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Unit 1: Management Information Systems

Information Technology on the Emergence of Networks Notes

At the moment, the most spectacular and potentially powerful uses of the information systems
technology go beyond the individual borders of the enterprises. In fact, the most important
function of IT in the nineties is the better management of the interdependencies among the
enterprises. Information Technology has to be the most powerful instrument to reduce the
co-ordination costs». While the traditional uses of IT tried to facilitate the internal processes of
the enterprises, the Interorganizational Information Systems (IOS) are addressed towards the
efficiency of a group of enterprises.
Most of the studies about IOS have focused on the incidence of IT on the flows of information
among the organizations, its capability of reducing the transaction costs, and its potential to
achieve competitive advantages. Many authors have verified that:
 IT influences the nature, punctuality and detail level of the information shared by enterprises

 IT reduces the transaction costs, while it provides a better management of the risks
 IT reduces the co-ordination costs.
In order to benefit from the advantages of IT, the enterprises have to keep in mind that IT cannot
be isolated from its organizational context». We do not agree with the existence of causation
between the implementation of IT and the organizational changes in the enterprise driving to
an increase in the competitiveness of the enterprises. On the contrary the technological and
organizational implementations are both sides of the same issue, since they depend on and
determine each other». We think that, although IT might have the above mentioned positive
effects on the organizations, the will and capabilities of the directors of the company are needed
in order to make the most of those advantages.

In order to make the most of the whole potential of the IOS, it will be required that the managing
directors get involved with the project, since they have a wider and more strategic view of the
company. In this way, a system coherent with the objectives of the company would be implemented.
This system would allow taking even more profit from IT, what would have positive repercussions
on the enterprise and would facilitate the achievement of its objectives. The active participation of
the Management Board in the planning of the IOS brings a problem related to the fact that IT is a
relatively new resource that did not exist when most of the current managers were trained.
Therefore, they usually do not feel comfortable with these new technologies.
As a proof of this, we will consider an example.

Example: McKesson was a dealer company of chemical products. This company knew that
its success was linked to that of its customers, which were small stores, so it established a close
relationship with them. By means of an appropriate use of Information Technologies, it helped its
customers to maximize their profits, since it gave them useful information for competing with the
big pharmaceutical chains, which were getting a greater market share. The McKesson Corporation
directors’ idea was so successful that many other enterprises of the sector tried to imitate it, but
they made a terrible mistake. They thought that the network created by McKesson was just a
computerized system with terminals connected in other enterprises.
The secret of the success of this company were not the computer links; information technology did
not create the network. The network’s success was due to the fact that the directors of McKesson
were aware of both the relationships along the added value chain and the need to strengthen as
much as possible every link within the chain, so cooperative behaviors could be established in
order to provide the share of information and the quick response to the changes of the demand.

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