Muhammad Shaukat, Muhammad Zafarullah Rana Abdul Wajid

2008 Oxford Business &Economics Conference Program ISBN : 978-0-9742114-7-3

Impact of Information Technology on Organizational Performance: A Comparative

Quantitative Analysis of Pakistan’s Banking and Manufacturing Sectors.

Muhammad Shaukat, Assistant Professor, Institute Of Management Sciences, Bahauddin Zakariya University Multan (Pakistan). Email: [email protected]

Prof. Dr. Muhammad Zafarullah, Vice-Chancellor, Bahauddin Zakariya University Multan(Pakistan). Email: [email protected]

Prof. Dr. Rana Abdul Wajid, Director, Centre for Mathematical and Statistical Sciences, Lahore School of Economics, Lahore(Pakistan). Email: [email protected] Words: Information Technology, Organizational Performance, IT in Banking and Manufacturing sectors

Abstract

One of the major developments which had profound impact on the economic growth

pattern in the world in the new millennium has been the strides in the domain of

Information Technology sector. The world has observed significant growth of applications

in diverting areas of Information Technology. Information Technology has permeated

nearly every aspect of modern business operations and communications. This technology

really has drastically changed the working of today’s organizations and is being used both

by developed and developing countries for performance improvements. Similar to other

developing countries, this technology is also being applied in all the organizations of

Pakistan. Information Technology is also one of the most exciting areas of research that has

been the focus of intense interest throughout the globe over the decades but little has been

devoted to examining the impact of Information Technology on Pakistani organizations.

This study examines the impact of IT on organizational performance in quantitative terms

of Pakistan’s manufacturing and banking sectors over period of 1994-2005. The primary

data was collected through in-depth interviews, official documents and field surveys of 48

companies, 24 in manufacturing sector(12 local and 12 foreign) and 24 in banking

sector(12 local and 12 foreign). The data was tested by applying different statistical and

financial techniques. The results of the research have led to the conclusion that Information

Technology has positive impact on the organizational performance of all the organizations June 22-24, 2008Oxford, UK

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mailto:[email protected]

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but the banking sector performance outstrips the performance of manufacturing sector and

local banking sector of Pakistan dominate the scene by implementing world class IT

systems.

INTRODUCTION

Information Technology is a powerful force in today’s global society. The advent of

computers and Information Technology (IT) has been perhaps the single massive drive

impacting organizations during past few decades. Information Technology or IT is

revolutionizing all the living ways. No doubt, it has given a new meaning to the word

“Convenience”. Information Technology has drastically changed the business landscapes

and word “IT” has become the “Catchword” of the modern life today. Information

Technology has become, within a very short time, one of the basic building blocks of

modern industrial society. The effective use of IT is an essential element of competing in a

fast-paced, knowledge based economy. Information Technology is the major contributor to

the progress of the developed countries(Drucker, 1992; Lang,2002; Vasudevan,2003).

The developing countries are increasingly deploying IT to solve their developmental

problems by investing in it from their own sources as well as by borrowing from different

institutions(Odedra & Kluzer, 1998). Lending for IT by the World Bank has also been quite

pervasive and growing at six times growth rate of total banks’ lending. A study has shown

that the significant IT components were present in over 90% of all world bank’s lending in

developing countries(Harris & Davision, 1999). It is also estimated that total annual

worldwide expenditure on Information Technology (IT) probably exceeds 1.5 trillion US

dollars per year and is growing at about 10% compounded annually (Anandarjan et al.,

2002).

Information Technology also creates a serious dilemma for management today. IT

innovations have the potential for changing the competitive game for any organization. On

the other hand, the size of IT investments put increasing pressure on managers to asses its

business value. One key to this dilemma is to improve the ability to measure and track the

impact of IT on productivity. Alongside, the seemingly inexorable rise in IT investment

June 22-24, 2008Oxford, UK

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during the last 20 years, there have been considerable uncertainty and concern about the

productivity and efficiency impact of IT being experienced in work organization. However,

in quest of improving efficiency and effectiveness the companies are making heavy

investments in Information Technology. These enduring magnitudes of investment in

Information Technology so has drawn attention of many researchers, managers and policy

makers to the impacts of IT on growth and productivity. The expectation was that increased

investment in IT would naturally lead to increase performance of organization. But despite

the massive investments in IT both in the developed and developing economies, the impact

of IT on productivity and business performance continued to be questioned (Wilcock, et. al,

1998). Despite hundreds of studies carried out, scholars remained deeply divided into two

groups which can be identified as “Productivity Paradox-IT has no impacts on

productivity”(Turner, 1985, Loveman, 1988,1994; Roach, 1988; Mitra & Cyaya, 1996;

Strassman(1997); Dasgupta & Sarkis(1999) etc.), and “Productivity Payoff-IT does

improve productivity” (Bender, 1986, Mody & Dahlman, 1992); Raheim & Pennings,

1987; Harris & Katz, 1991, Brynjolfsson, 1993, 1996, Brynjolfsson, & Hitt, 1994, 1997,

1998; Attewel, 1991; Karemer, et. al, 1994; Dewan & Kraemer, 1998, Quinn, et. al, 1994 ;

Ng, 1996, Weill, 1992, Mehmood & Mann, 1993).

The goal of every information systems, based in any organization is to improve

performance on the job and this performance efficiency is only achieved when IT is

accepted and used warmly by the concern employees in organizations (Venkatesh et al.,

2003). In their quest for development, many developing countries put great hope in use of

IT. Yet, the challenges of IT diffusion in these countries are by no means identical to the

ones in the developed countries. The challenges faced by developing countries in

harnessing the full potential of IT are not really very different from those of that confronted

by the developed countries(Khan, 2003). Information Technology now is the most

preferred choice of all developing and developed countries to upgrade their economies and

become competitive in the global market place. The IT based economies have streamlined

the most complex economies of the world and enhanced the productivity to the level where

an economy such as US has wriggled out of the entire trillion plus dollars national deficit


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and turned into a surplus in recent years. The world economy now has moved from low-

value basic industries to a fast paced high-value information based economy.

Motivation for this Study

The impetus for this research came from the main reason that in modern organizations

Information Technology is a key to competitiveness and economic growth. It has no doubt

the greatest influence on the global economy. Like other countries Pakistan has also

accepted this challenge of 21st century by making efforts in the development of Information

Technology. A decade ago IT had very little introduction in the country, but very soon with

the efforts both on private and government fronts the concept of IT has become very

popular with all Pakistani organizations. Pakistani manufacturing and banking industries

are the major users of IT products. The central thesis of the present study is to seek the

impact, which Information Technology has on organizational performance of Pakistani

companies working in above mentioned sectors.

Literature Review

Definition of the concept of Information Technology

Information Technology has been defined in various ways by different authors. Over the

years, IT has been conceptualized and measured differently by different researchers. The

majority of the authors, however, parallel Information Technology with computer systems.

Frenzel(1999) for example defines IT as “Information Technology is the term that

describes the organization’s computing and communications, infrastructure, including

computer systems, telecommunication networks, and multimedia (combined audio, text,

and video) hardware and software”. Shelly et. al(2005) narrate that “IT includes hardware,

software, databases, networks, and other related components which are used to build

information systems” Many other researchers also have come up with the same idea and

say that “IT is the technology that supports activities involving the creations, storage,

manipulation and communication of information together with their related methods and


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management applications” (Martin et al., 1999; Gupta,2000; Kendall & Kendall ,2000;

Chan, 2000; Poku & Vlosky, 2002). However, William & Sawyar, 2005 define Information

Technology as a general term that describes any technology that help to produce,

manipulate, process, store, communicate, and/or disseminate information. This definition

may be regarded as the comprehensive one, as it covers all aspects discussed by different

researchers and includes all the components and processes needed to carry out information

processing work in the organization. So it can be said that that IT concept came from a

merging of computer with telecommunications technologies, when computer and

communications technologies are combined, the result is Information Technology or

‘infotech’.

