2008:037

MASTER'S THESIS Impact of Information Technology on Productivity

Ahmad Sobhani

Lule University of Technology Master Thesis, Continuation Courses Marketing and e-commerce Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce
2 0 0 8: 03 7 - IS SN : 1 6 5 3 -0 1 8 7 - ISR N : L TU - PB -E X- -0 8 /0 3 7- -S E

MASTER'S THESIS
Impact of Information Technology on Productivity
A case study in Telecommunication industry of Iran

Supervisors: Dr. Mohammad.T. Hamidi Beheshti Dr. Deon Nel Referee: Dr. Abbas Asosheh Dr. Anne Engstrom Prepared by: Ahmad Sobhani
Tarbiat Modares University Department of Industrial Engineering Lule University of Technology Department of Business Administration and Social Sciences Division of Industrial Marketing and E-Commerce Joint MSc. program in Marketing and Electronic Commerce

2008

Abstract Productivity is an important economic factor which has a key role in evaluating the economic growth. It is identified as the foundation for economic prosperity, a prerequisite for national development and also an important indicator of organizational competitiveness (Dedrick et al., 2003).
Information Technology (IT) is one of the important resources for increasing the economic growth. It causes companies to use their input resources as much as possible in an effective way. As investment in IT capital accounts for an ever-increasing share of capital investment, it is important to understand how these investments might pay off (Gilchrist et al., 2001).There has been much debate on whether or not the investment in IT provides improvements in productivity and business efficiencies. IT investment may make little direct contribution to overall performance of companies until they are combined with complementary investments in business activities, human capital, and company restructuring. Therefore, according to role of IT in Business Process Reengineering, as a facilitator and enabler, BPR is valuable for companies to increase the impact of IT on overall performance of companies. On the other word, both IT and BPR investments, together, are able to improve productivity drastically. In this research Cobb-Douglas model was used to examine the impact of Information Technology investment on productivity at Telecommunication Company of Tehran (TCT).44 financial and economic data were collected since 1997 up to 2007 for driving the corresponding model. Weighted Least Square (WLS) was run by SPSS 15 to test hypotheses. The results have indicated that IT investment not only makes the positive contribution to output of Telecommunication Company of Tehran but also this contribution is positive after deductions for depreciation and labor expenses. Further productivity analysis exposed the positive correlations between IT, Total Factor Productivity and Labor Productivity. In order to reveal the importance of BPR approach as a complementary investment for improving IT influences, the appropriate questionnaires distributed through Employees and Experts of TCT in the second phase of this study. Evaluation of BPR factors proved the necessity of employing this complementary investment at Telecommunication Company of Tehran. 1

Acknowledgment I would like to extend my sincerest thanks and regards to all those who supported and encouraged me during my study. First, I would like to express my Special gratitude to Dr. Amir Albadvi at the Department of Industrial engineering, Tarbiat Modares University, and Dr. Esmail Salehi-Sangari at the Division of Industrial Marketing and E-Commerce, Lule University of Technology, for their continuous efforts in conducting this joint program of Marketing and e-Commerce. Additionally, I would like to express my gratitude to Dr. Mohammad.T.Hamidi Beheshti, Professor at the Faculty of Engineering, for his supervision and valuable assistance. Without his continuous encouragement and support, it would not have been possible for this thesiss completion. I would also like to express my special thanks to my Lule University of Technology supervisor; Dr. Deon Nel, who has given me this pleasure to use his valuable comments, feedbacks and suggestions during the time that I have been working on this thesis. Separate thanks to experts at Iran Telecommunication Research center who give me a lot of their working and even personal times. My deep gratitude is expressed to my family and friends whose love and support have made years of study an enjoyable and unforgettable experience. My father and mother deserve special and heartfelt thanks for their support and patience during my work on this thesis.
Ahmad Sobhani February 15 , 2008

th

Table of content
Abstract 1 Table of content ... 3 Chapter One: Introduction and Problem statement ... 9 1-1. Back ground.. 9 1-2. Problem Area and Discussion... 12 1-3. Purpose of the research. 14 1-3-1. Objective of the research. 15 1-4. Importance of the research 15 1-5. Research Questions... 16 1-6. Our contribution 17 1-7. Disposition of the thesis 17 Chapter Two: ICT in Iran . 19 2-1. Introduction... 19 2-2. ICT in Iran. 20 2-2-1. ICT indicators.. 21 2-3. Information Technology sector in Iran. 25 2-4. Telecommunication Company of Tehran. 26 2-4-1. ICT indicators . 26 Chapter Three: Literature Review .. 29 3-1. Productivity... 29 3-2. Common minus of the term.. 31 3-3. Basic types of productivity... 31 3-3-1. Partial productivity.. 31 3-3-2. Total Factor Productivity. 32 3-3-2-1. Source of TFP growth. 32 3-4. Benefits of productivity measurement of organizations... 33 3-5. Benefits of higher productivity in organizations.. 34 3-6. Economic performance......... 34 3-7. Information Technology and Productivity 35 3-8. The productivity paradox.. 37 3

3-9. IT opportunities for development. 39 3-10. Role of IT in the production process.. 42 3-11. IT and Labor .. 43 3-12. IT, Coordination and Firm output... 44 3-13. Production Function Model 45 3-13-1. Cobb- Douglas function... 46 3-13-2. Translog function model.. 47 3-14. Decision tree technique... 47 3-15. Reengineering. 49 3-16. Business process. 50 3-17. Business Process Reengineering. 50 3-18. BPR approach. 52 3-18-1. Importance of BPR approach 53 3-18-2. Attributes of BPR approach.. 53 3-19. Radical changes, Top management, Strategic thinking.. 55 3-20. BPR characteristics. 56 3-21. Potential BPR impacts 56 3-22. Principles in BPR... 56 3-23. Impact of Information Technology on BPR... 57 3-24. Role of IT on BPR.. 58 3-25. Benefits of IT enabled BPR. 60 3-26. IT tools for BPR.. 62 3-26-1. Enterprise Resource Planning 63 3-26-2. Outsourcing... 63 3-26-3. Enterprise software 63 3-26-4. Internet... 64 3-26-5. Intranet... 64 3-26-6. Electronic data interchange... 65 3-26-7. Knowledge management. 65 3-26-8. Legacy system. 66 3-27. Digitized information effects on business process.. 66 3-28. Conceptual framework 67 3-28-1. IT and Productivity.. 68 4

3-28-2. Production function model.. 69 3-28-3. BPR, IT and Productivity 69 3-28-4. Frame of reference... 70 Chapter Four: Research Methodology . 73 4-1.Research process.... 73 4-2. Research design 74 4-3. Type of research 74 45-3-1. Reporting research. 75 4-3-2. Descriptive research 75 4-3-3. Explanatory research... 75 4-3-4. Predictive research.. 75 4-4. Research approach 76 4-4-1. Deductive vs. Inductive... 76 4-4-2. Qualitative vs. Quantitative. 76 4-5. Research strategy.. 77 4-6. Sample selection... 78 4-7. Classification of data 79 4-8. Data collection.. 79 4-9. Reliability.. 81 4-10. Validity... 82 Chapter Five: Data analysis .. 84 5-1. Telecommunication Company of Tehran. 85 5-2. First phase analysis... 85 5-2-1. Data sources. 86 5-2-2. Hypotheses. 87 5-2-3. Methodology 88 5-2-3-1. Linear regression 88 5-2-3-2.Weight estimation 89 5-2-4. Data analysis. 90 5-2-5. Further Productivity analysis 93 5-2-5-1. Total Factor Productivity.. 93 5-2-5-1-1. Method of Kendrick.. 93 5-2-5-1-2. Method of Dujea... 94 5

5-2-5-2-1-3. Method of Solow 94 5-2-5-2.Labor Productivity..... 95 5-2-5-3. Correlation 97 5-3. Second phase analysis... 98 5-3-1. Hypotheses... 100 5-3-2. Data sources. 100 5-3-3. Methodology. 101 5-3-3-1. 2-paired T-test.. 101 5-3-4.Data analysis. 103 5-3-5. Cross analysis... 106 5-3-5-1. Performance Quality. 106 5-3-5-2. Information Technology... 108 5-4. Summary of the results. 110 Chapter Six: Conclusions and Future Suggestions 111 6-1.Remarks on the first research question.. 112 6-2. Remarks on the second research question 113 6-3. Conclusion 115 6-4. Implications.. 116 6-5. Recommendations for future research.. 117 Reference . 118 Appendix A . 126 Appendix B . 130

