in business organizations. In other words, we will be seeing what business organizations can expect out of using telecom networks. Business Value of Telecommunication Networks Reduced Transaction Costs A transaction is an exchange of goods/services by the producer for money from the customer. Each transaction, if it has to take place, is associated with a cost. For example, if you go to a bank to with draw money, you may have to fill in a form, give it to a cashier, who records the transaction in a ledger and passes it on along a chain of decision

makers, removes the cash from the vault and gives it to you. The form, the cashier, the ledger, the vault arent free. Right from the cost of real estate to the cost of labor, this exchange involves a series of costs called Transaction costs. Telecom systems by handling the flow of information and by allowing people to collaborate with each other help reduce the transaction costs. For example, an online store, selling books, can completely avoid having a physical book store. So the cost of real estate, sales assistance, inventory costs can all be avoided getting the price of the book down to a great extent. Similarly, a bank, using an ATM, drastically cuts on the labor cost as well as administrative costs of managing information. Thus, at a lower cost, higher amounts of transactions can be managed. This brings the average cost of transaction to a fraction of the cost of setting up a full fledged branch.

Reduced Agency Costs Agency costs are the costs that are incurred by a firm in order to setup and execute a managerial process that enables the exchange of products/services in the market place. For instance, if you have a grievance about your banks services, you approach executives who can address the issue and resolve it such that you continue to use the banks services. These are managerial professionals who can figure out what went wrong with the system and make changes such that such mistakes are not repeated. They have nothing to do with the transactions until the process of making the transaction happens goes kaput. For an executive to figure out what went wrong with the system and how the system can be improved, information from various sources would be required. To collate this information is the first step. Second, to assess this information in the light of the task to be performed, in the light of the policy to be implemented, in the light of the steps to be taken to reconcile from the deviation is another task. Thus, we can see managerial delays in making decisions are a function of (a) avaialability of information and (b) the skill of the decision maker to see this information from various perspectives and make a choice. Using Telecom services it would be easy to collate information and to process it in multiple ways in a very very short period of time. This results in Higher span of control of each managerial professional. Meaning the ability to handle more number of people on a timely and effective basis. Further meaning less number of managers are required to manage more number of people. Lower information overheads. Meaning lower cost of processing and using information that is already present with the organization. Increased Agility By transmitting and processing information faster, the response times across organizations reduces drastically. The response time for customer demands, for supplier's requests and employee requests come down as the speed with which information travels across the organization improves. If demand information can be transmitted across production units, decisions on how the demand can be made use of to result in more sales can be made faster. Thus, when an opportunity for serving a market is spotted, the time which the organization takes to respond to that active demand is reduced. This time is called Time to Market. The time to market can be furhter reduced, if employees can easily collaborate to create the framework needed to fulfil an active demand. Using telecom systems, the best talent across the company, irrespective of its location, can be brought together to collaborate and find a solution to exploit an active opportunity.

Suppliers are a key for increased agility of the firm. By talking to suppliers and making sure the information is available to them as fast as allowed by a telecom system, they can be kept informed and collaborative plans for exploiting market demand can be made. Higher Quality Management Decisions Managerial professionals now dont have to run an arsenal of information processing executives to arrange, sequence, sort and find pieces of information that is valuable to decsion making. All that can be done by connecting computers using a telecom network. Thus information is made available on demand, wherever you are and whenever you need. This ability leads to management professionals focusing their time and effort on the issue at hand rather than on verifying and re-seeking information from their organizations databases. Further, this leads to higher quality managerial decisions. The ability of the organization to present information in wholistic, rather than compartmentalized, form leads to the formation of the complete context rather than looking at the problem/deviation from a single context. Hence professionals make better choices than when such information is not presented. Declining geographical Barriers The World Wide Web or the Internet's presence is a huge barrier breaker. The entire outsourcing industry which is thriving in our country is based on telecom infrastructure. What is a non-core business operation for a firm is now a core business operation for another. For example, tax calcualtion and auditing is a non-core busines operation for an automobile maker. His main focus shall be on designing and selling effective automobiles based on customer demand. However, taxes and audits are an essential formality to be legally complied with. So, what many firms do today is that they hire a firm which does the auditing and taxation for them by examining their documents, while the firm focuses on design and sales of automobiles. These documetns can be electronically made available and the resulting reports can also be electronically made available. So, a finance executive can transmit the documentation at 6pm (when he leaves home) to an Indian BPO for processing and by the time he returns back to office the next day at say, 9am, there is a report waiting for him to see and say okay for the audition. The Indian morning and the US evening are at the same time and hence this magic can happen.

