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Ribari Aidone, E., Tomljenovi, Lj., Stilin, A.

, Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4

Implementation of IS Supported by Contemporary ICT the Role of Management in Evaluating ICT Performances
Eda Ribari Aidone B. econ., Polytechnic of Rijeka, Trpimirova 2/5, 51000 Rijeka eribaric@veleri.hr Ljerka Tomljenovi B. econ., Polytechnic of Rijeka, Trpimirova 2/5, 51000 Rijeka ljerka@veleri.hr Anita Stilin B. econ., Polytechnic of Rijeka, Trpimirova 2/5, 51000 Rijeka astilin@veleri.hr

Abstract. In contemporary business environment IT


obtrudes as an important factor of companys competitive advantages. Therefore, it is important for managers to evaluate IT performances in order to estimate its contribution to a business result. The question is how to draft IS which will ensure adequate business information and at the same time strong business relations with partners, considering economic indicators. How to evaluate IT, measure its costs and benefits, and could they be accurately evaluated? This paper proposes the way to evaluate IT performances, giving relevant parameters for estimating IT construction and maintenance costs and benefits of its implementation.

Keywords. Information System, IT, management,


evaluation of ICT

1. Introduction New economic conditions, through the global competitiveness as a resultant of more and more connected world economic space, made the environment in which only the change can be taken as a constant. Only dynamic innovation brings the possibility for the companys longterm subsistence. From one aspect, using of contemporary IT technology often is considered as the accelerator of innovation and change processes, and from the other, there is a question whether the IT can react quick enough on challenges and demands of innovations. It is often seems that the goal of the IT is a stability instead of proactivity and innovation support. The question is whether the usage of IT contributes to the enhancement of companys competitive advantages through the innovation

and change incitement, or it is only the instrument that ensures change pursuing in contemporary business environment as well as the survival in such an unstable conditions. IS supported by contemporary ICT must provide management with adequate information as a basis for performing business projections and decision-making. The problem is how to design and implement IS which will ensure adequate in-time business information of both internal and external movements. Should firms be using their own resources, or should they engage extern experts, considering the costs of its designing and implementation and benefits that will such an IS bring to. Croatian firms have different approach to this problem they equally develop and implement IS by their own forces and by external experts. But it is important to notice that majority of managers and other users of IS participate actively in designing adequate IS. So, the question is how should management ensure the construction of IS and which parameters are relevant for estimating IS constructing costs and benefits of its implementation, that is, how to evaluate this benefits, and could they be accurately evaluated? On the other side, it should be taken into consideration that measuring the importance of IS does not imply only the evaluation of information that this system collects, stores and delivers. This evaluation must include as well the fact that IS ensures relations, connections, both internal and external. That is, IS ensures global activities, crossing the national market frame as well as business development.

Ribari Aidone, E., Tomljenovi, Lj., Stilin, A., Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4

Contemporary Information-Communication Technology and virtual world (Internet world) made, so called, virtual/digital economy. Spacious distances dont exist anymore, companys size is no longer important in global competitiveness, simply, each and everyone can approach to a market and everyone must be ready for changes in every moment. That is very important, especially for SMEs, in nowadays business environment, where e-business is taking increasing significance, and virtual organizations are becoming reality, ensuring to companies specialization and their expansion. Small and Medium Sized Enterprises (SMEs) during few past years changes their business fundamentally and get the chance for equal participating on the global market. European Union intensively promotes and supports using of ICT in SMEs. It emphasized that by using ebusiness concept, SMEs get bigger opportunity for development, become capable of selling and buying over the Internet, reduce their own costs and increase productivity, manage changes more efficiency, and finally, eliminate spacious distances enabling do business all over the world through one web-site. Therefore, IS and implementation of contemporary IT should support internal business processes and external relations, ensuring that way development of companys dynamic capabilities and with it its dynamic competitive advantages. In order to expand and achieve a global competition SMEs can build their virtual - soft resources. So, an essential growth of their actual volume isnt crucial anymore. These virtual resources include information skills, digital resources and competencies for managing interfirm relations and collaborative engagements with other firms [6]. However, it should be emphasized that ebusiness cannot compensate the lack of entrepreneurial initiative and negligence in monitoring market trends. Therefore, in that context, managers innovation and its entrepreneurial spirit are equally important as it is technological support in SMEs facing challenges in a new digital economy. This paper is structured in five parts. In the Introduction is pointed the research problem and the structure review is given. The Chapter 2 includes the basic characteristics of firms in contemporary business environment and the role of ICT in it. In Chapter 3 are elaborated the main

