Chapter eleven

In this chapter, the author told that today’s business is not business as usual. Thus, there are some initiatives for the sellers. First, the sellers should cut the expense base by 20 to 40 percent because many technology companies would never become profitable in the new spending environment unless they change the way they manage their business. This requires an operational focus and skill set that many companies today do not have. Second, the sellers should change selling and support models. The successful technology business model of the future will be oriented toward services and subscription revenue. Third, the sellers should focus on a small target market and plan to be acquired. The vendor landscape of the future would be dotted with a few large companies and many small vendors with revenues no greater than $500 million, most under $100 million. Finally, the sellers should emulate consumer technology sales and support models. To decrease costs, vendors will need to standardize offerings, minimize expensive customization, and make their technology easy to use and install. The buyers also changed because they paid more attentions for making cuts. For example, they explore ways to set up their development abroad and hope to cut as much as 40 percent of their total R&D costs. They also have little operational focus and overspend on technology, buildings, furniture, and benefits. They also can have the Web-based service and support programs to help many companies improve their cost structures. For those suggestions, I feel that whoever the buyers or the sellers have to change their business models and consider what IT projects companies or what innovation companies should maintain for their success. If the technological organizations are not considering shifting their markets, there needs to be a balance between buyers and sellers.

Chapter ten

This chapter told us that there were some savings in IT management such as improving IT business inefficiency, the greater the inefficiencies, and the cut. For the smaller inefficiency, the companies should increase efficiency in operations for their business, limited 0ff-shoring, and re-examination of labor. These ways may help the companies reduce 10-20 percent of costs. For the larger inefficiency, the business groups should be combined with IT staff in the cost analysis. However, combining the business groups and IT staff in the cost analysis sometimes has the conflict because nobody likes his groups’ budget cut. This way may help the companies reduce 20-40 percent of costs. The final group includes companies burdened with a 40 percent or more cut because they let spending get out of control for many years. Thus, there are some approaches to cut costs effectively. IT groups can focus on operational efficiencies. With operational efficiencies, companies look to maximize current technology investments to get more speed, capacity, and use out of current equipment and labor. Business and technology groups understand how much is being spent on technology, the business groups can understand the profile of technology spending and correlate it with use. This allows the technology and business groups to see where cuts can be made. The final area of focus is business efficiency. Technology business efficiency focuses on how clever companies are in their overall use of technology. Thus, this last means of cost cutting is led by business groups that focus on investment return and whether a technology provides a benefit to the corporation. The evaluation metrics should include factors such as gross margins, customer satisfaction, and increase in sales.

Chapter nine

This chapter told us that there were the four paths of IT spending for IT spending in the companies. These are the path of propaganda, the path of problems, the path of pennies, and the path of profits. The first path of propaganda described that when the company got the new technology, the company did not have the well knowledge for this new technology. Thus, the company just spent the money buying the new technology and did not even know the new technology, and the company usually spent more than the industry average. However, the book said that if the companies’ spent less than the industry average, they would lose profits. That is very wrong and incorrect assumption. The second path of problem was that the companies spent money solving the problems which they met in the new technology. However, the most important path is that companies should reduce their inventory and assets to rid unused technologies adding to costs. The third path of pennies is that the companies just consider the cost but did not consider how IT would be a powerful and useful strategic. For example, some companies just bought the system and use the system, but they did not spend the money make their system to become the strategic of the companies. This way can not make the companies increase their competition in their industries’ areas. The final path of profit is that companies combine the strengths of previous paths. For example, Jetblue operates at a lower costs than the traditional airlines but they get much higher returns than the traditional airlines. Their partnership with Microsoft helps their IT processes because Jetblue did practice simplicity in their IT processes with Microsoft. Microsoft helps Jetblue’s customer service agents to operate from their homes using VOIP technology. That is very fresh idea to save the rent and labor expenses.

Chapter eight

This chapter introduces some approaches to cost savings and cut the IT budget which the companies use for narrowing IT spending. For example, off-shoring, the low cost of the hardware, new conservative spending patterns and open-source software can help the companies cutting IT spending for the new technology. However, it make the new problem, that the IT industry come to an end. However, the author disagrees with this kind of problem because of the many factors and he also assumes spending will decline. I also agree with the author. Because I believe that his prediction would be happened such as what has happened with hardware over the thirty years is positioned with the software and internal labor. The risks of the economy increased over the last few months, it would make the decreasing of the IT investment be able to show up. The other reason of the author’s assumption of decreasing the spending of IT investment is that the Web and Y2K make IT spending uncommon from tradition. In addition to open-source, free-ware and off-shoring also decrease IT spending to unnatural levels. What is the natural level for IT spending? When the companies implemented the new technology before, they had to spend millions on the materials and the cost of the maintenance. However, now the new IT things help the companies save millions for that kind of costs. Thus, the companies need to reduce the IT budget. The technological providers should prepare for a decrease in revenue. The possible sufferings are lower hardware sales, varied losses in all software categories, and the competitive pricing for the providers. The vendors should accept these kinds of loose changes.

