Strategic Role of Information Systems in Contemporary Business Organisations - Case Study Example

Google Table of Contents Executive Summary 3 Introduction 3 Conceptual Framework 4 Findings and Analysis 5 Conclusion 9 Recommendation 10 Bibliography 11 Google Executive Summary Google is arguably the most used search engine in the world today, an advantage attributed to its unique search engine technology that incorporates the PageRank (a web page ranking algorithm) and application of knowledge management in all of its web-based applications. In addition, the firm uses an efficient distributed computer system to run its applications. In the information and communication technology world (ICT) today, the verb “to Google” is synonymous to carrying out a web search (Scott 2008:95). The key success of Google has been its strategic utilization of hardware and software information technologies, as well as adoption of knowledge management. Behind the Google search engine IT infrastructure are huge server farms and storage databases that enable the production of significantly high computational processing power. There is speculation about Google’s server farms, terabytes of storage disks packaged into shipping containers in order to allow for more set-ups of server farms around the world (Spencer 2011:35). These infrastructures are then distributed across numerous independent, which further provide resources for parallel computing. The arrangement has enabled Google to expand its market worldwide, surpassing the 100 billion dollars market capital as well as gaining admiration and respect all over the globe. Additionally, the paper uses Porter’s 5-forces approach to elaborate the competitive environment of the company as well as highlights its competitive advantages. Introduction The Google search engine is among the most widely used search engines in the globe. The firm has captured the hearts of information-craving individuals searching the web for everything and anything in their imagination. The growth of the company has been tremendous, dominating the search engine market by more than 60% worldwide (Scott 2008:162). Additionally, the firm currently has a market capital approaching the 200 billion dollars mark, which economically suggests that the company is doing great. The company capitalizes on information technology strategies to expand its market share, including improvement of its unique search engine algorithm as well as knowledge management techniques (Dalkir 2005:122). This paper seeks to analyze the conceptual framework of Google’s strategies and the application of knowledge management concept in developing and sustaining the strategic capabilities and the competitive edge of the company. The research strategy focuses on the recent adoption of knowledge management techniques in the search engine, as well as other application like the new social network Google Plus. The paper utilizes materials from educative and scholarly articles, journals, and books. Conceptual Framework The success of Google in the web-based search engine industry is attributed to the adoption of knowledge management principles in its search technology. Knowledge management is a powerful tool that Google has incorporated at the centre of its search paradigm (Fernandez and Leidner 2008:81). The search technology design is in such a manner that it polls the collective judgment of many web creators to optimize its search results. Consequently, the company has created a multi-billion dollar business empire from super-targeted advertisements that give magazines and newspaper classified a run for their money. Google was a first-mover in the many/ordinary business model, leaving most of the other competitors on the few/expert model (Bottletree Books 2011:23). The company capitalizes on the fact that search results be ranked based on collective judgment. The search results improve as more people conduct web search using their application, enabling Google to associate relevant contents with keywords. Findings and Analysis The development of search engines began in early 1990s with aims of facilitating information sharing among researchers. During that period, there was a consistence creation of thousand of web pages. The main method of searching the then expanding World Wide Web was through online document search, but this was a problem as the web pages were in disarray. This experience prompted the birth of online search industry. Most of the early search engines were results of university research, with Alta Vista emerging the first to perform a full-text web search (Chen, Lam, and Kramer). Brilliant graduate students and academic researchers were the founders of the early web search companies, though most of them were arrogant, young, and lacked the business experience and knowledge to run the companies. Additionally, the dot-com bubble of 2000 sent most of these companies out of business. Many search engine companies lost focus of the core products leading to decline of quality in their search results, which sent users to search for other alternatives. Most of these found their options at Google because of their positive customer attitude and experience. The popularity of the search engine spread wide