factors of IS and ICT in doing business and factors of its evaluation. Chapter 4 includes results of a survey of a certain pattern of Croatian SMEs, concerning how do managers evaluate IT performances. The last chapter, the Conclusion represents the synthesis of research and points out the main conclusions presented in this paper. 2. Characteristics of firms in contemporary competitive business environment and the role of ICT Globalization, uncheckable impact of new technologies, virtual economy, e-business and increasing electronic connections, through widespread financial markets, continuously accelerate business dynamics. Considering deregulation, political instability, shapping of new economies and explosive growth of new scientific discoveries (fast implementation into new products and commercial usage), contemporary economic environment demands from the company new shapes of dynamic capabilities. The impact of Internet, communication-costs reduction, growing volume of long-distancelabour, together with larger impact of research and development have changed business conditions. Change-dimensions in nowadays competitive environment define the structure of succesflul companies. The structure of modern industry is build on the basis of competitive advantages grounded more and more on the knowledge, intelectual capital and information management. In such an environment the usage of contemporary ICT capabilities is of great importance. From the aspect of national economies, promotion of entrepreneurship and innovation leads to an economic growth and international competition on the global market. Small enterprises promote entrepreneurship and contribute not only to employment and political stability, but also to national innovative and competitive power. In order to do that successfully, it is necessary to apply general market fragmentation, flexibility and adaptability to new information and communication systems, connected with growing education standards, free goods' circulation and constantly-changing customers' tastes. The main characteristics of entrepreneurship are more-dimensions, creativity

Ribari Aidone, E., Tomljenovi, Lj., Stilin, A., Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4

and innovations as the state of mind. In includes motivation and capability of individual to perceive the chance and to impact on creating a new value or economic success, whether he operates by himself or within an organization. Although SMEs are the bearers of the majority of entrepreneurship-activity, entrepreneurship isnt confined only on them, but can manifest in any sector. It is becoming more important in big companies also. Growing demand for radical changes and diversification gives a new dimension to a complexity of managing large company. Such a complexity could be solved through creating virtual small firms inside big company. Those virtual small companies get advantages from large companys resources, its brand and corporative image, and on the other side, they contribute to dynamics, adaptability and flexibility, which are characteristics of small firms. All this contemporary processes have changed the classic comprehension of competitive advantages. Instead of natural wealth, the biggest comparative advantage of contemporary economies is knowledge as a capability of understanding and possibility of using available information and processes (softresources). In such a context flexibility and adaptability represent comparative advantages produced by managers (with their knowledge) [2]. Permanently, competitive advantage is relying on different aspects of structure, relations and connections inside and outside the company. Specific advantages from these relations are created from the flexible and cooperative behaviour, information-sharing and creation of organizational knowledge. Such relations are visible through customers-relations, brand and companys reputation or through typical organizational routines and specific organizational knowledge. Relations companysupplier are also very important, such as: confidence, development of reputation on the labour market that represent company as attractive to potential employees, networking companies that successfully shares certain skills and knowledge, and other different shapes of mostly intangible competitive advantages. Constant changes that originate in dynamic environment require continuous organization capacity for reacting and adapting. SMEs, because of their small number of employees,

