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Information Technology – The 21st Century Business Value Driver
Marius Daraban
“Lucian Blaga” University of Sibiu, Romania
marius.daraban@dmc.ro
Abstract
One of the most important changes of the 21st century, an information-driven century, is the
shift in the paradigm of managing and understanding businesses. Economic value has become
more and more difficult to define and understand when looking through the perspective of the
information age. The information age has brought information technology “into the spotlight” and
transformed some of the classical economics concepts. The qualitative research for this paper has
shown that “Information Technology” is a solid 21st-century knowledge-based organization and
economic- and business-value driver that business organizations have to capitalize in order to
achieve Porter’s business margin. The paper demonstrates that information technology as a
business activity is not only a clerical activity, it has morphed to knowledge based organization
and a value driver for the business organizations of the information age.
Key words: economic value, information technology, knowledge-based organization
J.E.L. classification: M00, D46, D83
1. Introduction
Technology is defined by Porter’s value chain model as being part of the secondary activities,
that are supporting the business through their contribution to the achievement of margin, the
business success factor.
Technology can be defined and understood as follows:
“The application of scientific knowledge for practical purposes, especially in industry.
Machinery and devices developed from scientific knowledge.” (Oxford University Press,
2017)
“The practical application of knowledge especially in an area. A capability is given by the
practical application of knowledge “ (Merriam-Webster, 2017)
Technology can be understood as being the practical application of existing knowledge and
information for the creation of machines and devices that support a sustainable and consistent
improvement of existing processes, machines and devices.
Technology has been the main driver for development, evolution, and innovation of existing
living conditions. The main supporters of technology have been the operation business
organizations that have been looking for ways to improve, increase efficiency and succeed.
Technology has been the force that enabled the leaps and development of human society.
Therefore, technology has accompanied humanity from the very first stages of evolution.
In the context of this research, information technology will be used as a sub-branch of
technology as being one of the main innovation factors of existing business organizations of the
21st century, a century driven mainly by the creation, usage, and storage of data, information, and
knowledge. Information technology, also known as IT, is an integral part of the today's 21st-century
modern business organizations that must cope, manage and select business relevant information for
their usage out of a huge available volume of data, information, and knowledge to be able to
maintain and potentially gain more sustainable competitive advantage.
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OxfordReference.com is defining information technology as being “the study or use of
computers, telecommunication systems, and other devices for storing, retrieving, and transmitting
information” (Oxford University Press, 2017). Merriam-Webster Dictionary is defining
information technology as being “the technology involving the development, maintenance, and use
of computer systems, software, and networks for the processing and distribution of data.”
(Merriam-Webster, 2017)
The definitions describe the generic role and scope of information technology within business
organizations that used IT as an additional mean in their competition for sustainable business
advantages.
2. Theoretical background
The 21st century is also commonly known as the information age has come with a lot of
technological changes and developments. Besides the many technological developments and
breakthroughs, the information age has come also with a major change in business philosophy and
management. The information age has transformed the once clerical number processing activity to
a potential definitive competitive advantage where data, information, and knowledge are put into
the economic and business “spotlight”.
Porter, in his value chain concept, has defined technology as support activities that leverage the
primary activities towards the achievement of the ultimate goal of any business organization, the
achievement of the business margin. Information technology is included in the technology category
of Porter’s value chain concept and is supporting the business organization. The present paper
shows that the 21st-century information age information technology is doing much more than just
supporting the primary activities. Information technology leverages and drives the primary
activities by beeing one of the businesses knowledge-based organization that is creating economic
value that any company can use to grow and succeed in the modern business environment.
The information age, in the 21st century, has become much more than a “simple support
activity”, it includes and illustrates all characteristics of a knowledge-based organization that is
creating economic value for its users or beneficiaries.
3. Research methodology
The main research methodology used for this paper is qualitative research. Direct free
discussions, unstructured interviews, and observations gave very important and insightful facts and
findings. The analysis of publications published articles and social and professional media and
networks have supported the findings and conclusions of the present paper. Quantitative data have
been used only for the indication of perception of the business environment of business support
services that support the main objective of the research paper.
4. Dawn of information technology
Based on the storage and processing technologies used there are 4 IT development stages
identified, pre-mechanical stage (3000 BC – 1450 AD), mechanical stage (1450 – 1840),
electromechanical stage (1840 – 1940) and electronic stage (1940 – present).
Each of the development stages has been marked by scientific and technological breakthroughs
that have changed the way things have been done previously.
