Yarmouk University

Faculty of Economics and Administrative Sciences

Management information system

How information technology enhances and support organizational
performance

Oversee: Professor Karasneh Abd

Preparation: Osama Bataineh

Semester: 2013 \ 2014



Introduction
Information Technology is a powerful force in todays global society.
The advent of computers and Information Technology (IT) has been
perhaps the single massive drive impacting organizations during past
few decades. Information Technology or IT is revolutionizing all the
living ways. No doubt, it has given a new meaning to the word
Convenience. Information Technology has drastically changed the
business landscapes and word IT has become the Catchword of the
modern life today. Information Technology has become, within a very
short time, one of the basic building blocks of modern industrial society.
The effective use of IT is an essential element of competing in a fast-
paced, knowledge based economy.
The impact of information technology (IT) use on performance and
other organization, outcomes is an important topic to both practitioners
and academics. During the 1970s and 1980s, manufacturers began
adopting IT to automate plant operations. Since the early 1990s there
has, been a rapid growth in IT investments for enterprise resource
planning and supply chain, management in manufacturing industries.
These information technologies are believed to improve the efficiency of
manufacturer shop floor operations, enhance integration across
different functional areas, and facilitate inter-firm collaboration.
In the Information technology (IT) literature, a large number of studies
capture the level of IT adoption using highly aggregated IT investment
measures that typically lump together all IT related spending, such as
investments in computer hardware, software, and telecommunication
infrastructure. This approach to examining IT capital does not allow
the isolation of the impact of specific IT applications. However, assessing
the impact of specific IT use is important for improving plant operations
because building IT-based competence is an ongoing process that
requires incremental investments in new IT applications in order to
improve the effectiveness and efficiency of operational processes at
different levels.
Over the past two decades, manufacturing firms have witnessed
increasingly of individualized customer demands, leading to increased
customization and proliferation products and services. As a result,
modern-day manufacturing firms tend to have multiple product lines
targeting different markets and customer segments. Within
manufacturing firm individual manufacturing plants supplying
different target markets and customers need to be supported by a
tailored configuration of IT applications.
Information Technology also creates a serious dilemma for management
today. IT innovations have the potential for changing the competitive
game for any organization. On the other hand, the size of IT investments
put increasing pressure on managers to assess its business value. One
key to this dilemma is to improve the ability to measure and track the
impact of IT on productivity. Alongside, the seemingly inexorable rise in
IT investment during the last 20 years, there have been considerable
uncertainty and concern about the productivity and efficiency impact of
IT being experienced in work organization. However, in quest of
improving efficiency and effectiveness the companies are making heavy
investments in Information Technology. These enduring magnitudes of
investment in Information Technology so has drawn attention of many
researchers, managers and policy makers to the impacts of IT on growth
and productivity. The expectation was that increased investment in IT
would naturally lead to increase performance of organization. But
despite the massive investments in IT both in the developed and
developing economies, the impact of IT on productivity and business
performance continued to be questioned.
The goal of every information systems, based in any organization is to
improve performance on the job and this performance efficiency is only
achieved when IT is accepted and used warmly by the concern
employees in organizations. In their quest for development, many
developing countries put great hope in use of IT. Yet, the challenges of
IT diffusion in these countries are by no means identical to the ones in
the developed countries. The challenges faced by developing countries
in harnessing the full potential of IT are not really very different from
those of that confronted by the developed countries.
Information Technology now is the most preferred choice of all
developing and developed countries to upgrade their economies and
become competitive in the global market place. The IT based economies
have streamlined the most complex economies of the world and
enhanced the productivity to the level where an economy such as US
has wriggled out of the entire trillion plus dollars national deficit and
turned into a surplus in recent years. The world economy now has
moved from low-value basic industries to a fast paced high-value
information based economy.




Definition of the concept of Information Technology
Information Technology has been defined in various ways by different
authors. Over the years, IT has been conceptualized and measured
differently by different researchers. The majority of the authors,
however, parallel Information Technology with computer systems. For
example defines IT as Information Technology is the term that describes
the organizations computing and communications, infrastructure,
including computer systems, telecommunication networks, and
multimedia (combined audio, text, and video) hardware and software.
IT includes hardware, software, databases, networks, and other related
components which are used to build information systems Many other
researchers also have come up with the same idea and say that IT is the
technology that supports activities involving the creations, storage,
manipulation and communication of information together with their
related methods and management applications. ). However, William &
Sawyar, 2005 define Information Technology as a general term that
describes any technology that help to produce, manipulate, process,
store, communicate, and/or disseminate information. This definition may
be regarded as the comprehensive one, as it covers all aspects discussed
by different researchers and includes all the components and processes
needed to carry out information processing work in the organization. So
it can be said that that IT concept came from a merging of computer
with telecommunications technologies, when computer and
communications technologies are combined, the result is Information
Technology.