relatively simple organization structure and the mode of managing business, have the possibility for fast inside changes (flexibility) as well as for adapting to the environment (adaptability) [2]. SMEs are, unlike large, more flexible, have flat organization, they are more specialized and have better information flows and knowledge sharing, decision-making can be allocate to all organization-levels, and have great mobility. Nowadays, they have also different possibilities of connecting and networking. All this specific competitive advantages are supported in different ways by ICT technologies. Companys flexibility can be defined as a capability of reacting on newly-aroused environmental changes and represents companys internal capability that depends on managers flexibility. However, in order to be enough dynamic, it should be supported by flexible IS (supported by contemporary IT) that would optimise information management and directly support information exchange and raising the level of employees knowledge [2]. From one side, it represent the tool for facilitate everyday business processes, and from the other, it can have positive impact on organizational learning and with it, on the creativity level and companys innovative potential. Therefore, IT is a tool for gaining knowledge ensuring conditions for organization learning through communication via local and global networks. In order to achieve adaptability, company must be flexible. It is a condition to companys capability of accommodation to environmental changes. In that context, contemporary ICT technologies enable the possibility of virtual connections with other business subjects, creation of specific information and virtual relations with customers and suppliers, scientificresearch organizations and others. Managers must focuse on using posibilities of ICT on the best possible way. They should be able to measure and evaluate the cost and benefits of each and every aspect of ICT implementation. Therefore, the question is how to make this evaluation? What aspects shoud be measured? What is the best way to evaluate benefits? 3. Implementation and evaluation of IS supported by ICT

Ribari Aidone, E., Tomljenovi, Lj., Stilin, A., Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4

New technologies and constant rapidly changing environment have changed business and with it the approach to managing data their collecting, storing and delivering. In such an environment the crucial factor becomes IS and the speed of collecting and delivering required information. So, IS has become crucial for high quality business decisions. Its task is to ensure prompt and quality management reports about changes in company and in its environment. SMEs can achieve global competitiveness through exploitation of modern informationcommunication technologies. Quality IS must be designed according to companys goals and in function of making quality business decisions. In order to be adequate and compatible with goal function, provided information have to be in-time, relevant, filtered and provided to the right subject, but it is also necessary to take into a consideration basic economic principles [5]. It is necessary to take care of economic rationality in justifying IT spending. In order to do that, managers should consider result-based approach, where they should calculate a return on investment ROI, expressed as a residual of total IT benefits and its operating costs versus total capital costs investment (including direct cost of implementation, disruption costs and cost of risk mitigation). Therefore, in order to make business more successful, it is necessary to have information not only about business and environmental changes delivered by IS, but also information about functioning of this IS its efficiency and contribution to a business result. The question is who will and how gather this information and how to, after all, evaluate it, as well as what is the benefit of implementing contemporary ICT. The answer is: there are no exact indicators or measures. Every evaluation is based on estimation, but it is also important to point out that estimations must be based on hard indicators grounded by facts. These indicators must be monetary valuated. Therefore, any change, including the change enhanced by implementation of ICT, at the end will bring to a certain movement in doing business. These movements reflect in a change of business result. These information which are necessary for measuring IT performances, came from the Accounting department. The comparison of situation before and after the implementation of

IT should also be done in the Accounting. All these measurements include all areas that are, in any way, affected by implemented IT (e.g. sales, supply, production, etc.). Therefore, Accounting represents the basis for evaluating IT it gathers all relevant information from every business function, valuates it financially, compares and estimates. The successful measurement of IT results considers evaluation of critical resources and processes that produce desirable and successful results [3]. Benefits of IT should reduce costs or increase revenue, so when evaluating IT, it is necessary to assign monetary values to nonfinancial IT results. Therefore, for quality evaluation, it is required to measure the total costs of IT investment (including disruptions and risks) and the final, total benefits it has produced. In order to improve its functioning, managers should try to maximize its potential instead of trying to reduce its costs. Interrelated business processes in function of achieving defined goals are the basis for companys performance and they represent the business technology. IS, as a copy of business system as a hole, should represent a model of companys business technology in which purpose it has been developed and implemented. Therefore, technology combined with business processes ensures a basis for quality IS. Performance and success of IT depends of it inputs and processes. This includes corporate strategy, organizational structure, available resources and external environment, as well as leadership and IT structure itself [3]. This inputs and processes affect outputs, both internal (productivity improvement, saving time, etc.) and external (costumer satisfaction, etc.). At the end, successful IT will ensure outputs that should result in improved profitability. These four dimensions (Fig. 1): inputs processes outputs outcome are basis of IT Contribution Model and the basis for measuring the efficiency of IT.
Dimensions Activities

