Seabelo Mathswenyego, Rembrandt Klopper and Sam Lubbe
• What is the impact of ICT investment on organisational risk, cost‐benefit analysis, operating leverage, and return on IT assets?
• What is the impact of ICT investment on the financial performance of SAPO, as measured by ROI, operational costs, profitability levels( operating income, operating leverage, net profit, and turnover growth) and operating expenses?
3. Research methodology
This study was predominantly quantitative in nature, and was conducted by means of a survey that made use of a semi‐structured questionnaire, which was completed by knowledgeable individuals within the SAPO. Information for the study was only gathered from SAPO’ s CIO. These people were presumed to be knowledgeable, objective and experienced with regard to the subject matter being explored.
The financial data for this study was obtained from the SAPO 2005 – 2010 financial statements, which was the period under investigation. The questionnaire was sub‐divided into sections covering details of the organisation, type of ICT investment, financing of the investment, monitoring of the ICT investment and financial figures that were needed to complete and calculate the necessary models.
3.1 Questionnaire validation and finalisation
The questionnaire was tested by sending it to three friends and one academic employee, who were requested to read it and indicate whether or not their understanding was the same as that of the researcher. Firstly, the initial questionnaire draft was piloted among nine people, consisting of six colleagues and three friends. The researcher did not recommend any changes to the questionnaire. After receiving the responses and feedback from the pilot group, the questionnaire was revised. It was sent via e‐mail to the CIO at the SAPO after the necessary approvals from the supervisor had been obtained.
4. Research results and analysis
The operational data needed for this study was gathered by means of a questionnaire that was completed by the CIO of the SAPO. Most of the financial information was sourced from the SAPO’ s financial statements for the period 2005 to 2010. Indicators such as the computerisation index, risk and risk‐related measure, ITrelated ratios and cost‐benefit analysis ratio / profitability index were computed for the period 2005 to 2010.
The SAPO’ s computerisation index, calculated as the weighted average of variables such as management activity level, years of computer usage, number of computers, application software, size of CPU, hardware costs, staff, number of shifts, organisational location and project investment analysis. This index is a measure of ICT resources that have been invested in an organisation over a given period of time.
The data gathered showed that the SAPO increased its computerisation level by 25.9 % to 7208 between 2005 and 2010. This means that the SAPO has increasingly in ICT resources in order to improve the general level of computerisation sophistication. This could have been driven by dynamic and advanced market expectations, as well as the intense competition faced by the SAPO during the period under review( Kwong and Mohamed, 1985).
4.1 Relationship between the computerisation index and return on IT assets( ROI)
Figure 1 below illustrates the relationship between ICT investment( CI) and return on IT assets. It shows that for the first two years, return on IT assets was increasing, with a corresponding increase in ICT investment. However, the remainder of the 5 year period indicates a different trend, whereby an increase in ICT investment was followed by a decrease in return on IT assets. This might indicate that SAPO has an inefficient operational environment that does not improve company returns when the computerisation levels are increased( Hu and Quan, 2005).
Investing in more ICT resources at the SAPO during the period 2005 to 2010 did not have any significant impact on returns on ICT assets. The results obtained in this study contradict Hu and Quan’ s( 2005) theory, which states that ICT provides competitive advantages to firms by adding value across all aspects of the value chain, including improving operational performance, reducing costs and improving returns. Nevertheless, it must be
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