ICT Adoption And Company Performance Information Technology Essay
Organizations are increasingly becoming dependent upon on information technology for setting up the latest platforms for operations of the business (Chaffey, 2006). The impact of technology on organizational learning and business performance has been the most significant change of the past few decades. The arrival of information technology has enabled company workers to build complex personal networks, carry out work across distances and have access to world of information (Jean, 2007). Information technology tools can be used to analyse, search, interchange and present information reliably and without discernment. Organization can have rapid access to ideas and experiences from a variety of resources, all because of information technology. Information technology impact organizational learning as proven by many researches by the scholars (Masino, 2001).
Despite the potential benefits of ICT and e-commerce, there is debate about whether and how their adoption improves firm performance. Use of and investment in ICT requires complementary investments in skills, organisation and innovation and investment and change entails risks and costs as well as bringing potential benefits (Weert and Tatnall, 2005). While many studies point to the possibility of market expansion as a major benefit for SMEs, larger businesses can also expand into areas in which SMEs dominated. Moreover, it is not easy for SMEs to implement and operate an on-line business, as this involves complementary costs for training and organisational changes as well as direct costs of investing in hardware and software solutions (Scales and Snell, 2002). While many studies provide evidence of the positive effects of ICT adoption on firm performance, others have shown no relation between computer use and firm performance. OECD (2002) analysis shows the impacts of ICTs and e-business strategies on firm performance are positive overall, but that ICTs are not a panacea in themselves. Further work by researchers based on large scale statistical surveys provides evidence that the use of ICT can contribute to improved firm performance, in terms of increased market share, expanded product range, customised products and better response to client demand (Goode and Stevens, 2000). Moreover, it indicates that ICT may help reduce inefficiency in the use of capital and labour, e.g. by reducing inventories, and that the more customers or firms are connected to the network, the greater the benefits (spillover effects). However, the analysis shows that complementary investments in skills, organisational change and innovation are key to making ICT work, and that the use of ICT affects firm performance primarily when accompanied by other changes and investments and that without these, the economic impact of ICT may be limited (Scales and Snell, 2002).
There has been a range of research that has analysed the relationship between ICT and company performance. The work of Scale and Snell (2002) has been particularly sceptical. They suggested there was no correlation between expenditure on IT and any known measure of productivity (Weert and Tatnall, 2005). The accepted wisdom amongst many observers has been that IT delivers competitive gains, speeds up business transactions, increases customer satisfaction, delivers superior quality and leads to improved profitability. (Avgerou and Land, 2008) suggest that the fundamental economic role of IT becomes clearer if one thinks about organisations and markets as information processors. Most of our economic institutions and intuitions emerged in an era of relatively high communications costs, limited computational capability and related constraints. IT has the ability to reduce co-ordination costs, communications and information processing (Chaffey and Smith, 2008). Much of the research in the field has focused on companies, irrespective of their size, but there has also been a body of work that has examined SMEs, and in particular small firms.
2.10 ICT and Organizational Learning
Banks pay a lot of attention to the concept of organizational learning and focus on learning for better performance to gain effectiveness, innovativeness and competitive edge. Organizational learning is a process and tool that an organization can use to produce excellent quality products and create services. It can also be helpful in better satisfying its customers and improve the overall quality of working environment (Smith and Lyles, 2005). Information technology has a capability of offering good enough support to the learning of the organization by creating a learning environment for both businesses and its workforce to learn in new and innovative ways which organizes the companies to transfer knowledge and experiences, share information and ultimately enhance the overall organization’s performance. Information technology, if implemented properly and effectively can support organizational learning functions and can revolutionize the way organization is managed leading the businesses towards strategic advantage (Langer, 2005).