Having discussed about the above, we need to now look at the capabilities that the system must possess to deliver such business value. The following are the capabilities of the system. These have been sufficiently elucidated in the above discussion and hence are being touched in brief here. Capabilities of a Telecom System Ability to manage communications with Employees, Customers and Suppliers Provided connectivity on demand Whenever, Wherever Manage communication channels for Text, Voice, Data, Images, Videos: Suffice it to say here that, all data can be transmitted through a single channel, but depending on the complexity of the data to be transferred the speed limits will vary. Hence managing communication channels for handling a variety of data is an essential capability. Types of Networks

Small Networks These networks have a very limited range ranging a few kilometers at their best. Thus, they dont extend beyong a city limit. If they do, they become very expensive. All these networks are connected by physical cables. The following are the examples LAN Local Area Network. Range is within a few hundred meters. Maybe a whole building can be connected using a Lan. Very limited serving capability and data transmission rate is low. Very fast communication when the number of devices is small. As devices get added the speed goes down and the errors in transmission increase. WAN Wide Area Network. Connects maybe a couple of buildings next to each other. Uses physical cables for connecting. Except for a wider range, other features are similar to LAN MAN Metropolitan Area Network. Connects different locations across a city. Uses telephone lines for communcations. Also private communication channels can be established but are usually expensive. We can think of a MAN as a network of several LANs. Features similar to that of LANs. More complicated to manage as several networks have to come together.

Large Networks These networks can extend beyond city limits and usually use telephone infrastructure or a fibre optic cable infrastructure to connect beyond city limits. These systems are more complicated to manage and often involves dealing with a third party service provider. Intranet A term used to refer to the network that is accessible from anywhere within the company premises only to the authorised users of the organization. Requires to ride on either a government telecom network or a private one on a leased basis. If the requirements are limited and/or huge privacy is required, organization usually set up their own teams. Extranet A term used to refer to the network between different organizations that need to collaborate to fulfil a market need. For example a supplier or a customer such as a retail outlet can be connected to a company using an Extranet. Again a government telecom infrastructure or a third party service provide would be involved. Internet A network of all networks, publicly accessible to everyone across the world. Usually also know as the World Wide Web, its the most dynamic of all networks and also the most complex.

Wireless Networks Do not require any wired connections and hence are more convenient to use. Usually used to increase mobility and as a complimenting force for Large Networks. Bluetooth Has a range of upto 10 meters. Data transmissions effective upto a few MB of data. Usually effective for text and voice data. Vidoe, Images and other types of data would be painfully slow for exchange. Wi-Fi Wireless Fidelity networks. Have a range of about 100 feet from access points. Has low security and Interference from other devices is not handled appropriately. Wi-Max Wireless Interoperability for Microwave Access. Uses Microwave transmission technology. Access range is around 31 miles. Uses antennae to beam signals at high speed.