through the word of mouth and their free advertising strategies. The founders of Google, Larry Page and Sergey Brin, focused on designing a platform that would distinguish it from other search engines by providing accurate, reliable, and fast search results to the users. Nonetheless, the efforts to license PageRank to companies like Yahoo and Alta Vista were futile. Google’s popularity grew as the number of queries increased. In 2000, Google held less than a percentage of the search engine market share, but quickly surpassed Yahoo in 2002 (Chen, Lam, and Kramer). In the past ten years, Google has become dominant in the search engine market, commanding literally the entire industry. Since the beginning of Google as a research project by two Computer Science graduates in Stanford University, the company has maintained its cause on the mission to organize web-based information all over the world and make it useful and accessible universally. During its first initial years of formation, Google’s business model was undefined for income generation. The co-founders brought in Eric schimidt from Novell. Under the new business leadership, Google developed their foundation on online advertisement, a venture enabled by their increasing web-based search engine users. The search engine and partner websites were the sources of profit growth and revenue generation. The firm introduced a cost-per-click scheme for its advertising clients that enabled the advertiser to pay a basic base charge and the number of referrals made to their site (Fernandez and Leidner 2008:124). The equation for calculating Google’s revenue is the product of multiplying the number of users by queries/user, adverts/query, clicks/adverts, and revenue/click. These metrics suggest that the revenue for Google is influenced by quantity (ads/ query * users* queries/user), price (revenue/click), and quality (clicks/ads). The advertisers can to bid or set a maximum amount they are willing to invest for their advertisement. Once the costs reach the set limit, the advert is taken offline. Google’s business strategy remain a secret, but their main foundation is evidently that of its services and products that get the best out of personalized advertising and advanced search technology (Kim 2011:571). For instance, Gmail, Google’s email service, allows users to search and store old mails using a search application integrated into the client, then displaying advertisements on the sides. These advertisements are base on the contents of the email that the user is reading. In addition, the user is able to note email contents with links to other Google applications like Google Map. Currently, the existing the search results are textual-based. However, the company is on the verge of adopting advanced technology that will allow the user to search for other forms of information apart from textual data, including multimedia contents like images, audio, and video. In order to maintain its reputation and leadership in the forefront of technological innovation, over the past few years Google has been acquiring software developing companies that are incorporated into their existing framework, and which can easily achieve Google’s leverage. However, Yahoo (Google’s main competitor) also uses the same methodology of acquiring small companies. A prime example is the acquisition of Stata Labs, Overture, and Inktomi by Yahoo to retrieve Yahoo email client, perform web search, and locate advertiser key words respectively (Vise and Malseed 2008:127). Additionally, Google faces a threat from Yahoo as the latter posses several search technologies for different products and services while Google only one such technology. Other competitors for Google include Microsoft Network (MSN), AOL, and Ask Jeeves among others. Various aspects pose a challenge to Google. Its applications have eroding public trust, weak customer lock-in, dependence on search advertising, and lawsuits, all which are risks to the company. Additionally, financial analysts claim that Google’s stock is overvalued, which has lead to a decline. Despite having twice as many advertising click-through than its main competitor, Google lacks the customer lock-ins and maturity than Yahoo. The latter has over 200 million customers in its profile that assist it in customizing search results (Babar, Lago, Vliet, and Dingsoyr 2009:61). Google began subscribing customers through its home page and Gmail recently. The online advertisement industry is currently doing great, but it may experience commoditization and thus the need for another business model to enhance its relationships with existing customers and entice them to new business horizons. Current Google online advertising customers enjoy Advanced Tools and Reporting, an application that assists sophisticated advertisers. Google also plans to integrate other products in advertising. Google Analytics is an application offered to advertisers enabling them to maintain a statistical and log analysis of the visitors and their interaction. The application integrates AdWords for key words optimization. The company has lately been shifting its attention to the Fortune 1,000 companies. Google currently holds approximately half of the market share