Business Value of Information TechnologyThe first value added function in an organization is Inbound Logistics. This involves the processes of procurement and obtaining the input materials required for the process of manufacturing, putting them together and making an output product. Data is the major input used by several organizations and the process of data collection is done intensively with the information technology skills. This function adds value in information organizations since it enables procurement processes such as supply chain management, electronic data interchange, E-procurement and just-in-time approaches to manufacturing.
This function can also add value through cost reduction since it enables organizations to participate in E-market places (Association of Consulting Engineers New Zealand, 1998). The other value added function in organizations is the Operations. This looks at all the major processes in an organization. When all the processes are IT enabled this will have an impact on various value parameters. The function of operations adds value through redesign of the processes which can lower the costs and can make the processes to be faster. The other function is Outbound Logistics.
This refers to the manner in which products and services are being delivered to the customers. Through use of IT, it has been possible to separate the content from medium in information rich products and passing those products through the internet. IT enabled changes in outbound logistics have been in areas such as online flight and hotel reservation and automatic teller machines. This has led to increase in an organizations value. Another function is on Marketing and Sales. This function looks at the way companies promote and sell their products.
IT has increased business value by reducing the costs incurred during sales and marketing since it has enabled distribution of information through the internet. Through the internet, the customer can access the information about the products in a faster way and be able to learn about them. Real time inventory control system has also enabled the companies to keep a track of how their products are selling and also large scale modification of the products. The last function is the Customer Service. This involves building of a relationship with the customers by the use after sale services.
IT enabled customer service system adds value by increasing on the knowledge of various customers’ purchases, their behaviours and their contact with the organization. This also adds value by increasing the speed of the companies and customers since it offers convenient ways of communication thereby offering the customers a 24hour service. The quality of customer service has also increased (Egan, 1998). There are two major processes that apply the Information Technology Business Value (ITBV) model which is designed for teaching discovery of value. The first major process it the use of The Matrix.
This is a two dimension matrix which defines value and states where value can be used in an organization. The matrix is a portion of the ITBV which looks at explaining what business value is and stating the functional areas in an organization where information technology can be applied to add on value. The horizontal axis of the matrix represents the value that can be added (what), while the vertical axis represents the areas that it can be applied (where).