FREE online courses on Information Technology - Chapter 3 THE IMPACT OF
INFORMATION TECHNOLOGY - THE IMPACT OF IT ON THE ORGANIZATION.
Can information technology have an impact on organizational
structure? Information can be used to reduce uncertainty and to coordinate
different individual and groups. Information helps people function with
interdependence. It can also be used to create more flexibility in the
organization and design new organizational forms through IT enabled design
variables.
Many individuals think that information technology creates
more rigid procedures in firms. Can it also be shown that systems have often
been associate with rigidity, particularly
legacy systems, old systems that generally run on mainframes, that have been
around for many years doing critical tasks for the firm. Due to the demand for
new systems and the cost of creating replacements, there is often little
incentive to change these rigid applications. Changing any computer or
communications system is a difficult job. A major system may contain hundreds of
thousands or even millions of program statements; and change frequently produces
errors. We have a great deal of flexibility in the design of new systems, but
many older technologies in place are rigid.
Flexibility is the ability to adapt when confronted with new
circumstances. A flexible organization defends quickly against threats and moves
rapidly to take advantage of opportunities. Flexibility provides the
organization with the ability to adapt to change and respond quickly to market
forces and uncertainty in its environment.
Technology changes the pace of work. It has speeded up order
routing and processing on the stock exchange. Technology has made it much faster
to search a library book catalog, to communicate with someone at a remote
location, and to perform a number of tasks. Technology can also be used to
shorten product development cycles. In general, technology speeds up the pace of
work and increases the capacity of the organization to process information.
Information technology also alters the space and time
boundaries of work. Using electronic mail and computer conferencing, colleagues
working on a project do not have to be in the same physical location. Even
people work together in the same office can communicate easily if traveling.
With a portable computer and modem, you can conduct some kinds of business from
virtually any location at any time of the day or night.
Thus, we see that technology has the ability to change the
pace of work and to alter time and space boundaries of work. These impacts of
the technology can be viewed as increasing organizational flexibility. With
properly designed systems, the organization can increase its ability to respond
to customers, competitors, and the environment in general.
Table below describes the history and impact of technology in
the airline and securities industries.
|
Boundaries
|
Time
|
Nature and pace of work
|
Responsiveness
|
|
AIRLINE CRS STAGE 1
|
|
Remove boundary of manual centralized processing; make
reservation from anywhere
|
Make reservation anytime
|
Confirmed reservation made instantaneously
|
Alter schedule in
response to loads.
|
|
AIRLINE CRS STAGE 2
|
|
Boundary for making reservation shifts from airline to
agent; airport boarding pass moved to travel agency.
|
Extra service by agent, e.g., 24-hour assistant
|
Travel agent becomes more productive
|
Yield management program allow instantaneous adjustment
demand for seats.
|
|
SECURITIES FIRM BACK OFFICE
|
|
Make data available to brokers on-line
|
Eliminate need to close exchange early.
|
Greatly speed processing of trades.
|
Create new products and services
|
|
SECURITIES INDUSTRY EXCHANGES AND MEMBER FIRMS
|
|
Able to route orders without intervention of floor broker;
floor becomes an extension of brokerage office; may remove need for floor,
e.g. NASDAQ London
|
Movement toward 24-hour trading; passing the book around
the world for currency; New York City
to London to
Tokyo; trade anytime
|
Able to execute trading decisions instantaneously
|
Enable new investment strategies.
|
In the early days of airline travel, few people ventured
forth on the relatively small, propeller aircraft. If you wanted to make a
reservation, everything was done manually, and there was no actual record
associating your name with your flight. The airline allocated a number of seats
to the departure city and to a few other cities. When the number of available
seats began to dwindle, a reservation office would have to call a central
location to be sure it could sell a seat. One never knew for sure if he or she
has a reservation because a name was never associated with a reservations
record.
In the late 1950s, American Airlines realized that its manual
reservation process could not keep up with the expected growth in travel. At
this time almost all civilian information systems ran in batch mode, that ism
all data were collected at once, key punched, and used to update computer files at a later point of time.
Such an approach would not work for an airline reservation
system because people throughout the country need to be able to update and
inquire against files instantly. Fortunately, IBM had at this time completed a
defense system called SAGE, which allows operators to interact with real time
data from radar. The operator could display different information processed by
computers from a console.
IBM and American Airlines established a joint project to
develop an automated airline reservation system that would be on-line. IBM would
develop the control programs that managed on-line processing, while American
would write the applications program that provide the logic for making an
airline reservations. Surprisingly, the system was completed shortly ahead of
schedule, though with a large cost overrun, and provided a basis for the
development of others like it by competing airlines.
The computerized airline reservation systems maintain a large
database that contains the names of passengers associated with their flights. In
the early days these systems were known as Passenger Name Reservation (PNR)
systems because the idea of keeping your name with your flight was so novel. The
difference in service is incredible when the computerized reservation systems
(CRSs) are compared with their predecessor manual system.
What was the first-order impact of the airline reservation
systems. First, they removed the limitation of a manual, centralized
reservations group. In terms of time and space, you can make a reservation
anytime of the day or night from virtually anyplace in the world. The features
of these systems contributed to their second-order impact: a competitive
advantage based on customer service. Airlines with reservations systems could
provide better service to their customers. They could also better manage the
airline because they had historical data on reservations and boarding. Using
their reservation system as a base, airlines have added many functions ranging
from meeting special dietary request to balancing the loading of the aircraft.
A third-order effect is that one would have great difficulty
starting up an airline without a reservation system. Donald Burr, chairman of
People Express, pointed out the lack of a decent reservation system as one of
the factors that contributed to the demise of his airline. People Express had
too few reservation lines; it was not unusual for customers to be unable to
reach them from early morning until late evening because of the number of
callers.
In addition, in recent years the airlines developed yield
management system; these programs look at future flights and dynamically adjust
the number of special-fare seats depending on the number of reservations so far.
Burr felt that the airlines could use their systems to target People's flights
and competitors could selectively lower their fares on competing routes and
still keep up their margins on other routes.