Organizations are always learning but the learning speed have magnified by the fast pace of change in market (Hunt and Osborn, 2010). Organizations working in this environment must learn and understand that these changes whether it is of pure business nature, technological or any other kind of change, in order to efficiently feel and respond to it as swiftly as possible. For this, information technology has a capability of offering good enough support to the learning of the organization by creating a learning environment for both businesses and its workforce to learn in new and innovative ways which organizes the companies to transfer knowledge and experiences, share information and ultimately enhance the overall organization’s performance (Gorelick, 2005). Information business value theory recommends that organizational performance is closely related to information technology that can contribute to such performance by improving a company’s ability to solve problems, administer, coordinate and manage work, share knowledge and/or communicate (Scales and Snell, 2002). Information technology, if implemented properly and effectively can support organizational learning functions and can revolutionize the way organization is managed leading the businesses towards strategic advantage (Armstrong, 2003). In fact, organization is not only affected by information technology but it also indirectly has an impact on the organization’s capabilities and its performance through organizational learning. It also proves helpful in responding to change which in return enables workforce to better benefit themselves as well as improve collaboration with colleagues and customers, helping the organizations to gain competitive edge over competitors (Chaffey, 2006).
2.11 Problems Faced
Communication technologies have come to play a vibrant role in democratizing not only in the developed but also in the developing Countries. However, in spreading the use of Information and communication technology some major difficulties are felt by the policy makers as well as the implementers. These difficulties are felt both at the growth and application stages of communication technology. Mottonen and Lin (2009) highlight the importance of three aspects in the application of new information and communication technology. They are people, software and hardware. Different permutations and combinations with regard to the three variables create different implications for the growth and application of Information and communication Technology. Among these, they stated that the most difficult aspect to address would invariably be the human element (Arendt, 2008).
Authors identified a number of other key problems, both technology and business related, with regard to ICT adoption and use. SMEs are concerned about their technology being out of date and are keen to upgrade when the opportunities arose (Arendt, 2008). But this favourable attitude to ICTs was often tempered by harsh business realities of the costs involved in purchasing ICTs and the complexity that SME owner/managers often associated with those technologies. Often, overworked SME owner/managers find themselves totally dependent on ICT suppliers and external consultants in dealing with technology problems and use issues. When this is seen in combination with high levels of distrust of ICT consultants and vendors, we see a general picture of helplessness and frustration for these SME managers (Arendt, 2008).
In terms of business issues, SMEs are often driven by cost and efficiency imperatives. Therefore, managers are keen to establish value for money and often question the benefits from new ICTs (Mottonen and Lin, 2009). Again, any felt need for new ICTs to improve business efficiency or effectiveness in dealing with clients and customers is often tempered by the lack of internal expertise to judge the appropriate ICT investments and to fix specific ICT-related problems. The situation is often exacerbated when the firms in question do not possess good project management skills that are essential to overcoming resistance to change from staff and to meet time and cost targets (Tan t al, 2010).
Research from the United Nation (2008) has shown that SMEs face particular problems when it comes to introducing ICT. Generally statistics suggests across the EU that the smaller the enterprise the less likely it is to use ICT. However, this does not imply that specific SME policies will necessarily solve these problems. SMEs benefit from a reliable, stable and open business environment (Grembergen, 2009). Therefore policies which encourage this as well as liberalisation of telecoms supply, and the interoperability of ICT solutions, and easier access to finance through 'horizontal' policy initiatives are likely to succeed in tandem with SME-specific initiatives (Grembergen, 2009). Whether SME sector in those countries are attitudinally ready and strong enough to develop the required capacity to undertake the programme? And if so, what should be the contents and form of capacity building exercise?
Due to the nature of ICT businesses, fewer SMEs are involved in this sector than in traditional SME sectors like construction (Lesjak, 2007). Hence in order to cover the widest scope possible concerning standards and standardisation in ICT, we have to take into account both SMEs as ICT users as manufacturers and service providers. Another difference when discussing this subject is to approach standardisation as well as the use of standardised products (Yang and Sang, 2007). Therefore we decided to limit this survey to SMEs as ICT users as if not all SMEs are involved in this sector all of them use ICT products and services.