Chapter seven

This chapter tells us what off-shoring is and off-shoring is rapidly becoming as a competitive for companies, workers and consumers. For example, for U.S. companies, they can produce their goods at the less cost and get the good quality of the goods. However, the off-shoring also have the defect for the labor market for U.S.A. For example, the IT-related employees, off-shoring will affect the professions out of U.S.A and their salaries and job security will decrease. Even though, the service industry prefers to do the services by face to face customer interactions. That might keep some level of the labor market in U.S.A. However, because of the high-speed networks such as Internet and low-cost labor, the off-shoring is growth very fast for manufacturing, and software developing industries. Thus, the majority of the 11% of service jobs off-shored were IT-related jobs. This chapter also expresses that off-shoring result in the loss of over 200,000 jobs in computer and mathematical fields with an overall loss of 560,000 jobs between 2001 and 2002 in U.S.A. However, off-shoring also cause the development of low cost marketing within foreign countries to provide IT services at 20% to 50% less than it cost in U.S.

Even though, off-shoring impact many things to U.S.A, I still think that off-shoring is good for U.S.A. I am an international student. Thus, I totally know that the labor cost in China is much cheaper than in U.S.A. I think that the world works together on a project but doing different things. This way can make people reach the best service for their need. Also, it make the different countries have their roles in the world. For example, the IT industries can do the research works for the new technologies in U.S.A and produce their products in China at the low-cost labor market. I think that this way make a win-win approach for the IT industries.

Chapter six

In this chapter, I understand that sellers are experiencing the pricing pressures. the book states that Microsoft technology is the most appropriate for small workloads and companies, Unix for medium, and IBM mainframe for large. This rule looks like so right for me. Even though, in this rule, Microsoft is limited in the small business and can not get more form the medium and large companies. However, the small companies are growth very fast than before. Therefore, Microsoft’s appropriate target market is already much greater than the market for Unix and IBM. Even though, some of research said that in the future, Microsoft’s operating system will be good as the same as Unix or IBM. About this, I doubt very much. For example, even though, Microsoft’s operating system is cheaper than others and let the companies save millions of money in the operating system, but Microsoft’s operating system is usually shut down during the operating time in the companies. That is the quality issue. However, I am not saying that spending more and getting better quality. Only express the quality of Microsoft’s operating system. The other way, the open-source software is increasing and some companies are adopting it. Even though, the open-source software can let the company reduce the cost of purchasing the software, but it let the company increase the maintenance cost for the software. The open-source may let the company get a lot of unnecessary software for operating their business. That might be slow down the system in the company. Thus, the company might spend a lot of time and money to maintain the open-source software. However, the open-source has some advantages. For example, custom programming accounts for two-thirds of all software spending. With freeware, the source code is available for free which provides a great savings in cost for those companies seeking to build custom solutions from existing software.

Chapter five

This chapter is repeating to talk that companies will practice more conservative spending because they overbuy. For example, It is amazing that buyers who initially purchased software at a 50% discount price but they have the maintenance costs of 40% or more every year after on the software’s list price. Thus, we can see that there are a lot of hidden costs which the companies did not predict. However, I think that this situation can be improved. When the companies purchase a new technology, they have to pay attention for negotiating contracts. Another thing is that some companies buy the new software without comparing it to needed level of use within its organization. For example, the company just cut the cost of the new technology but they did not know what level of use of the technology is within the organization. The book has already showed us that the company can save 5 million dollars by cutting down the number of licenses purchased. Thus, I hope that the company has to pay some attention for what level of use of the technology is within the organization.
In conclusion, I agree that IT spending will decrease as companies as technology bills and budgets are being scrutinized. Uncertainty of the future causes concern for consumers who spend less in general. This is likely to spill over into business and IT spending. I also suggest that companies should evaluate their projects when they pay attention to their current technology assets. Thus, the companies are learning how to get more than their assets. I think that this part is very important for the companies.