The impact of information technology investments on organizational performance at Kenya Commercial Bank group Ltd

Abstract

Information Technology has emerged as a key component in solving complex strategic issues. Relevant literatures have recognized Information technology as the driving force behind the fast rate of changes in global markets. Organizations are becoming increasingly dependent on Information Technology to improve their performance. While the dependence on Information Technology is on the increase, Organizations are unsure of the payoff of these heavy investments. It is on the backdrop of this dilemma that this study set out to establish whether Information Technology have an effect on Organizational Performance. The theory that anchored this study was Edith Penrose’s (1959) Resource Based theory of the firm. This theory stipulates that a firm is a bundle of resources within an administrative framework. The study considered Information Technology as a critical resource for the bank. It was a case study that sought to utilize longitudinal studies to establish the trends exhibited by the two variables during the period studied. The study collected both primary data and secondary data to benefit from triangulation. Primary data were collected using a pretested interview guide that was used to interview 10 senior managers drawn from key functional areas of the bank. Secondary data was collected from published annual financial statements of the bank. The data findings were analyzed using Excel software tools and the findings showed a positive relationship between Information Technology and Organizational performance. The key findings of the study were that some of the internal benefits of Information Technology included cost reduction, improved customer services, process and people efficiencies and better employee performance. Under Information Technology practices, the key findings were that the bank has hardware, which included personal computers, laptops, servers and Internet protocol phones. It was also noted that there was a bank website to provide information to the public. The existence of an intranet for employees and networks was also a notable feature. The strategic benefits of Information Technology at the bank included competitive advantages gained by the bank, innovation of products, organization learning, restructuring, expansion and increased business opportunities. There were challenges that arose with adoption of Information technology which included system failures, frauds and high costs of IT investments. The study established that there is a relationship between Information Technology and Organizational Performance though the relationship was not very strong because of the existence of other variables that affect Organizational Performance. This study recommends that managers in organizations need to closely monitor the implementation of Information technology in order to optimize its benefits. It further recommends that managers and policy makers need to keep abreast of the developments in this dynamic information technology sector to ensure that organizations survive in the global market place and craft necessary policies to guide and regulate this critical industry. The study contributes to the resolution of the “productivity paradox” where Information technology has often brought doubts to practitioners and researchers alike as to its claims on productivity.