Managerial Issues of IT The usage of technology brings about several challenges as people begin to discover how technology can be of help to them in their own personal way. The relationship between technology and the society is a very interseting phenomenon. To understand this we have to look at the whole thing in two different ways. First, as said in an old adage, Necessity is the mother of invention. People in a given social setting face challenges to their living style and this challenge provokes them to discover and/or invent new tools and techniques which give them the opportunity to bring about the necessary change in their onw life styles. For example, writing was proving to be a pretty difficult task and was error prone and so the printing press was born. Same way, moving things from location to location was difficult and so the wheel was born. Name a noteworthy invention or discovery, it was done by someone who tried ot solve a specific problem related to or associated with a social life style. Second, as people put to use the technology, it shapes their life styles. That is different people use the technology for different purposes and as the scope of its usage widens, the technology evolves and goes through iterations that were probably not even been thought of by those that invented it in the first place. The potter might have invented the wheel for making his potter's life easy. Someone took it and built a cart and carried things around with ease and grace. Someone else tied a horse to it and made it into a fast moving vehicle, someone else gave it to a kind and made him fight differently, and someone else built a roller skate, and the story goes on. Sot the impact of technology is two fold. First, the society initiates the building of technology and hence the technology would be shaped initially by a social need. Then as the technology is put to use in a given community, it shapes the way the community is structured and as its adoption grows in scale it becomes central and influential for the existence of a certain kind of life-style. Having said this, let us now examine what Managerial issues are present in the usage of Information Technology. Suffice it to say here that it was business that actually grew the need for information technology and nurtured that demand for quite a while and now the same technology is shaping the way business is carried out and the evolution of the digital firm. Managerial Issues of IT Ethical and Security Challenges There are many ethical and security challenges of having information online. We shall see them in a separate session dedicated for the same. Managing the Structural Changes IT brings strucutral changes as organization structures, job roles and job descriptions change with the introduction of and wide spread adoption of IT Managing the IT Function The IT Function is a speacialized function that helps the organization built, operate and maintain the techonological base that it needs to run its business. From one person division for small businesses to a completely functional team of several hundreds in multinationals we will see which aspects of managing the function require attention and which garner lesser interest. Managing Structural Changes 9. Organization Structure Changes with the use of IT: The usage of IT, as we have seen earlier can either reduce labor cost at the lowest echelons by heavy automation and at the higher levels can replace managerial work. Thus, when less people are required, the nature of the

organization and the strucutre that represents how the organization is governed undergoes a change. What we mean by structural change is the change that is seen in the authority responsibility relationships that people share. (a) When the span of control increases, the organization is expected to become flat. There are two consequences of this structural change i. The speed at which communication reaches the top management becomes very fast. Thus we can see most people at the top levels of management experiencing a flood of information coming their way. Unless executives are trained to handle this information overload, it becomes a burden and an unwanted intervention. However, the top management being known as closeby and approachable is a definite plus. ii. People would end up spending more time on email, tele conferences and other impersonal or semi personal forms of communication. This leads to a feeling of not being personally in touch in many cases. However, people can be trained to handle this psychological side effects and be able to manage their teams better with the help of technology than without its help. 10.Roles and Job Descriptions go through a change (a) The jobs of people, how they report, what they do, how they do whatever they are doing, how they manage people, how they impact others with their communication, everything undergoes a change and this finally requires a change in the role and the job description of many people in the organization. The digital firm requires someone who is not only trained in technology, but also trained in handling the socio-cultural issues that crop up during the period. 11.Managing the learning curve (a) People need to constantly learn and upgrade. The more technology is being shaped by our needs, the more it will shape us and our needs further. Thus, learning is a continuous process in digital firms, and learning curves of the people must be given adequate attention. Slow learners might turn out to be detrimental to the system, which quick adapation would require frequent upgrades to newer and better models of IT for organizations. Managing Structural Changes Managing the resistance to all these changes One thing which is taken for granted, which will probably seldom change, is change itself. And when things change people are not going to embrace it with open hands. There is going to be resistance to change. Usually, people do not embrace that change which requires them to make an alteration in their context of life itself. IT is a powerful change in peoples life and it demands that people think and act fundamentally differently. Thus, one can expect that there would be a great deal of resistance to this change. Managing the resistance is a very major issue in organizations Those who are tech savvy suddenly embrace change and would be seen as power usurpers and would be hated by those who held power earlier. This way of looking at things is detrimental to the progress that the technology can bring. Those who resist changes in IT being sought after by top management are usually looked upon as rebels and conservationalists. But, they also may be those whose contributions have been key to the success of the organization. Thus identifiying those who are resisting change, finding out their reasons for resistance and giving them time and space for a change are the usual tactics that need to be followed. Formulating the Information Policy

