Impact of Information Technology

Information technology has revolutionized the current global society in numerous ways. The introduction of IT and computers in the past few years has significantly impacted the performance of organizations, and the business sector as a whole, emerging to become the pillar and accelerator of growth in organizations. In the present knowledge-based economy that is marked by stiff competition among businesses, the effective use of IT is vital. According to Vasudevan (2003), technology is a key contributor to the advancement of developed nations, as a solution to developmental challenges. According to the study, more than 90% of all World Bank loans are IT-related. It is estimated that over 1.5 trillion USD are spent annually on IT in the whole world (Anadarajan, & Anakwe, 2002).

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Organizations have hugely invested in IT in an attempt to enhance their efficiency and effectiveness; this move has drawn various opinions from policy makers, managers, researchers etc, with regard to the effectiveness of IT in improving the productivity of companies. Naturally, it is an expectation of every organization that its investment on technology would yield fruit by increasing their performance. While some scholars admit that IT positively impacts organizational performance, others maintain that it does not have any effect on the productivity of an organization. Performance improvement, which is the main goal of information systems in firms, is only attainable when IT is accepted and utilized effectively by the employees in an organization (Strachman, 1994). Information Technology is the most favorite driver of economies, and a tool used to achieve competitiveness in the global market. The global economy has shifted from industrial to an information-based economy. The Pakistan’s banking sector is one of the high users of IT and the most ordered sector. This sector has surpassed all other Pakistan’s sectors in its huge investments in IT, consequently attaining high performances. Similar to other nations, Pakistan has also accepted the 21st century’s challenge by embracing internet technology. A few years back, very little was known about IT in Pakistan, but now, the concept has become a part and a parcel of all Pakistani organizations (Rizvi, 2005). This study sought to determine the impact of IT on the organizational performance of the banking sector in Pakistan.

Literature Review

Various authors have defined Information Technology in different ways, but for this research, the definition by Robbins and Coulter (2003) was adopted. It states that IT is a broad term that is used to portray any technology that assists in the production, processing, manipulation, storing, communicating, and disseminating information. Performance, on the other hand, is the outcome of an activity, and, therefore, organizational performance refers to the accumulated outcome of all the activities of an organization (Strachman, 1994). This review focuses on Pakistan’s Banking Industry, and how it has evolved over the years, with the help of IT.

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Information Technology and Pakistan’s Banking Industry.

The financial sector is seemingly the world leader in the use of IT. This is evident in its incorporation of electronic data processing within its operations, via the use of Automated Teller Machines, electronic funds transfer, bookkeeping, loan application processing etc. Today, ATMs work 24/7, offering fast and convenient banking services to numerous customers around the world. The increasing use of ATMs has helped banks to lower the high costs of maintaining numerous bank branches equipped by tellers (Strachman, 1994). The Pakistan’s banking sector has undergone great changes in its history. In the 1970s, only a few bank branches were present in Pakistan, but now, numerous banks have grown in every corner of the country. The banking sector in Pakistan is diverse, and consists of Private Banks, Nationalized Banks, and Foreign Banks (Rizvi, 2005).

The introduction of computers in the Pakistan’s banking sector began in 1965, with commercial banks in the private sector, such as the United Bank, purchasing computers to help regulate their work. Since then, the banking sector has hugely invested in IT. This is evident by the fact that more than $200 million was invested in IT, by the financial sector in the year 2003-2004. In addition, there has been a remarkable reliance in the use of IT, evident by the growing number of online banking services. In Pakistan, nearly all banks are utilizing IT to boost their performance (Rizvi, 2005).

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Numerous studies have been done to measure the impact that IT has on organizational performance, using indicators, such as income, customer satisfaction, employee’s job interest, inter-office relations etc. Researchers, for example, Vasudevan (2003), studied the effect of IT on profits of the companies, and positive results it brought. Though other researchers have found different results, while studying the above factors following IT implementation, they all have come to a conclusion that IT increases the performance of organizations. Due to the variation in the findings of different researchers, this study was done to verify the past research that found out that IT had a positive effect on the profits/income of organizations. Therefore, the aim of this study was to determine the impact of IT on the incomes/profits of banks in Pakistan.

The sample for this study was ten commercial banks in Pakistan. It is, however, important to note that there are forty banks in that country, but only ten were chosen, for the reason that some of them were established recently, hence, they do not serve the purpose of this research. Data collection involved the use of questionnaires. Well-structured questionnaires were emailed to the CEOs of ten banks in Pakistan, detailing questions pertaining to the study. The research period was two weeks. The respondents were very cooperative, and all the ten questionnaires sent were returned completely filled within a period of one week. The names of the banks are shown in the table below:

The main limitation of the research was the limited time allocated for the study. There was fear that some questionnaires would be returned unfilled, because of the short time, but after follow-up calls, all the CEOs agreed to fill them within the required time. The lack of appropriate tool for statistical analysis such as SPSS was another major challenge for this study. Otherwise, the research went well, and the gathered information was very significant for the achieving the aims of this study.

The research found out that IT had a positive impact on the incomes/ profits of over 80% of the banks studied, both local and foreign. However, the study found out that IT did not have any effect on the income of Allied Bank. Overall, a positive impact was seen in the performance of all the banks due to the use of IT. Another thing to note from the study is that the higher investments on IT led to higher returns by banks.

Information Technology has, certainly, revolutionized every aspect of human communication, as well as the business industry. The need for improved effectiveness and efficiency is the main reason why organizations use IT. The Pakistan’s banking industry has hugely invested in IT over the recent years, and the results have been amazing; from cost reduction, and convenience to maximum profits (Rizvi, 2005). From this study, it is evident that the use of IT had a significant impact on the incomes of banks in Pakistan, and, consequently, impacted positively on their organizational performance. In conclusion, this study revealed that the findings of the past research were true, and it encouraged organizations other than the banking sector; to fully embrace the use of technology in order to reap its benefits.

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