on Fortune 500 companies, a significant share in the industry. The firm is also expanding the advertisement business to other mediums like print and radio. This is evident from the acquisition of dMarc broadcasting in 2006 (Vise and Malseed 2008:267). The companies is in the process of incorporating the AdWords platform with dMarc’s software to automate the placing and buying of advertisements. The main source of revenue for Google is online advertisement, which generates about 90% of the total revenue. Google has other products and services, including Google Earth, Google Map, Google Local, Google Images, Gmail, Google Desktop, Google Video, Google Books, Google Checkout, Orkut, GTalk, Froogle, and the recently launched Google Plus. Google is a leader in technological innovation in the industry. The company’s focuses on the development of revolutionary ideas and complementary services and goods. Among the company’s employees, more than two-thirds comprise of scientists and engineers working in the technology laboratory, Google Lab. The atmosphere at Google headquarters resembles that of a graduate campus atmosphere that encourages open mind. The company adopts a relatively flat organizational structure to prevent management from colliding with scientists and engineers. Additionally, Google implements the 20 percent rule where the engineers work on the main products 80% of their time and spend the remaining 20% on other pet projects. This rule has however changed to accommodate the 70/20/10 policy, where 70% of time is dedicated to online advertising, 20% on related products, and 10 % for other projects (Eardley and Uden 2011:36). Google offer its employees other services like barber, gym, massage, free laundry, car washes, commuting services, free food, and on-site oil changes. Google’s focus on information technology is cost and speed. The two metrics are vital in the search engine industry. The search results for a user must in the frame of a second. Google has a large cluster of PC network that operates in a similar methodology to a typical computing grid (Babar, Lago, Vliet, and Dingsoyr 2009:61). The information technology is still the old model of developing a prototype system, which uses intelligent software and commodity hardware. Google values overall price per performance over individual peak performances as it is based in parallel processing, a factor that contributes to its superiority in speed. Conclusion Google is a dominant force in the search technology market, posing a threat to the other stakeholders in the industry. At the back of the company, knowledge management and information technology have been the critical and strategic success factors for the company’s services and products (Dalkir 2005:91). Google services and products also incorporate advanced concepts in computer Science, including software architecture, distributive systems, communication networks, and machine learning. Google remains at the forefront of technological advancement due to its vision on applying knowledge management and advanced computing concepts at the core of its search technology. Will the company sustain its rapid growth in the market? The story of Google’s success is the beginning. The future of Google will be determined by time. Recommendation Google’s growth and expansion in the search engine market has been enormous. Its technological and innovational advancement still top the market. However, the company faces imminent threats from major competitors like Yahoo and Microsoft. The company needs to focus on improving its customer lock-ins. In addition, Google needs to broaden its horizons, probably into multimedia advertising. The recent venture into social networking by the application Google Plus is a great step, and the company should allocate more resources on the project. Lastly, the copyright, privacy, and political issues need to be solved. This will improve the public image of the company, and thus its services and products. Bibliography Babar, M., Lago, P., Vliet, H., and Dingsoyr, T., 2009. Software Architecture Knowledge Management: Theory and Practice. Berlin: Springer-Verlag Berlin Heidelberg. Bottletree Books, 2011. Google Advertising Guerrilla Tactics: Google Advertising A-Z Plus 150 Killer Ad-words Tips and tricks. North Carolina: BottleTree. Chen, R., Lam, O., and Kramer, K., 2007. Strategic Use of Information Technology-Google. Retrieved on Feb, 10, 2012, from http://www.crito.uci.edu/papers/2007/google.pdf Dalkir, K., 2005. Knowledge Management in Theory and Practice. Burlington, MA: Elsevier Butterworth-Heineman. Eardley, A., and Uden, L., 2011. Innovative Knowledge Management: Concepts for Organizational Creativity and Collaborative Design. Hershey, PA: Information Science Reference. Fernandez, I., and Leidner, D., 2008. Knowledge Management: An Evolutionary View. New York: M.E Sharpe Inc. Kim, T., 2011. Software Engineering, Business Continuity, and Education. Berlin: Springer-Verlag Berlin Heidelberg. Scott, V., 2008. Google. Westport, CT: Greenwood Press. Spencer, S., 2011. Google Power Search. Sebastopol, CA: O’Reilly Media. Vise, D., and Malseed, M., 2008. The Google Story: For Googles 10th Birthday. New York: Delta Trade Paperbacks. Read More