Information technology and information have accompanied human development from the very
early stage of existence and progress. Since the beginning, humans have communicated and passed
on data, information and knowledge through the means existing and used at the time.
The pre-mechanical stage (3000BC – 1450AD) is the oldest and 1st stage of development of
information technology and dates to the first petroglyphs found in caves. During this development
stage the Sumerians, through cuneiforms, have used their form of writing and storage of data and
information. In Europe, Greeks have developed the Phoenician symbols that have been picked up
and introduced by Romans what is known today as the roman alphabet as a means to transmit data
and information. The Chinese have introduced and developed the basics of today's paper that are a
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development of the Egyptian papyrus rolls and serve the storage aspect of information technology.
Also during this stage, the first basic analog calculator, the abacus, was introduced that has been
based on the early numeration systems. The abacus is one of the first documented tools used for
data processing.
During the 2nd stage, the mechanical stage, information technology has developed driven by
leaps in science and technology. Gutenberg has invented and introduced the printed press that was
a big step from the hand-written books and documents of the time. The slide rule of William
Oughtred, Pascal’s Pascaline, Leibniz's Machine, and Babbage's Engines have raised the bar in
understanding and using more complex machines for data processing. The punch card system was
introduced by Joseph Marie Jacquard as being the first real-time programs for the operation of
machines.
The 3rd stage, the electromechanical stage, is picking up a lot of the earlier discoveries and
refining them through the usage of more modern and actual technologies. During the time (1840 -
1940) the handling and management of electricity have changed the way the world was handling
and doing things. The introduction of the voltaic battery, the telegraph, the Morse code, Bell’s
telephone, and radio and Marconi’s early “radio” communication have set the foundation of the
modern telecommunication technology. During this stage, Hollerith introduced the census machine
that used an early form of punch-cards. IBM (International Business Machines) introduces the
MARK 1 computer that was using paper taped stored data and instructions.
The biggest evolutionary leaps, regarding information technology, have been made during the
4th stage, the electronic stage (1940 – present). During this time the electronic vacuum tube has
made further developments possible and represented the first migration towards today's digital data
processing technologies. Soon after the introduction of the electronic vacuum tubes, transistors by
using semiconductors and integrated circuits have driven electronic data processing. Alongside the
hardware development also the software development has made electronic data processing
machines, also known today as computers, more affordable and accessible. The information
revolution started in 1990, has enabled a large-scale acceptance and usage of hardware and
software. Companies like Microsoft, Apple, Intel have made their mark and established themselves
as world-leading information technology companies. Driven by the refinement of software,
information got more accessible and affordable. The world-wide-web, the internet, and the smart
devices have made information the prime “commodity” of the 21st century, where more and more
complex technologies emerge and evolve on the hardware and software side.
The massive amounts of data and information that are generated by require more and more
processing power, abilities and speed in transmission. The information revolution has changed
classical concepts and so will information technology, it will transform and innovate conventional
concepts in all areas of human society. The usage of artificial intelligence will become more and
more accessible and reliable for human society the same way that electronic vacuum tubes have
been integrated into the development of information technology.
5. IT as a corporate knowledge-based organization
“Organizations will increasingly be regarded as joint human‐computer knowledge processing
systems. A knowledge‐based organization is a society of knowledge workers who are
interconnected by a computerized infrastructure.” (Holsapple & Whinston, 1987, p. 1)
IT is the organization that enables and assures that the business organization can create
processes and store data and information. Based on the Knowledge-Based Organization definition
from Holsapple & Whinston the future human society is based on interconnected human
knowledge workers that must cope and deal with an increasing volume and complexity of data and
information. This can only be assured by the usage of the best possible combination of hardware
and software that are maintained, managed and improved by the business organization IT as an
important part of making a business work.
In a business environment that is constantly evolving, changing and reacting to current market
conditions the business function that is taking care of data and information availability and
relevance is the IT function.
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Speed is one major factor has impacted information technology massively. In an information
society, data and information tend to become obsolete very quickly, consequently, the management
of data and information needs to be performed accurately and in due time by the business
organizations in order to make the most of the newly acquired information.
The involved staff in managing the IT function must find the best suitable and adequate solution
to deploy and maintain a software and hardware business environment that meets the specific needs
of the specific business organization. The deployed systems need to reflect the specificity of the
business organizations that enables the maximum leverage of obtainable and insurable competitive
advantages.
