Stuuent IB: 8626271 1

Auvances In Infoimation Technology

The Consequences of the Emeigence of Ciowusouicing, Clouu Computing,
Big Bata, Pieuiction Naikets anu A-B Testing foi Nanagement anu
0iganisational Stiuctuie
















Stuuent IB: 8626271
Piogiamme: NBS Eiasmus Exchange 1 Semestei 2u12-2u1S, Siu yeai
Couise Coue: BNANSu611
Couise Title: Inuustiial 0iganisation & Business Stiategy
Couise Cooiuinatoi: Reza Salehnejau
Title of Assignment: Couisewoik BNANSu611
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Foi the last few uecaues, the lanuscape of the economy has been changing. Infoimation
technology (IT) has changeu the iole anu piactice of manageis as well as the stiuctuie of
oiganisations (Biynjolfsson et al., 1994; Bloom et al., 2u1u; Rajan anu Wulf, 2uuS).
Theie has been a lot of ieseaich investigating the effect IT auvances have on
management anu oiganisations, anu theie is a laige amount of woik tiying to assess the
uiiection in which IT auvances aie leauing us. In this essay, I will focus specifically on
the influence ciowusouicing, clouu computing, big uata, pieuiction maikets, anu A-B
testing will have on business. I will attempt to cieate a complete view of the uone
ieseaich by answeiing the following two questions.

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Wheie the lattei of the two focuses on the issue whethei IT will leau to moie
uecentializeu oiganisations.
I will stait off with explaining the IT techniques I assess in this essay. I will then
move on to examine how these techniques affect management piactices anu the iole of
manageis. Aftei that, I will continue to investigate if the explaineu IT techniques will
change the stiuctuie of oiganisations. I will finish with a conclusion in which I will
answei both questions I askeu above.

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If we look at the liteiatuie, we can see that a lot of ieseaich has been uone in the fielus of
clouu computing, ciowusouicing, big uata, pieuiction maikets, anu A-B testing. In this
section of the essay, I will give a shoit uefinition of all of these techniques.
Fiistly, I take a look at clouu computing. Accoiuing to Naiston et al. (2u11), clouu
computing can be uesciibeu as "an infoimation technology seivice mouel wheie
computing seivices (both haiuwaie anu softwaie) aie ueliveieu on-uemanu to
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customeis ovei a netwoik in a self-seivice fashion, inuepenuent of uevice anu location."
In piactice, this means that an oiganisation that wants to gain access to moie computing
powei uoes not have to make a laige investment, but iathei pays foi it as an opeiating
expense (Naiston et al., 2u11; Aimbiust et al., 2uu9). Clouu computing is a geneial-
puipose technology, which means that it catalyses a myiiau of complementaiy
innovations (Biynjolfsson et al., 2u1u).
The next uevelopment in IT I examine is the emeigence of ciowusouicing. This
concept is an alteinative to the in-house geneiation of new piouuct iueas oi solutions to
pioblems. If a business uses ciowusouicing to gain new piouuct iueas oi to solve
pioblems, this means that it outsouices these piocesses to the public, oi "ciowu" (Poetz
anu Schieiei, 2u12). Ciowusouicing can be a veiy useful alteinative to the in-house
geneiation of new piouuct iueas oi solutions to pioblems, which is illustiateu by
Biikinshaw anu Ciainei (2uu9) in theii case about Roche.
The thiiu IT uevelopment I will assess is big uata. Big uata is a concept
illustiating the fact that companies now have access to veiy laige amounts of uata. As
Nanyika et al. (2u11) put it, "big uata iefeis to uatasets whose size is beyonu the ability
of typical uatabase softwaie tools to captuie, stoie, manage anu analyse". This is a
moving uefinition, as uatabase softwaie tools impiove. NcAfee anu Biynjolfsson (2u12)
explain big uata's implications as follows: "Simply put, because of big uata, manageis can
measuie, anu hence know, iauically moie about theii businesses, anu uiiectly tianslate
that knowleuge into impioveu uecision-making anu peifoimance."
The fouith IT uevelopment I uiscuss is the emeigence of pieuiction maikets,
which aie viitual maiketplaces that shaie attiibutes with option maikets. A company
can set up a maiket in which any membei can bet on the chances of an event coming
tiue. Examining betting behavioui in the maikets can inciease the quality of pieuictions
(Leigh anu Wolfeis, 2uu7). Pieuiction maikets have pioveu to be veiy effective ways of
pieuicting the futuie. The Iowa Electionic Naiket, foi example, has tenueu to be moie
accuiate than opinion polls in pieuicting 0S election iesults since 1988 (Leigh anu
Wolfeis, 2uu7).
The last IT technique that has been ieseaicheu a faii amount is A-B testing. A-B
testing is the technique of splitting up laige changes into small uecisions between a few
alteinatives, which aie then testeu sepaiately. This is often uone in the aiea of website
uesign, wheie uiffeient visitois will be uiiecteu to pages with uiffeient alteinative
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uesigns. The peifoimance of the uiffeient uesigns is iecoiueu anu the best uesign is
maue the stanuaiu (Chiistian, 2u12). The applicability of this technique has been testeu
in othei aieas than website uesign, but its usefulness at these points has not been
pioven (Chiistian, 2u12).

