Information Systems in Organizations - Principles of Information Systems - page 59

nents—more as a service than as separate products. In other words, instead of purchasing
hardware, software, and database systems, the organization only pays a fee for the systems it
needs at peak times. This approach can save money because the organization does not pay
for systems that it doesn't routinely need. It also allows the organization's IS staff to con-
centrate on more-strategic issues.
Downsizing involves reducing the number of employees to cut costs. The term rightsiz-
ing is also used. Rather than pick a specific business process to downsize, companies usually
look to downsize across the entire company. Downsizing clearly reduces total payroll costs,
though employee morale can suffer. 33
Employers need to be open to alternatives for reducing the number of employees but use
layoffs as the last resort. It's simpler to encourage people to leave voluntarily through early
retirement or other incentives. Voluntary downsizing programs often include a buyout pack-
age offered to certain classes of employees (for example, those over 50 years old). The buyout
package offers employees certain benefits and cash incentives if they voluntarily retire from
the company. Other options are job sharing and transfers.

downsizing
Reducing the number of employees
to cut costs.

IBM Global Services provides
consulting, technology, and
outsourcing services.
(Source: www.ibm.com.)

COMPETITIVE ADVANTAGE

A competitive advantage is a significant and (ideally) long-term benefit to a company over
its competition, and can result in higher-quality products, better customer service, and lower
costs. Establishing and maintaining a competitive advantage is complex, but a company's
survival and prosperity depend on its success in doing so. An organization often uses its
information system to help achieve a competitive advantage. According to Meg McCarthy,
“At Aetna, the IT organization is critical to enabling the implementation of our business
strategy. I report to the chairman of our company and I am a member of the executive

competitive advantage
A significant and (ideally) long-
term benefit to a company over its
competition.