The sustainable competitive advantage can be obtained only by the acquisition, implementation,
and deployment of unique software and hardware systems. In the case of IT, the uniqueness of
implemented and managed systems is created by skilled, knowledgeable professionals that
understand the specific business requirements that are paired with the best available and suitable
software and hardware systems.
The continuous and quick development of information technology is the case per se for a by the
book knowledge organization. There are the tech professionals, the knowledge workers, employed
by business organizations that analyze, improve and develop existing systems and deploy new ones
that meet the perspective business needs to be defined by the evolving business strategic and
operational plans. The created unique solution represents, in the context of the knowledge
organization, the created knowledge that is used and exchanged within the business organization.
The rapid development and obsolesce of software and hardware systems transformed some of
the IT services into commoditized yesterday’s news, email, web presence, general acceptance and
usage of computers are part of the today’s and of the 21st-century business requirements.
Smart devices and their usage is the new challenge of business organizations, the development
of data and information-driven systems that are maintained and managed without human
intervention need the utmost involved knowledge.
The 21st century IT systems tend to reflect the new challenges of business organizations that
need more and more reliable and accurate data and information. The full-scale implementation and
roll-out of artificial intelligence is the next step in IT development. The IT function is getting more
and more involved in business actions by making use of specific knowledge and deploying it into
the business organization.
The business organization can be regarded as a classical learning organization, IT professionals
need to permanently learn and stay up to date with the latest technologies. The learning ability and
need is an additional attribute of the knowledge-based organization; new knowledge is acquired
through the learning of new technologies and applications of the software and hardware ecosystem.
The corporate business IT function and organization are providing to the modern business
organizations the tools and systems that it needs to achieve the needed sustainable competitive
advantage. The existing systems are maintained, managed and updated based on rapidly changing
market requirements by trained, skilled knowledge workers that create and adjust IT business
systems that support business knowledge usage, sharing and communication.
The information revolution has started the battle for human intelligence that can develop more
and more complex business systems.
“The firm is conceptualized as an institution for integrating knowledge. In contrast to earlier
literature, knowledge is viewed as residing within the individual, and the primary role of the
organization is knowledge application rather than knowledge creation.” (Grant, 1996, p. 1)
6. IT as a business value driver
Modern Information Technology provides the business organization the ability to act and react
to rapidly changing business market requirements.
Innovation and productivity increase are the foundation of business organizations'
competitiveness and profitability that is enabled by information technology development and rapid
adoption.
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“Without sophisticated IT systems, it would be impossible to create value chains that extend
around the world. High-end hardware, upgradable software and global networks have given rise to
the evolution of entire industries, the digitalization of virtually every business process and the
development of novel business designs. “ (Oliver Wyman, 2012)
Information technology is enabling features and abilities of the modern business organization
that allow the transformation from a reactive organization to a proactive organization.
Typically, a value driver is defined as being the activity that adds value by increasing
profitability to the business organization by managing and reducing risks through the achievement
of strategic business goals.
Information technology is creating business value considering two roles, the business support
role, and the business driver value creator role.
By meeting the minimal market requirements of modern business, IT is assuring that the
business able to compete without having drawbacks. The today’s standardized IT services like
email, web presence, sharing, and storage, IT security, etc. are evolving and developing and
enabling the business organization operations without having drawbacks compared to current
market requirements. Due to the uninterrupted changing in business dynamics and complexity of
the business environment, companies must meet specific market requirements to be competitive.
The minimal requirements of IT are simple business support activities that just support proper
business operations without being a business driver.
The business driver value creator role of IT is enabling a business organization to have the
specific needed competitive advantage. By being at the edge of technological development,
software and hardware, companies can have accurate, rapid, reliable data and information needed
for the business decision process.
IT can bring much more value and a specific competitive advantage when “their top
management team (TMT) moves from flirting with IT to marriage.” (López-Muñoz & Escribá-
Esteve, 2017). To profit from all IT benefits the management of a business organization must be
ready to adopt change and update and adapt to the latest market requirements.
7. Conclusions
IT has evolved a developed from being an aid for certain calculus tools to a real and consistent
ecosystem of tools and systems that have decisive business support and driver functions. The 21st-
century business organizations must face a huge amount of daily new data and information that
might impact or influence their business. To manage all the data and information and turn it into
useful business intelligence business organizations must adopt and promote adequate software and
hardware solutions that allow them to acquire, process, store and communicate relevant business
data and information.