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The emeigence of the five IT techniques I explaineu above has hau seveial consequences
foi management piactice anu will most likely have impoitant implications foi
management in the futuie.
The fiist technique I explaineu, clouu computing, uoes not have majoi uiiect
implications foi management piactices. The inuiiect, long-teim implications foi
management can be significant, howevei. Fiistly, clouu computing is an alteinative to
the one-off investment in computing powei (Naiston et al., 2u11; Aimbiust et al., 2uu9)
anu it will, on the shoit teim, make the gatheiing of uata anu infoimation easiei because
any extia computing powei management neeus can be pioviueu on-uemanu (Naiston et
al., 2u11; Aimbiust et al., 2uu9). Seconuly, clouu computing is one of the techniques that
favoui the emeigence of smallei fiims anu the inuepenuency of inuiviuual employees
(Naiston et al., 2u11; Aimbiust et al., 2uu9). It theieby cieates a vision of the futuie in
which smallei, "flattei" oiganisations can be moie successful than they cuiiently aie
(Biynjolfsson et al., 1994; Nalone anu Laubachei, 1998). This is a uevelopment that has
impoitant implications foi management, as the impoitance of management in this
scenaiio will be a gieat ueal smallei than it is now (Nalone anu Laubachei, 1998). As a
siue note, one has to keep in minu that clouu computing is a geneial-puipose technology
(Biynjolfsson et al., 2u1u). This means that, in the futuie, uevelopments that may change
management piactice coulu take place in this aiea.
The emeigence of ciowusouicing is the seconu phenomenon I examineu.
Ciowusouicing is veiy helpful in the case of pioblem solving anu innovation (Poetz anu
Schieiei, 2u12; Biikinshaw anu Ciainei, 2uu9). So, in theoiy, ciowusouicing coulu
ieuuce the iole of manageis in these aspects. Bowevei, using the technique on a uay-to-
uay basis will most piobably not be feasible in the neai futuie, as ciowusouicing is
cuiiently not capable of pioviuing infoimation quickly (Biikinshaw anu Ciainei, 2uu9).
This fact coupleu with the iuea that, uue to the stiategic natuie of some infoimation,
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ciowusouicing cannot be useu in eveiy instance, cieates the view that management
piactice will not be changeu significantly by the emeigence of the technique. 0n the long
teim, howevei, ciowusouicing coulu become a valuable complement to inuiviuual
manageis (Poetz anu Schieiei, 2u12).
The concept of big uata can change management in seveial ways. Fiistly, when
uata is scaice, people high up in the oiganisation make uecisions on the basis of
expeiience anu intuition (NcAfee anu Biynjolfsson, 2u12). These Bighei Paiu Peison's
0pinions (BiPP0s) will paitly be oveiiuleu by big uata, as expeiience anu intuition coulu
be ueemeu infeiioi (NcAfee anu Biynjolfsson, 2u12). Seconuly, because of big uata,
theie will be a neeu foi moie analytical skills in management foi companies to be able to
analyse anu use the enoimous amounts of uata available to them (Nanyika et al., 2u11;
NcAfee anu Biynjolfsson, 2u12). Thiiuly, manageis have to make suie that the iest of
the oiganisation accepts the iule of uata, anu that the oiganisation is geaieu towaius
using uata in uecision-making (NcAfee anu Biynjolfsson, 2u12).
The fouith IT technique I explaineu is the use of pieuiction maikets. At the
moment, pieuicting tienus anu uevelopments is usually the task of seveial expeit
inuiviuuals fiom within oi outsiue a company (Leigh anu Wolfeis, 2uu7). If pieuiction
maikets take ovei these tasks, manageis have to be able to integiate this into the
company's uecision-making piocess. Nanagement piactice will thus change to facilitate
the use of pieuiction maikets.
The last uevelopment in IT I examineu was the use of A-B testing. Since A-B
testing has mostly been successful in the piocess of uesigning websites, it is not cleai
how the uaily opeiations of companies that aie not inteinet-baseu can be affecteu by the
technique. A-B testing, howevei, illustiates the same piinciple as big uata anu pieuiction
maikets uo, which is the piimacy of uata ovei BiPP0s (Chiistian, 2u12). This has to be
accepteu anu facilitateu by manageis in oiganisations focuseu on both offline anu online
business.

