Impact of ICT on Firm Performance

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Table of Contents

Introduction
The Influence of Cloud Network on Businesses
Efficiency Improvement
Cost Reduction
Risks
Disadvantages
Summary
Works Cited

Introduction

Globalization has created expansion opportunities to businesses in nearly all industries. Most businesses have opted to join overseas markets in order to expand their market shares and to increase their profits. However, joining new markets often involve high administrative and operating costs.

Adopting modern information and communication technologies can enable investors to manage and expand their businesses in a cost effective manner (Berman, Marshall and Srivatbsa).

Thus, this paper will attempt to analyze the extent to which ICT impact firm performance in the domestic and overseas markets. The analysis will focus on the use of cloud network in businesses.

The Influence of Cloud Network on Businesses

Cloud network technology has tremendously changed the methodology of doing business in various industries. In general, it has influenced the way businesses store data, develop new products, serve customers and manage their costs. The specific influences include the following.

To begin with, most businesses are adopting cloud networks to optimize their capacity to improve customer value propositions. Optimizers are normally interested in offering great value in the market without undertaking major risks (Berman, Marshall and Srivatbsa).

For example, North Carolina State University found it difficult to provide enough computing resources to over 30,000 students. In order to enhance its value proposition, the university adopted cloud network technology by creating a virtual computing lab.

Consequently, the university has been able to attain flexibility in the provision of computing services to its students.

Cloud network is also being used to facilitate innovation. Innovators use this technology to extend their customer value propositions in order to create new revenue streams. In this context, cloud technology enables businesses to change their roles in their industries, as well as, to join new markets.

Finally, disruptors use cloud technology to identify new customer needs and to create new value propositions (Berman, Marshall and Srivatbsa). For example, in 2011, Comcast Corporation adopted cloud technology to respond to emerging needs in the entertainment industry.

Concisely, Comcast used the technology to provide internet, entertainment and communication services to its customers via internet enabled devices. The technology has enabled Comcast to provide content via more devices than before. Additionally, the company is able to develop new applications faster and cheaply.

Efficiency Improvement

Cloud network technology has enabled businesses to improve their efficiency in the following ways.

First, it facilitates easy storage, retrieval, as well as, maintenance of records or data (Yang, Goodchild and Huang 305-329). The network uses web-based applications which eliminate the need to store, maintain or process data within the business. These activities are outsourced and the user has real time access to his data.

Second, it enhances internet communication by enabling all employees to interact using the same interface and data (Cloud Computing World).

This improves consistency and eliminates chances of miscommunication. Cloud technology ensures that the data or information being used by business executives is accurate and current.

Third, the technology improves efficiency in sales and marketing. In this case, it enables marketing executives to rapidly access sales data which are fundamental in developing marketing plans.

For instance, managers can save time by having automatic access to data which is often organized in easy-to-understand formats such as tables and charts. This improves the manager’s ability to respond immediately to customers’ needs.

Fourth, cloud network technology promotes efficient resource allocation. By entrusting most information technology (IT) functions with a third party, the business can significantly reduce its fixed and variable costs (Plummer 3-41).

Consequently, the business will have more time and financial resources to implement important programs such as developing new products. Finally, cloud technology improves management efficiency. It enables investors to monitor the performance of their businesses using the most accurate and updated information.

Cost Reduction

Cloud network technology enables businesses to reduce costs in the following ways. To begin with, cloud networks facilitate cost flexibility. It facilitates a shift from capital to operational expenses, thereby reducing fixed IT costs (Berman, Marshall and Srivatbsa).

Cloud technology eliminates the need to acquire computer hardware and software that is required to store and process data. Consequently, it eliminates the cost of purchasing IT equipment and software license fees.

Cloud network services are often provided through a pay-per-use model. Users of the network are expected to subscribe for services according to their needs and ability to pay.

Consequently, businesses save money by avoiding expenditure on services which are not fundamental to their IT needs. Storing data in a cloud network is also cheap as compared to building data centers. Heavy users of data such Netflix have been able to reduce their operating costs by adopting cloud technology.

Similarly, small businesses that are not able to build their own data centers can reduce costs by adopting cloud technology. Small businesses can obtain large data storage space at a relatively low price since the cost of using the network is shared by many users (Sridhar 1-41).

Risks

The risks associated with cloud network technology include the following.

First, there is a risk of losing security over sensitive data. Even though passwords are used to protect the data stored in the network, the service provider can still access it easily. Additionally, criminals can hack the system and access users’ data illegally.

