2008 Oxford Business &Economics Conference Program
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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: shoukatmalik@bzu.edu.pk
Prof. Dr. Muhammad Zafarullah, Vice-Chancellor, Bahauddin Zakariya University
Multan(Pakistan). Email: vc@bzu.edu.pk
Prof. Dr. Rana Abdul Wajid, Director, Centre for Mathematical and Statistical Sciences,
Lahore School of Economics, Lahore(Pakistan). Email: drrana@lahoreschool.edu.pk
Key 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
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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
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
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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
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
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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
and turned into a surplus in recent years. The world economy now has moved from lowvalue 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,
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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
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.
1
www.moitt.gov.pk
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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
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
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.pk
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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
year, representing a three fold increase in annual volume over the decade straddling the 21 st
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
3
Don Wetzel developed ATM in 1973 and it was first installed at Chemical Bank in New York (Shelly et.
al(2004) pp5.39.
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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
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 30th September,
2005. There is a phenomenal progress in banking sector of Pakistan. It recorded an
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increase of 99% growth in profit in only one year i.e 2005 4. 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
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
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.
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 31-5-2007
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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.
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Table 1
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Information Technology
Industry.
ISBN : 978-0-9742114-7-3
And Pakistan’s Manufacturing
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.
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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
9
Report from Federal Ministry Of Industries, 2004.
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“Efficiency is minimum utilization of resources and getting maximum output”.
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
Organizational Performance.
Technology
On
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
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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
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
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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
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.
Table 2: Group 1: (Companies for which data was available for year 1990 to 2004
A. Foreign Banks
1.
ABN Amro
June
2. 22-24,
Bank2008
Of Tokyo
Oxford,
UK
3. Deutsche Bank
B. Local Banks
1.
Allied Bank Ltd.
2.18 Bank Of Punjab
3. First Women Bank Ltd.
4.
HSBC Bank
4.
Muslim Commercial Bank Ltd.
5.
HBL AZ-Zurich
5.
National Bank Ltd.
2008 Oxford Business &Economics Conference Program
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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.
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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 (pvalue < 0.05).
Regression Results Summary ( = 0.05)
For Banking Sector
Year 1990-2004
Table 4(a)
Results
S/No
1
2
3
4
5
6
7
8
9
Bank Name
 coefficient
t-Statistics
p-value
7.179
4.458
7.726
7.487
12.919
3.214
8.264
10.791
7.316
8.661
10.573
5.929
15.187
9.829
2.574
3.673
8.871
2.510
.000
.000
.000
.000
.000
.023
.003
.000
.026
All Banks : n=10
All Foreign Banks: n=5
All Local Banks: n=5
ABN Amro
HBL AG Zurich
Bank of Punjab
First Women Bank
Muslim Commercial Bank
National Bank of Pakistan
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Regression Results Summary ( = 0.05)
For Manufacturing Sector
Year 1990-2004
Table 4(b)
Results
S/No
Company Name
1
2
3
4
5
6
7
 coefficient
t-Statistics
p-value
4.357
4.148
12.157
12.509
61.397
1.956
1.624
4.357
3.071
2.686
7.885
4.898
2.182
5.927
.000
.003
.019
.000
.000
.048
.000
All Companies: n=20
All Local Manufacturing: n=5
Atlas Honda
Lakson Tobacco
Suzuki
P.T.C
Siemens
Regression Results Summary ( = 0.05)
For All Companies
Year 1999-2004
Table 4(c)
Results
S/No
Company Name
1
2
3
4
All Companies: n=20
All Banking Sector: n=10
All Local Banks: n=5
All Foreign Banks n=5
 coefficient
t-Statistics
p-value
0.02.798
0.04.57
0.03923
0.155
2.685
6.159
4.432
9.453
.008
.000
.000
.000
Regression Results Summary ( = 0.05)
For All Companies
Year 1999-2004
Table 4(d)
Results
S/No
Company Name
1
2
3
4
5
 coefficient
t-Statistics
p-value
0.03496