Information policy is the policy that determines who gets what information and how that information can be used by different groups of people in the organization. It consists of the following Parts Access Rights: Who accesses which information at what point in time? Who is the one who has authorized them to see that information? Which information is wanted, and how long it is required? What will be done with the information once it is accessed and processed? What are the outputs required and why this information input is needed to produce the output? These are some of the questions that are asked before granting the access to information which is not within the direct scope of the seeker. Disclosure Information can be protected, but it must also be disclosed to the right people at the right time so that decisions are made effectively. Also concealing information, even unintentionally, leads to lack of trust. Thus to build trust amongst employees, customers and suppliers, sufficient disclosure of information must be there. At the same time the disclosure should not lead to any advantage to any singly group such that the other groups are victimized. Distribution and Usage Where the information is flowing? Whether it is allowed to have free flow or not? Whether the usage is permitted or not? How can the usage be done such that enough information is disclosed but enough is concealed from competitiors? Such are the challenges being faced by professionals and IT practitioners when it comes to distribution and usage of information. Privacy of customer and employee information is a very critical aspect. Customer databases, and vendo databases are usually very attractive sources of income if one decides to sell them for a profit. However, such distribution of information leads to lack of trust between all the three parties. This makes the job of information collection much more difficult. That is to say that people will not be interested in revealing any information as they would find that its usage is not appropriate.

Managing the IT Function IT function is usually outsourced Sometimes its cheaper, easier and efficient to let someone else who is good at managing the IT function manage it for the organization. The core business of the organization, in that case, gets more time and attention than the supportive function and hence the outsourcing option is looked at. Managing the interfacing between the IT Solution Provider and the organization It requires a special interface to manage an outsourced function. The business to which this function is outsourced might not be in complete alignment with the organizations mission and goals. Hence it would require special attention and wise interfacing Managing the dependency on the technology Too much dependence on a given technology will lock down the firm to a few vendors and therefore, probably might compromise the firm's goals and objectives. Thus care must be taken to have alternative technology plans and crisis management plans when things are not working out and the vendor of IT is being manipulative.

The Internet: Evolution and Revolution Basics of doing business on Internet The Internet: Evolution and Revolution

The Internet actually began its journey in the late 1960s as an experiment by the military and a few academic researchers called DARPA. In fact four computers were connected in the experiment to see how information could be exchanged over them in real time. This experiment's success lead to an expansion in connecting many computers, especially in the academic community as they could exchange research based information without doing much of travel. Thus began the utility of having connected computers. However this revolution was slow. Once Business Enterprises saw the utility of such networks, the whole scenario turned out to be different. The early 1980s saw an increase in the number of Internet hosts being available as businesses started to create networks which are accessible, not only to their employees, but also to their customers and vendors. As time passed by, we can see that an almost vertical growth took place in the number of hosts and by the early 1990s, the Internet amongst the business community was a well established phenomenon. What is noteworthy is the amount of technological innovations that happened around this phenomenon. Ability to connect devices manufactured by a variety of hardware companies, standardized way of producing devices such that they are compatible with each other, establishing, refining and implementing different protocols for reliable communhication delivery, developing the ability to handle various types of data in an effective manner, etc., laid out the foundation for the ultimate network of networks called the Internet. After the 1990s the Internet through the World Wide Web became a common phenomenon even in the households. Avaialability of information that is useful for everyone, cheaper, faster and better devices such as personal computers, mobile phones, etc., helped to accelerate this phenomenon. Thus, we can see that the outreach of the network in terms of hosts available and in terms of number of hits each host was receiving is pretty vast. This could not have been achieved if the above stated supplimentary phenomenon have not happened, when they had to happen. Revolution!! Revolution is when a large set of people start to fundamentally THINK AND ACT differently from the normal and accepted ways of thought and action.