List of Tables
Table 2.1 Status of Telephone in Iran 21 Table 2.2 Status of Mobile phone in Iran 23 Table 2.3 Computers diffusion among various user groups 23 Table 2.4 Number of Internet users 24 Table 2.5 Internet penetration in designated countries 24 Table 2.6 E-commerce indicators 2004-09 25 Table 2.7 Status of Telephone in Tehran province 26 Table 2.8 Number of online Mobile phones in Tehran province 27 Table 2.9 ICT indicators in Telecommunication Company of Tehran 27 Table 2.10 Financial indicators of Telecommunication Company of Tehran 28 Table 3.1 Labor productivity growth by industries in US 1989-1999 36 Table 3.2 The annual percentage of GDP devote to expenditure on ICT 41 Table 3.3 Alternative estimates of the acceleration of productivity growth 42 Table 4.1 Reliability of the questionnaire 82 Table 5.1 Coefficients related to Cobb-Douglas model 90 Table 5.2 Strength analysis of Findings 90 Table 5.3 Calculated findings for relationship between IT and productivity 91 after deducting the ICT costs Table 5.4 The Average of IT and non IT capital 92 Table 5.5 Correlation coefficient of IT capital and Labor productivity 97 Table 5.6 Correlation coefficient of IT capital and TFP 98 Table 5.7 Descriptive findings of second phase analysis 101 Table 5.8 2 paired t-test 102 Table 5.9 Parameters of 2 paired t-test 103 Table 5.10 Statistic findings for performance quality 103 Table 5.11 Paired test findings for performance quality 104 Table 5.12 Statistic findings for Information Technology 104 Table 5.13 Paired test findings for Information technology 105 Table 5.14 Paired test findings for performance quality indicators 107 Table 5.15 Paired test findings for IT indicators 109 Table 6.1 Summery of final results 114 7

List of Figures
Figure 1.1 Thesis outline Figure 3.1 Labor productivity of US 18 37

Figure 3.2 Contribution of IT and non IT capital in GDP 39 Figure 3.3 BPR schematic 52 Figure 3.4 Kobu conceptual model 62 Figure 3.5 Impact of using IT on business benefits 67 Figure 3.6 BPR indicators 71 Figure 4.1 Research process 74 Figure 5.1 TFP of Telecommunication Company of Tehran 95 Figure 5.2 Indicators of TFP 95 Figure 5.3 Labor productivity of Telecommunication Company of Tehran 96 Figure 5.4 Indicators of Labor productivity 96 Figure 5.5 BPR main factors 99 Figure 5.6 Expected performance quality improvements 108 Figure 5.7 Expected Information Technology improvements 109

Chapter One Introduction and Problem Statement

This chapter begins with background in productivity as an economic factor and Information technology. This will be followed by problem area discussion, the purpose of the research and the main objectives and importance of the study. The main questions which are investigated within scope of research will be introduced. Finally, our contribution and overview of entire thesis are presented.

1-1. Background Strong Competition causes the new technologies to be employed for improving productivity level of companies resources. Productivity is one of the important factors to evaluate the economic growth both at the industry and firm level. Its growth directs companies to increase their market share (Tabatabae, 2000).
At the most basic level, productivity is based on the economics of the firms. It is measured as the ratio of output to input. Historically, productivity is often defined as the ratio of output to the most limited or critical input, with all the other inputs held constant. 9

Based on Neo-classical economic model, productivity is one of the important factors that impact on economic growth. It causes Companies to produce more products through specified productions factors, and to optimize the employment of the productions requirements (Solow, 1956). Improving the productivity is fundamental to survival companies in a very competitive market. The purpose of all productivity-related attempts is to make lasting improvements in performance. Productivity is also the best methods we have to fight inflation, reduce unemployment, enhance profits, reduce costs, create capital and wealth and improve the quality of working life. (Drucker, 2001) clearly, indicated the importance of productivity as an economic indicator when he stated Without productivity objectives, a business does not have direction. Investigation of the productivity achieves the following results: The resources efficiency will be judged. Evaluation of resources management will be facilitated (Kazemi, 2003). Measuring the productivity growth causes companies to evaluate the factors that affect on value added such as IT, Innovation ant etc (NPC productivity report, 2003). Current business activity is characterized by intense international, rapid product innovation, increased use of automation, and significant organizational changes in response to new manufacturing and information technologies (Dirks, 2005). Information technology (IT) is one of the valuable resources to increase the economic growth and customer satisfaction. It has a potential to impact on the structure of organizations and improve the quality of organizational performance significantly. In the 1980s, IT was heralded as a key to competitive advantage (Porter and Millar, 1985). Porter and Millar (1985) concluded that IT has influenced competition in three ways: it has led to changes in industry structure and competition, it was used to support the creation of new businesses, and companies using IT outperformed their competition. Although IT as a critical factor to competitive advantage became less certain in the recent years, the high percentage of top executives considered IT as a key to a company's profitability and survival. This issue causes IT to pose a serious 10

dilemma for top management. On one hand, continuing IT innovations have the potential of changing the competitive game for many organizations. On the other hand, the size of the IT investment puts increasing pressure on managers to assess its business value (Mukhopadhyay, et al., 1997). For many years, there has been much discussion about whether the IT revolution was paying off in higher productivity. Studies in the 1980s found no positive relationship between IT investment and productivity, a situation referred to as the productivity paradox (Dedrick et al., 2003). Since then, decades of studies at the firm and country level has consistently shown that the impact of IT investment on productivity and economic growth is significant and positive. Albadvi and Keramati (2006) also provided the satisfactory evidences to show that IT implementation increase productivity when supported by rational complementary investment. In the face of extreme competition and economic pressures, firms are changing their fundamental unit of analysis from the business function to the business process. IT investments may make little direct impact on the overall performance of the firms or the economy until they are combined with complementary investments in business activities, human capital, and companies redesigning. Therefore, according to the role of IT in Business Process Reengineering (BPR), as an enabler, BPR is essential for corporations to enhance the potential impacts of IT on their performances. On the other word, both IT and BPR investments, together, are able to improve productivity drastically. Despite the fact that little more than 10 years ago Iran was backward technologically among the Middle East countries, it has been considered as a successful example of fast introduction of information technologies, recently. The GDP growth of 6.9% in June 2005 places Iran among the fastest growing economies in the region. The economy has grown by an average 5% every year since 1999. The continued growth of exports to Middle East and western markets, integration with Asian countries, and institutional and regulatory reforms has thus laid a strong foundation for sustainable economic growth. The economy is likely to grow 11

by 5- 6 percent per year in near future (Central Bank of the Islamic Republic of Iran, 30 June 2006; cited Pourmirza, 2006). th The Average of the annual economic growth has been calculated 8 percent in fourth cultural, social and economic development plan of Iran (2005-09). 2.5% of the mentioned growth should be obtained by productivity. Besides, in order to achieve the above economic growth, all governmental sectors have to establish 31.3% of their GDP growth via Total Factor Productivity (TFP). And labor productivity, capital productivity and TFP would be at least 3.5%, 1% and 2.5% raised annually. Therefore, all activities and investments cause to achieve the above goals and extract the resources of organizations in the optimum ways are considered. Telecommunication Company of Tehran (TCT) is one of the powerful companies which have continued business activities independently since 1995. TCT serves communication services and infrastructures. It is identified as a government company which has positive balance of finance. Therefore, TCT has a key role in the economic growth of Iran. The positive impact of IT investment on productivity causes TCT to increase its capacity for stay in competitive telecommunication market. This research identifies and describes the impact of IT investment on productivity at Telecommunication Company of Tehran. Furthermore, the situation of BPR approach in TCT, as a method to improve the IT influences, is evaluated.

