An investigation of business value of information technology: Case of Kenya capital markets

Abstract

Investing in information technology is an important exercise that most organizations strive to perform. Several organizations continue to invest in large scale IT systems. Many however companies become so focused on IT that have lost sight of their core goals set in their corporate strategies; this has eventually led to IT systems being bottomless holes that pull their companies resources. Indeed IT investments have been a sad tale for some companies, for example the near collapse of Interstate Bakeries' financial reporting system which contributed to a loss in market value of one-third in a single day. Clearly, IT investments are about so much more than just implementing an IT solution and calling it a day. Therefore there is need to carry out measurements so as to ensure that the objectives of the IT projects realized. It is imperative to utilize business performance metrics in the pre- and postimplementation phases for result comparison so as to determine IT business success. This study therefore sought to establish the business values realized by organizations through investments in information technology. The study consequently sought to answer three major questions viz: which tools are used to measure the impact of IT in organizations? What is the relationship between IT investments and business performance? Finally, what are the challenges that hinder the measurement of business value of IT investments by firms in the capital markets? The study adopted the exploratory design and data was collected using questionnaires and interviews and data was analyzed using frequencies, percentages, means, and standard deviation and correlation analysis. The findings of the study indicated that TQM and balance score card were the most used tools in measuring the impact of IT by organizations .Consequently there existed a negative relationship between IT investments and business performance and finally the findings revealed that valuation of non monetary benefits, difficulty in obtaining information from the user departments and incorporation of uncertainties like obsolescence of technology were the major challenges affecting efforts to evaluate the business value created by IT investments by firms. The study finally concluded that although investments in IT enable the organizations to cut on costs and improve efficiency, the net benefits realized by organizations do not warrant such investments. In this regard the study recommends that before organizations commit shareholders fund in investing in IT infrastructure it should carry a baseline study and build a case to demonstrate the business value and tangible benefits that the investment will reap.