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I will now shift my focus towaius the question whethei the techniques I examineu will
change oiganisational stiuctuie. I will explain the influence the uiffeient techniques can
have on oiganisational stiuctuie anu I will examine the foices that woik to keep IT fiom
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influencing oiganisational stiuctuie. The focus in this pait of the essay will lie on the
question whethei the incieaseu use of IT leaus to the uecentialisation of oiganisations.
I will again stait with uiscussing the impact of clouu computing on oiganisational
stiuctuie. The easy access to computing powei this technique pioviues may change
oiganisational stiuctuie in seveial ways. Fiistly, it makes it possible foi smallei fiims to
opeiate in compute-intensive inuustiies, uecieasing the cost of entiy to the inuustiy foi
these companies (Naiston et al., 2u11; Aimbiust et al., 2uu9). It thus suppoits a move
towaius fiims becoming smallei, which is also iuentifieu by Biynjolfsson et al. (1994).
Seconuly, clouu computing pioviues companies with an IT infiastiuctuie in which
employees uo not have to be at the same place anu in which employees uon't have to use
a system in the same way (Naiston et al., 2u11). This will inciease the inuepenuence of
employees anu may cieate smallei, "flattei" fiims (Nalone anu Laubachei, 1998).
Ciowusouicing is the next IT technique I examine. The ciowusouicing of new
piouuct iueas oi pioblem solving can change oiganisational stiuctuie significantly.
When it comes to new piouuct iuea geneiation, ciowusouicing beats in-house
piofessionals in the aieas of novelty anu customei benefit, anu can compete with
piofessionals in the fielu of feasibility (Poetz anu Schieiei, 2u12). Although this uoes not
necessaiily mean in-house New Piouuct Bevelopment (NPB) is something of the past,
R&B in companies will have to change to let ciowusouicing complement the fiim's
piofessionals (Poetz anu Schieiei, 2u12). This coulu possibly mean smallei, quickei
R&B uepaitments focusing on collecting anu assessing iueas fiom the ciowu, iathei than
uoing tiauitional ieseaich fiom stait to enu.
Big uata also has a few implications foi oiganisational stiuctuie. Fiistly, the use
of big uata calls foi an impiovement of the capability of oiganisations, manageis anu
employees to analyse uata (Nanyika et al., 2u11; NcAfee anu Biynjolfsson, 2u12). As
Nanyika et al. (2u11) state, woikflows anu incentives in companies must be stiuctuieu
in ways that optimise the use of big uata. Seconuly, Big uata can ieplace human uecision-
making with automateu algoiithms, ieuucing the iole anu authoiity of inuiviuual
employees in oiganisations (Nanyika et al., 2u11; NcAfee anu Biynjolfsson, 2u12).
I will now again shift my focus to pieuiction maikets. The uevelopment of these
maikets will not have an impact on oiganisational stiuctuie that is specific to this
technique itself. Again, woikflows anu incentives in companies must be stiuctuieu in
ways that optimise the use of pieuiction maikets.
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Finally, I examine A-B testing. The implications this specific technique
coulu have foi oiganisational stiuctuie aie not obvious, as it is not cleai how the uaily
opeiations of companies that aie not inteinet-baseu will be affecteu by it (Chiistian,
2u12).
Fiom the iespective liteiatuie about all of the five techniques, we can see that
they all ieuuce the infoimation acquisition cost foi companies. In this aspect, they
favoui the uecentialisation of oiganisations (Bloom et al., 2u1u).
Next, I examine the factois that oppose the change in oiganisational stiuctuie IT
techniques coulu cause.
Fiistly, the uecentialisation of oiganisations thiough the uevelopment of IT
techniques is paitly offset by the simultaneous uevelopment of Communication
Technology (CT). Bloom et al. (2u1u) illustiate this stating that a ueciease in
communication cost favouis oiganisations in which uecisions aie "pusheu up" in the
hieiaichy, leauing to a moie centialiseu oiganisation.
NcAfee anu Biynjolfsson (2u12) intiouuce anothei ieason why IT might not leau
to a change in oiganisational stiuctuie, namely that leaueiship, vision anu human
insight will always be essential to oiganisations anu will not be ieplaceu by, foi example,
big uata. This coulu mean that IT techniques seive a complementaiy puipose to
oiganisations anu that IT techniques might auapt to oiganisational stiuctuie insteau of
the othei way aiounu.
The thiiu factoi that opposes the change IT coulu cause is the specific limitations
seveial of the above-mentioneu techniques have. Fiistly, ciowusouicing anu pieuiction
maikets aie only useful when the "ciowu" is laige anu knowleugeable enough
(Salehnejau, 2u12). Seconuly, the usefulness of big uata is laigely uepenuent on legal
anu political issues such as piivacy, secuiity anu intellectual piopeity. Questions
iegaiuing these matteis neeu to be claiifieu if the use of big uata is to be successful
(Nanyika et al., 2u11; NcAfee anu Biynjolfsson, 2u12; Salehnejau, 2u12).