1-2. Problem Area Discussion More recently, the continuous movement towards globalization has made information technology one of the most important factors in achieving success as well as in seeking new markets, improving quality and providing better and faster customer service. Many of the recent studies have shed some light on the impact of IT on economic growth, productivity, employment, work organization and competitiveness (Satti, 2002).
Productivity at the organizational level is affected by the level of comp etition, which leads other organizations to step up the development of their productivity (Dedrick et al., 2003). Increased productivity, however, does not necessarily imply increased profitability. Competition may result in lower prices, thus eroding improvement in 12

margins. The beneficiaries will then be consumers, who get more value added for the price paid (Dedrick et al., 2003).This phenomenon is defined as consumer surplus. IT has made rationalization possible in organizations by minimizing human involvement. These aspects of IT are labeled as automational (Zuboff, 1988). Increased access to information and enhanced means of accessing, analyzing, storing and communicating information can result in effects in addition to pure rationalization. These aspects are defined as informational (Zuboff, 1988) informational aspects empower employees and enrich quality of decisions and performances. Transformationa l is the third type of effects which encompasses the changes observed in process innovation and transformation. Another type of effects is identified by Hitt & Brynjolfsson (1996), who discuss the importance of the increased value perceived by consumers as a result of technological improvements. This phenomenon is defined as consumer surplus (Mooney et al., 1996). IT is known as the productive resource to increase the economic growth, productivity and customer satisfaction. It has an effective role to enhance the quality of communication services. IT can be gainful in the communication services when appropriate successful BPR is implemented in the different parts of companies (Limayem, 2006). Moreover telecommunications service providers survival depends on its ability to prepare for changes in customer needs, as well as changes in regulation and technology (Fornell and Wernerfelt, 1987; Reichheld and Sasser, 1990). BPR begins with process redesigning which leads to fundamental changes in many aspects of an organization, including organizational structure, job characteristics, performance measures and the reward system. BPR relies heavily on the IT uses to create radically different working methods to achieve improvements of the order of magnitude required. Furthermore, BPR facilitates the change in corporate managements perception of technology. It also confirms an alternative channel through which IT solutions are being scrutinized and selected (Soliman, 1997). Productivity growth arises from the development of new work methods based on new technology and production techniques. Consequently, when the new technology of IT was introduced in working life, productivity growth was expected. But, because computers were initially used in a situation where productivity growth had been low 13

and unemployment had been high since the mid-1970s, it was initially difficult to prove positive effects of investments in IT (Lundgren and Wiberg, 2001). Solow referred to this situation when he stated, You can see the computer age everywhere but in the productivity statistics (Solow, 1987). This phenomenon was later defined as the productivity paradox ( Horzella, 2005). Of late, however, firm-level studies, in the manufacturing and service sectors, have shown that there are significant positive contributions from IT investments toward productivity (Harker, 2000).

1-3. Purpose of the research Nowadays, there are strong competitions among corporations which serve the communication services. Therefore, they not only employ information technologies through the organizational levels to improve the performance quality but also use the newest technologies to cover customers needs.
There has been much discussion on whether or not the IT investment provides improvements in productivity and business efficiency. Several studies at the industrylevel and at the firm-level have contributed differing understandings of this phenomenon. Telecommunication Company of Tehran is one of the powerful companies that serve communication services and infrastructures.TCT has taken great steps in the development of telecommunication networks and for this purpose, as the main responsible organization in Iran, it has utilized the most advanced equipments and services such as digital switching centers, mobile phones, data networks, satellite services, Internet and special telephone services during the recent years. TCT has a key role in economic growth of Iran. Acceptance of Iran in WTO provides superior opportunities to penetrate in the Middle East and members markets. In addition entrance the new competitors in communication market of Iran (Irancell and Taliya) causes TCT to increase its services quality, productivity and customer satisfaction. The purpose of this research is to investigate the impact of IT investment on productivity at Telecommunication Company of Tehran. Besides, the status of BPR approach in TCT, as a complementary investment for improving the IT influences, will be evaluated. 14

In this research the production function model is used to assess impact of IT capital and labor in a government company and evaluate the BPR factors such as team working, paperwork and etc in order to obtain clear view about future investments and organizational change.

1-3-1. Objective of the research The main objectives of the research are introduced in below:
Investigating the productivity measurement models. Calculating the productivity during the specific period of time at Telecommunication Company of Tehran. Calculating the variant subjects of Infor mation Technology in Telecommunication Company of Tehran. Measuring and analyzing the impact of IT investment on productivity at TCT. Investigating BPR indicators at TCT to improve the productivity.

1-4. Importance of the research Rapid process of information, producing low price IT equipments and employing automation systems through the organizational levels in recent years cause

corporations to access to the update information and knowledge easily and quickly. Information Technologies are driving national development efforts worldwide. And a number of countries in both developing and the developed world are exploring ways of facilitating their development process through deployment and the exploitation of IT within their economies (Pourmirza, 2006). More than 80% of the national GDP of Iran is created by governmental sectors. Although economic stagnation impact on all companies in 1990s, IT investments have been increased over the past years (Jahangard, 2004).Government companies, which have the positive financial levels, are pioneers in this area. Besides, the organizational levels of the most government companies in Iran are pyramidal. These kinds of levels make a lot of waiting and wasting times so, heavy IT investment in the current processes may fall down the positive IT influences.

15

Therefore, bright view of IT capital makes companies to better manage their recourses and future investments. Rational complementary investments increase the positive impact of IT implantation (Albadvi and Keramati, 2006). Companies have implemented BPR approach to shift their fundamental unit of analysis from the business function to the business process, achieve remarkable improvements in critical, contemporary measures of performance and employ the real potential of IT investment through their organizations. BTN, British company in telecommunication area, is pioneer in implementing BPR. Thus, BPR approach can be an essential way for Telecommunication Company of Tehran to streamline its business activities. In order to prove the importance of BPR in Telecommunication Company of Tehran, evaluation of its indicators is the first step. Evaluating the impact of IT on productivity causes at least the following results: Telecommunication Company of Tehran evaluates the factors that affect on value added. Future planning for the value level of Telecommunication Company of Tehran can be facilitated. The resources management of Telecommunication Company of Tehran will be facilitated. Telecommunication Company of Tehran finds clear view about its future investments and organizational change.

1-5. Research Questions The critical questions within the scope of this research are:
RQ1 : What is the relationship between IT investment and productivity at Telecommunication Company of Tehran? RQ2 : Is there a meaningful difference between the present situation and the desired situation of Telecommunication Company of Tehran, with regard to BPR approach?

16

1-6. Our Contribution The study makes contribution to both theory and practice. Also, it has been conducted in two phases. In the first phase, the research problem has been confined to explore and describe the impact of IT investment on productivity. Production function model has been used to assess the impact of IT capital and labor at Telecommunication Company of Tehran. Hence, related financial and economic data were collected from Management and planning Organization, Iran Telecommunication Research Center, Telecommunication Company of Tehran and Telecommunication Company of Iran.
BPR factors have been evaluated in the second phase of the research. Several meetings with experts of Iran Telecommunication Research Center assisted us to prepare and localize the questionnaire. So, the practical information has been extracted through questionnaire data collection from head offices of Telecommunication Company of Tehran. Briefly in this study, the following theory and practical steps have been from the beginning, in order to reach the final results: Review the literature, in order to understand the relationship between IT and productivity deeply and find out the BPR indicators. Study of different methods to find an appropriate model for the first phase analysis. Model selection and modification based on the context (governmental telecommunication sector) characteristics in the second phase of the research. Start field work with gathering financial and economic data for the first phase analysis and distributing the questionnaires through the head offices of Telecommunication Company of Tehran to evaluate BPR factors in the second one. Data entry, analysis and data presentation.

1-7. Disposition of the thesis The entire thesis is divided into seven chapters, as presented in figure 1.1.

17

Chapter 1: Introduction

Chapter 2: ICT in Iran

Chapter 3: Literature Review

Chapter 4: Methodology Chapter 5: Data analysis

Chapter 6: Conclusion Figure 1.1 : Thesis outline

18

Chapter Two ICT in Iran

This chapter presents the situation of Communication and Information Technology in Iran. Also a brief introduction of Telecommunication Company of Tehran will be review at the rest of this chapter.

