Impact of Information Technology on Organizational Performance

Investment in IT is usually aimed at improving productivity, profitability and quality of operations but Devaraj and Kohli (2003) were unable to identify the impact of technology on the organizational performance. Kelly (1994) found out that the reason for the inability to properly explain the relationship between technology and productivity was due to the aggregated unit of analysis at the organizational level which adds to the complexity of isolating the effects of any individual technology. He noted that the chance of finding IT usage impacts depends on how detailed the analysis is. Devaraj and Kohli (2003) stated that examining the amount of money invested in IT may not yield accurate measure of IT effectiveness because levels of usage could be different across industries, firms and processes. In their own contribution to the fledging debate on IT usage impacts, Goodhue and Thompson (1995) explained that the fit between task and technology would have to be established before IT utilization can lead to individual performance impacts. In order to achieve task- technology fit, the technology and targeted application would have to be compatible as well as the availability of qualified users who will use the technology (Goodhue & Thompson, 1995). This proposition implies that IT infrastructure and the organization’s business goal would have to be in alignment.

The IT usage literature has shown that there is difference between voluntary use of IT and mandatoriness. Subjective norm was found to affect mandatory IT use whereas it was absent in voluntary use. Also, it was noted that pay off in technology do not usually occur instantaneously but are realized over time (Devaraj and Kohli, 2003; Hartwick and Barki, 1994). Peffers and Dos Santos (1996) conducted a survey on the impact of IT in banks and observed that cross-sectional studies that are done soon after applications are installed may not yield desired results by not finding benefits even if their is potential for large benefits. Their study indicated that impact of IT on performance became apparent after certain time lag and that benefits from IT accrued more to early adopters than late adopters.

References:

Devaraj, S., & Kohli, R. (2003). Performance impacts of Information Technology:

Is actual usage the missing link. Management Science, 49(3), 273-289.

Goodhue, D.L, & Thompson, R. L. (1995). task technology fit and individual performance. MIS Quarterly, (19)2, 213-236.

Hartwick, J., & Barki, J. (1994). Explaining the role of user participation in information system use. Management Science. 40, 40-465.

Kelly, M. (1994). Productivity and Information Technology: The elusive connection. Management Science, 40(11), 1406-1425

Peffers, K., & Dos Santos, L. (1996). Performance effects of innovative IT applications over time. IEEE Trans Engrg. Management, 43(4), 381-392.

Dr. Austin Umezurike is an experienced Information Technology management consultant with more than 15 years experience in business technology consulting. He has unique experience in utilizing the mix of technology and business to achieve organizational and industry leadership in technology and to gain competitive advantage. His interests include Organizational IT strategy, Organizational assessment, Business IT alignment, Outsourcing/Sourcing, Supply Chain management, IT Audit/Compliance, training and new business development strategies.

Dr. Umezurike holds a Ph.D. in Information Technology Management and Masters in Information Technology from Capella University, Minneapolis, MN.

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