0.04879
0.04024
0.09181
0.03068
4.258
7.903
4.953
10.714
2.680
.000
.000
.000
.000
.010
All Companies n=32
All Banking Sector n=16
All Local Banks n=8
All Foreign Banks n=8
All Local Manufacturing n=8
Regression Results Summary ( = 0.05)
For Banking Sector
Year 1990-2004
Table 5(a)
Results
S/No
5
6
7
9
Bank Name
 coefficient
t-Statistics
p-value
15.788
-.466
11.273
.288
2.128
-.172
1.405
.047
.053
.866
.184
.963
Bank of Tokyo
Deutsche Bank
HSBC
Allied Bank Limited
Table 5(b)
Regression Results Summary ( = 0.05)
For Manufacturing Sector
Year 1990-2004
Results
S/No
1
2
3
4
5
6
7
Company Name
All Manufacturing Companies: n=10
All Foreign Manufacturing: n=5
D.G. Cement
Packages
Service
I.C.I Pakistan
Uniliver Pakistan
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21
 coefficient
t-Statistics
p-value
.118
-.275
1.171
70.706
-.701
.496
-.960
.285
-.423
.374
1.869
-.112
.226
-.761
.776
.674
.715
.084
.913
.824
.460
2008 Oxford Business &Economics Conference Program
Table 5(c)
ISBN : 978-0-9742114-7-3
Regression Results Summary ( = 0.05)
For all Companies
Year 1999-2004
Results
S/No
1
2
3
Company Name
 coefficient
t-Statistics
p-value
-0.0153
0.01588
-0.03544
-.648
1.165
-1.210
.519
.254
.236
All Manufacturing Sector: n=5
All Local Manufacturing: n=5
All Foreign Manufacturing n=5
Table 5(d)
Regression Result s Summary ( = 0.05)
For all Companies
Year 1999-2004
Results
S/No
1
2
Company Name
 coefficient
t-Statistics
p-value
-0.005.53
0.001141
-.203
.073
.840
.942
All Foreign Manufacturing n=8
All Manufacturing n=16
Table 6
Regression Results Summary
For Total and IT Employees (n=20)
Year 1990-2004
Results
S/No
Organizations
t-Statistics
1
All Companies
20.886
2
All Banks
13.576
3
All Foreign Banks
-1.288
4
All Local Banks
13.953
5
All Manufacturing
16.565
6
All Local Manufacturing
12.428
7
All Foreign Manufacturing
17.500
Years: Independent variable IT Employees %age to Total Employees: Dependent variable
P-value
.000
.000
.220
.000
.000
.000
.000
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
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online/ computerized services. The net income for these banks for the years
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 (pJune 22-24, 2008
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values< 0.05). A positive regression coefficient supplements our results that
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
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employees have been decreased. Further, our regression analysis also shows
(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.
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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.
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.
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ncome for all the Income
banks for
year Comparison for All companies for the year 1990-2004
& ITthe
Expense
Table 7(a)
For Group 1 : n=20
Sector
Net Income
Expenses %of
income
IT Expenses
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
Series1
Total All
Companies
Tatal
Manufacturing
Sector
Foreign
Manufacturing
Local
Manufacturing
Tatal Banking
Sector
Local Banks
Com parison of Incom e & IT Expenses for Com apanies for the year 1990-2004
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Foreign Banks
Expense % of Income
Graph 1
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
%age of 1999-2004
expenses
to 1990-2004 Expenses
Net Income
IT Expenses
Expenses %of income
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.
80%
60%
40%
20%
Series2
Series 2 Show the Expense % of Income
Total All
Companies
Tatal
Manufacturing
Sector
Foreign
Manufacturing
27
Series1
Local
Manufacturing
Tatal Banking
Sector
June 22-24, 2008
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Series 1 Show the Income
Local Banks
0%
Foreign Banks
Expense % of Income
Com paris on of Incom e & IT Expe ns e s for Com apanie s for the ye ar 1999-2004
100%
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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.
80%
60%
40%
20%
Series1
Series 1 Show the Income
Total All
Companies
Tatal
Manufacturing
Sector
Foreign
Manufacturing
Local
Manufacturing
Tatal Banking
Sector
Local Banks
0%
Foreign Banks
Expense % of Income
Com paris on of Incom e & IT Expe ns e s for Com apanie s for the ye ar 1999-2004
100%
Series2
Series 2 Show the Expense % of Income
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
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years 1990-2004, i.e. PKR 36,490,050,000 and IT expense are 11,827,808,480
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.
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
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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.
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.
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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
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
June 22-24, 2008
Oxford, UK
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ISBN : 978-0-9742114-7-3
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
total banking sector, are 76.33%, out of their total IT expenses for the years 19902004. 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
June 22-24, 2008
Oxford, UK
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2008 Oxford Business &Economics Conference Program
ISBN : 978-0-9742114-7-3
has positive impacts on the performance of the organizations and we accept our
research hypotheses.
