Effects on New Business

When a business invests in new ICT there is bound to be some effect on individuals within the business.  For example, if a small business invests in a computerised accounting system dealing with sales and purchase invoices, they will have spent a lot of money.  Manual book-keepers will need to be retrained to use the computerised system effectively otherwise it will not be worth the company’s while investing in it.

Longer term, the company would expect increased productivity.  This could mean that fewer staff members are required to do the same work, or the same staff can do far more work.  In an accounting system increased functionality would be expected (automated printing of statements and letters about overdue accounts for example), and this can help get money in more quickly (increased productivity).

A business would get an accountant to produce a profit-and-loss account every three or six months at great expense, but a computerised system can produce this sort of information at the drop of a hat, saving a lot of money and keeping the managers better informed.

Generally a cost accountant would work out just how much more profitable an employee became after using ICT and as we have seen this can be a combination of earning more money (telesales as opposed to mail order), saving the company money (producing accounting information) and doing jobs that could not be done before (statements and letters).   All these factors build up a picture of productivity and profitability of an individual.

Business and ICT

If a business decides to invest in an information system with all the associated costs of equipment, software and personnel then they must be certain that they will see a competitive advantage compared to competitors in the same area of business who have not made a similar investment.

A company planning this step will probably employ a systems analyst to complete a feasibility study covering not only technical aspects but also legal and economic feasibility.

It would have been a huge step for the first computerised but paper based mail-order company to move over to a call centre and telephone ordering tied in with an ‘intelligent warehouse’.  They would have made an exhaustive economic feasibility study to see if they would gain a competitive advantage over their rivals.  Maybe they did, but was it an even bigger leap of faith to be among the first companies to introduce Internet ordering?

Business costs

Many businesses want to invest in new technology to help them maintain a competitive advantage, whereas other businesses feel forced into making that investment to keep up with their competitors.

Some ICT projects are very large, such as setting up a computerised production line or a just-in-time component ordering system in a factory, or a large call centre.  These ICT investments will cost a company millions of pounds and will be central to its running.  The money spent is rightly called an investment, as the company is investing it in the core activities of its business.

These initial costs can be very high but the pace of competition in the marketplace can often dictate that companies invest the money needed.

Running costs can be as trivial as replenishing ink cartridges or buying printer paper for an office micro, to employing a large ICT support staff.  Another area of running costs is software licences and updates and some companies prefer to pay a fixed cost for software licences and all updates every year so that their software is always up to date and there are no sudden large costs.

Most organisations with a large number of microcomputers, like financial institutions, run a rolling update program where a quarter of their oldest micros are replaced every year so they can budget for this cost.

Download and complete Worksheet 12.




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