2-1. Introduction Information and communication Technologies (ICTs) causes economic variables to improve. These influences are considerable in developing countries (Qabadi, 2006). Developing digital networks, computers, Mobile communication, TV and etc have created unique capacity to enrich the knowledge in ICT area.
In millennium, 80% of ICTs market was covered by the top ten countries of the world. And the bottom ten underdevelopment countries just employed 1% of the market. Digital Divide is defined as the difference between developed and underdevelopment countries in using ICT to improve productivity and efficiency of processes and to make appropriate infrastructures for creating Knowledge of ICT and consuming the digital goods and services. China, Vietnam, Poland and some others are able to fill digital divide. China has tried hard to change traditional economy and improve its national 19

economy level by employing High Technologies. So, these investments let china had 27% annual economic grow in 1992 and more than 220 Billion dollar ICTs expenditures in 2006 (Witsa, 2003). Nations worldwide have recognized developmental opportunities and challenges of the emerging information age characterized by ICT. These technologies are driving national development efforts worldwide and a number of countries in both developing and developed world are exploring ways of facilitating their development process through development, deployment and the exploitation of ICT within their economies and societies.

2-2. ICT in Iran In 1857, the first line of telegraph was started its activity between Tehran and Chaman Soltanieh (near Zanjan).Two years later, this line was stretched to Zanjan, Tabriz, Jolfa and connected to Russias Telegraph network. Iran was accepted as a member of International Union of Telegraph in 1869.
The first company, which has produced communicational equipments, was established in 1966. In recent years, government has invested in digital switches, Fiber cable, Mobile phone, Information Networks, Satellite, Internet and telephones services(Iran Telecommunication research center, 2003). Government plays a key role to facilitate the use of ICT in Iran. All governmental institutions in Iran were pooled into the portal www.salamiran.org in 1998. Iran first time introduces the e-government system in 2005 while using Internet for internal public administration communication. Iran has been also a pioneer with discussions about e-banking but currently the implementation has been delayed due to some factors (Iran Daily 15 June 2006). th 49% of current revenues from Irans small and medium sized ICT and telecommunications enterprises come from exports. Over the past five years, a key focus of foreign investment in Iran has been on ICT (telecom) infrastructure, accounting for about 20 percent of 130 major investments. In the last three years Iran has established a thriving mobile telecommunications sector, winning the GSMA global trade association's Government Leadership Award for 2006. 20

The performance of Iranian ICT cluster is based largely on the developments of telecom, as it provides substantial input to computer services and equipment production (Iran Daily, December 2005). This has also been a prerequisite for Internet usage growth because providing good quality Internet connections is vital for attracting wider public to the Internet. Iran was one of the first countries in Asia to get private investments into the telecommunications industry when Pars Telephone Kar (PTK), Keresm Communications Research (KCR), and Hi Tel Kar (HTK) acquired a 57% stake in Irans Telecommunication Industry (ITI) in 2002/2003. From 2005, ITI enjoys the exclusive rights for providing basic services granted by the Concession Agreement. Since 2003 the number of telecommunications companies increased remarkably (ITI annual report 2005) which means higher competition, diversity of services and growth of quality (Pourmirza, 2006).

2-2-1. ICT indicators In this section the ICT Developing indicators, which were introduced as the appropriate indicators to evaluate the situation of ICT by Consortium of national union, are presented. Number of telephones Telephone is one of the important communication services, which is identified as the basic service in ICT area. Nowadays, this basic service develops by focusing on fiber cables. Table 2.1 demonstrates the status of Telephone indicators in Iran.
Content 2000 2001 2002 2003 2004 2005 2006 2007 unit Oct Online 9486260 10896572 129344167 15340805 17798809 20340060 22626944 23681454 phone Penetration 14.9 16.78 Coefficient 19.73 23.06 26.32 29.71 32.57 33.15

Public 86999 94311 100793 Telephone

116776 128558 144145 168075 190017 Source: www.tci.ir Table 2.1 : Status of Telephone in Iran

21

 Number of mobile phones Development of mobile phone is introduced through the economic, Cultural and social plans. First economic, cultural and social plan (1990-94): in this period of time, GSM technologies were introduced in Europe. Without any scientific marketing research, the small mobile network was established by government to Cover Tehran. Capacity of this network was about 10000 mobile lines. Second economic, cultural and social plan (1995-99): Iranian customers welcome this new communication technology. Therefore, government presented mobile communication for 450000 customers in Tehran and 220000 customers in other cities. Third economic, cultural and social plan (2000-04): In 2000, 900000 online mobile lines were established and about 337 cities were covered across Iran. Capacities of mobile networks were augmented and about 3.5 million customers and 937 cities were covered up to end of this period of time. Fourth economic, cultural and social plan (2005-09): Capacity of mobile services have increased in this period however, the quality of mobile communication has felt down. Government executes some projects to overcome the problem. Irancell and Taliya are non government companies which have initiated mobile services in recent years. Table 2.2 introduces the status of mobile phone indicators in Iran since 2000 up to 2007.

22

Content 2 000 2001 2002 2003 2004 2005 2006 2007 unit Oct Online Mobile 962595 2083353 2279143 3449876 5075678 8510513 15385289 21561954 phone Penetration Coefficient 1.51 1.72 3.48 5.19 7.49 12.43 22.20 31.15

Cities covered 337

493

594 9000

708

851

999

1016

1016 -

covered roads 800 8500 (KM) Countries have international rooming 3

10000 25000 26000 32000

7 30 58

80

80

*Coefficients were calculated as each 100 persons

Source: TCI website Table 2.2 : Status of mobile phone in Iran

Number of Computers According to the last issued report, in 2001, about 4.5million computers were used by Iranian people. These computers were increased up to 7 million in 2004(penetration coefficient: 10.4%). Table 2.3 exhibits the situation of computers diffusion among various user groups
DOMESTIC USERS 19% Table 2.3 : Computers diffusion 26% 55%

BUSINESS USERS GOVERNMENTAL USERS

Furthermore the annual computer sale is about 1.2 million in Iran (Tabesh, 2004). Number of Internet users In recent years, Government attempts hard to enhance internet access for the public people. Cheap and easy access to the internet is the main goal of Iranian government. Increasing the rate of internet from 9.74% to 30% indicates these kinds of endeavors. Table 2.4 shows the number of internet users in Iran. 23

Year 2000 2001 2002 2003 2004 2005 2006 2007 Source: High Council of Informatics Table 2.4 : Number of Internet users

Number of Internet users 200,000 1,700,000 3,200,000 5,500,000 6,600,000 6,750,000 7,350,000 11,260,000

Furthermore, based on the Information Technology report of Europe and official website of Telecommunication company of Iran, table 2.5 demonstrates the situation of Internet penetration in different countries.
Countries Internet penetration coefficient(2005) 7.9% 69.9% 6% 42.2% 70.7% 3.6% 10.8% 0.1% 45.8% 49.3% 23.7% 60.9% 5.7% 11% 9.9% 65.2% 37.1% 75.2% 13.9% Growth (2000-05)

China Denmark Egypt France Hong Kong India Iran Iraq Israel Italy Kuwait Japan Pakistan Saudi Arabia South Africa South Korea Spain Sweden Turkey
*Coefficients were calculated as each 100 persons

357.8% 92.9% 833% 201.4% 113.7% 684% 2900% 188% 152% 118.7% 300% 65.8% 5522% 1170% 99.9% 71.1% 199% 68% 411%

Table 2.5 : Internet penetration in designated countries

24

 Key indicators of ICT used at firm level Based on WSIS report (2003), the e-commerce indicators have shown that ICT employment, at the firm level in Iran, is far from the desired situation. According to table 2.6, just 3 percent of Companies in Iran employed website through their business in 2005. There is no accurate information about using internet in Iranian companies. However Iran small industries and Industrial parks organization issued that lack of Internet equipments is considerable in some industrial parks.
Indicators (base) Companies which employ website 30% Active companies in E-commerce 5% Rate of business through electronic networks 4% 6% 8% 10% to Total business(based on GDP) Source: Forth economic, cultural and social plan, 2004 Table 2.6 : E-commerce indicators 2004-09 - 3% 9% 16% 23% 2004 2005 2006 2007 2008 2009

- 1% 2% 3% 4%

- 2%

2-3. Information Technology sector in Iran IT is a term that encompasses all forms of technology used to create, store, exchange, and use information in its various forms (business data, voice conversations, still images, motion pictures, multimedia presentations, and other forms; including those not yet conceived). It is a convenient term for including both telephony and computer technology in the same word. With most of the global IT company presence in Iran, and with revenues growth (35%) yearly, the IT industry is probably the most exciting and dynamic sector in the country today. The industry is characterized with about 100000 professionals, major ongoing IT projects within the government and the private sector to the tune of hundreds of millions of US dollars, and world-class software product and services companies bears testimony to the vibrancy of the IT and IT enabled services sector in Iran. The convergence of communications, computing, and entertainment has resulted in the blurring of boundaries between disciplines and IT companies now come in all shapes and sizes. IT has indeed been taken out of the closet and has been mainstreamed into every aspect of industrial and economic activity within the country (Pourmirza, 2006).
25

2-4. Telecommunication Company of Tehran Telecommunication Company of Tehran (TCT) has separated from Telecommunication Company of Iran since 1995.Installation, development and maintenance of the communication networks (Mobile and fixed) in different private and governmental area through Tehran province are undertaken by TCT. Furthermore, enhancing the quality level of communication networks, establishing and developing different internet services (ISDN, ADSL and etc) and Intelligence system (VOT, UPT, NP and etc) are pointed out as the other services.
80 communication centers, under control of 7 main communication zones, cover Tehran. Besides, more than 390 communication centers undertake communication activities of TCT in the other cities of Tehran province.