Information Technology Developments In Pakistan

The process of computerization in Pakistan started since 1957 when a company named

‘Packages Ltd.” started using computer for its work. Since then IT usage is increasing

gradually. Though in the beginning Pakistani government was slow in adoption and

diffusion of IT but now it is at forefront of all government priorities. In Pakistan, realizing

the global revolution in Information Technology, the government has liberalized its

policies with regards to hardware & software imports since 1985. The custom duties on

electronic goods were also reduced drastically, but the real quantum jump was experienced

in early 90s, which can be termed as IT revolution in Pakistan and satellite communication

technology was introduced. In 1991, 90% telephone lines were converted to digital. In

1995, Internet Service Providers (ISPs) started providing Internet facility to Internet users

and now there are more than 132 ISPs in operation all over the country providing internet

facility to more than 3,000,000 users1.

It is all in 2000s, that the government started giving a lot of emphasis to IT sector. New IT

educational institutes are opened & IT professionals are hired to impart IT training in

universities. Nationwide IT seminars, forums, exhibitions and competitions are being

arranged to create IT awareness among the people. Computer as a subject have been

introduced in schools & colleges. Cyber Cafes are being opened to create awareness for

Internet use. Telephone network has been enhanced and in rural areas, telecommunication

1 www.moitt.gov.pk June 22-24, 2008Oxford, UK

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facilities are provided through small exchanges and PCOs. By doing so links between

Pakistan & other countries have been improved significantly (Imam 2002).

Information Technology is now also being used in all government organizations. Now the

Government of Pakistan is taking all steps to make Pakistan an IT super power by adopting

IT as a national program so as to enable personal and national growth. The country’s

current ‘IT Policy and Action Plan’ intends to involve all walks of life, e.g., industry and

commerce, banking and insurance, finance, revenue, communication, media, human

resource development, defense etc.(Rehman, 2005).

The computerization in the country which was initially monitored by the Ministry of

Science & Technology(MOST), now is being managed by a separate ministry of

Information Technology since November 2002. This ministry is maintaining firmness and

viscosity with the policy and achievements made in the IT & Telecommunications sectors

since its inceptions and to cope with modern challenges and meeting requirements of the IT

and Tele-communications, the policy is regularly updated. Many other departments/

institutions like Electronic Government Directorate, Pakistan Computer Bureau, Pakistan

Software Export Board, Pakistan Telecommunication Authority, Computer Society of

Pakistan, Pakistan Software Houses Association (PASHA)2 etc. are working side by side

the Ministry of Information Technology to help forward IT in the country. To provide

protection and enhance the confidence of users, providers and facilitators of information

services, legislation based on the recommendation of the working group comprising IT and

legal experts have been framed. Action in the area of digital signature act intellectual

property and copy right act and the consumer protection act has been started.(Kazmi,

2005).

According to some estimates, in Pakistan presently there are around 2,100 mainframe and

minicomputers in the country with nearly half of them being in the government sector.

Liberal import policy and reduction/removal of duties has led to a burgeoning usage of PCs

and servers (Osama, 2005). It is estimated that nearly half a million PCs are added each

2 PASHA is a representative body of software developer of Pakistan. It was found in late 1992 by 9 software hoses and now have about 350 members national wide: www.moitt.gov.pkJune 22-24, 2008Oxford, UK

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year, representing a three fold increase in annual volume over the decade straddling the 21st

Century. Analysts estimate that this rate of growth could very well quadruple by 2010. The

Federal Government of Pakistan has laid great emphasis on expedition towards the

intensity of Information Technology in a variety of fields. (Ghauri, 2003; Pasha, 2005).

To conclude all efforts of the government it can be said that the Government of Pakistan

now is giving all-out support and push to IT sector. Millions of dollars are being invested

by the government in IT, and majority being spent on human resource development and

enabling infrastructure provision. The Government of Pakistan is leading the technology

revolution in the country in various projects aimed at improving infrastructure, human

resource development and integrating IT in the public and private sector (Kazmi, 2000).

Information Technology And Pakistan’s Banking Industry.

Financial sector appears to be a clear leader in the growth of IT. It was among the first to

incorporate electronic data processing in its operations, through check handling,

bookkeeping, credit analysis and ATMs. Mayer(1987) while narrating the history of

computer usage in banking demonstrates that the use of computers in banking first began in

the early 1950s, when the first large commercial computer was built for Bank of America.

Initially, computers were used to process check transactions through magnetic ink character

recognition. With the introduction of first automated clearing house in the early 1970’s

electronic funds transfer (EFT) was made possible, and then ATM was introduced.

Automated Teller Machine (ATM)3 is one of the most significant technological

investments made by the commercial banks. ATM’s introduced the power of computer

technology to the general public and made banking convenient for consumers. Today,

ATM’s deliver banking service 24 hours a day, 7 days a week to more than 22 millions

peoples only in USA. The banks increasingly have turned toward ATM and other

computer technology like prepaid cards, loyalty cards, debit cards and even chip cards, to

reduce the high costs associated with maintaining traditional “brick and mortar” branches

staffed by tellers Koepp(2000). Franke(1987); Martini(1999). Now the banks are using

Information Technology in back-office (check and accounts) processing, mortgage and

3 Don Wetzel developed ATM in 1973 and it was first installed at Chemical Bank in New York (Shelly et. al(2004) pp5.39.June 22-24, 2008Oxford, UK

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loan application processing, and the electronic funds transfer to more strategic innovations

such as automated teller machines and new kinds of securities (Nsouli,2002).

The financial sector in Pakistan can be grouped into banking and non-banking financial

institutions (NBFIs). Banking institutions include large public sector scheduled banks,

private sector banks and foreign banks, while NBFIs include development finance

Institutions (DFIs), private sector investment banks, leasing companies and modarbas. The

banking industry in Pakistan has seen great transition during fifty-nine years of his history,

especially since early 1970s. The banking nationalization in 1974 and then privatization

and liberalization in early 1990, are termed as major restructuring years of the entire

banking industry of Pakistan. At the time of inception of Pakistan in 1947, only few bank

branches existed in the country, which were concentrated mainly in the urban areas.

Moreover, Pakistan was without a central bank of its own till June 30, 1948. However, by

early 1990s the banking sector had spread to every nick and corner of the country.

The market for banks is diverse in Pakistan comprising Nationalized Banks, Private Banks

and Foreign Banks. In 1993 there were 33 commercial banks in Pakistan 14 being local &

19 foreign. By the end of 2001 due to government liberalization policy to setup a private

bank, the number has increased to 43, 24 being local & 19 as foreign. But by the end of

2005, with some mergers there were 38 commercial banks 14 being foreign and 24 being

local. Total number of scheduled banks branches stood at 7,075 as on 30 th September,

2005. There is a phenomenal progress in banking sector of Pakistan. It recorded an

increase of 99% growth in profit in only one year i.e 20054. NBP, HBL, MCB, ABL,UBL

are considered five large banks and are very dominant in the banking industry , in term of

total number of branches, deposits and advances, collectively accounting for 78% and 77%

of total deposit and advances respectively. Most of the local banks are in private sector

now, and many of them have started business since 19925. The introduction of computer in

banks in Pakistan started in 1965 when the main commercial banks in private sector i.e.

Habib Bank, United Bank and Muslim Commercial Bank started acquiring computers to

4 The daily Dawn: “Banks profit grew 99pc in 2005”, Tuesday March 21, 2006. pp9. Mahmood Javed (2006) “Another productive year for Banks” Money Plus July 17,2006.5 Pakistan banking infrastructure statistic: State Bank of Pakistan’s report 30-09-2005.June 22-24, 2008Oxford, UK

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regulate their banking work. Since that time there is a massive investment in IT in banking

sector (Akhtar, 2006). This is bore out by the fact that during fiscal year 2003-2004, over

US$ 200 millions was invested by the financial services sector into Information

Technology products and services6. Shafiq(2002) says that not only this but also the

banking sector has dramatically increased its dependence on use of IT, and it is evident by

the growth in the number of branches that are connected online. In Pakistan almost all

national and multinational banks are using Information Technology to increase their

performance. Most of the Pakistani banks (local and foreign), have launched their web

sites and have uploaded many things on web including accounts opening forms and loan

applications. Likewise, the number of Automated Teller Machines(ATMs) and the use of

automated cheque clearing and other back end systems within the banking community

have increased7.

