How IT can add value to a company directly and indirectly. Information technology can add value to a company either directly or indirectly. Reducing the cost associated with a given products/services. Cost reduction could happen anywhere within acquisition of raw materials to delivery of final product/services. Cost reduction occurs in different forms, it usually occurs when IT allows the same activity or set of activities to be performed more efficiently (Diann, n.d.). IT may either reduce or eliminate the workforce to perform repetitive task but not reducing its production level. Cost reduction is also possible when IT redesigns an existing process to be more efficient like by avoiding wastages.
Cost can be reduced by applying standardization policy, for example creating and distributing standard desktop images or implementing a unified set of systems tools and processes across the enterprise leads to simplification and reduce the work load on employees that could lead to reducing work force or to make use of work force on other items to improve productivity. IT can add value indirectly by increasing revenues that could by adding more value to customers or to reach wide audiences. For example, airlines companies add extra value to customers by allowing them to check-in online, also if a company is delivering a solution in desktop could attract more customers or retain existing customers on delivering the same solution in mobile devices. Increase in revenue could also occur when a firm is able to either produce more or service more without having to hire more employees.
Companies can gain competitive advantage by adding value, rarity and “appropriability” characteristics to the resource that it delivers. IT can make the resource as valuable and rare to provide competitive advantage to firms. Appropriability refers to the ability of the firm to create earnings through the resource. On top of delivering competitive advantage, firms must sustain it, for that resources must be inimitable, imperfectly mobile and have low substitutability. Imitability is the facility with which a rival firm can copy the resource. Mobility refers to the degree to which a firm may easily acquire. Firm make use of IT to make the resource as inimitable and immobile. Firms can improve customer service by adopting new innovative way of addressing customer concerns, for example by providing live chat feature users can reach firms by addressing their concern 24 hours without even getting up from their systems.
Diann, D (n.d.). Reduce Information Technology Complexity, Costs with Consolidation. Retrieved December 3, 2014, from http://www.cio.com/article/2437692/infrastructure/reduce-information-technology-complexity–costs-with-consolidation.html.