2-4-1. ICT indicators of Telecommunication Company of Tehran In this part, some of ICT indicators of Telecommunication Company of Tehran are presented. Telephone is the basic communication. According to table 2.7, TCT could not increase or just stabilize the increase rate of its penetration coefficient in recent years.
Year 1998 2001 2003 20.9 85 1999 2000 22.24 89 2002 34.88 84 2004 2005 2006
*Coefficients were calculated as each 100 persons

Penetration coefficient 22.24 88 86 39.08 44 46.03 86 83 84 86

Operation coefficient

Table 2.7 : Status of Telephone in Tehran province

Table 2.8 demonstrates the number of online mobile phones. According to the total mobile phones in Iran, about 50% of them are served in Tehran province.

26

Year 1996 1997 1998 1999 2000 2001 1186123 2003 2004 2005 2006

Number of online mobile phones 49199 150185 217788 261688 503774 1100321 1735298 2539970 4173726 7231085

2002

Source: www.TCT.ir Table 2.8 : Number of online mobile phones in Tehran province

Table 2.9 is the last table which exhibits the main ICT indicators of TCT.
Indicators 2004 2005 2006 Number of Set up telephones 6400765 6796552 Number of online telephones 5331262 5704273 Number of public telephones 36595 networks Number of special services clients 733131 758081 Number of ADSL-clients 28691 Number of ISDN -Clients 8283 6 4.5 0.47 (month) Source: Telecommunication Company of Tehran Table 2.9 : ICT indicators in TCT 997 6700 665704 35715 communication 34783 5496886

4742703

Number of villages that have 1151 1181 1214

Average of waiting time to engage telephone

Telecommunication Company of Tehran is one of the government companies, which has favorable balance of finance. By considering the situation of above presented services, TCT plays a key role in the economic growth of Iran. Table 2.10 shows the financial situation of TCT over the past 11years.

27

Thousand IR Rials
Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 509 000 893 000 382 000 954 938 852 593 557 459 000 863 635 347 777 788 000 531 967 169 960 1 938 195 415 3 638 399 824 3 744 980 463 3 797 793 610 5 863 191 303 Revenues 370397793 450793397 50 030 1 066 374 955 259 1 349 752 1 654 159 1 602 493 1 103 473 1 847 486 1 860 351 Total Costs 33407663 406588691 Profits 3670501130 44204705.4

1 035 702 151 1 000 743 790 2 785 317 712 2 000 849 574 5 214 002 317 5 849 083 937 5 760 641 097

7 099 051 654 962

Table 2.10 : Financial indicators of TCT

28

Chapter Three Literature Review

During the last few decades, organizations have made immense investments in IT. The implications of these investments for productivity have been widely discussed in business and academic communities. Besides, according to the role of IT in Business process reengineering, BPR is essential for companies to increase potential impact of IT to overall performance of a company. This chapter will frame the study in the theoretical context and provides an overview of relevant literature, relating to productivity, to direct theoretical contexts toward research questions.

3-1. Productivity Productivity growth is identified as the foundation for economic prosperity, a prerequisite for national development and also an important indicator of organizational competitiveness (Dedrick et al., 2003). Measured productivity therefore shapes the political decisions of national governments and management decisions within organizations.
29

The word productivity has become such a buzz word these days. It is almost mentioned in different fields such as commercial magazine, newspapers, political speeches, TV news, business news, social magazine and etc In a formal sense, probably, the first time the word productivity was mentioned in an article by Quensay in the year 1766. In 1833 Littre defined productivity as the faculty to produce , that is, the desire to produce. In 1950, the Organizational European Economic cooperation (OEEC, 1950) offered the more precise definition of productivity: Productivity is the quotient obtained by dividing output by one of the factors of production. In this way it is possible to speak of the productivity of capital, investment, or raw materials according to whether output is being considered in relation to capital, investment or raw materials After this time many economic specialists offered other definition from productivity. Sumanth offered that total productivity is the ratio of tangible output to tangible input (Sumanth, 1984) and Siegel said productivity is a family of ratios of output to input(Tabatabae, 2000). Finally, productivity can be defined as the below for mula: (Output obtained) (Input expended) Or (Performance achieved) / (Resources consumed) Traditional economic studies of productivity focused on labor and capital such as plants and equipments. In order to measure capital, all component categories are considered. This issue is also considering about measuring labor. In some cases the number of the labors is used and in some other cases the person- hour for special period of time is regarded. Increasing the productivity growth causes that: The life level in the investigated countries goes up. Inflation is decreased. The buying power of the people is increased. The life quality is improved and etc Some authors distinguish between productivity and efficiency. While productivity applies to the transformation of input to output in a process, efficiency expresses the relation between input and output in monetary terms. Thus measured, the results not only indicate the improvement in output per man-hour or the change in the quantity of 30

inputs, but also the importance of changes in costs of inputs such as human resources(Rapp, 1999) .In this study, however, no difference is made between productivity and efficiency and the term productivity will primarily be used.

3-2. Common misuse of the term The term productivity is often confused with the term production . Many people think that the grater the production, the greater the productivity. This is not always true, the meaning of productivity and production are different. Production is concerned with the activity of producing goods and / or services. But productivity is defined with the efficient application of resources in producing goods and / or services. 3-3. Basic types of productivity

At this part two basic types of productivity will be introduced.

3-3-1. Partial productivity Partial productivity is the ratio of output to one of the consumed resources. For example capital productivity is the ratio of output to capital input or Materials productivity is the ratio of output to materials input and labor productivity is the ratio of obtained output to labor input. Also Labor productivity can be defined as the traditional, generally used indicator measuring output produced per a certain unit of labor time, usually per man-hour (Jancek and Zamrazilov, 2001). Advantages: 1. Easy to attain the data 2. Easy to compute the productivity indices 3. Easy to understand 4. Good diagnostic tools for productivity improvement. if used along with total productivity indicators. 5. Easy to sale management because of the above first third advantages.
Limitations: 1. If used alone, can be very misleading and may lead to costly mistakes. 2. Tend to shift blame to the wrong areas of management control. 3. Profit control through partial productivity measures can be a hit and miss approach. 4. Do not have the ability to explain overall cost increases. 31

3-3-2. Total Factor Productivity (TFP) Total factor productivity is the ratio of the net output (pure output) to the sum of associated labor and capital input. Net output means total output minus intermediate goods and services purchased. Theoretically, TFP is a relevant measure for technological change by measuring the real growth in production value, which cannot be explained by changes in the input of labor, capital and intermediate input (Zhi et al., 2001). A series of articles that appeared in the recent World Bank Economic Review highlights the important role of total factor productivity (TFP) in the process of economic growth of countries (Cororaton, 2002).Total Factor Productivity measures the synergy and efficiency of the utilization of both capital and human resources. It is also regarded as a measure of the degree of technological advancement associated with economic growth. Higher TFP growth indicates efficient utilization and management of resources, materials and inputs necessary for the production of goods and services (NPC report, 2003). TFP also refers to the additional output generated through enhancements in efficiency arising from advancements in worker education, skills and expertise, acquisition of efficient management techniques and know-how, improvements in an organization, gains from specialization, introduction of new technology and innovation or upgrading of existing technology and enhancement in Information Technology (IT) as well as the shift towards higher added value processes and industries (Cororaton, 2002). Generally, higher productivity growth is associated with growth in Capital Intensity (CI) and the growth in TFP. Capital Intensity measures the physical capital expansion (Fixed Assets) allocated to each employee. This measure indicates whether an enterprise adopts a capital-intensive or labor intensive policy. Higher CI provides the advantage of technology, quality, volumes and speed to increase productivity and hence generate greater output.