There have been great advances in Pakistan banking technology in the past several years.

The most recent automated banking systems like Misys, Sibel, and Fidility etc are being

installed in many of the Pakistani banks. Kazmi(2004) points out that most of the banks

operating in Pakistan however, have been making huge investments in three key areas

namely 1) expansion of the branch network 2) up gradation of the existing infrastructure 3)

adaptation of the new technologies with their ultimate objective is to offer a complete

electronic banking facility. Table 1 presents a real picture of E-Banking infrastructure

statistic of Pakistan till September 2005. Ahmed(2003) posits that the huge investments by

the commercial banks in technology has ushered a new era of convenience and improved

quality of services in Pakistan. The banks are offering Internet and mobile banking but it

has not made major impacts yet. In the end to mention another big achievement in payment

area is RTGS setup by State Banks of Pakistan for interbank settlement.

6 “Status Of IT Industry Of Pakistan, The Dawn, 28th February, 2005.7 Approximately 2174 ATMs have been installed by different banks till May 2007 in different cities of Pakistan (The Dawn, June 22, 2007). Out of Total 7674 Branches, 4091 (53%) are Online. Jang 31-5-2007June 22-24, 2008Oxford, UK

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Table 1


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Information Technology And Pakistan’s Manufacturing Industry.

Automation in manufacturing organizations goes back to 1900. Around the year 1900,

factory mechanization facilitated mass production to meet the consumers’ demands for

improve products. In the year 1930, transfer lines and fixed automation were created to

facilitate mass production. This resulted in the development of programmable automation.

By the year 1950, numerical control (NC) was developed as an innovative approach to

programmable automation. With the development of commercially available computer

technology, the application of computer in manufacturing started to emerge by producing a

variety of new technologies. By the year 1955, the introduction of computer aided

design(CAD) and development of NC resulted which lead to the evolution of system like

computerized numerically controlled machine tolls (CNC). By the year 1970, development

in CAD applications and Computer Aided Manufacturing (CAM) based systems, Computer

Aided Engineering(CAE),Material Resource Planning(MRP), Flexible Manufacturing

Systems (FMS),which are collectively named as AMTs-Advanced Manufacturing

Technologies was made(Negalingam and Lin, 1999). AMT provided flexibility as well as

data driven computer integration for a manufacturing organization, in which the

manufacturing technology utilized is intelligent enough to urge forward the activities with

less human interventions. Industrial robots, automated guided vehicles, and automated

storage and retrival systems are also introduced. These applications can be connected via

Local Area Networks(LAN) to from computer Integrated Manufacturing(CIM) and

externally, across organizations and space, via Electronic Documented Interchange (EDI)

(Sohal, 1999).

The technology advancement in the world over is so rapid and wide spread that isolates

manufacturing and technology from each other is merely an impossible proposition.

Information Technology is becoming critical to many manufacturing organizations that

want to be a world-class manufacturer as IT often provides a manufacturing based

advantage. Information Technology can assist manufacturing firms in developing their

strategic roles. In today’s competitive global market, for the survival of any industry,

manufacturing companies need to be pliable, adaptive, responsive to change, proactive and


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be able to produce a variety of products in short time at a lower cost (Ho, 1996). Hence,

manufacturing companies are compelled to seek advanced technologies by integrating

manufacturing facilities and systems in an enterprise through computers, its peripherals and

communication network to transform island of enabling technologies in to a highly

interconnected manufacturing systems. Today, the capability of producing high quality

products according to diverse customer requirements with short delivery times has become

the characteristic of order-qualifiers for manufacturing industries. Furthermore, non price

factors, such as quality, product design, innovation and delivery services are the primary

determinants of product success in today’s global arena(Shaw, 2000). Implementing

integrated advanced technologies is an effective approach towards solving the problems of

decreased productivity, labor cost and consequent rise in unit costs, which are continually

plaguing present day manufacturing manager. Implementing advanced manufacturing

technologies (AMTs) provides opportunities to achieve competitive advantage in an

intermediate-to long-term time frame (Sohal, 1999). The Internet based distributed systems

motivated the industries to utilize IT in all areas. Advances in software technologies have

been transforming the world of integration into compatibility systems and devices by

establishing an open connectivity standards, agreed by the manufacturers, which will

provide plug-and-play communication and interoperability between field devices, control

systems, and enterprise wide business applications(Kumar, et. al, 2004).

Pakistan industrial sector remains a relatively small part of the total economy. Pakistan’s

manufacturing sector has grown rapidly but remains inefficient and lacks diversification. In

practice, Pakistan’s industrialization process has largely been governed by trade and tariff

policies which are driven by revenue and/or balance of payments considerations rather than

by a coherent industrial policy framework (Kemal, 1999). Overall manufacturing is

growing at a much faster pace than agriculture and services and if this pace is sustained, its

share in GDP is likely to rise further in the medium term8. Various factor including

accommodative monetary policy, financial discipline, consistency and continuity in

policies, strengthening of domestic demand is continuously improving to improve

contribution of manufacturing sector. In Pakistan both large-scale, multinationals, local and

8 Pakistan Federal Bureau Of Statistics, 2004.June 22-24, 2008Oxford, UK

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small scale domestic and international companies are operating which are producing goods

of almost all kind (Saeed, 2003).

Revolutions beget openings of one kind or the other. The IT revolution would semblance to

have opened a beneficial window of opportunity for the Pakistani manufacturing

organizations. After that many other companies in this sector started using computer to

increase their productivity. Now IT usage in manufacturing and industrial sector is very

common. Within the industrial sector, the use of Enterprise Resource Planning software

packages such as SAP and Oracle have become commonplace.9(Rizvi, 2005; Shahid, 2005;

Mujahid, 2003).

Organizational Performance

The performance as stated by Wheelen and Hunger(2000) is an end result of an activity and

an organizational performance is accumulated end result of all the organization’s work

process and activities. Managers measure and control organization performance because it

leads to better asset management, to an increased ability to provide customer value, to

improve measures of organizational knowledge and measure of organizational performance

do have an impact on an organization’s reputation. When the performance of the

organization is assessed, the past management decisions that shaped investments,

operations and financing are measured to know weather all resources were used effectively,

weather the profitability of the business met or even exceeded expectations, and weather

financing choice were made prudently. The most frequently used organizational

performance measures include organization efficiency(productivity), organizational

effectiveness and industry ranking (Wetherbe,1999; Turban, et al, 1999 & 2001). As this

paper focuses on measurement of efficiency and effectiveness part of organizational

performance, therefore, these concepts are elaborated in detail.

In the academic literature efficiency is defined by many ways, Witzel(1998) for example

looks at the origin of the term and finds that it has two meanings: technical efficiency or

ensuring that systems and process work to their optimal level, and total efficiency, or

ensuring that the organization as a whole is fit to meets its goals. Edwards(2001) says that

“Efficiency is minimum utilization of resources and getting maximum output”.

9 Report from Federal Ministry Of Industries, 2004. June 22-24, 2008Oxford, UK

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Druker(2002) defines efficiency as “It is doing job successfully without wasting time or

energy. While defining effectiveness Hosmer(1982) says that “Effectiveness means how

well the job gets done”. McClenahen (2000) defines effectiveness in a way that “It is extent

to which an organization realizes its goal”. Oz (2002) defines effectiveness, as “It is the

degree to which a goal is achieved”. According to Robbins & Coulter(2002)

“Effectiveness is “doing the right things” to achieve organization goal.

Measuring Impact Of Information Technology On Organizational Performance.

As Walrad & Moss(1993) state that efficiency and effectiveness do not means the same

thing. In fact, they are often natural enemies. Often one can have one, or the other, but not

both (Unless one is lucky or one want to spend a lot of money). Being efficient means that

one spends less time on something, one spends less money on something or one spends less

efforts (or number of workers) on something. Being effective means that one does his job

well. In other words, the output (finished product) is of high quality. It is a rare and

delightful occasion where a solution to a problem is both efficient and effectiveness; one

usually has to decide which he prefers, because one usually cannot have both.