2.12 Role of Management
Many organisations are realising that they have to devote more resources to the important issue of managing their IT. A key component is an IT Coordinator who can effectively manage all the ICT related issues (Lesjak, 2007). It is important that organisation’s ICT is supported and there should be someone with staff responsibility for IT support, even if this role is simply to liaise with an external source of support. Manager will help Manage Information Communication Technology (ICT) that will enable organisations to get more out of their current ICT and IT equipment. It seemed vital to regularly meet and compile the overall IT strategy to be agreed by the Management (Yang and Sang, 2007). This provides the framework for future decisions and the processes by which our IT is managed. The manager has to back up the network, add and remove users from the network, keep records of equipment, maintenance agreements, licensing, update virus software, data protection registration and so on (Taylor and Murphy, 2004). The manager’s responsibilities include Queries and support. A clear chain of response is required to deal with the regular stream of queries and problems. Training has always been an important issue (Matlay and Addis, 2003). The manager needs to train its staff with the latest ICT equipment in order to run the business operations smoothly. The role of the manager is to bridge the skills gap between what we knew as users of the network and the often technically complex problems that were occurring (Matlay and Addis, 2003). Ideally the management will liaise with external support (consultants or suppliers), co-ordinate the running of the network and communicate with the support agency when things went wrong. In other words a mediator between IT consultants and ordinary mortals, with particular responsibility for the task areas- installations, administration work queries and support (Shiels and McIvor, 2003). Management has key roles in facilitating content availability across all platforms and encouraging local development of new content Lack of ICT skills and business skills are widespread impediments to effective uptake once adoption decisions are made. Governments have major roles in providing basic ICT skills in compulsory schooling, and an important role in conjunction with education institutions, business, and individuals in providing the framework to encourage ICT skill formation at higher levels, in vocational training and in on-going lifelong learning (Payne, 2003).
Evaluation is systematic determination of merit, worth, and significance of something or someone using criteria against a set of standards. Evaluation could be concluded as the process of interpreting the measurement’s value for decision making of effective selection for the authorized (Tangen, 2005). The main focus of the field of informatics traditionally has been on development and implementation of the information and communication technology and information systems (Tangen, 2005). In many development and implementation models the need for an evaluation phase is mentioned, but in practice there is generally not much efforts devoted to evaluation activities, compared with other activities. There is, however, an increasing community of researchers trying to draw attention to the importance of evaluation issues. The evaluation of the contents and process of the development, implementation and use of information and communication systems could contribute to important knowledge that can be used in order to increase quality and efficient aspects of the organisation (Hass and Burnaby, 2005). The increasing focus on knowledge issues in organisations also should include an emphasis on the contribution of reflection and evaluation in the learning process. Different types of information systems need different evaluation approaches (Tangen, 2005). The evaluation context is much more complex when a system is used by many users compared with a few users e.g. if a system is used by many users at different geographical locations and at different times. The characteristics of the information communicated through the system are also of importance. It is more complicated to evaluate the exchange of informal than formal information. Different types of organisations could have a need for different evaluation criteria. Different parts of the organisations could have different internal logics and cultures that could affect the evaluation approaches (Lesjak, 2007). There is also a tendency for increasing communication using information systems between organisations and departments. The increasing complexity of the systems has led to a focus on multi-method approaches among many researchers. In his panel debate some researches are discussing the advantages and disadvantages with different approaches. The main focus on the debate is on future need for different evaluation approaches.
Consequently, the evaluation developed here was the form of interpreting the value from the measurement on ICT management, which would be an evaluation for the four aspects such as 1.financial, 2.customers, 3.internal business process and 4.learning and growth of personnel in organization (Tangen 2005). The benefits gained from the measurement would cause the evaluation on the SME. The evaluation on ICT is considered at the first step of strategic planning and the result from this would generate strategy creation. In the past, many researchers tried to search for various evaluation methods on ICT management. Specially the economic-conceptualized evaluation which did not give any importance point. This evaluation focus on not only the financial perspective but also the benefits gained from the resources. The evaluation of ICT reward divided in both tangible and intangible benefits as considering the role of capacity by various researchers. Also ICT by-product and actual benefit directly affected the organization operations (Grembergen, 2009).