3-3-2-1. Sources of Total Factor Productivity Growth There are five major determinants of TFP growth. (a) Demand Intensity which indicates the extent of productive capacity of the economy. A slow-down in demand intensity would result in unused capacity, lowering the utilization of existing
32

machinery and equipment. Demand intensity is reflected in sales performance. (b) Education and training of the worker which aims to upgrade skills, and knowledge. With higher level of skills, workers will be more efficient and produce better quality products and services. (c) Economic restructuring which refers to the movement of resources from less productive to the more productive sectors of the economy. Experience of the developed countries indicates that resources in the more Productive sectors of the economy were utilized at the more efficient level than resources in the less productive sectors. (d) Capital structure which relates to the proportion of investments in productive capital inputs. Investment in machinery and equipment which are productive capital inputs yields immediate output as compared to infrastructure, plant and buildings which have longer lag time. (e) Technical progress which relates to the effective and efficient utilization of technology, innovation, work attitudes and management and organizational effectiveness. With high technological capabilities, a motivated workforce and as effective management, higher value-added products and services will be produced at competitive costs (NPC report, 2003). Advantages: 1. The data from company records are relatively easy to obtain. 2. This factor investigates the efficiency of resources convert and studying the value added that made in the companies. 3. Planning and managing the resources will be facilitated by measuring TFP. 4. Measuring TFP causes that the company knows how to compete and recognize and increase its ability for competing in target market. Limitations: 1. The value added approach is not very appropriate in a company setting because it is difficult for middle managers to relate the value added output to production efficiency.

3-4. Benefits of productivity measurement in the organizations Productivity measurement should be considered in order to organizations know in which productivity level they are working now and in which corresponding level should be operating productivity measurement also shows the direction for companies within their industries. Productivity measurements in the organizations have the following benefits: 33

The organizations access to the conversion efficiency of their resources. Hence, more goods and services are produced for a given amount of expended resources. Also resource planning can be facilitated. The economic and none economic objectives of the companies can be re organized by the priority in the light of the productivity measurement efforts. Measuring and investigating the productivity create the competition action among companies. Strategies to improve productivity would be determined based on the extended distance (gap) between the planned level and measured level of productivity (Sumanth, 1981).

3-5. Benefits of the higher productivity in the organizations Higher productivity in a company with the respect to physical and human resources will mean higher profit because, Profit = revenue cost of goods and services produced by the utilization of the material and labor resources( Bernolak, 1976 ).Also higher productivity can be translated in to higher real earning for its employees . Moreover, it causes the cost of manufacturing to be reduced and the customers to pay relatively low price. This role increases the market share (Tabatabae, 2000). 3-6. Economic performance Economic performance can be interpreted in a variety of ways at each level of analysis. At the country level it usually refers to economic growth, labor productivity growth, and consumer welfare .Economic growth is the rate of change in real output, or GDP, and is measured at the country level. Labor productivity growth, is a measure of the efficient use of (human) resources to create value. It allows the economy to provide lower-cost goods and services relative to the income of domestic consumers and to compete for customers in international markets (McKinsey Global Institute 2001, cited by Dedrick .2003). Corresponding measures focusing on the output of an industry sector and companies are utilized at the industry level and company level (kraemer et al., 2003).
Clearly, labor productivity growth is also an indicator of the economic performance of firms. A firm that is more productive than its competitors will generally enjoy higher profitability, which is of course, also an important measure of economic performance 34

for firms. A more productive firm will either produce the same output with fewer inputs and thus experience a cost advantage, or produce higher quality output with the same inputs, enabling a price premium. Sustaining higher profits through productivity gains requires a firm to maintain productivity levels higher than its competitors. Therefore, over time, profits might be competed away with result that consumers benefit (Gurbaxani et al., 2003).

3-7. Information Technology and Productivity Some recent studies have highlighted both the opportunities and the challenges that IT has imposed on the world economy. For instance, Hitt and Brynjolfsson (1996) have analyzed the implications of IT on productivity while studies by Stiroh (2001), Pohjola (2001) have looked at growth and development (Satti and Nour, 2002).
Proving the business value of IT on organizational productivity has been a major concern of information system (IS) research. It has been a matter of much debate whether or not investment in IT provides improvements in productivity and business efficiency. In 2002, Morgan Stanley reported that US companies wasted $130 billion in the previous 2 years on technology. While organizations have increased investmen ts in IT in order to improve organizational performance, findings from earlier IT productivity studies have been inconclusive despite the fact that several recent firmlevel empirical studies have found a positive relationship between IT investments and organizational performance . For several years, scholars and policy makers lacked conclusive evidence that the high levels of spending on IT by businesses improved their productivity, leading to the coining of the term IT Productivity Paradox. Morrison and Berndt (1990) concluded that additional IT investments contributed negatively to productivity, arguing that estimated marginal benefits of investment in IT are less than the estimated marginal costs. Others, such as Loveman (1994) and Barua et al . (1991), said that there is no conclusive evidence to refute the hypothesis that IT investment in inconsequential to productivity. Of late, researchers working with firm-level data have found significant contributions from IT toward productivity (Brynjolfsson and Hitt 1996). Most of these firm-level studies have been restricted to the manufacturing sector, in large part owing to lack of firm-level data from the service sector. 35

Kamil (2001) Declared that appropriate use of IT in the companies increase the productivity by three ways: (a) Increasing the volume of capital used per worker (capital deepening), when firms invest in IT (b) A speedup of growth of Total Factor Productivity in industries producing information technologies, thanks to technological progress (c) A speedup of growth of TFP in industries using information technologies. Table 3.1 shows the labor productivity growth in different industries in US. Also at this table intensity of IT use in us industry also compared between corresponding periods of times.
Industry 19989-1995 1995-1999 Change Private industry .88 2.31 1.43 Agriculture,forestry,fisheries .34 1.18 .84 Mining 4.56 4.06 -.50 Manufacturing -.10 -.89 -.79 Durable Goods 3.18 4.34 1.16 Nondurable Goods 1.65 1.07 -.59 Transportation 2.48 1.72 -.76 Trucking and Warehousing 2.09 -.78 -2.82 Transportation by air 4.52 Other Transportation 1.51 Communications 5.07 Electric, gas and sanitary service -.09 4.52 0.0 2.14 .63 2.66 -2.41 2.51 2.42

Wholesale trade 2.82 7.84 4.99 Retail trade .68 4.93 4.25 Finance, insurance and real state 1.70 2.67 .97 Finance 3.18 6.76 3.58 Insurance -.28 .44 .72 Real state 1.38 2.87 1.49 Services -1.12 -.19 .93 Personal Services -1.47 1.09 2.55 Business Services -.16 1.69 1.85 Other services -3.03 -1.76 1.27 Industry by intensity of IT use Intense IT use 2.43 4.18 1.75 Less intense IT use -1 1.05 1.15 Source: (Kenneth. Kramer et al., 2003) Table 3.1 : Labor productivity growth by industries in US 1989-1999

As shown on table 3.1, we understand that by increasing the rate of IT use in variety industries, approximately labor productivity in the most of corresponding industries increased too (Kamil, 2001).

36

In the studies of IT and productivity, for successful measuring, it becomes necessary to disaggregate capital into the component categories of investmentIT and the traditional forms of capital, labeled non-IT. IT investment, broadly defined, includes investments in both computers and telecommunications, and in related hardware, software, and services (Dedrick et al., 2003). At the end, the positive impact of IT capitals on the labor productivity growth at US industry is shown in figure 3.1.