Maggiolini(1999) rightly assessed that efficiency and effectiveness are entirely unrelated,

so as their measurement.

In an IT context when we measure the effectiveness, we basically measuring the capacity

of the outputs of information systems or of an IT application to fulfill the requirements of

the company and to achieve its goals, making this company more competitive. In the same

IT context the efficiency is the measurement that how cheaply can you get things done, and

are the people to whom you provide IT services (the stakeholders) happy with the levels of

service being delivered? and does it reduced the operational expenses?.

Various studies have been undertaken to measure the impact of IT on management

performance (efficiency & effectiveness) of business organizations using different

performance indicators which according to Dyson(2001) are considered key factors. These

variables capture all activity levels and performance measures and common to all units and

cover the full range of resources used. These variables include income, customer June 22-24, 2008Oxford, UK

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satisfaction, supplier/customer links, company image, job interest of employees, stake

holders confidence, interoffice links. Researchers like Huber(1996), Parthasamthy and

Sethi(1993), Kelly(1994), Earls(1996), Rumizen(1998), O’Dell(1999) etc. have

investigated the impact of IT on incomes/profits of the companies and found positive

impact. Whereas, Farkline(1997), Marton and Chester(1997), Olalla & Fassas(2000),

Schmidtel et. al(2001), Zee(2004) etc. have seen the increase/decrease in above qualitative

factors after implementation of IT. They have concluded that IT has ultimately increased

company image, job interest of employees, stake holders confidence, interoffice link etc.

This study measures the organizational performance in respect of increase/decrease in

income/profits and no of employees of Pakistani companies operating in banking and

manufacturing sectors with relation to IT implementation.

Research Propositions

The Sample

There are two population groups for this research. One is the banking sector local and

multinational and the other is large manufacturing organizations again both local and

multinationals, which are making use of Information Technology. The reasons to select the

above-mentioned sectors are that; 1) the banking sector of Pakistan is the most organized

sector of the service industry and highly IT user 2) this sector has made much more

investments in IT than any other sectors to achieve high performance 3) IT has met greater

introduction in banking sectors for performance improvements since 1992 because of throat

cut competition after establishment of many new banks in the private sector and

privatization of many nationalized banks. The second sector of study i.e. manufacturing is

the next best user of Information Technology. A large number of local and foreign

manufacturing companies working in Pakistan are using IT for their business processes

since long. Many companies in both the sectors have state-of-the-art technologies for

improving their performance. The management of these organizations has also made

numerous investments in I.T with the hope to increase their efficiency.


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In the sample from the above sectors 48 companies, 24 in banking sector (12 foreign, 12

local) and 24 in manufacturing sector (12 foreign, 12 local) were taken. List of sample

companies is given in Annexure II. There are about 40 commercial banks operating in

Pakistan. Out of these 40 banks, 24 banks are included in the sample because of the reasons

that many other banks are either set up in few years back or do not have well established

network in Pakistan, therefore, they do not serve the purpose of this research. There is no

definite information available relating to the size of large manufacturing sector. It is

estimated however that about 2000 large-scale manufacturing units are operating in

Pakistan. Therefore, in the sample, from the manufacturing sector, a total of 24 big

organizations were randomly included. The sample size could have been increased but the

nature of problem seems to be similar in each case. So the chosen sample size is considered

to be sufficient. The companies selected are using latest Information Technology and have

well established IT set up.

Data Collection

The participants in the study were categorized as follows; the senior managers of finance,

human resources, marketing and IT departments of the companies in sample. The data was

collected from in-depth interviews using a structured close-ended questionnaire, and from

official documents, detailing different aspects pertaining to the study. During the process of

data collection, follow-up letters and telephone calls were also made to the respective

company.

Data Limitations

In this research the research problem has been analyzed for the last decade i.e. from 1994

to 2004, because of the reasons that many companies operating in Pakistan were either not

using IT before 1994 or IT had very little introduction and computers were being used

merely as a word processing tools. So it was difficult to measure any of significant IT

impact on management performance before above period. Most of the companies initially

declined to provide any financial(IT expenses and Income) data citing confidentiality and

busy schedules as reasons. However, by help of SBP and SECP, the researchers managed

to collect some data in one year period from these companies. Therefore, Income & IT

expense analysis for test of hypothesis is limited to those companies and for those years for


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which the data is received. So for analyses of Income Vs IT expense, the companies are

divided into two groups as given in Table 2 & 3 below. The response rate for data was

42% for the year 1990-2004 and 67% for the year 1999-2004.

Data Analysis Methods:

The statistical software packages named SPSS 12.0 and Minitab 14.0 have been used for

analysis. According to the problem/requirement, statistical techniques such as linear

regression model, t-test, One Way ANOVA and ratio analysis have been applied. The

proceeding discussion presents the analyses/results of the hypothesis of the study with

conclusion at the end. The research hypothesis stated at the beginning, is then taken as

alternative hypothesis in the statement of statistical hypotheses.


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Table 2: Group 1: (Companies for which data was available for year 1990 to 2004

A. Foreign Banks B. Local Banks1. ABN Amro 1. Allied Bank Ltd.2. Bank Of Tokyo 2. Bank Of Punjab3. Deutsche Bank 3. First Women Bank Ltd.

4. HSBC Bank 4. Muslim Commercial Bank Ltd.

5. HBL AZ-Zurich 5. National Bank Ltd.

C. Foreign Manufacturing D. Local Manufacturing1. I.C.I Pakistan Ltd. 1. Atlas Honda Ltd.

2. Pakistan Tobacco Ltd. 2. D.G. Cement

3. Suzuki Pakistan Ltd. 3. Lakson Tobacco4. Simens Pakistan Ltd. 4. Service Industries

5. Uni Lever Pakistan Ltd. 5. Packages Ltd

Table 3: Group 2: In this group three more companies in each sector of group 1 are added and the data is available for the years 1999-2004. A. Foreign Banks B. Local Banks

1. ABN Amro 1. Allied Bank Ltd.2. Bank Of Tokyo 2. Bank Of Punjab

3. Deutsche Bank 3. First Women Bank Ltd.4. HSBC Bank Ltd. 4. Muslim Commercial Bank Ltd.

5. HBL AZ-Zurich 5. National Bank Ltd.6. Citi Bank 6. Askari Bank Ltd.7. Standard Chartered Bank 7. Bank Al-Habib Ltd.8. Oman Bank Ltd. 8. Metropolitan Bank Ltd.

C. Foreign Manufacturing D. Local Manufacturing1. I.C.I Pakistan Ltd. 1. Atlas Honda Ltd.2. Pakistan Tobacco Ltd. 2. D.G. Cement3. Suzuki Pakistan Ltd 3. Lakson Tobacco

4. Simens Pakistan Ltd. 4. Service Industries5. Uni Lever Pakistan Ltd. 5. Packages Ltd6. Bata Pakistan Limited 6. General Tyre Ltd7. L.G Pakistan Limited 7. Indus Mtors Ltd8. Reckitt Benkiser Limited 8. Honda Atlas Ltd


Research Hypothesis

This section examines the performance of both the sectors of economy i.e banking and

manufacturing in term of increase/decrease in net income and no of employees.

Increase/decrease in incomes has been observed for all companies in both the sectors and

for each conditions two different research hypotheses have been tested as under;

“Implementation of IT has impact on the performance of an organization”.

This can be translated in form of statistical hypotheses as:

H0: IT has no impacts on performance of the organizations.

H1: IT has impacts on performance of the organizations.

In order to test the above hypotheses, the performance of an organization has been

measured by measuring:

(a) Increase/decrease in net income, after implementation of IT.

(b) Increase/decrease in the proportion of IT employees as the IT is implemented.


18


Time series data was available for these variables. Simple linear regression model was

fitted taking IT expenses and time as independent and income as dependant variables.

Summary of regression results are presented in Tables 4(a,b,c,d) to 5(a,b,c,d) and 6.

