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Business Information Systems: Cost Management

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Reasons for organizations needing IT strategy

Information technology or IT is required by various organizations. The information technology strategy is the specific comprehensive plan, which eventually outlines the procedure of utilizing technology in any organization for fulfilling the organizational objectives and goals (Eason 2014). It is the kind of strategic plan, which has all the details of the various factors affecting the investment of the organization regarding the utilization of technology. There are various reasons for requiring IT strategy in a company. The most significant reasons are given below:

  1. i) Cost Management: The first and the foremost reason for using this technology is cost management. This type of strategy helps in managing the overall costs of the organization by simply outlining the processes of the business and so that no extra cost is incurred here.
  2. ii) Risk Management: The second reason for utilizing the IT strategy is risk management (Schwalbe 2015). There is always a high chance of various types of risks in any organization. IT strategy helps to reduce or mitigate the risks of the business.

Hardware or Software Management: The next important and significant reason of the IT strategy is the management of hardware and software. The strategy of information technology maintains the details of software and hardware by properly up grading them on a regular basis (Holtshouse 2013). This daily up gradation helps in reducing the business complexities and allows advancements towards new technology.

  1. iv) Vendor Management: The fourth reason of using IT strategy is the management of vendors. It helps to obtain correct quotes with proper pricing, capabilities for negotiation of contracts, ensuring payments and many more.
  2. v) Customer Relationship Management: It strategies also help to maintain a good relation with the customers by maintaining a customer relationship management (Eason 2014).

Information Technology helping a company to gain competitive advantages

IT is extremely helpful for any company to gain several competitive advantages. The factors, which enhance the procedure for helping an organization in obtaining competitive advantages, are as follows:

  1. i) Increasing Buyer Power: The first factor is buyer power. This factor is extremely high when the buyers have several choices from where they would buy and are extremely low when these choices become limited. In any competitive market, technology is utilized for increasing this buyer power for any particular product (Bloom et al. 2014). The technological tools plays the most significant role in attracting the attention of customers and thus competitive advantage is obtained. Moreover, information technology is utilized for advertising the products.
  2. ii) Reducing Supplier Power: Supplier power is higher when the buyers have limited choices from where they would buy and are extremely low when these choices are many. The higher supplier power solely affects the business as the supplier holds the goods and services with the target to increase the prices (Schwalbe 2015). The technological tools such as Internet help any company to search for more efficient suppliers within their niche. Moreover, B2B marketplaces are also enhanced with information technology.

Creating Entry Barriers: Information technology also helps any business in creating the entry barriers. The most successful organizations have created entry barriers by blocking their competition and thus gaining competitive advantages (Bloom et al. 2014). The entry barrier refers to the product that the customers expect from the organizations in any specific industry.



Bloom, N., Garicano, L., Sadun, R. and Van Reenen, J., 2014. The distinct effects of information technology and communication technology on firm organization. Management Science, 60(12), pp.2859-2885.

Eason, K.D., 2014. Information technology and organisational change. CRC Press.

Holtshouse, D.K., 2013. Information technology for knowledge management. Springer Science & Business Media.

Schwalbe, K., 2015. Information technology project management. Cengage Learning.


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