INPUTS - Corporate strategy - Corporate structure - Corporate systems - Resourses - Environment

PROCESSES - Leadership oIT structure oIT strategy oIT systems

OUTPUTS - Time-saving - Improved quality - Increased productivity - Direct IT cost savings - Customer acquisition - Customer loyality - Value added

OUTCOME - financial result profitability

Evaluation and changes

Ribari Aidone, E., Tomljenovi, Lj., Stilin, A., Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4
CONSEQUENCES OF IT MEASURES

Figure 1. The basis for measuring IT efficiency

It is important to use monetary values as often as possible to measure the efficiency and the impact of any IT performances element. Some elements could be difficult to measure, but every element that is crucial for quality IT functioning must be incorporated in evaluation. Therefore, productivity increase can be measured by additional sales resulted by that or quality improvement can be measured by money saved on reduced rework. Before taking measurements, it is necessary to establish indicators for each performance and to gather historical information of own companys performances as well as of other firms in order to benchmark and make conclusions about the IT efficiency, evaluating this way its results. Evaluation of IT should be taken before starting an IT project to estimate its potential costs and benefits and after the project to measure the results, taking further measurement yearly during the life-time of the IT because its benefits increase over time. It should be taken into consideration that many of benefits (especially those which include nonmonetary aspects) wont be clearly translated into short-term profits, but their impact on IT efficiency is significant, resulting in the end in reducing costs or increasing revenues. Table 1 shows some relevant parameters for measuring IT performances, that is, its impact on final outcome.
Table 1. Measures for IT performances [3]

OUTPUTS

reduction in response Time-saving time; on-time deliveries lower preventive and Improved quality appraisal cost of quality increase in production output per employee and INTERNAL in sales as a consequence Increased of an improved productivity productivity reduction in mandatory IT costs - administrative, Direct IT system downtime, cost savings maintaining the IT number of new customers gained throug implemented IT sales from retained EXTERNAL Customer customers against new loyality one average customer Value addes profitability cash-flowth percentage of overall SHORT-TERM cost reduction percentage change in stock price, as a LONG-TERM consequence of IT ROI Customer acquisition

IT is a resource for business goals realization and in order to ensure its efficiency, evaluation and control, it is important that its users understand functioning of each information component, goals achieved through usage of a certain technology, a potential influence of new technologies on business etc. [4] Users should be aware of all possibilities that technology gives and take advantages of it. That is, technology could be used not only to cut down the time required for certain tasks, but also to open new market opportunities. For example, Internet ensures development of business through contacts made on Web. It is possible to advertise, to join the online forums where one can get a professional advice, to have quick approach to information, as well as to enter into global market an area that is often very difficult to enter for small firms [1]. Contemporary ICT offers tangible benefits contented in marketing and developing contacts on the Internet that enables expansion of business across the borders and professional contacts. So, technology plays a crucial role in achieving and remaining competitiveness. It is necessary to have in mind that IT resources are permanently changing, so due to continuous change, users have to be aware