Results And Discussions

In the discussion below we examine the impact of IT on organizational performance by

performing the quantitative analysis of net income, IT expenses, total and IT employees. In

interpretation, results of each company are discussed separately then comparison has been

made between the Local & Foreign Banks, Local and Foreign Manufacturing Companies,

Banking and Manufacturing Sectors. The discussion is also made on all the companies

overall.

i) Banking Sector .

a) Foreign Banks: The regression analysis shows that IT has no impact on the

incomes of the Bank of Tokyo, Deutsche Bank and HSBC bank as p-values or marginal

significance levels for these banks are above 0.05. IT has positive impact on the

incomes of ABN Amro and Habib Bank AG Zurich as p-values or marginal

significance levels for both these banks are far below 0.05. All regression coefficients

are positive showing that with the increase in expenditure on IT, the incomes of these

banks have substantially increased. Analysis is also made for all foreign banks as a

whole for group 1 and group 2(Tabel 2 & 3). For both groups, it was found that IT has

significant positive impact on income of all foreign banks operating in Pakistan (p-

value < 0.05).

Regression Results Summary ( = 0.05) For Banking Sector

Table 4(a) Year 1990-2004

S/No Bank NameResults

coefficient t-Statistics p-value

1 All Banks : n=10 7.179 8.661 .0002 All Foreign Banks: n=5 4.458 10.573 .0003 All Local Banks: n=5 7.726 5.929 .0004 ABN Amro 7.487 15.187 .0005 HBL AG Zurich 12.919 9.829 .0006 Bank of Punjab 3.214 2.574 .0237 First Women Bank 8.264 3.673 .0038 Muslim Commercial Bank 10.791 8.871 .0009 National Bank of Pakistan 7.316 2.510 .026


19


Regression Results Summary ( = 0.05) For Manufacturing Sector

Table 4(b) Year 1990-2004

S/No Company NameResults


1 All Companies: n=20 4.357 4.357 .0002 All Local Manufacturing: n=5 4.148 3.071 .0033 Atlas Honda 12.157 2.686 .0194 Lakson Tobacco 12.509 7.885 .0005 Suzuki 61.397 4.898 .0006 P.T.C 1.956 2.182 .0487 Siemens 1.624 5.927 .000

Regression Results Summary ( = 0.05) For All Companies

Table 4(c) Year 1999-2004



1 All Companies: n=20 0.02.798 2.685 .0082 All Banking Sector: n=10 0.04.57 6.159 .0003 All Local Banks: n=5 0.03923 4.432 .0004 All Foreign Banks n=5 0.155 9.453 .000

Regression Results Summary ( = 0.05)For All Companies

Table 4(d) Year 1999-2004



1 All Companies n=32 0.03496 4.258 .0002 All Banking Sector n=16 0.04879 7.903 .0003 All Local Banks n=8 0.04024 4.953 .0004 All Foreign Banks n=8 0.09181 10.714 .0005 All Local Manufacturing n=8 0.03068 2.680 .010

Regression Results Summary ( = 0.05)

For Banking Sector

Table 5(a) Year 1990-2004

S/No Bank NameResults


5 Bank of Tokyo 15.788 2.128 .0536 Deutsche Bank -.466 -.172 .8667 HSBC 11.273 1.405 .1849 Allied Bank Limited .288 .047 .963


For Manufacturing Sector

Table 5(b) Year 1990-2004



1 All Manufacturing Companies: n=10 .118 .285 .7762 All Foreign Manufacturing: n=5 -.275 -.423 .6743 D.G. Cement 1.171 .374 .7154 Packages 70.706 1.869 .0845 Service -.701 -.112 .9136 I.C.I Pakistan .496 .226 .8247 Uniliver Pakistan -.960 -.761 .460



20


For all Companies

Table 5(c) Year 1999-2004



1 All Manufacturing Sector: n=5 -0.0153 -.648 .5192 All Local Manufacturing: n=5 0.01588 1.165 .2543 All Foreign Manufacturing n=5 -0.03544 -1.210 .236

Regression Result s Summary ( = 0.05)For all Companies

Table 5(d) Year 1999-2004



1 All Foreign Manufacturing n=8 -0.005.53 -.203 .8402 All Manufacturing n=16 0.001141 .073 .942

Regression Results SummaryFor Total and IT Employees (n=20)

Table 6 Year 1990-2004

S/No OrganizationsResults

t-Statistics P-value

1 All Companies 20.886 .0002 All Banks 13.576 .0003 All Foreign Banks -1.288 .2204 All Local Banks 13.953 .0005 All Manufacturing 16.565 .0006 All Local Manufacturing 12.428 .0007 All Foreign Manufacturing 17.500 .000

Years: Independent variable IT Employees %age to Total Employees: Dependent variable

As depicted in Annexure II, total no of employees in foreign banks have been

increased continuously from the year 1990 to 2004, despite of the facts that IT

has been applied in all operations of the banks. The IT has not reduced the

number of employees as anticipated by some circles due the reasons that most

of the banks in this sector have introduced new products or services during this

period, so the work load has increased therefore staff strength has also

increased. It has also been observed that there are floating trends in the

strength of IT employees. As Annexure II indicates that IT employees have

increased for years 1990-1993, decreased from 1994 to 1997 but again

increased from 1998 onwards and that increase is due to increase in IT

activities because of raised volume of transactions, introduction of new

products/services and increasing competition with the local banks in offering

online/ computerized services. The net income for these banks for the years


21


1990-2004 is PKR 11,429,932,000 and IT expenses are PKR 1,716,997,260

which comes to 15.02% of net income but net income for these banks for the

years 1999-2004 comes to PKR 18,616,763,000 and IT expense are PKR

2,460,082,000, which are 13.21% of net income.

b. Local Banks: It is revealed from regression analysis that IT has positive

impact on the income of most of the local banks i.e. Bank of Punjab, First

Woman Bank, Muslim Commercial Bank and National Bank of Pakistan (p-vale

or marginal significance level is far below 0.05). But IT has no impact on

income of one bank, i.e Allied Bank (p-value > 0.05). Overall it is also found

that IT has positive impact on income of all the local banks for group 1 and 2 as

for both groups (p-value <0.05).All regression coefficients are also positive

which shows that with the increase in expenditure on IT, the incomes of these

banks have increased significantly.

As shown in Annexure II, there has been decrease in total no of employees of

local banks. It is not because of IT but it is due to restructuring and privatization

of most of local banks. For right sizing purpose many employees were laid off

by offering ‘golden hand shakes’ schemes. Contrary, as also presented in

Annexure II, there has been gradual increase in the IT employees, due to

increase in workload for up gradation, computerization/making online of many

branches as per industry or customer need. Moreover, net income for these

banks for the years 1990-2004 is PKR 28,040,686,000 and IT expense are

4,185,681,800, with a ratio of 14.93%, whereas net income for these banks for

the years 1999-2004 is PKR 28,710,716, 000 and IT expenses are

4,479,494,500 with an increased ratio of 15.60%.

c. All Banks : Turning to the overall performance of all the banks for group 1 &

2, it is observed that IT has positive impact on the income of all these banks (p-

values< 0.05). A positive regression coefficient supplements our results that


22


increase in expenditure on IT significantly increases the incomes of these

banks.

To further examine the performance, trend analysis for IT spending and net

income is carried out. It is noted that there is increase in income with

proportional increase in IT expenditure of all banks. Detailing it, the net income

for all the banks for the years 1990-2004 is PKR 39,470,618,000, IT expenses

are 5,902,679,060, which are 14.95% of net income. The net income for all the

banks for the years 1999-2004 for group 2 is PKR 47,327,479,000 and IT

expenses are 6,939,576,500, which are 14.66% of net income. While the net

income for all foreign banks for the year 1999-2004 is PKR 7,44,175,000 and IT

expenses are 1,050,855,000 which are 14.12% of the net income for the same

period, but these expenses are 61.20% of total IT expenditure out of the year

1990-2004. That means that the companies have been spending large

amounts during the last six years in their IT operations. The same case is for all

local banks i.e. the net income for all local banks for the year 1999-2004 is PKR

18,773,824,000 and IT expenses are 3,454,532,500 which are 18.40% of the

net income for the same period but these are 82.53% of total IT expenditure

from the year 1990-2004. That also shows that there are high increasing trends

in IT expenditures in local banks in the past six years (1999-2004). Surprisingly,

the same results are found for the entire banking sector i.e. the net income for

all the banks for the year 1999-2004 is PKR 26,213,999,000 and IT expenses

are 4,505,387,500 which are 17.19% of the net income for the same period but

these expenses are 76.33% of total It expenditure for the year 1990-2004. It

indicates that there is high increase in IT expenditures in the entire banking

sector during the year 1999-2004.