Sour ce: (Triplett, 2000) Figure 3.1 : Labor productivity of US

3-8. The productivity paradox During the last few decades, organizations have made immense investments in IT. The implications of these investments for productivity have been widely discussed in business and academic communities since the American economist Solow questioned their benefits (Horzella, 2005). In a now famous quote from 1987, he claims, You can see the computer age everywhere but in the productivity statistics (Solow, 1987). Growth in productivity is a central measure of national and organizational success and is often considered in economic decision-making. This is because the amount that a nation can consume is closely linked to what the nation produces. In a similar way, the performance of a company is dependent on its ability to deliver more value for
37

consumers based on the same resources. The inability to demonstrate a positive correlation between IT investments and improved productivity and increase the IT investments in the companies was later defined as the productivity paradox and formed a baseline for many studies and discussions in subsequent years. The results were conflicting (Harker, 2000). Many studies in the 1980s showed no correlation between IT investments and productivity growth, whereas research based on subsequent data and new assumptions mainly showed a positive and significant effect on productivity and economic growth (Dedrick et al., 2003). As various questions of measurement made it difficult to present distinct conclusions based on aggregate national or industry-level data, researchers turned to aggregate firm-level data when seeking explanations for the productivity paradox. This research indicates that organizations that have made IT investments of equal scale show substantial differences in the development of their productivity (Brynjolfsson, 2003). Explanation for this phenomenon is that the benefits gained from investments in IT are dependent on firm-specific conditions. Idiosyncratic conditions (market position, cost structures and etc.) and complementary investments in management practices, organizational development and strategy are decisive for achieving planned effects. As a example is sa Horzella (2005) concluded that there is a correlation between the level of employee education and the productivity gains from investments in IT. Another part of the explanation for the productivity paradox is the view of IT as a General Purpose Technology (GPT) that makes extensive further development possible and offers a wide range of potential applications. The implementation of other GPTs, such as the electrical dynamo and the steam engine, has shown that it takes time before full advantage of the technology can be taken and productivity improvements achieved. Information structures and operating modes need to be developed and organizations adjusted for the effects of a new technology to be realized. Another explanation for productivity paradox includes: Miss measurement of outputs and inputs. Time lags due to learning and adjustment. Redistribution of profits, and Mismanagement of IT. 38

 Inappropriateness of traditional productivity measures (Brynjolfsson, 1993; Loveman, 1994). Some experts claimed that inconsistent findings from IT productivity research were due to interchanging terms between productivity and financial performance and also lack of adequate data. However, recent studies have claimed that IT productivity paradox no longer exists (sa Horzella, 2005) and there is a positive correlation between appropriate use of IT and economic growth. To prove this issue, figure 3.2 presents the contribution of IT and non IT capital in GDP (from 1948 to 1999).

Source: (Kenneth. Kramer et.al, 2003) Figure 3.2 : Contribution of IT and non IT capital in GDP

3-9. IT opportunities for development IT has the potential to accelerate economic development by: Promoting economic growth by facilitating the generation or increase of another sources of income and investment, thus enhancing sustainable development and welfare economy. Enhancing employment opportunities by creating and initiating new jobs and increasing the employment rate of already existing jobs. Improving the knowledge-based economy by (a) increasing the efficiency of the educational system and learning to benefit from long-distance teaching in the near future; (b) developing the communication system through the provision of cheaper, easier, faster and more efficient services; (c) Upgrading skills and developing human resources through improved educational and training systems and enhancing the capability of people. Promoting the degree and the efficiency of the work organization.
39

 Accelerating the catching-up effect. The diffusion of IT can be used to accelerate and facilitate efforts to bridge the gap with the advanced countries. Minimizing poverty in the region by creating additional employment opportunities. Advancing R&D efforts by motivating and facilitating the collaboration between research institutes and organizations in the region, thus promoting research activities in the region. Insuring gender equality in the region by increasing both education and employment opportunities for women. Promoting e-commerce. Investments in IT have the potential to push/enhance ecommerce. Both Internet and the recent growth in e-commerce can help facilitate the fast delivery of products or services to large number of consumers (Satti and. Nour , 2002). Table 3.2 shows the average of annual percentage of GDP devoted to expenditure on ICT in different countries (from 1998- 2004). By considering the requested table, importance of ICT opportunities for development is tangible as much as pervious.

40

Country Percentage New Zealand 10.3 Singapore 9.6 Australia 8.7 UK 7.9 USA 7.8 Japan 7.8 Canada 7.7 Switzerland 7.6 Sweden 7.5 Czech Republic 7.4 Denmark 7.3 Hong Kong 7.3 South Africa 7.1 Netherland 7 Colombia 7 Malaysia 7 Finland 7 Korea 6.6 Hungary 6.2 Germany 6 France 5.9 Austria 5.8 Slovakia 5.6 Norway 5.5 Portugal 5.5 Brazil 5.4 Ireland 5.3 Vietnam 4.7 Italy 4.6 China 4.3 India 4.27 Iran 2

The annual percentage of GDP devoted to expenditure on ICT Table 3.2 : Moreover some more important improvements of using IT in the firms are: Better information about customers Retailers, wholesalers, service providers and manufacturers can now use detailed real-time information about customer purchases to make business decisions. Faster information flow Information gathering and reporting is highly automated and flows almost instantaneously between business units and companies. Smaller and more accurate inventories At all stages of the value chain participants boost efficiency by keeping lower inventories on hand. 41

 Sharp declines in operating margins and real consumer price s These are the ultimate rewards of the investment, and many of the gains are passed on to the consumer. Increased firm and store size The technology rewards scale and scope, enabling large centralized chains and big box stores to expand rapidly. These achievements are substantial, but they have not been realized quickly or easily. Rather, they are the product of decades of heavy investment, meaningful organizational change, and effective managerial leadership. Indeed, the transformation is far from complete (McGuckin et al., 2004). Table 3.3 exhibits the acceleration of productivity growth from 1973 up to 1995 in US industry. The estimations were introduced by different experts. The major factor that affect on this Acceleration is IT investment.
Category Jorgenson Oliner and Robert and Sichel Economic Gordon Stiroh Advance Labor productivity 0.9 1.2 1.5 1.4 Cycle n.a. n.a. n.a. 0.7 Trend 0.9 1.2 1.5 0.7 Capital per worker 0.0 0.3 0.5 0.3 IT capital 0.3 0.5 n.a. n.a Other Capital 0.0 -0.2 n.a. n.a. Labor Quality 0.0 0.0 0.1 0.1 Multi factor productivity 0.7 0.8 0.9 0.3 Production of IT 0.3 0.3 0.2 0.3 Other sectors 0.4 0.5 0.7 0.0 Concil

Source :( Bosworth, 2000) Table 3.3 : Alternative estimates of the acceleration of productivity growth

3-10. Role of IT in the Production Process

Production process is defined as the process of producing the products or presenting the services. Many studies addressed and evaluated the role of IT on the production process and its affection on productivity both in industry level and country level. Yet, the decision makers who choose to invest in IT are managers who deploy IT for use in their organizations and who use investment criteria that are related to the outcomes at the level of the firm. labor productivity and total factor productivity is certainly one 42

often-used criterion, managers also use measures such as profitability, market share, margins, and product variety and quality as justifications for investment in IT systems. In order to understand the overall impact of IT at the firm level, it is useful to begin by thinking about the qualitative impacts of introducing IT into a firms production processes. Past research has distinguished among using IT to automate processes, to provide better information, and to transform entire processes. For example, a cashier at a retail chain store using a computer-based information system such as a scanner can process a transaction in less time. Impact of improved information allows workers and managers to make decisions more effectively. For instance, infor mation provided by the store-based system allows the managers to better manage inventory. Transformation impacts occur when a firm redesigns a process to achieve significantly higher levels of productivity. One key difference between IT capital band other forms of capital is the dual roles that IT can play in a firm. First, like other types of capital, IT can be used directly as a production technology to improve labor productivity, as in the case of a banks transaction processing system. However, research suggests IT has its greatest impact in its second role as a technology for coordination also it has important role on effective integration of business process of the company for increasing the productivity of the firms (Brenham 1997; and Whang 1991; cited by Vijay Gurbaxani et al., 2003).