The availability of information on line whenever and wherever needed, the ability to connect to the Internet whenever and wherever needed enormously altered the way of thinking people had about their work and personal life. Availability of connectivity on demand helped business to think of new ways of interacting and engaging customers, vendors and employees. Hence we can see that the Internet did bring about a Revolution to the very fundamental way people lead their lives. The Internet Revolution New ways of communicating and connecting with people Telephone Vs Email Vs Social Networking: As information started travelling faster than humans can travel and as information could be organized in a personalized form that aided the understanding of the individual, more new ways of communicating and connecting with people started emerging. Telephones and then emails and then social networks made it possible not only to inform people about the businesses, but also to engage them in a variety of activities, collect feedback and analyze it for effectiveness. Hence a whole new way of delivering business results opened up because of Internet Access to information Information, Knowledge, Discovery&Invention: Its not only about accessing of information, but also about processing it in different ways, to suit different situations and thinking styles, quickly and effectively that leads to Knowledge, Discovery and Invention. The Internet, with its ability to cut across communication channels, networks and data types enabled people not only to access information, but also to process them and personalize them in ways that suited their tastes and preferences. The result of such processing can now be shared, re-analyzed and re-shared. This ability leads to knowledge and discovery and invention. 12.The Internet Business Models (a) B-2-C E-commerce: Also known as Business to Consumer sites. These sites allow customers to browse for information, place enquiries and orders, engage in conversations and pay through several online methods i. Flipkart (b) B-2-B Exchanges: Also known as business to business sites. These sites allow vendors and suppliers to exchange information with each other. i. FedEx (c) B-2-G: Business to Government sites. Allows a business to connect to a governing and/or regulatory body seemlessly and interact with them on several policy related matters. i. E-Governance (d) C-2-C: Customer to Customer sites. Sites built by organization where customers get to know other customers, and engage in active discussions on their needs and wants. i. Wikipedia, Facebook An Example Given below is a self-explanatory diagram of how the above business models fit into an enterprise system. As we ca nsee B2B and B2C models, different types of networks can be integrated to suit the needs of the business strategy.

Information Flows The Diagram below refers to the hard product flows and the information flows throughout the supply chain beginning from the suppliers and ending with customers. The Solid Red lines are the hard products, the dotted red lines are soft information products, the dotted blue lines are orders and payment flows. One thing that is clearly evident from the diagram below is that the pace at which business can be carried out is now the pace at which the hard product can be moved from the supplier end to the customer end. The soft and information products from no real barriers as their speeds are independent of and faster than the speed at which the hard products move.

Having said that let us now take a look at the various things that need attention when we are doing business on the Internet. Please note that fulfilment is a very very critical part of any e-business model as the rest of the transactions are carried out on-line. Five key components of running a business Location and Hosting Traffic: The location and hosting depends on the size of traffic expected. Image: Different hosting services ranging from free hosting to exclusive and customized hosting are available. While free hosting requires you to ride on someone else's website

name, it gives you access to be present on the Internet, exclusing and customized hosting is often flexible and expensive. Choosing the host with an appropriate image is critical for the Internet business to be successful or not. Competition: Number of players being hosted in a given location and the traffic spread across the players is also a noteworthy factor Convenience: How quickly and easily can the information be presented to the customer and how flexible can it get when it has to be presented across different gadgets. Size Bandwidth, Processing Power, Data Storage: The size of information and the amount of information transfer per unit of time will determine what are the requirements for bandwidth, processing power and data storage. Domain name registration This is often cumbersome as many domain names (the website name) are already taken and one might have to pay for the name registration service. Hosting Free hosting: Some service providers offer free hosting services. Usually experimental startups and people who do business at a very fundamental level use these services. Usually they are very limted and do not allow complex e commerce transactions to take place. Shared Server hosting: Several people share the server, but the domain names will be unique. However, the amount of space available will be limited. If competing websites are sharing the same space, then possible security threats are many. Dedicated Servers hosting: Dedicated servers are host computers that are exclusively given for the use of the e-commerce business. The whole of the data and software is exclusively of the domain holder and greatest felxibility is available here. Co-Located Servers: Servers located in large and unique infrastructural setting that enables the servers to perform better and cheaper are called co-located servers. By sharing infrastructural facilities the cost of the server and the service comes drastically down. In-house hosting: Organizations own hosting without depending on a third party hosting service is called in house hosting. This type of hosting is preferred either if there are high level security concerns and/or when the organization wants to have everything under their control.

