Impact of IT on Productivity

SHANKAR MUDALIAR

ROLL NO. 59
MMS 2

The progression of IT

Over the past two decades, most industrial countries have made significant investments in IT. For example, the share of IT in a firms total investment in equipment jumped from 7% in 1970 to 40% in 1996. The decline in IT prices provides enterprises powerful economic incentives for the substitution of IT investment for other forms of inputs. In the U.S., the value of the net stock of IT capital equipment approached $900 billion by the end of 1999

Social Impacts of Information Technology

Office automation

Office automation helps office workers improve working efficiency productivity, data security and communications with others Refers to commercial activities carried out in an electronic network e-bay, a popular online trading site UID project

E-commerce

IT in Government UID project

Contains personal data, templates of thumb prints and photograph of card holder
Information stored is encrypted with high security Helps in booking the tickets online Reduces the physical movement of people for paying bills

Railway Bookings

Bill payments

How Can Information Technology Improve Productivity?

Working from Anywhere

Information technology has made on productivity is that it allows employees to work from anywhere

Working More Efficiently

Information technology now allow all paper documents to be scanned into a central database, where a single employee can easily search for just the records that are needed by the organization. Work that once required an office full of employees can now be accomplished by one or two dedicated workers.

Exponential Storage Gains

The price per gigabyte of storage has fallen sharply in recent years and that lower price has allowed companies to keep more of their data online for longer periods of time.

Case: State Bank of India, World's Largest Centralized Core Processing Implementation

SBI the largest and oldest bank in India, had computerized its branches in the 1990s, but it was losing market share to privatesector banks that had implemented more modern centralized core processing systems. In 2002, SBI began the largest implementation of a centralized core system The State Bank of India selected Tata Consultancy Services to customize the software, implement the new core system It expanded the project to include all of the more than 14,600 SBI and affiliate bank branches.

SBIs objectives for its project to modernize core systems

The delivery of new product capabilities to all customers, including those in rural areas The unification of processes across the bank to realize operational efficiencies and improve customer service Provision of a single customer view of all accounts The ability to merge the affiliate banks into SBI Support for all SBI existing products Reduced customer wait times in branches

Challenges for the Bank

Finding a new core system that could process approximately 75 million accounts daily Employees would effectively use the new system. Meeting SBI's unique product requirements that would require the bank to make extensive modifications to a new core banking system

Critical Success Factors

Senior management commitment

The project was driven by the chairman of SBI, who met every month with the information technology (IT) and the business sector heads. The chairman monitored the overall status and ensured that sufficient resources were allocated to the project. The core banking team consisted of the bank's managing director of IT acting as team head and 75 business and IT people selected by the bank. The regional business line heads were responsible for the success who reported the status to the chairman. The business heads' objectives were aligned with those of the project team.

Staffing and empowerment of project team

Ownership by business heads

Focus on training

SBI used its network of 58 training centers across India to train employees on the new system

Benefits of New Core Systems Implementation

The business per employee increased by 250% over the last five years The bank has achieved its goal of offering its full range of products and services to its rural branches Core conversion project has also allowed the bank to undertake several new initiatives to further improve service and support future growth

Implementation of the core system has provided the bank with the ability to consolidate the affiliate banks into SBI

Business results for SBI group (200207)

Category Total deposits 2002 $72 2003 $82.5 2004 $99.6 2005 $11.5 2006 $121.9 2007 $146 Change 200207 103%

Total loans/advances
Total operating expenses Staff expenses Total operating profits

$34.1
$2.00 $1.29 $1.81

$40.2
$2.25 $1.56 $2.38

$50.6
$2.87 $1.82 $3.33

$65.6
$3.30 $1.92 $3.44

$83.9
$3.95 $2.41 $3.47

$112.1
$4.60 $2.44 $3.31

229%
130% 89% 83%

Conclusion

The findings show that IT investments not only makes positive contribution to productivity, but also its returns is higher than non IT investments.

Top managers play a critical role in employing IT and radical organizational change. They have to think strategically. It means that they should recognize their companys resources and assess the target market and its characteristics IT investments become much more important for companies not only as a new technology to produce products but also as an enabler to increase productivity growth.

Thank You