IT and evolution of process control
Since the 1970s, manufacturing industries have observed growing
adoption and use of advanced manufacturing technology (AMT),
enabled largely by modern information technology (IT). Technologies
such as computer aided design (CAD), computer aided manufacturing
(CAM), material requirement planning (MRP), and flexible
manufacturing systems (FMS) have dramatically changed
manufacturing processes and their outputs.
AMT is believed to deliver high production flexibility, rapid responses to
changes in demand and product design, greater control and
repeatability of processes, faster throughput, reduced waste, and
distributed process capability. As such, the traditional tradeoff between
flexibility and efficiency has been altered significantly: one of the
primaries the capability to combine traditional economies of scale with
economies of scope in an ability to achieve both flexibility and
efficiency.
Indeed, IT has been widely acclaimed to enable mass customization
since it provides efficient flexibility to help firms cope with the dual
challenge of speed and flexibility and low cost
The impact of IT is not limited to core production processes. Broad
adoption and use of IT within the firm and across firm boundaries also
may stimulate new work practices and Organizational forms, leading to
changes beyond core production processes. Recently, advances in
Internet technology have enabled firms to monitor, improve, and control
operational processes throughout the supply chain.
Interorganizational processes, when enabled by integrated IT systems,
can create capabilities in demand sensing, operations and work flow
coordination, and global "optimization of resources.

Information Technology Resource
Based on the analysis of how IT business value researchers have treated
the IT artifact, the predominant approach has been either (1) to use
aggregate variables such as IT capital or counts of systems in
quantitative empirical studies, or (2) to take a holistic approach in
exploring the interdependencies between IT and human resources in the
creation of business value within case and field studies.
Other researchers have attempted to develop a more generalized view of
IT. For example, in their review and synthesis of quantitative empirical
IT business value research, Dehning and Richardson (2002) identify
three different formulations of IT: IT spending, IT strategy (type of IT),
And IT management/capability. Likewise, Bharadwaj (2000) derives IT
infrastructure, human IT resources, and IT-enabled intangibles such as
customer orientation and knowledge as principal IT-based resources.
Based on a survey of top IT executive's at50 firms, Ross et al. (1996)
identify three IT assets underlying a firms IT capability: human,
technology, and relationship.
Physical capital resources comprise plant and equipment, geographic
location, access to raw materials, and physical technology, a subset of
which is the technological IT resource (TIR). TIR can be further
categorized into (1) IT infrastructure, i.e., shared technology and
technology services across the organization; and (2) specific business
applications that utilize the infrastructure, i.e., purchasing systems, sales
analysis tools, etc. TIR thus includes both hardware and software the
separation of TIR into infrastructure and business applications is
consistent with how companies view their physical IT assets, an
important consideration as firms view the two in different ways when
making investment decisions and setting performance expectations.
The second resource is the firms human capital, which refers to
expertise and knowledge, and we thus call the second component of the
IT resource the human IT resource. HIR denotes both technical and
managerial knowledge. Examples of technical expertise include
application development, integration of multiple systems, and
maintenance of existing systems; managerial skills include the ability to
identify appropriate projects, marshal adequate resources, and lead and
motivate development teams to complete projects according to
specification and within time and budgetary constraints. Though
technical and managerial expertise is often intertwined, they are
nonetheless distinct concepts, and their conceptualization as such is
necessary for precision in describing IT investment impacts. Human IT
expertise may be associated with the entire technological infrastructure
of the organization or may reside locally within business units and be
associated with specific business applications.