To investigate the linkage between the It expenditure and increase/decrease in

number of total and IT employees, we observed that during the sample period,

the number of IT employees have increased in the banking sector but total

employees have been decreased. Further, our regression analysis also shows


23


(Table 6) that this increase has positive impacts on income (p-value < 0 0.05).

Table 7(a,b,c) and Graph 1 to 3 report the summary of net income/ IT

expenses and % increase/decrease of income to expense.

ii. Manufacturing Sector

a. Local Manufacturing Companies: The regression analysis shows that IT has

positive impacts on the incomes of the local manufacturing companies i.e Atlas

Honda and Lakson Tobacco (p-values < 0.05). But IT has no impact on the

income of D.G. Cement, Packages and Services Industries, (p-value > 0.05).

Further analysis for all local manufacturing companies for the years 1990-2004 and

1999-2004 shows that IT has positive impacts on income of all the local companies

as p-value is far below .05 for group 1 and 2 (Table 3 & 4). The regression

coefficient for these companies is positive, which indicates the decisive impact of

IT on income. At the same time, net income for these companies for the years

1990-2004 is PKR 14,118,508,000 and IT expenditures are 1,374,077,480 which

are only 9.73% of net income. Whereas, net income for the year 1999-2004 is

9,791,169,000 and IT expenses are 950,434,480 that are 9.71% of the net income

of 1999-2004 but 69.17% out of total IT expenditure of 1990-2004. For group 2 the

net income for these companies for the years 1999-2004 is PKR 16,455,436,909

and IT expense are 1,436,243,780 which are low as 8.73% of net income.

As also seen from Figure in Annexure II, there is a gradual increase in total and

IT employees till year 2002. It is due to the facts that some of these companies

have expanded their operations during these years and consequently the volume

of transaction/job has been increased, resulting therein an increase in staff

strength. After year 2002, there is a slight decrease in IT employees because of

the reasons that some of these companies have implemented S.A.P/Oracle and

maintenance of IT systems is outsourced to ERP providers.


24


b. Foreign Manufacturing Companies : It has also been observed from

regression analysis that IT has no impact on the incomes of I.C.I and Unilever

Pakistan Ltd (p-values > 0.05). Furthermore there are three companies, SIMENS

Pakistan Ltd, Suzuki Ltd and P.T.C for which IT has positive impacts on the

income (p-value< 0.05). Our analysis for group 1 and for group 2 presents that IT

has no impacts on income of foreign companies as overall (p-value>0.05). The net

income for these companies for the years 1990-2004 is PKR 22,371,542,000 and

IT expense are 10,453731,000, which are high as 46.73%. Where as net income

for the year 1999-2004 is 16,439,359,000 and IT expenses are 5,934,785,000,

which are 36.10% of the net income but 56.77% of the total IT expenditure from

1990-2004.


25


ncome for all the banks for the year


26

Income & IT Expense Comparison for All companies for the year 1990-2004 Table 7(a) For Group 1 : n=20

Sector Net Income IT Expenses Expenses %of income

Foreign Banks 11,429,932,000 1,715,997,260 15.02

Local Banks 28,040,686,000 4,185,681,800 14.93

Total Banking Sector 39,470,618,000 5,902,679,060 14.95

Local Manufacturing 14,118,508,000 1,374,077,480 9.73

Foreign Manufacturing 22,371,542,000 10,453,731,000 46.73

Total Manfacturing Sector 36,490,050,000 11,827,808,480 32.41

Total All Companies 75,960,668,000 17,730,487,540 23.34

Graph 1

Comparison of Income & IT Expenses for Comapanies for the year 1990-2004

0%10%20%30%40%50%60%70%80%90%

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Series1 Series2

Series 1 Show the Income Series 2 Show the Expense % of Income

Income & IT expense Comparison for all companies for the year 1999-2004

Table 7 (b) For Group 1 : n=20

Sector Net Income IT Expenses Expenses %of income%age of 1999-2004

expensesto 1990-2004 Expenses

Foreign Banks 7,440,175,000 1,050,855,000 14.12 61.2

Local Banks 18,773,824,000 3,454,532,500 18.4 82.53

Total Banking Sector 26,213,999,000 4,505,387,500 17.19 76.33

Local Manufacturing 9,791,169,000 950,434,480 9.71 69.17

Foreign Manufacturing 16,439,359,000 5,934,785,000 36.1 56.77

Total Manufacturing Sector

26,230,528,000 6,885,219,480 26.25 58.21

Total All Companies 52,444,527,000 11,390,606,980 21.72 64.24

Graph 2.


0%

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For group 2, net income for the years 1999-2004 is PKR 17,604,147,000 and IT

expense are 6,055,853,900, which are 34.40% of net income.

Like local companies, there has been an increase in total and IT employees. Table

in Annexure II represents these results. Again this increase is considered due to

expansion in production over the period of last ten years. So, the volume of

transactions/jobs and employees have been increased.

c. All Manufacturing Companies: The overall analysis of all the manufacturing

companies for group 1 & 2 further validated that IT has no impacts on income of

all the manufacturing companies (p-value >.05). But surprisingly, there is

marvelous increase in the net income for all the manufacturing companies for the

years 1990-2004, i.e. PKR 36,490,050,000 and IT expense are 11,827,808,480 June 22-24, 2008Oxford, UK

27

Income & IT Expense Comparison for all Companies for the year 1999-2004 Table 7(c) For Group 2 : n=32

Sector Net Income IT Expenses Expenses %of income

Foreign Banks 18,616,763,000 2,460,082,000 13.21

Local Banks 28,710,716,000 4,479,494,500 15.60

Total Banking Sector 47,327,479,000 6,939,576,500 14.66

Local Manufacturing 16,455,436,909 1,436,243,780 08.73

Foreign Manufacturing 17,604,147,000 6,055,853,900 34.40

Total Manufacturing Sector 34,059,583,909 7,492,097,680 22.00

Total All Companies 81,387,062,909 14,431,674,180 17.73

Graph 3.


0%

20%

40%

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Fo

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being 32.41% of net income. For the years 1999-2004 net income for these

companies is 26,230,528,000 and IT expenses are 6,885,219,418 which are

26.25% of net income. There is an increase in the IT expenses during the last six

years i.e. 1999-2004 as IT expense ratio of net income is 58.21% out of the total IT

expenses for the years 1990-2004 despite of the above facts that IT is not

contributing more to incomes of these companies. There is an increase in total and

IT employees and this increase is due to the same reasons as mentioned above.

Tables in Annexure II presents clearly these effects. For group 2 the net income

for all the manufacturing companies for the years 1999-2004 is PKR

34,059,583,909 and IT expense are 7,492,097,680 which are 22% of net income.

The regression coefficient is positive for this group. Similar to group 1, the same

pattern of increase in total and IT employees appears. It is more obvious if we look

into the computer usage statistic of manufacturing companies in Annexure III that

only those manufacturing companies (local & foreign) dominate the scene which

have excellent IT systems and have also implemented world class E.R.P systems

i.e SAP or Oracle.


28


iii. All Companies In Both The Sectors:

After analyzing the performance of individual sector, the analysis is made to know

about performance of all the companies in banking and manufacturing sectors for

group 1 and 2. As discerned, IT has positive impacts on income of all the

companies (p-value<0.05). The regression coefficient is also positive which shows

that there is an increase in income after increase in IT expenses. So far net

income for all the manufacturing companies for the years 1990-2004 is concerned,

it is PKR 75,960,668,000 and IT expenses are 17,730,487,540 which are 23.34%

of net income for 1990-2004. For the years 1999-2004 net income for all

companies is 52,444,527,000 and IT expenses are 11,390,606,980 which are

21.72% of net income. Similarly, net incomes for group 2 for all the companies for

the years 1999-2004 are PKR 81,387,062,909 and IT expenses are

14,431,674,180 which are 17.73% of net income. There appears to be constant

increasing trends in the IT expenditures during the last six years i.e. 1999-2004 in

both the sectors. As the IT expense for these years for both the sectors are

64.24% out of total IT expenses for the years 1990-2004.