OUTCOMES

Ribari Aidone, E., Tomljenovi, Lj., Stilin, A., Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4

that it is their responsibility to improve own understanding of technology and to remain informed about IT [4]. It is also necessary to develop a strategy for permanent user education, in order to enable them for adequate usage of all IT possibilities. 4. Evaluation of IT performances in Croatian SMEs Based on a survey conducted on a certain pattern of Croatian SMEs, it is evident that these companies perform the evaluation of ICT on an intuitive basis, or mostly by measuring only the time-saving as a consequence of implemented IT (they do not evaluate the benefits through financial indicators - Accounting doesnt have the main role in IT evaluation). Furthermore, they are mostly focused on a subjective impression of direct IT users, rather than on real contribution of IT to a business expressed through financial indicators. According to a survey, the key criteria for choosing ICT are its price and maintenance costs, instead of its benefits. Considering all this it was impossible to get concrete, relevant information - financial indicators of IT impact on business. However, gathered information testify the better and more stabile, quality companys relations with business partners both suppliers and customers (image improvement as a consequence of time saving for orders, supplying, delivering, etc.). The consequence of relations improved quality can also be seen in income increase, according to examined managers. It is important, however to point that this firms does not conduct yearly evaluations of IT, and that their maintenance is mostly left to external experts. When managers estimates that the system is obsolete or that it needs to update, the implementation of new IT or updating the old one is taken. At the end, although Croatian managers in SMEs are aware of importance of ICT for creating competitive advantages, they still do not evaluate its performances adequately. 5. Conclusion Constant changes that originate in dynamic environment require continuous organization capacity for reacting and adapting. That implies flexibility and adaptability as important factors

of companys survival in contemporary business environment and specific competitive advantages. These competitive advantages are supported in different ways by ICT technologies that represent the tool for facilitate business processes and have positive impact on organizational learning, creativity and companys innovative potential. Managers should focus on taking advantage of IT because of their capabilities of creating dynamic competitive advantages. Therefore, they should measure every aspect of ICT implementation and evaluate the cost and benefits of IT. This evaluation is based on four dimensions of IT Contribution Model: inputs processes outputs outcome and represent a result-based approach, where managers should calculate a return on investment ROI. Benefits of IT should reduce costs or increase revenue, so when evaluating IT efficiency, monetary values should be assigned to non-financial IT results. IT could be used not only to cut down the time required for certain tasks, but also to open new market opportunities. From one side IT represents an instrument and accelerator of changes and innovation-processes, enhancing flexibility and adaptability of SMEs. From the other side, IT demands optimal level of formalization, attention to a system-safeness, stability and great availability, representing a threat and a bridle for doing-business. However, advantages and benefits for SMEs of implementing contemporary ICT overmatch the potential threats. Therefore, in order to achieve global competitiveness, SMEs must use contemporary ICT. 5. References
[1] Denis, A. (1997): Taking Advantage of Technology, Journal of Accountancy, August, AICPA, <http://www.aicpa.org/pubs/cpaltr/nov96/suped. htm#b> (22.04.2006.), [2] Dujani, M.; Sunda, D.; Zrili, N. (1997): Fleksibilnost i adaptibilnost, IBCC, Rijeka [3] Epstein J., M., Rejc Buhovac, A. (2006): Whats in IT for You (and Your Company)? Journal of Accountancy, April, AICPA, <http://www.aicpa.org> (29.06.2006.) [4] Information Technology Competencies in the Accounting Profession: AICPA Implementation Strategies for IFAC International Education Guideline No.11, http://www.aicpa.org> (29.06.2006.)

Ribari Aidone, E., Tomljenovi, Lj., Stilin, A., Implementation of IS supported by Contemporary ICT the Role of Management in Evaluating ICT Performanses, 17th International Conference on Information and Intelligent Systems, Conference proceedings, Varadin, Hrvatska, 20th 22nd September 2006., str. 189-194. (predavanje, me unarodna recenzija, znanstveni rad, objavljeni rad), ISBN 953-6071-27-4

[5] Ribari Aidone, E., Tomljenovi, Lj. (2004.): Management of Change: The Role of Information and Information System, 16th International Conference on Information and Intelligent Systems, September 21.-23. 2005., University of Zagreb, Faculty of Organization and Informatics, Varadin, p.11-18. [6] Tetteh, E., Burn, J. (2001): Global strategies for SME-business: applying the SMALL framework,

Logistics Information Management, Vol 14, N , p.171-180.

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