IT and Performance
Performance comprises business process performance as well as
organizational performance. The former denotes a range of measures
associated with operational efficiency enhancement within specific
business processes, such as quality improvement of design processes and
enhanced cycle time within inventory management processes. Examples
of business process performance metrics used in prior IT business value
research include on-time shipping, customer satisfaction and inventory
turnover.
In contrast, organizational performance denotes aggregate IT-enabled
performance impacts across all firm activities, with metrics capturing
bottom-line firm impacts such as cost reduction, revenue enhancement,
and competitive advantage. IT business value researchers have
operationalized these measures via operations measures (cost reduction,
productivity enhancement, etc.)
Resource-based theory informs understanding of the linkage between
the type of IT and the nature of business process and organizational
performance impacts. For example, upon its introduction the SABRE
airline computerized reservation system was valuable and rare, thus
conferring a temporary competitive advantage. However, imitation over
time and diminished rareness weakened such advantages. Regarding the
conversion of business process performance impacts to improved
organizational performance, several factors are salient, including the
scope of the business process, the extent to which it is core to the
organization, the rareness of the particular IT in question, as well as the
competitive environment.
The Impact of IT Competitive Environment
The competitive environment in which the focal firm operates, which
we separate into two components: industry characteristics and trading
partners. Industry characteristics include competitiveness, regulation,
technological change, clock speed, and other factors that shape the way
in which IT is applied within the focal firm to generate business value.
In addition to industry characteristics, the competitive environment also
includes the focal firms trading partners. When IT spans firm
boundaries, the business processes, IT resources, and non-IT resources of
trading partners play a role in the IT business value generation of the
focal firm. We thus include industry characteristics and trading partners
in the competitive environment domain.
The technology advancement in the world over is so rapid and wide
spread that isolates manufacturing and technology from each other is
merely an impossible proposition. Information Technology is becoming
critical to many manufacturing organizations that want to be a world-
class manufacturer as IT often provides a manufacturing based
advantage. Information Technology can assist manufacturing firms in
developing their strategic roles. In todays competitive global market,
for the survival of any industry, manufacturing companies need to be
pliable, adaptive, responsive to change, proactive and be able to produce
a variety of products in short time at a lower cost.
Hence, manufacturing companies are compelled to seek advanced
technologies by integrating manufacturing facilities and systems in an
enterprise through computers, its peripherals and communication
network to transform island of enabling technologies in to a highly
interconnected manufacturing systems. Today, the capability of
producing high quality products according to diverse customer
requirements with short delivery times has become the characteristic of
order-qualifiers for manufacturing industries. Furthermore, non-price
factors, such as quality, product design, and innovation and delivery
services are the primary determinants of product success in todays
global arena.
Implementing integrated advanced technologies is an effective approach
towards solving the problems of decreased productivity, labor cost and
consequent rise in unit costs, which are continually plaguing present
day manufacturing manager. Implementing advanced manufacturing
technologies (AMTs) provides opportunities to achieve competitive
advantage in an intermediate-to long-term time frame.
The Internet based distributed systems motivated the industries to utilize
IT in all areas. Advances in software technologies have been
transforming the world of integration into compatibility systems and
devices by establishing an open connectivity standards, agreed by the
manufacturers, which will provide plug-and-play communication and
interoperability between field devices, control systems, and enterprise
wide business applications. Revolutions beget openings of one kind or
the other. The IT revolution would semblance to have opened a
beneficial window of opportunity for the manufacturing organizations.
After that many other companies in this sector started using computer to
increase their productivity. Now IT usage in manufacturing and
industrial sector is very common. Within the industrial sector, the use of
Enterprise Resource Planning software packages such as SAP and Oracle
have become commonplace.


Organizational Performance
The performance is an end result of an activity and an organizational
performance is accumulated end result of all the organizations work
process and activities. Managers measure and control organization
performance because it leads to better asset management, to an
increased ability to provide customer value, to improve measures of
organizational knowledge and measure of organizational performance
do have an impact on an organizations reputation. When the
performance of the organization is assessed, the past management
decisions that shaped investments, operations and financing are
measured to know whether all resources were used effectively, weather
the profitability of the business met or even exceeded expectations, and
weather financing choice were made prudently. The most frequently
used organizational performance measures include organization
efficiency (productivity), organizational effectiveness and industry
ranking.

IT SUPPORT Industry Characteristics
The organization of industries concentration, supply chain
configuration, etc. as well as their salient features technological
change, regulation, IT standards, etc. can shape how IT is used within
focal firm business processes to create IT business value. For example,
the competitive characteristics of strategic factor markets, including the
IT resource, affect the degree to which a firm can enjoy above normal
returns. Another example is the high degree of unionization in such
industries as telecommunications and auto manufacturing that may
hamper a firms ability to substitute IT for labor or to implement
complementary work practices such as cross functional work teams.
The resulting sub-optimal application of IT may limit IT business value
generation. Alternatively, in time-sensitive industries such as personal
computers and apparel, there is ample opportunity to apply IT to reduce
cycle times, better manage inventory, and improve customer satisfaction.
Industry characteristics apply to all firms in an industry. However, the
response of industry competitor's vis--vis information technology is not
necessarily uniform. It is thus necessary to account for heterogeneity
across industries as well as alternative response strategies among
industry competitors to the same set of industry stimuli when examining
the role of industry characteristics on IT business value.