Research has shown that the current approaches to managing ICT generally have not always produced satisfactory results (Grembergen, 2009).Specifically: computer systems take too long to develop, users often voice their dissatisfaction with the quality and timeliness of support they receive; systems often run over budget; are frequently perceived not to deliver the benefits on which they were originally business-justified ; and, are often seen not to meet the managerial or operational needs of users (Worrall, 2004). These issues are not new and they have been a central challenge for ICT management and the management of user-oriented ICT services for the past thirty years. However, despite being known for thirty years they continue to be a major problem in many organisations today.
ICT evaluation is important in determining and improving an investment’s performance and in enabling corrective measures to be taken. However, organisations often fail to formally evaluate their ICT systems (Grembergen, 2009). The evaluation process is underpinned by numerous complexities such as organisational politics, intangible system impacts, and limitations in existing evaluation techniques, and ICT evaluation remains a topic of on-going debate. Evaluation techniques are numerous. For example, Berghout and Renkema (2001) identified 65 methods. Each differs in its level of detail, the range of stakeholders considered and the characteristics of the data required. Selection of an appropriate method is critical since evaluation accuracy and success depends on the technique’s suitability and the rigour with which it is applied (Berghout, 2002). To help in identifying a suitable method, Farbey et al (1999a) proposed a set of matrices that enable project characteristics and evaluation techniques to be matched. Further, Videira and da Cunha’s (2005) manager-friendly roadmap helps select techniques based on the ICT project’s characteristics, which are classified using McFarlan’s strategic grid. Each ICT project has characteristics that lend itself towards a certain evaluation technique, while each technique is suited to a specific set of circumstances. The method chosen is influenced by many factors (Huang, 2003; Lech, 2005). These include social and organisational contexts, the organisational domain, the level of analysis, evaluation purpose and perspective, investment purpose, measurability of system impacts, and ICT application. It is now widely believed that several metrics are required to evaluate the different aspects of an ICT project. The many evaluation techniques are classified in various ways in the literature. For example, Bannister and Remenyi (2000) categorised techniques as fundamental measures, composite approaches or meta-approaches. Lech (2005) discussed financial techniques and qualitative methods such as multi-criteria methods, strategic analysis methods and probabilistic methods. Berghout and Renkema (2001) categorised four predominant approaches which they termed the financial approach, multi-criteria approach, ratio approach and portfolio approach. Many more classifications exist which are not cited here. Some overlap between the various classifications are evident, however there are also distinct differences between them. This highlights the difficulty associated with establishing an agreed, coherent framework for evaluating ICT investments. A review of all available techniques cannot be exhaustive; new methods continue to be introduced while other techniques combine several existing tools. Many of the more important ones are reviewed in the following sections (Grembergen, 2009).
In order to evaluate the SME performance, to evaluate the impact of ICT on company’s performance and appraise the effect on employees’ performance, different methods can be used such as Balance scorecard, feedback, KPI, Index etc. (Tangen, 2005). Knowing ICT’s impact is important. This is because it enables organisations to better understand how they can maximise their ICT returns. However, ICT investment evaluation is complex and poses many challenges. It is difficult to understand and measure how ICT facilitates improved business performance. This problem has been addressed on numerous occasions through many research studies and many contributions have been made (Grembergen, 2009). These contributions have centred on improving understanding of ICT costs and benefits; the evolution of evaluation approaches; the development of evaluation techniques, models and frameworks; and recognition of the need for lifecycle-based approaches that involve stakeholders. There is no shortage of ideas on how ICT may be evaluated. However, many of the methods developed simply look at well-established concepts from different angles or they reflect variants on existing techniques (Lesjak, 2007). Hence, many contributions do not provide any significantly new insights into the field of study. Further some methods developed are too diverse or obscure for practical application. In addition, there is still no consensus on how evaluation may be performed. Much of the research is fragmented with little congruence of ideas. There is little integration in the ICT evaluation field; it is characterised by ambivalent practice and no clear roadmap towards success. This inhibits organisational learning and improved system utilisation and performance.
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