Marketing and Presentation Next task is to attract and retain customers through a variety of awareness-building activities Advertising: A traditional way of getting attention from customers. Different print and electronic media are avaialble for the same. Guerilla Marketing: Its a technique of hiding the marketing effort till the last minute and unleashing a plethora of activities that can take the competion by surprise. The following are some of the characteristics Characteristics of Guerilla Marketing (Traditional & Web-based) It does not include overt media buys. That is media buying is kept secret. It relies heavily on word-of-mouth to spread its message. The competition cannot sense it as it is informal communication It is generally used by companies with limited budget. Its cheaper and requires a special talent to use informal and non-traditional wasy to attract customer

attention. Additional Web-based Techniques Affiliate Programs Marketing programs designed to enable merchants to mobilize other websites (affiliates) to help sell products, produce traffic, or build brand Viral Marketing Company-developed products, services or information that are passed from user to user Direct Marketing Involves direct contact between the company selling a product or service and the intended customer Often considered intrusive and annoying Examples of direct marketing: e-commerce: Unsolicited email (spam), newsgroup postings, etc. Presentation In addition to traditional advertising methods, e-commerce can use Web-based marketing efforts Search Engine and Directory Listings Search Engine Optimization: The process through which a website can make itself appear in the top ten list presented by various search engines. This can be easily done by knowing how search engines evaluate information being presented on a website and place a rank on relevance of the site to the seeker of information Paid Placement : Sponsored placements where the advertisement appears at a preferred spot such as on the top of the webpage etc., Banner Adds Most common advertising product on the Web Can be highly Targeted: Can be displayed to only those customers who are actively seeking information.

Presentation Presentation serves to add or detract from products appeal to customer. It helps to draw and retain customers to a store Aspects of Online Presentation User Interface: It is a very critical aspect of any e-commerce business Is the e-commerce equivalent of Store Layout for brick-and-mortar stores Should reflect the theme of the store represented, be easy to navigate, and be pleasing and viewable to the stores customers Information Access (database navigastion) Website should be fast and easy to navigate. Usually when information from a database has to be retrieved and processed to fit into the user's needs, it takes a long time to interact with a database service. This was so earlier because the data services were not an integral part of the world wide web. As business enterprises started using the web, these services became important and today are an integral part of any web based application development tool Customer Service Defines the customers experience It is a leading driver of customer retention e-commerce does not allow for real person-to-person live interaction Payment Cash-on-Delivery Models: This delivery model is very critical in India as it avoids online payment. The reason this model is popular is because of two reasons. First, the reach of credit cards and the internet payment gateways is very limited and the businesses expand byond this reach. Second, there is a lot of insecurity associated with online payments in terms of cyber theft and cyber crime. Hence this is a preferred mode of payment. On-Line Payment Models Credit Cards / Debit Cards: submitting account and card information so that the website can access the bank's website and do an online transfer of money. PayPal: A peer-to-peer payment system in which bank account and electronic transfer of money is handled completely by a third-party and the rest of the exchange happens through emails. Mobile Payments: Same as credit cards, but payments are done through a mobile phone rather than through a credit/card

Security e-commerce stores require more sophisticated and technologically complex security measures Attacks can potentially come from a worldwide base of hackers Potential for damage in the event of attack is much greater Fulfillment Fulfillment encompasses all activities that enable merchants to complete customer orders It is a significant factor in determining profitability of an e-commerce venture For e-commerce, fulfillment is similar to that of catalog sales

Burden of delivery is placed solely on merchant Challenges of e-commerce fulfillment Customer demand for Transparency Providing increased information demand from Web customers requires seamless integration of different systems and information sources Multiple Activities and Parties Must be capable of handling many activities and parties simultaneously Multiple Systems Must be able to coordinate between different platforms and computer systems Capacity Utilization Must be able to accommodate fulfillment during peak times and yet have efficient capacity utilization during valleys. This can be accomplished by outsourcing fulfillment to third party e-commerce service providers (ESP)