Competitive Forces Model for IT Infrastructure Investment
The competitive forces model can
be used to determine how much to spend on IT infrastructure and where to make
strategic infrastructure investments, starting out new infrastructure
initiatives with small experimental pilot projects and establishing the total
cost of ownership of information technology assets.this
model has six components
·
Market Demand
for Your Firm’s
Services
Make an inventory of the services you
currently provide to customers, suppliers, and employees. Survey each group, or
hold focus groups to find out if the services you currently offer are meeting
the needs of each group.For example, are customers complaining of slow
responses to their queries about price and availability? Are employees
complaining about the difficulty of finding the right information for their
jobs? Are suppliers complaining about the difficulties of discovering your
productionrequirements?
·
Your Firm’s Business Strategy
Analyze
your firm’s five-year
business strategy, and try to assess what new services and capabilities will be
required to achieve strategic goals.
·
Your Firm’s Information Technology (IT) Strategy,
Infrastructure, and Cost
Examine your firm’s information technology plans for the
next five years, and assess its alignment with the firm’s business plans. Determine total IT
infrastructure costs. You will want to perform atotal cost of ownership
analysis (see the discussion later). If your firm has no IT strategy, you will
need to devise one that takes into account the firm’s five-year strategic plan.
·
Information
Technology Assessment
Is
your firm behind the technology curve or at the bleeding edge of information
technology? Both situations are to be avoided. It is usually not desirable to
spend resources on advanced technologies that are still experimental, often expensive,
and sometimes unreliable. You want to spend on technologies for which standards
have been established and IT vendors are competing on cost, not design, and
where there are multiple suppliers. However, you do not want to put off
investment in new technologies or allow competitors to develop new business
models and capabilities based on the new technologies.
·
Competitor
Firms’ IT Services
Try
to assess what technology services competitors offer to customers, suppliers,
and employees. Establish quantitative and qualitative measures to compare them
to those of your firm. If your firm’s
service levels fall short, your company is at a competitive disadvantage. Look
for ways your firm can excel at service levels.
·
Competitor
Firm IT Infrastructure Investments
Benchmark your expenditures for IT
infrastructure against your competitors. Many companies are quite public about
their innovative expenditures on IT. If competing firms try to keep IT
expenditures secret, you may be able to find IT investment information in
public companies’
annual reports to the federal government when those expenditures impact a firm’s financial results. Your firm does not
necessarily need to spend as much as, or more than, your competitors. Perhaps
it has discovered much less expensive ways of providing services, and this can
lead to a cost advantage. Alternatively, your firm may be spending far less
than competitors and experiencing commensurate poor performance and losing
market share .
This model is similar to"Porter's model" .
in this video explain of Porter's Five Forces as it applies to the retail industry.
Total
Cost of Ownership of Technology Assets
The TCO model can be used to analyze these
direct and indirect costs to help firms determine the actual cost of specific
technology implementations.
The total cost of owning technology resources includes not only the original cost of acquiring and installing hardware and software, but it also includes the ongoing administration costs for hardware and upgrades, maintenance, technical support, training, and even utility and real estate costs for running and housing the technology
The total cost of owning technology resources includes not only the original cost of acquiring and installing hardware and software, but it also includes the ongoing administration costs for hardware and upgrades, maintenance, technical support, training, and even utility and real estate costs for running and housing the technology
References:
Question
Used to analyze these direct and indirect costs to help firms determine the actual cost to specific technology implementations