29


There can be several reasons for these increasing trends in the IT expenditures.

Firstly, there was now proper recognition of the importance of IT at government

level till 1990s. The government has started playing its role more aggressively in

creating IT’s awareness and encouraging its use in the country for the last 4-5

years. It has also reduced import duties and sales tax on IT items which in turns

substantially lowered down prices of IT products, enabling companies to buy and

introduce new IT in every functional area more freely. Secondly, reduction in

communication charges by PTCL as well as availability of state-of-the-art world

standard IT infrastructure with latest communication channels i.e. DSL, VSAT,

Radio link etc. is a great attraction for the companies to replace their old hardware

and software. Most of the companies are now upgrading their existing

infrastructure to make it in line with world standards. Thirdly, due to revised and

strong economic polices of the government, most of the multinationals that were

previously working with low profile have started expansion of services or

diversification of products. Therefore, to support this they have started investing

more in their IT set up in the recent past. Conversely, to stay abreast of

competition, the local companies are also improving their IT setup by investing

more in it. The last plausible reason for incremental investments in IT by these

companies during the recent years is the availability of new and modern computer

systems/IT products in the market, which were not available few years back. So,

aforementioned initiatives seem to have compelled all companies to introduce

modern technologies in their work to earn more profits, thereby increasing IT

expenses.

So far as total and IT staff strength is concerned as reported in Annexure II, there

is an increase in IT but decrease in total staff and reasons for this increase have

already been discussed in detail in individual banking and manufacturing sections.

Conclusion:

IT has revolutionized and redefined all aspects of human interaction in social,

business or other. It has turned world in global village where limits of time and

location no more apply. The companies use IT to get improved efficiency and


30


effectiveness. This use has grown at an astonishing rate over the past three

decades. Now, Information Technologies permeate nearly every aspect of modern

business operations and communications. As computing and networking

machinery proliferated into every aspect of business life, the pressing need to

manage these technologies effectively has grown accordingly.

Realizing the need of time like other countries, in Pakistan banking &

manufacturing industries are also using IT to increase their performance in almost

all areas. Information Technology has become means of better production and

services in these industries. An advancement in production and communication

through IT has changed the nature of working for both the industries. In addition

introduction of Internet and advancement in computer connectivity have given

companies an opportunity to conduct their business on-line. It is also encouraging

that the IT initiative is being fully supported by the regulators very cautiously

towards development of complete E-Commerce/E-Banking status in Pakistan. It is

therefore, predicted that the future of the banking and manufacturing industry’s

Information Technology efforts and its spending will continue to increase in

importance for the transition of traditional organizations into virtual organizations.

The recent statistic revealed that with this aim the total spending on computer &

Information Technology is projected to increase by about 100 percent by the year

2010.

It is observed that the IT has positive impact on performance of both the industries.

According to above discussions, the banking industry is seemed to be more

benefited with IT than that of Manufacturing. It would appear from above analyses

that Information Technology in Pakistan is being applied aggressively both in

manufacturing and banking sectors but it is being used more efficiently in banking

sector than the manufacturing sector. The following salient points of above

discussion are worth stressing that 1) the local banking sector of Pakistan is using

IT more discreetly than the foreign banks 2) there is high rise in IT investments in

local baking sector in the latest IT systems in the recent years as compared to

foreign banking sectors as percentage of IT expenses for the years 1999-2004 for


31


total banking sector, are 76.33%, out of their total IT expenses for the years 1990-

2004. 3) the percentage increase in IT expenses in local banks is 82.53% for the

year 1999-2004 out of expenses of the years 1990-2004, which is much higher

than the foreign banks where %age increase is 61.20%. 4) in comparison of local

versus foreign manufacturing companies mixed trends have been observed in IT

spending. The IT expenses percentage is 69.17% and 56% respectively for both

the sectors out of incomes of years 1990-2004. But surprisingly, percentage IT

expense for local and foreign companies for the years 1990-2004 as a whole are

9.73% and 42.33%. For group 2 these expenses %ages are 8.33 and 34

respectively. It is, therefore, evident that overall foreign manufacturing sector is

investing more in IT than the local manufacturing sector. 5) overall, there is

remarkable increase in the IT expenses and in income in return, of all the

companies, given to the facts that IT expenses are 17,730,487,540 in 1990-2004

and in 1999-2004, these are 11,390,606,980 which are 64.24% of total IT

expenses. The net income is 75,960,668,000 in the years 1990-2004 and for the

years 1999-2004 it is 52,44,527,000. The percentage increase in net income thus

comes to 69.04% for year 1990-2004.

We find strong evidence through above facts that though manufacturing sector is

investing much more in IT but the banking sector surpass the manufacturing sector

in performance. On the other hand the study also detected that there is an

increase in IT employees in both the sectors due to increased work because of

expansion of operations of the companies over the years but decrease in total

employees because of implementation of down/right sizing policies in local baking

sector since 1990s. In line with above results, in final conclusion, we say that IT

has positive impacts on the performance of the organizations and we accept our

research hypotheses.

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Websites of :

Computer Society Of Pakistan: www.csp.org.pkConnect IT Pakistan: www.connectitpakistan.comElectronic Government Directorate Of Pakistan: www.e-government.gov.pkFederal Bureau of Statistic of Pakistan: www.fbs.gov.pkMinistry of Information Technology Of Pakistan: www.Moitt.gov.pkMinistry of Science & Technology Of Pakistan: www.Most.gov.pkPakistan Government: www.pakistan.gov.pk, www.infopak.gov.pkPakistan President’s web site: www.Presidentofpakistan.comPakistan Software Export Board: www.pseb.org.pkPakistan Computer Bureau: www.pcb.gov.pkPakistan Software Houses Association: www.pasha.org.pkPakistan Telecommunication Corporation: www.ptcl.org.pkPakistan Telecommunication Authority: www.pta.gov.pkSate Bank of Pakistan: www.sbp.org.pk


37

http://www.sbp.org.pk/

http://www.pta.gov.pk/

http://www.ptcl.org.pk/

http://www.pasha.org.pk/

http://www.pcb.gov.pk/

http://www.pseb.org.pk/

http://www.Presidentofpakistan.com/

http://www.infopak.gov.pk/

http://www.pakistan.gov.pk/

http://www.Most.gov.pk/

http://www.Moitt.gov.pk/

http://www.fbs.gov.pk/

http://www.e-government.gov.pk/

http://www.connectitpakistan.com/

http://www.csp.org.pk/


Annexure 1


38

List Of Companies In SampleThe list of companies surveyed for this study is given as under.Banking SectorList Of Local Banks List Of Foreign Banks

1 Habib Bank Ltd. 1 American Express Bank Ltd.

2 National Bank Ltd. 2 Citibank N.A.

3 United Bank Ltd. 3 Habib Bank AG Zurich

4 Muslim Commercial Bank Ltd 4 Algemene Bank Netherland (ABN Amro)

5 Bank Al Habib Ltd 5 Internaional Islamic Bank

6 Metropolitan Bank Ltd. 6 Deutsche Bank A.G.

7 Bank Of Punjab 7 Rupali Bank Ltd.

8 Askari Commercial Bank Ltd. 8 Standarad Charterd Bank

9 Bank Alflah Ltd. 9 Oman International Bank Ltd.

10 Allied Bank Ltd. 10 Bank Of Tokyo Ltd.

11 Faisal Bank Ltd. 11 Mashraq Bank Ltd.

12 First Women Bank Ltd. 12 Hong Kong & Shangai Bank Ltd.

Manufacturing Sector

List Of Pakistani Manufacturing Companies.

