Seabelo Mathswenyego, Rembrandt Klopper and Sam Lubbe
Figure 4: Relationship between ICT investment and IT‐related ratios
In this regard, the operating expense ratio averaged 1.4 for the 5 year period. This means that the total operational costs for SAPO between 2005 and 2010 were outstripping its operational income. This is not good for business, as the organisation might then have to rely on other sources of income to close the gap and remain viable. In the first two years, IT cost‐efficiency and IT efficiency ratios dropped slightly before showing an increase for the remaining period. Despite being positively correlated( IT cost efficiency and IT efficiency), with a high positive correlation of + 0.84, the IT efficiency ratio correlated negatively with CI, while the IT cost efficiency ratio was positively correlated with CI. This is supported by Harris and Katz( 1991), who report that top performers are more likely to spend a significantly higher proportion of their operating expense on IT, thereby resulting in a positive relationship between CI and operational expenses.
Table 3 below indicates the profitability performance indicators and IT‐ related performance ratios for the 5 year period under review.
Table 3: Profitability performance indicators and IT‐related performance ratio trend for the 5 year period under review
Year 2005
Year 2006
Year 2007
Year 2008
Year 2009
Year 2010 AVG
Computerisation Index( CI) |
5,724 |
5,764 |
6,207 |
6,646 |
6,898 |
7,206 |
6,408 |
Operating leverage |
|
0.902 |
0.934 |
0.669 |
‐6.674 |
3.308 |
‐0.172 |
Return on IT assets |
0.338 |
0.337 |
0.510 |
0.319 |
0.295 |
0.321 |
0.353 |
Organisational risk factor |
80.06 % |
79.24 % |
78.38 % |
77.53 % |
74.82 % |
75.66 % |
0.776 |
IT efficiency ratio( ITEX) |
0.21 |
0.25 |
0.15 |
0.21 |
0.22 |
0.21 |
0.210 |
IT cost efficiency ratio( ITCE) |
0.24 |
0.24 |
0.15 |
0.24 |
0.25 |
0.24 |
0.226 |
Operating expense ratio |
1.39 |
1.17 |
1.32 |
1.47 |
1.53 |
1.50 |
1.396 |
Profitability index |
|
|
|
|
|
|
4.192 |
6. Responses to the research questions
6.1 What is the impact of ICT investment on IT cost‐efficiency and IT efficiency ratios?
Kwong and Mohammed( 1985) suggest the use of a CI in their empirical study on the quantitative evaluation of ICT investment in an organisation. They state that the CI measures the extent and sophistication of computerisation. In their evaluation model, CI incorporates factors such as the number of computers, application software, staff, number of shifts and years of computer usage.
6.2 Will the initial ICT investment target be changed if managers can identify changes in the organisational risk?
Kwong and Mohammed( 1985) conclude that increased computerisation is positively associated with improved organisational performance, in both the short‐ and long‐term. However, the results obtained in this study contradict Kwong and Mohammed’ s theory. Improved computerisation at the SAPO did not translate into
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