To be able to adapt, act and react to the ever-changing market requirements, business
organizations must focus on the actual business support functions, information technology is one of
the support / indirect business functions, and reconsider their classical role as indirect productive /
business support services. Business support functions have a more and more definitory impact on
the business operations by bringing business-relevant information into the focus of the business
operations.
Information technology is enabling the untapped resources that business organizations have in
their already owned data and information. Software is heavily supported by modern and powerful
hardware that empowers business organizations to use data and information insights by using
modern technologies like big data, data cubes, analytical data processing, etc. The increased
accessibility of modern technology, especially information technology allows business
organizations to make the most of available data and information that has been previously remained
untapped.
The near future will bring again new developments and breakthroughs that will rewrite classical
concepts and will allow companies to capitalize on the new possibilities. IT is no longer a resource-
consuming business function, it has transformed into a clear and decisive business driver and value
creator. The future developments in IT will allow having even more reliable data and information
that can be used by business organizations to gain the needed competitive advantage.
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Information technology, used as a very broad term, is the driving force of the information age
that has transformed and changed many aspects of human society. The key element of the
information age is data and information that are processed and distributed by highly complex and
performant software and hardware systems. The essence of information technology (IT) is the
management of huge and complex volumes of data that are generated by human activity. The
information age has taken the discoveries and developments of the industrial revolution and put
them through the next progress step of the information age.
IT has enabled business organizations to become more dynamic and more accurate in their
decision processes that led to better and more sustainable business developments. The IT function
of a business organization became an integral and decisive factor of competitive and sustainable
companies. The more the adoption of IT modern technologies is assured the more competitive
differentiation arguments a business organization has.
IT is the pinnacle of data and information management of the 21st century that is based on
already commoditized services like basic network infrastructure and services and on business-
specific software and hardware systems. The knowledge creation, processing, storage, and
dissemination process is digital, it feeds all needed internal stakeholders and should self-adjust to
the requirements of the new digital informational markets. Corporate IT became quickly the
differentiating factor of the information age. The modern technology has enabled and redefined the
means of knowledge management from creation to dissemination.
The IT tools used today are evolving and are re-defining once again the classical concepts
driven by the need for better alignment of used systems and tools to the requirements of a dynamic
changing market environment. IT has allowed fast access and accurate business data processing
that can be used for automation and improved and efficient business processes. The value
proposition of information technology is incontestable; the provided possibilities exceed everything
that was considered state of the art in the industrial age. IT has led business organizations into the
21st century and away from analogic, mechanical, limited means of the previous age.
IT is contributing to the business organization value creation process by highly accurate, fast
and complex systems that capitalize on the relevant business information that allows companies to
differentiate themselves from other business organizations.
Information technology has enabled and made possible massive developments towards
increased efficiency, accuracy, reliability and speed by innovations and inventions of technological
means that completely transformed and made obsolete some of the classical concepts like analog
communication, fax services, written communication, data acquisition, and processing, etc.
The challenges of modern fast-moving business organizations for the coming years will be the
creation and usage of IT tools and systems that allow relevant data query and filtering that enable
pattern recognition and reliable future steps models to be created and used for future predictive
business management decision process through automated and/or artificial intelligence.
8. References
• Grant, M. R., 1996. Toward a knowledge-based theory of the firm. Strategic Management Journal,
17(S2), pp. 109-122.
• Holsapple, C. W. & Whinston, A. B., 1987. Knowledge‐based organizations. The Information
Journal, 5(2), pp. 77-90.
• Merriam-Webster, 2017. Merriam-Webster Definition of Information Technology. [Online]
Available at: https://www.merriam-webster.com/dictionary/information%20technology
[Accessed 30 05 2017].
• Merriam-Webster, 2017. Merriam-Webster Dictionary technology. [Online]
Available at: https://www.merriam-webster.com/dictionary/technology
[Accessed 30 05 2017].
• Oliver Wyman, 2012. Information technology as a value driver. [Online]
Available at: http://www.oliverwyman.com/our-expertise/insights/2012/nov/information-technology-
as-a-value-driver.html
[Accessed 05 06 2017].
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• Oxford University Press, 2017. English Oxford Living Dictionaries - Technology. [Online]
Available at: https://en.oxforddictionaries.com/definition/technology
[Accessed 30 05 2017].
• Oxford University Press, 2017. Oxford Reference - information technology. [Online]
Available at: http://www.oxfordreference.com/view/10.1093/oi/authority.20110803100003879
[Accessed 30 05 2017].
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