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2008 Oxford Business &Economics Conference Program
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Websites of :
Computer Society Of Pakistan: www.csp.org.pk
Connect IT Pakistan: www.connectitpakistan.com
Electronic Government Directorate Of Pakistan: www.e-government.gov.pk
Federal Bureau of Statistic of Pakistan: www.fbs.gov.pk
Ministry of Information Technology Of Pakistan: www.Moitt.gov.pk
Ministry of Science & Technology Of Pakistan: www.Most.gov.pk
Pakistan Government: www.pakistan.gov.pk, www.infopak.gov.pk
Pakistan President’s web site: www.Presidentofpakistan.com
Pakistan Software Export Board: www.pseb.org.pk
Pakistan Computer Bureau: www.pcb.gov.pk
Pakistan Software Houses Association: www.pasha.org.pk
Pakistan Telecommunication Corporation: www.ptcl.org.pk
Pakistan Telecommunication Authority: www.pta.gov.pk
Sate Bank of Pakistan: www.sbp.org.pk
June 22-24, 2008
Oxford, UK
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Annexure 1
List Of Companies In Sample
The list of companies surveyed for this study is given as under.
Banking Sector
List 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.
June 22-24, 2008
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2008 Oxford Business &Economics Conference Program
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Total and IT Employee Statistics
Annexure II
All Foreign Banks
Years
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
All Local Banks
Tot Emply
IT emply %
Tot Emply
IT emply %
Tot Emply
4.176904177
5.213270142
5.882352941
5.052631579
5.350553506
4.915254237
4.380664653
3.362391034
3.369434416
4.026845638
4.057017544
4.618689581
4.771784232
4.688995215
4.523026316
407
0.397944681
0.435039241
0.484961834
0.507420225
0.524067097
0.530067262
0.550511879
0.677014899
0.74828114
0.801463767
0.814461154
0.893144512
1.083914002
1.148781997
1.170427016
45735
0.431277361
0.478717643
0.53634895
0.552799731
0.578503798
0.581406886
0.598870919
0.72419376
0.80015241
0.874099451
0.888245715
0.983906843
1.186823366
1.256295788
1.285339798
46142
422
442
475
542
590
662
803
831
894
912
931
964
1045
1216
All Local Manufacturing
Years
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
June 22-24, 2008
Oxford, UK
All Banks
IT emply %
Tot Emply
IT emply %
0.357698289
0.392821382
0.4
0.420044215
0.438308131
0.427890011
0.463251054
0.495799477
0.528592023
0.581037665
0.610727562
0.64618225
0.611192462
0.631911532
0.600529879
12860
0.611028316
0.62193605
0.614549092
0.624699664
0.682035193
0.758807588
0.790460879
0.819399107
0.849087894
0.952569954
0.95444971
0.984445757
0.969397453
1.004548901
1.032030709
13500
13570
13689
14256
14463
14522
14567
14629
15064
15166
15707
15825
16985
45983
47101
47513
49805
51770
44903
41161
38804
39167
37284
33582
33949
34261
All Foreign
Manufacturing
IT emply %
12983
45743
39
46165
46425
47576
48055
50395
52432
45706
41992
39698
40079
38215
34546
34944
35477
All Manufacturing
Tot Emply
13420
13667
13994
14567
14662
14760
14928
15011
15075
15117
15192
15237
15783
15828
15891
IT emply %
Tot Emply
0.487062405
0.510318949
0.509202008
0.525997796
0.564353991
0.596222774
0.629444388
0.660278333
0.691586263
0.769851409
0.783315706
0.815708976
0.790727215
0.818247875
0.809100864
26280
26650
27494
28137
28351
29016
29391
29533
29642
29746
30256
30403
31490
31653
32876
All Co
IT em
0.4515
0.4902
0.5262
0.5428
0.5732
0.5868
0.6098
0.6991
0.7552
0.8294
0.8431
0.9093
0.8465
1.0473
1.0562
2008 Oxford Business &Economics Conference Program
Pakistani Top Banks & Manufacturing Companies IT Usage Summary/Statistics
Local Banks
Sr.
no
Company
Name
Year of
start in
Pak.
1
Allied
Bank Ltd.
Askari
Commercia
l Bank
1942
Year
of
starti
ng IT
1978
1992
1992
3
Bank Of
Punjab
1989
1989
4
Bank AlHabib Ltd.
Bank
Alflah Ltd
Faisal Bank
Ltd
1992
1992
1997
1997
1987
1992
First
Women
Habib
Bank Ltd.
1989
1989
1943
1966
Metro
Politan
Bank
M.C.B
NBP
1992
1992
1948
1949
1970
1980
United
Bank Ltd.
