Having spent considerable time paring back staff, consolidating servers and stor

Question

Having spent considerable time paring back staff, consolidating servers and storage equipment, rendering servers and storage equipment, renegotiating vendor contracts, and conducting selective outsourcing, CIOs are struggling to find new ways to reduce costs while still developing and implementing the new or improved business systems their companies need. In their quest to come up with even more ways to keep lid on costs, dauntless IT leaders are exploring everything from barter agreements with vendors to reselling services and joining purchasing consortiums for volume price discounts on equipment. At amazon.com, CIO Rick Dalzell followed the following strategies:

• Embrace open source

• Recognize when you have to spend to save

• Help your partners help you

• Use a tight budget as an excuse to get creative

Question:

a. What are the business benefits and limitations of Rick Dalzell’s strategies?

Explanation / Answer

Rick Dalzell’s strategies are somewhat inclined to reducing costs, saving money, and efficiency at work. When a person gets hold of their savings, they are tempted to overspend and may risk losing everything, including the profits they have made. Basically, Rick Dalzell’s strategies help the company to keep their money safe and sound. They also want the people to help each other to economize the time and effort of the company.

Benefits and limitations would include:

• Reduction of the percent of sales generated that is spent on IT costs.

• Hidden costs resulting from the use of open-source savings.

• Improve your relationships with customers and suppliers in ways that allow your customers to continue to benefit from your business partnering with them.

• Austerity forces a company to become creative in resolving IT upgrade and maintenance issues.

Not all investments give a profitable return. Some companies might invest a lot in their IT infrastructure, only to discover that they do not really need to spend that much, or don’t even use the software and hardware that they’ve already purchased. Some companies might choose to purchase the best printers –when in fact, most of their transactions are online and they do not really require much printing.

However, a company that develops websites is expected to have a website that would keep their customers and attract potential ones. The IT infrastructure of a company must match the type of company and the type of product the company sells –as was said, “Use a tight budget as an excuse to get creative.”

When Mr. Dalzell said “help your partners help you,” he referred to keeping customers and suppliers close. Through service-oriented architecture, companies can work together to increase customer satisfaction, and consequently increase profit. For example, a delivery company could work with a company that sells shoes online. Instead of having to make their own website, they could simply have a page in the website of the company that sells the shoes –one where customers could fill out the information for delivery. This not only increases their sales through the purchases of shoes, but also advertises them as a delivery company

the limitation would be that if the company that sells shoes online gains a bad reputation, the delivery company is also affected. Again, recognize when you have to spend to save.

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