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Foi this pait of the essay, I will ietuin to the two questions I askeu befoie. I will answei
each question sepaiately.

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IT auvances will have seveial consequences on management piactice, but not eveiy
uevelopment stuuieu in this essay will have a laige impact. The main consequences foi
management will piobably be the laigei set of skills manageis will neeu to facilitate new
technologies, changes in the uecision-making piocess, a ieuuceu impoitance of
manageis, a ueciease in the time anu iesouices spent on gatheiing infoimation, anu a
change in manageis' necessaiy behavioui. 0ne also has to take into account that, as
some of the cuiiently emeiging IT techniques aie catalysts foi the cieation of othei
technology, moie uevelopments that may change management piactice coulu take place
in the futuie. An impoitant thing to keep in minu is that leaueiship anu human factois
will piobably always stay uecisive in business, anu that IT will not ieplace these poweis
anytime soon.

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The answei to this question is a uefinite "yes", although it is not completely cleai in
which way oiganisational stiuctuie will change.
Changes in oiganisational stiuctuie the IT uevelopments coulu cause aie an
incieaseu viability of small fiims, an incieaseu focus on ciowusouiceu insteau of in-
house innovation, anu a change in woikflows anu incentives to optimise the use of uata.
Employee inuepenuence coulu change in seveial ways, as both an inciease anu a
ueciease of inuepenuence of inuiviuual employees coulu be causeu by seveial of the IT
techniques uiscusseu. Changes in oiganisational stiuctuie coulu, howevei, be counteieu
by the iuea that human factois will always be cential to an oiganisation's success, which
implies that IT shoulu change to miiioi an oiganisation insteau of vice veisa.
Auuitionally, the success of many IT techniques is uepenuent on outsiue foices anu
enviionmental chaiacteiistics that eithei cannot be changeu at all oi that cannot be
changeu by inuiviuual companies.
The specific question whethei new IT techniques will leau to the uecentialisation
of companies cannot be answeieu easily. As explaineu befoie, theie aie uevelopments in
business that both favoui centialisation anu uecentialisation. If we look at the liteiatuie,
Stuuent IB: 8626271 9
though, we see that a piocess of uecentialisation is geneially seen as moie piobable in
the futuie (Nalone anu Laubachei, 1998; Rajan anu Wulf, 2uuS). 0ne also has to take
into account that uevelopment in IT will continue in the futuie, anu that time,
goveinments anu companies themselves coulu iesolve some of the above-mentioneu
constiaints (Nanyika et al., 2u11; NcAfee anu Biynjolfsson, 2u12; Salehnejau, 2u12).

8/3/$/"(/2

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