The impact of IT on Trading Partner Resources and Business Processes
Information technology increasingly permeates organizational
performance, linking multiple firms via electronic networks and
software applications and melding their business processes. As a result,
trading partners increasingly impact the generation of IT business value
for the focal firm. For example, inefficient business processes and
antiquated technology within trading partner firms may inhibit the
attainment of IT business value of an interorganizational system initiated
by the focal firm. In some cases, this may give rise to incentives for the
focal firm to team with the trading partner for joint improvement.
We therefore adapt our formulation of IT, business processes, and
organizational complements to the focal firms trading partners, which
provides the conceptual foundation for understanding their impact on
focal firm IT business value generation. For example, the ability to
partner with external IT units in development and implementation
would be included in the human IT resource of both the focal and
external organization. Another example is poor work practices within a
supplier firm that inhibit its full use of a procurement system introduced
by the focal buyer firm.

IT enhance Macro Environment
Denoting country- and meta-country- specific factors that shape IT
application for the improvement of organizational performance
Examples include government promotion. And regulation of technology
development and information industries, IT talent, information
infrastructure, as well as prevailing information and IT cultures. As an
example, firms in developing countries face constraints in applying
information technology in the areas of education, expertise,
infrastructure, and culture. Inclusion of country factors in our model
emphasizes their role in shaping the attainment of IT business value,
especially salient to public policy makers. It also highlights the need to
better understand the specific elements that apply in differing political,
regulatory, educational, social, and cultural contexts.





Measuring Impact of Information Technology on Organizational
Performance
Efficiency and effectiveness do not means the same thing. In fact, they
are often natural enemies. Often one can have one, or the other, but not
both (Unless one is lucky or one want to spend a lot of money). Being
efficient means that one spends less time on something, one spends less
money on something or one spends less efforts (or number of workers)
on something. Being effective means that one does his job well. In other
words, the output (finished product) is of high quality. It is a rare and
delightful occasion where a solution to a problem is both efficient and
effectiveness; one usually has to decide which he prefers, because one
usually cannot have both. rightly assessed that efficiency and
effectiveness are entirely unrelated, so as their measurement.
In an IT context when we measure the effectiveness, we basically
measuring the capacity of the outputs of information systems or of an IT
application to fulfill the requirements of the company and to achieve its
goals, making this company more competitive. In the same IT context
the efficiency is the measurement that how cheaply can you get things
done, and are the people to whom you provide IT services (the
stakeholders) happy with the levels of service being delivered? and does
it reduced the operational expenses?
Various studies have been undertaken to measure the impact of IT on
management performance (efficiency & effectiveness) of business
organizations using different performance indicators which according
to Dyson (2001) are considered key factors. These variables capture all
activity levels and performance measures and common to all units and
cover the full range of resources used. These variables include income,
customer satisfaction, supplier/customer links, company image, job
interest of employees, stakeholders confidence, and interoffice links.

Conclusion
IT has revolutionized and redefined all aspects of human interaction in
social, business or other. It has turned world in global village where
limits of time and location no more apply. The companies use IT to get
improved efficiency and effectiveness. This use has grown at an
astonishing rate over the past three decades. Now, Information
Technologies permeate nearly every aspect of modern business
operations and communications. As computing and networking
machinery proliferated into every aspect of business life, the pressing
need to manage these technologies effectively has grown accordingly.
Realizing the need of time in organizations & manufacturing industries
are also using IT to increase their performance in almost all areas.
Information Technology has become means of better production and
services in these industries. Advancement in production and
communication through IT has changed the nature of working for both
the industries. In addition introduction of Internet and advancement in
computer connectivity have given companies an opportunity to conduct
their business on-line. It is also encouraging that the IT initiative is
being fully supported by the regulators very cautiously towards
development of complete E-Commerce. It is therefore, predicted that the
future of the organizations and manufacturing industrys Information
Technology efforts and its spending will continue to increase in
importance for the transition of traditional organizations into virtual
organizations. The recent statistic revealed that with this aim the total
spending on computer & Information Technology is projected to
increase by about 100 percent by the year 2010.




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