List of Foreign Manufacturing Companies

1 Packages Ltd 1 Uni Lever Pakistan Ltd.

2 General Tyres Ltd. 2 Reckett Benkiser Pakistan Ltd

3 D.G. Khan Cement Ltd 3 Procter & Gamel Pakistan Ltd.

4 Atlas Honda Cars Ltd. 4 Philips Electrical Company Ltd.

5 Pakistan Steel Ltd. 5 Siemens Pakistan Ltd.

6 P.E.C.O Ltd. 6 I.C.I Pakistan Ltd.

7 Lakson Tobacco Ltd. 7 Nestle Pakistan Ltd.

8 Indus Motor Ltd. 8 Colgate Pakistan Ltd.

9 Service Industries Ltd 9 Pakistan Tobacco Ltd.

10 P.E.L Ltd. 10 Suzuki Pakistan Ltd.

11 Dawllance Pakistan Ltd 11 Bata Pakistan Ltd.

12 Honda Atlas Ltd. 12 L.G Pakistan Ltd.


Total and IT Employee Statistics Annexure II

All Foreign Banks All Local Banks All BanksYears IT emply % Tot Emply

1990-91 4.176904177 407

1991-92 5.213270142 422

1992-93 5.882352941 442

1993-94 5.052631579 475

1994-95 5.350553506 542

1995-96 4.915254237 590

1996-97 4.380664653 662

1997-98 3.362391034 803

1998-99 3.369434416 831

1999-00 4.026845638 894

2000-01 4.057017544 912

2001-02 4.618689581 931

2002-03 4.771784232 964

2003-04 4.688995215 1045

2004-05 4.523026316 1216

IT emply % Tot Emply

0.397944681 45735

0.435039241 45743

0.484961834 45983

0.507420225 47101

0.524067097 47513

0.530067262 49805

0.550511879 51770

0.677014899 44903

0.74828114 41161

0.801463767 38804

0.814461154 39167

0.893144512 37284

1.083914002 33582

1.148781997 33949

1.170427016 34261


0.431277361 46142

0.478717643 46165

0.53634895 46425

0.552799731 47576

0.578503798 48055

0.581406886 50395

0.598870919 52432

0.72419376 45706

0.80015241 41992

0.874099451 39698

0.888245715 40079

0.983906843 38215

1.186823366 34546

1.256295788 34944

1.285339798 35477

All Local Manufacturing

All Foreign Manufacturing

All Manufacturing

All Companies

Years IT emply %

1990-91 0.3576982891991-92 0.3928213821992-93 0.41993-94 0.4200442151994-95 0.4383081311995-96 0.4278900111996-97 0.4632510541997-98 0.4957994771998-99 0.5285920231999-00 0.5810376652000-01 0.6107275622001-02 0.646182252002-03 0.6111924622003-04 0.6319115322004-05 0.600529879


0.611028316 13420

0.62193605 13667

0.614549092 13994

0.624699664 14567

0.682035193 14662

0.758807588 14760

0.790460879 14928

0.819399107 15011

0.849087894 15075

0.952569954 15117

0.95444971 15192

0.984445757 15237

0.969397453 15783

1.004548901 15828

1.032030709 15891


0.487062405 26280

0.510318949 26650

0.509202008 27494

0.525997796 28137

0.564353991 28351

0.596222774 29016

0.629444388 29391

0.660278333 29533

0.691586263 29642

0.769851409 29746

0.783315706 30256

0.815708976 30403

0.790727215 31490

0.818247875 31653

0.809100864 32876


0.451520256 72422

0.490283595 72815

0.526251708 73919

0.542839407 75713

0.573253409 76406

0.586820466 79411

0.609852975 81823

0.699105517 75239

0.755227964 71634

0.829445308 69444

0.843107983 70335

0.909382378 68618

0.846507965 66036

1.047308956 66647

1.056281363 68353


39


Pakistani Top Banks & Manufacturing Companies IT Usage Summary/Statistics

Local Banks

Sr.no

Company Name

Year of start in Pak.

Year of starting IT

Name of Standard application

Year of Installing standard Application

1 Allied Bank Ltd.

1942 1978 UnibankSwift

1998

2 Askari Commercial Bank

1992 1992 UnibankSwift

1992

3 Bank Of Punjab

1989 1989 Bop2001 in house software package

No standard application

4 Bank Al-Habib Ltd.

1992 1992 No standard application


5 Bank Alflah Ltd



6 Faisal Bank Ltd

1987 1992 IBS in hose system but Purchased Sibol

2005

7 First Women



8 Habib Bank Ltd.

1943 1966 MOBS, SWIFT, MISYS

1995, 2003

9 Metro Politan Bank

1992 1992 No Standard Application

No Standard Application

10 M.C.B 1948 1970 Sibol 200111 NBP 1949 1980 Planning for

FIDILITY system

No Standard Application

12 United Bank Ltd.

1959 1967 Unibank, Swift, CTL

1995


40


Pakistani Top Banks & Manufacturing Companies IT Usages Summary/Statistics

Foreign Banks

Sr. Company Name Year of starting Busines in Pak.

Year of starting IT



01 American Express Bank Ltd.

1980 1990 SBS(Standard Business application), In House developed

1997,2003

02 ABN Amro Bank Ltd.

1948 1990 In House developed

1995

03 Bank Of Tokyo 1980 1988 In House developed

1988

04 Citi Bank N.A 1980 1988 In House Development, Citibank World wide one package

1988

05 Deutsche Bank Ltd.


1995

07 Habib Bank AG Zurich


1990

08 Hong Kong Shanghai Bank Ltd

1982 1985 In House Global development

1985

09 Oman International Bank

1996 1996 In House Development

1996

10 Rupali Bank Ltd. 1976 1988 BANK GENERAL

1995

11 Standard Chartered Bank

1947 1985 EBBS global application

1995

12 Mashraq Bank Ltd.

1996 1996 In House Development

1996


41


Pakistani Top Banks & Manufacturing Companies Summary/StatisticsForeign Manufacturing Companies


Sr. No

Company Name Year of starting Busines in Pak.

Year of starting IT



1 Bata Pakistan Ltd.

1960 1985 Core systems from Head office, Payroll from systems Ltd.

Installed As/400 in 1985

2 Colgate Pakistan Ltd.


IBM Mini & Servers, No standard Application

3 I.C.I Pakistan Ltd.

1960 1985 SAP(ERP) Germany

2000

4 L.G Pakistan(New Allied Electronic)



5 Pakistan Tobacco Co.

1948 1985 S.A.P (ERP systems)

2000

6 Simens Pakistn Ltd.

1965 1980 S.A.P (ERP systems)

2000

7 Suzuki Pakistan Ltd

1985 1982 No Standard systems

1999

8 Reckitt Benkiser Pakistan Ltd.

1970 1982 JD Edwar/Oracle

2001

9 Uni lever Pakistan ltd.

1965 1970 MFG/Pro 2000

10 Proctor & Gamels Pakistan Ltd.

1970 1980 S.A.P world wide, Platinium in Pakistan

1999

11 Nestle Pakistan Ltd.

1988 1988 S.A.P 2005

12 Philips Electrical Co. Pakistan ltd

1949 1970 P-GIS, ERP stnadarad systems, J>D Edward/Oracle

1998

42


Pakistani Top Banks & Manufacturing Companies IT Usages Summary/StatisticsLocal Manufacturing Companies

Sr. No

Company Name

Year of starting Busines in Pak.

Year of starting IT



1 D.G.Khan Cement Ltd.


N.A

2 General Tyres Ltd


N.A

3 Lakson Tobaco Ltd.

1970 1982 S.A.P 2005

4 Packages Ltd.

1965 1966 S.A.P 2000

5 Service Industries Ltd.


N.A

6 Indus Motors Ltd

1990 1990 S.A.P 2000

7 Honda Cars Ltd.


N.A

8 Pakistan Electric Company


N.A

9 Dawlence 1985 1991 No standard application

N.A

10 PECO 1976 1990 No standard application

N.A

11 Atlas Honda LTd

1992 1992 S.A.P 2003

12 Pakistan Steel


N.A


43

Documents

Muhammad Shaukat, Muhammad Zafarullah Rana Abdul Wajid