Second, there is no guarantee for service delivery, especially, in public cloud networks (Berman, Marshall and Srivatbsa). Since the services are provided by third parties, users have little or no control over their provision.

For example, businesses using cloud networks are likely to incur huge losses if the service providers stop their operations without giving notice of closure.

Third, the network users are likely to be exposed to the risk of high prices and poor product quality if the service provider is a monopolist. This is likely to affect companies with operations in Africa and Asia where cloud technology is yet to be fully adopted.

Disadvantages

Cloud network services are often provided in a standard form (Yang, Goodchild and Huang 305-329). Consequently, businesses might not be able to access services that are tailor made for their IT needs.

Even though specialized services can be accessed through hybrid and private networks, these options tend to very expensive. Thus, small and medium size companies might not afford them. Using cloud networks also increases reliance on outsourced services, and this can disrupt expansion plans.

For instance, companies that intend to join countries where cloud network services are limited will be forced to incur additional costs in order to establish an ICT department.

Finally, there is a risk of losing data in a cloud network. Destruction of the equipment used to store data in the network can lead to a massive loss of data (Sridhar 1-41).

This risk is exacerbated by the fact that the network users have no control over the equipment or infrastructure used to store their data. Thus, users can not ensure security over the network infrastructure.

Summary

Modern information and communication technologies are being adopted by businesses in order to improve productivity and competitiveness. Multinational companies often adopt modern information technologies to facilitate efficient coordination between their headquarters and their overseas subsidiaries.

Local companies also use information technology to enhance their competitiveness. In general, ICT is used by businesses to enhance efficiency, product development, provision of customer services and monitoring operations (Sridhar 1-41).

Cloud network technology is one of the ICT products that are increasingly being used in the contemporary business environment.

Optimizers often use cloud technology to improve the quality of their products without facing the risks associated with investing in new ICT equipment or infrastructure (Berman, Marshall and Srivatbsa).

In this regard, cloud technology enables businesses to optimize their existing capacities. Innovators tend to use cloud networks to create new products and to improve the quality of existing services. Thus, cloud technology provides an excellent opportunity for product and process innovation.

Disruptors use cloud technology to respond to emerging market needs. In this case, businesses use cloud networks to identify new needs in the market. They also develop new products and business processes to respond to the identified needs.

Cloud networks enhance efficiency in businesses by facilitating easy storage and maintenance of data. Besides, accessing data in the system is often fast and easy. The technology is also capable of facilitating significant cost reduction. Cloud networks delegate IT functions to third party organizations (Sridhar 1-41).

Thus, it eliminates the expenses associated with the acquisition and maintenance of IT hardware and software (Yang, Goodchild and Huang 305-329). The risks associated with cloud networks include inability to control service provision and to ensure adequate security over users’ data.

The disadvantages of cloud networks include the fact that users are not likely to access specialized services. Furthermore, the users are likely to lose their data if the network infrastructure is destroyed.

The strengths demonstrated in this report include a detailed research on the use of cloud network in businesses. The report has attempted to cover various aspects of cloud network such as its influence on businesses, its risks and disadvantages.

The use of real companies as examples has helped to shed light on the application of cloud network in businesses. Furthermore, the findings in this report are based on current information about cloud network technology and its application in a business environment.

The difficulties encountered in the process of completing the report include unavailability of information. Access to most peer reviewed journals required subscription fees.

Additionally, cloud network technology is a recent innovation. Thus, there is a dearth of information about it. Besides, the existing literature about cloud network is based on inconclusive research findings.

The scope of the report is one of the areas that should be improved in future. The application of cloud network in business is a wide topic that cannot be easily covered in a short report. Additionally, further research should be conducted in future in order to verify existing findings about cloud network technology.

Works Cited

Berman, Saul, Marshall, Anthony and Srivatbsa Robin. The Power of Cloud. IBM Institute for Business Value. 2012. Web.

Cloud Computing World. Cloud Computing for Businesses. Cloud Computing World. 2012. Web.

Plummer, Daryl. The Business Landscape of Cloud Computing. Gartner Inc. 2012. Web.

Sridhar, Timothy. “Cloud Computing.” Internet Protocol Journal 12.4 (2009): 1-41. Web.

Yang, Chaowei, Goodchild, Michael and Huang Qunying. “Spatial Cloud Computing.” International Journal of Digital Earth 4.4 (2011): 305-329. Web.

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