Information Systems Creating Business Value: Dell, Apple & More

Dell and Ingram Micro: CRM and B2B Value Creation

Two firms that continue to generate significant value from their use of information systems and technologies are Dell Computer and Ingram Micro. Dell Computer is the world's leading provider of built-to-order laptops, desktop, and server systems. Through all of its selling and services channels, Dell interacts with approximately three million customers per day. The Customer Relationship Management (CRM) system in place is from Salesforce.com and is used by approximately 4,000 users across the United States, with plans to expand to 15,000 users globally over the next 18 months. CRM is so critical to Dell because the company is investing heavily in selling to state and local governments, enterprises, and small and medium businesses in addition to consumers. Nearly 50% of revenues, however, continue to come from consumers, and a large percentage of profits come from consumers who are buying accessories or making their second or third purchase from the company (Di Gangi & Wasko, 2009). As a result, CRM is critically important to Dell for profitable growth.

What also makes the CRM implementation at Dell unique is how it has been integrated directly into the company's supply chains to better support its build-to-order strategy (Gunasekaran & Ngai, 2009). Dell's approach to creating customized laptops, PCs, and servers is to take orders from its website or from one of its many selling channels, define the build order, and send it to manufacturing entirely electronically — saving days of processing time and hours of manual intervention (Gunasekaran & Ngai, 2009). The CRM system acts as the coordinator of all these transactions and tracks on-time delivery rates in addition to pricing and accessories purchased. It is therefore critically important for Dell to ensure the right product reaches the right customer at the right time. Dell also extended its CRM system to include Voice of the Customer programs, through which customers can submit feedback on new product ideas. Called Dell IdeaStorm, the program has collected over 2,500 ideas and provides customers with real-time updates on the status of each suggestion. This illustrates the depth of Dell's commitment to listening to customers and how pervasive its CRM systems and resulting strategies have become.

A company that exemplifies best practices in Business-to-Business (B2B) selling and services strategies is Ingram Micro. Ingram is the global leader in computer hardware, software, and solutions selling, and has one of the most pervasive channel management and order management systems of any distribution-based industry. Ingram works with approximately 4,500 resellers globally who order systems, software, or arrange for services to be delivered — all through the company's IMPulse ERP system, which was developed entirely in-house (Kunert, 2008). Ingram Micro has also successfully moved into selling enterprise-level web services through a partnership with Google (Fontana & Jedras, 2007). What differentiates Ingram Micro from the many other distributors in the industry is its ability to track and report the status of orders electronically from anywhere in the world (Theoharakis, Sajtos, & Hooley, 2009). Ingram Micro uses technology to ensure customers receive fast, reliable responses to their transaction needs.

The sustainability of first-mover advantage is often generationally limited by technology, as substitutes frequently arrive in a market and render a previous technology's advantage obsolete (Boulding, 2004). In the area of products that lend themselves to commoditization — including printers, PCs, and laptops — this is certainly true. However, this dynamic cannot be applied to the business models of Netflix and Apple, two companies that have been disruptive at a system and process level. Netflix, with its distributed order management system and optimization technologies for generating guided video recommendations, and Apple, with an ecosystem that capitalizes on new digital audio and video content, both possess first-mover advantages that are difficult to replicate. Both companies are clearly exploiting the benefits of network effects and the potential for even greater customer loyalty through the development of interactive feedback loops (Boulding, 2004). Netflix has been able to outrun the chain store-based strategies of competitors such as Blockbuster and the many regional chains competing for the same consumers. Apple dominates MP3 device sales with a consistent market share exceeding 70% for the iPod and iTouch series in the MP3 market alone (Vossoughi, 2008). The economies of scale embedded in these systems — Netflix's optimization software engines and distributed order management, and Apple's digital entertainment ecosystem — create significant switching costs for users, reinforcing the first-mover advantage (Boulding, 2004). Technology is an active enabler of sustainability for both companies, and each firm's process expertise in its core business is also a significant differentiator. Both companies possess exceptional insight into their customer bases, and Apple uses this intelligence in the development of next-generation MP3 players, laptops, and desktop systems (Noble & Kumar, 2008).

First-Mover Advantage: Netflix and Apple

In assessing the pros and cons of being an early versus late adopter of technology, the competitive advantages relative to the risks must be carefully weighed. Despite the inherent risks of early adoption, companies that choose this path also gain differentiated knowledge (Wozniak, 1993). Additional first-mover advantages include more personalized vendor attention, greater opportunity to influence product design and performance, and more in-depth training (Slater, Hult, & Olson, 2007). The disadvantages include potential revenue loss and customer attrition if the technology proves unreliable. There are also threats related to new technology exposing confidential processes, systems, and data, thereby making the adopting company more vulnerable. Finally, the risk that a new technology may be incompatible with existing processes and systems could require an entirely new operational structure and approach.

Li & Fung continues to be exceptionally successful in that it has created a unique distribution value proposition and continues to add services to its core business model. In addition, Li & Fung has created entirely new process workflows for supply chain coordination and supplier management in retailing hard goods and soft goods, and is consequently considered one of the global leaders in distribution (Matthews, 2006). The company has successfully transitioned from being a distributor to functioning more as a private trading exchange, specifically managing hard goods and soft goods through retail channels and also overseeing more complex supply chain processes through China for global clients. The Li & Fung value chain encompasses inbound logistics, operations, outbound logistics, marketing and sales, and after-sales service as its primary activities. Firm infrastructure coordinated with Human Resource Management (HRM) and the use of technologies to continually improve and streamline the procurement process are also critically important for the company's value chain to deliver profitable performance over time (Ayling, 2007).

The firm has been able to attain "top-notch quality at the best price in the timeliest manner" by concentrating on sharing information and knowledge throughout its supply chains with trading partners and the subsidiaries it owns. This approach to information and knowledge management has helped Li & Fung remain more agile than many of its competitors and therefore more resilient during challenging economic conditions. The use of enabling technologies has also acted as an accelerator for the company's efforts to keep all parties informed.