1959
1967
2
5
6
7
8
9
10
11
12
June 22-24, 2008
Oxford, UK
Name of
Standard
application
Year of Installing
standard Application
Unibank
Swift
Unibank
Swift
1998
Bop2001 in
house
software
package
No standard
application
No standard
application
IBS in hose
system but
Purchased
Sibol
No standard
application
MOBS,
SWIFT,
MISYS
No Standard
Application
No standard application
Sibol
Planning for
FIDILITY
system
Unibank,
Swift, CTL
2001
No Standard
Application
1992
No standard application
No standard application
2005
No standard application
1995, 2003
No Standard
Application
1995
40
ISBN : 978-0-9742114-7-3
2008 Oxford Business &Economics Conference Program
ISBN : 978-0-9742114-7-3
Pakistani Top Banks & Manufacturing Companies IT Usages Summary/Statistics
Foreign Banks
Sr.
Company Name
Year of
starting
Busines
in Pak.
1980
Year
of
starti
ng IT
1990
01
American
Express Bank
Ltd.
02
1948
1990
03
ABN Amro
Bank Ltd.
Bank Of Tokyo
1980
1988
04
Citi Bank N.A
1980
1988
05
Deutsche Bank
Ltd.
Habib Bank AG
Zurich
Hong Kong
Shanghai Bank
Ltd
Oman
International
Bank
Rupali Bank Ltd.
1962
1990
1979
1990
1982
1985
1996
1996
In House
Development
1996
1976
1988
1995
Standard
Chartered Bank
Mashraq Bank
Ltd.
1947
1985
1996
1996
BANK
GENERAL
EBBS global
application
In House
Development
07
08
09
10
11
12
June 22-24, 2008
Oxford, UK
Name of
Standard
application
SBS(Standard
Business
application), In
House developed
In House
developed
In House
developed
In House
Development,
Citibank World
wide one
package
In House
developed
In House
developed
In House Global
development
41
Year of
Installing
standard
Application
1997,2003
1995
1988
1988
1995
1990
1985
1995
1996
2008 Oxford Business &Economics Conference Program
ISBN : 978-0-9742114-7-3
Pakistani Top Banks & Manufacturing Companies Summary/Statistics
Foreign Manufacturing Companies
Sr.
No
Company Name
1
Bata Pakistan
Ltd.
2
3
4
5
6
7
8
9
10
11
12
Year of
starting
Busines in
Pak.
1960
Year of
starting
IT
Name of
Standard
application
1985
Colgate Pakistan
Ltd.
1985
1990
Core systems
from Head
office, Payroll
from systems
Ltd.
In House
developed
I.C.I Pakistan
Ltd.
L.G
Pakistan(New
Allied Electronic)
Pakistan Tobacco
Co.
Simens Pakistn
Ltd.
Suzuki Pakistan
Ltd
Reckitt Benkiser
Pakistan Ltd.
Uni lever
Pakistan ltd.
Proctor &
Gamels Pakistan
Ltd.
Nestle Pakistan
Ltd.
Philips Electrical
Co. Pakistan ltd
1960
1985
1989
1990
1948
1985
1965
1980
1985
1982
1970
1982
1965
1970
1970
1980
1988
1988
1949
1970
June 22-24, 2008
Oxford, UK
SAP(ERP)
Germany
No standard
application
Year of
Installing
standard
Application
Installed
As/400 in
1985
IBM Mini &
Servers, No
standard
Application
2000
No standard
application
S.A.P (ERP
systems)
S.A.P (ERP
systems)
No Standard
systems
JD
Edwar/Oracle
MFG/Pro
2000
S.A.P world
wide, Platinium
in Pakistan
S.A.P
1999
P-GIS, ERP
stnadarad
systems, J>D
Edward/Oracle
1998
42
2000
1999
2001
2000
2005
2008 Oxford Business &Economics Conference Program
ISBN : 978-0-9742114-7-3
Pakistani Top Banks & Manufacturing Companies IT Usages Summary/Statistics
Local Manufacturing Companies
Sr.
No
Company
Name
Year of
starting
Busines
in Pak.
Year
of
starti
ng IT
Name of
Standard
application
1
1984
1990
No standard
application
1964
1984
N.A
1970
1982
No standard
application
S.A.P
1965
1966
S.A.P
2000
1970
1980
No standard
application
N.A
1990
1990
S.A.P
2000
1994
1994
N.A
1985
1992
No standard
application
No standard
application
9
D.G.Khan
Cement
Ltd.
General
Tyres Ltd
Lakson
Tobaco
Ltd.
Packages
Ltd.
Service
Industries
Ltd.
Indus
Motors
Ltd
Honda
Cars Ltd.
Pakistan
Electric
Company
Dawlence
1985
1991
N.A
10
PECO
1976
1990
11
Atlas
Honda
LTd
Pakistan
Steel
1992
1992
No standard
application
No standard
application
S.A.P
1974
1985
No standard
application
N.A
2
3
4
5
6
7
8
12
June 22-24, 2008
Oxford, UK
43
Year of
Installing
standard
Applicati
on
N.A
2005
N.A
N.A
2003