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Impact of IT on

ProductivitySHANKAR MUDALIARROLL NO. 59

MMS 2

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The progression of IT

Over the past two decades, most industrial countries have madesignificant investments in IT.

For example, the share of IT in a firms total investment in equipmen

jumped from 7% in 1970 to 40% in 1996. The decline in IT pricesprovides enterprises powerful economic incentives for thesubstitution of IT investment for other forms of inputs. In the U.S., the

value of the net stock of IT capital equipment approached $900billion by the end of 1999

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Social Impacts of InformationTechnology

Office automation Office automation helps office workers improve working efficiency product

security and communications with others

E-commerce

Refers to commercial activities carried out in an electronic network e-bay, online trading site

IT in GovernmentUID project

UID project

Contains personal data, templates of thumb prints and photograph of card hold

Information stored is encrypted with high security

Railway Bookings

Helps in booking the tickets online

Bill payments

Reduces the physical movement of people for paying bills

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How Can Information TechnologyImprove Productivity?

Working from Anywhere Information technology has made on productivity is that it allows employee

to work from anywhere

Working More Efficiently

Information technology now allow all paper documents to be scanned intoa central database, where a single employee can easily search for just therecords that are needed by the organization.

Work that once required an office full of employees can now beaccomplished by one or two dedicated workers.

Exponential Storage Gains

The price per gigabyte of storage has fallen sharply in recent years and thalower price has allowed companies to keep more of their data online forlonger periods of time.

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Case: State Bank of India, World's LargestCentralized Core Processing Implementation

SBI the largest and oldest bank in India, had computerized itsbranches in the 1990s, but it was losing market share to private-sector banks that had implemented more modern centralized coreprocessing systems.

In 2002, SBI began the largest implementation of a centralized coresystem

The State Bank of India selected Tata Consultancy Services tocustomize the software, implement the new core system

It expanded the project to include all of the more than 14,600 SBIand affiliate bank branches.

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SBIs objectives for its project tomodernize core systems

The delivery of new product capabilities to all customers, includingthose in rural areas

The unification of processes across the bank to realize operationalefficiencies and improve customer service

Provision of a single customer view of all accounts

The ability to merge the affiliate banks into SBI Support for all SBI existing products

Reduced customer wait times in branches

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Challenges for the Bank

Finding a new core system that could process approximately 75million accounts daily

Employees would effectively use the new system.

Meeting SBI's unique product requirements that would require thebank to make extensive modifications to a new core bankingsystem

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Critical Success Factors

Senior management commitment The project was driven by the chairman of SBI, who met every month with t

information technology (IT) and the business sector heads.

The chairman monitored the overall status and ensured that sufficient resouwere allocated to the project.

Staffing and empowerment of project team

The core banking team consisted of the bank's managing director of IT act

team head and 75 business and IT people selected by the bank. Ownership by business heads

The regional business line heads were responsible for the success who repostatus to the chairman.

The business heads' objectives were aligned with those of the project team

Focus on training

SBI used its network of 58 training centers across India to train employees on

system

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Benefits of New Core SystemsImplementation

The business per employee increased by 250% over the last fiveyears

The bank has achieved its goal of offering its full range of productsand services to its rural branches

Core conversion project has also allowed the bank to undertakeseveral new initiatives to further improve service and support future

growth

Implementation of the core system has provided the bank with theability to consolidate the affiliate banks into SBI

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Business results for SBI group (2002-07)

Category 2002 2003 2004 2005 2006 2007 Cha07

Total deposits $72 $82.5 $99.6 $11.5 $121.9 $146 103%

Totalloans/advances

$34.1 $40.2 $50.6 $65.6 $83.9 $112.1 229%

Total operatingexpenses

$2.00 $2.25 $2.87 $3.30 $3.95 $4.60 130%

Staff expenses $1.29 $1.56 $1.82 $1.92 $2.41 $2.44 89%

Total operatingprofits

$1.81 $2.38 $3.33 $3.44 $3.47 $3.31 83%

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Conclusion

The findings show that IT investments not only makes positivecontribution to productivity, but also its returns is higher than non ITinvestments.

Top managers play a critical role in employing IT and radicalorganizational change. They have to think strategically. It meansthat they should recognize their companys resources and assess

the target market and its characteristics IT investments become much more important for companies not

only as a new technology to produce products but also as anenabler to increase productivity growth.

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Thank You