3-11. IT and Labor Firm-level studies in Us have shown that IT capital has been a net substitute for labor, as the use of IT allows firms to reduce headcounts or to grow output faster than employment (Dewan and Min, 1997). In addition, IT use is associated with a shift toward workers with higher skill levels, and these workers earn higher wages on average. Comparing industry sectors, found that the rate of skill upgrading has been most rapid in industries that are the most intensive users of computers. By Looking at the U.S. labor force, Krueger found that workers who used computers earned 10 to 15% more than nonusers. Also Reenen (1999) found similar results in studies of other developed countries (Dinardo and Pischke, 1997). he has found the strong correlation between wages and computer use in German data also Chennells and Van Reenen

43

(1999) pointed out, there is much evidence that workers with the best skills are given the best technology to use (Gurbaxani et al., 2003).

3-12. IT, Coordination and Firm Output The relationship between coordination and organizational performance has been reviewed by organizational researchers. These researchers regard coordination as a necessary condition for effective organizational performance. Viewing the organization as an information processing system, Galbraith (1973, 1977) argued that the primary function of an organization is to process the information for decision making needed for a given level of performance. Egelhoff (1982) also considered information processing as an important aspect of organizational performance. Coordination refers to all of the information processing necessary to integrate various economic activities. (Namchul Shin, 2000).
From an information processing perspective, Cheng (1984) argued that coordination is associated with a given level of organizational output performance: the higher the level of coordination, the better the organization can synthesize information into the organizational knowledge needed for better organizational output performance. According to Lawrence and Lorsch, coordination also aims to achieve unity of effort among various subsystems in the accomplishment of the organizations task, which is a complete input-transformation-output cycle involving at least the design, production, and distribution of some goods and services. The above organizational research agrees that a higher level of coordination can improve organizational output performance since coordination is a necessary condition for a given level of firm output performance. Since a higher level of coordination requires large coordination expenses, and since coordination can be achieved efficiently if coordination costs are reduced, IT can contribute to firm productivity by reducing coordination costs, thus facilitating a higher level of coordination. Production enhancement can also be achieved by IT applications that automate production processes and improve the capabilities of existing machinery. IT, however, is most often used to reduce coordination costs within and between organizations. Organizations can produce more if they cooperate, each specializing in 44

its own productive activities and then interacting with one another to acquire the actual goods and services they desire (Milgrom and Roberts 1992). When organizations are specialized producers that need to trade, their decisions and actions need to be coordinated to achieve these gains. A key problem in achieving coordination is that the information needed to determine the best use of resources is not freely available. By providing better means of communication, information processing, and searching, IT reduces coordination costs, improves the coordination cost efficiency, and contributes to firm productivity. The microeconomic theory of production considers the firm as a producer of goods and services. The production process requires a set of inputssuch as capital, labor, materialsin order to produce output. The theory of production assumes that a competitive firm will adopt the most productive bundle of inputs by substituting more productive inputs for less productive inputs. The most efficient economic output is produced by combining inputs in the most efficient manner over time. From this perspective, IT can be regarded as an input equivalent to capital, labor, or other production factors. As an input, IT contributes to an increase in firm output by improving the cost efficiencies of labor and capital. As mentioned above, productivity gains can be achieved by coordination cost efficiency, as well as production cost efficiency. Thus, coordination (costs) will be considered here as an important factor in the analysis of the impact of IT on firm productivity (Namchul Shin, 2000). At the rest of this part the methods that used for investigating the impact of IT on output of the companies and productivity will be introduced.

3-13. The Production Function Model In order to better understand IT and productivity debate, it is useful to begin with a discussion of the production process by which inputs are transformed into outputs in firms and economies, and the specific role of IT as a factor of production. Economists use two related approaches to modeling the production process by which inputs are transformed into outputs. One approach to understanding the output of an economic system is production economics, which uses specific functional forms, called production functions, to model the pr oduction process. (Brynjolfsson and Hitt 2000). This approach uses econometric techniques to relate the output of a firm, industry, or
45

economy to the inputs based on estimation models derived from the production function. Inputs typically accounted for in this approach include labor and capital, including both IT and non-IT capital. Most of the studies at the firm level use this approach. The primary approach used to model the production process inherent in an economy (or industry) is growth accounting (Oliner and Sichel 2000; Jorgenson and Stiroh 1999, 2000). This method also assumes specific properties of the production process and, based on these assumptions, allocates shares of output to the various inputs to production. Output growth in firms, industries, and the economy may arise from increases in input levels, improvement in the quality of inputs, and growth in the productivity of inputs (Gurbaxani et al., 2003). The production function framework has been the most widely used methodology in the study of returns to IT investment (Loveman 1994; Lichtenberg 1995; Brynjolfsson 1996). In the absence of measures of actual benefits associated with IT, it is not possible to perform cost-benefit analyses of IT investment and thus, production functions which relate IT spending to overall productivity or output measures are seen as the best alternative (Parsons et al., 1993). Production function techniques have been shown to be valid and quite successful through hundreds of empirical studies. The choice of the form of the production function is constrained by economic theory which requires that conditions such as monotonicity and quasi-concavity be satisfied. One of the simplest production functions that satisfies such conditions and has been used for about a hundred years is the Cobb-Douglas function (Berndt 1991). Most of the studies on IT-based productivity have used this model (Lichtenberg 1995, Brynjolfsson and Hitt1996).

3-13-1. Cobb Douglas Function The Cobb-Douglas function has had a long and successful life and is still a popular production function. The parameters estimated from this function have provided results which seem to be meaningful from the point of view of economic theory. In a majority of the cases the function fitted has been of the unrestricted type, in the sense that the parameters were allowed to take any value whatsoever, positive or negative, high or low.The Cobb Douglas Function is:
46

Where: Q = total production (the monetary value of all goods produced in a year) L = labor input K = capital input A, a and are constants determined by technology. If a + = 1, the production function has constant returns to scale. That is, if L and K are each increased by 20%, Q increases by 20%. If a + < 1, Returns to scale are decreasing, and if a + > 1 returns to scale are increasing. Assuming perfect competition, a and can be shown to be labor and capital's share of output.

3-13-2. Translog Function model This production function was introduced by Christenson & Jorgenson and Lau
The general equation of Translog is:

in 1973

i , j = 1,2,.n

Where: Y = Total production X and X = inputs efficiency parameter

i j

By increasing the number of inputs, the elastisities ( ) are increased dramatically .So
ij

this issue is the important problem to use this model. 3-14. Decision Tree Technique (DT) Using production function model is the basic method for investing the impact of IT investment on productivity. Decision tree regression is the data mining technique that extracts additional information through the results. Data mining techniques allow organizations to explore and discover meaningful, previously hidden information from huge organizational databases. An important 47

knowledge structure in data mining activities is the decision tree (DT). A DT is a tree structure representation of the given decision problem such that each non-leaf node is associated with one of the decision variables, each branch from a non-leaf node is associated with a subset of the values of the corresponding decision variable, and each leaf node is associated with a value of the target (or dependent) variable. There are two main types of decision trees (DTs): 1) classification trees (CT); and 2) regression trees (RT). For a classification tree, the target variable takes its values from a discrete domain, and for each leaf the DT associates a probability (and in some cases a value) for each class (i.e. value of the target variable). The class that is assigned with a given leaf of the classification tree results from a form of majority voting in which the winning class is the one that provides the largest class probability even if that probability is less than fifty percent (50%). For the regression tree (RT), the target variable takes its values from a continuous domain, and for each leaf the DT associates the mean value of the target variable. Thus, a DT is an alternative approach to continuous linear models for regression problems and to linear logistic models for classification problems (Clark and Pregibon, 1992). To generate a DT, the model dataset is partitioned into at least two parts: the training dataset and the validation dataset (commonly referred to as the test dataset). Then it undergoes two major phases of process: the growth phase and the pruning phase (Kim and Koehler, 1995). The growth phase involves constructing a DT from the training dataset in a top-down recursive manner (Han and Kamber 2001; Hand et al., 2001). In this phase, either each leaf node is associated with a single class or further partitioning of the given leaf would result in the number of cases in one or both child nodes being below some specified threshold. The pruning phase aims to generalize the DT that was generated in the growth phase in order to avoid over fitting. In this phase, the DT is evaluated against the test (or validation) dataset in order to generate a sub tree of the DT generated in the growth phase that has the lowest error rate against the validation dataset. The DT that results from this two-phase process is the sub tree of the pruning phase that had the smallest error (i.e. average squared error for RT) when applied to the validation dataset. It 48

follows that this DT is not independent of the training dataset or the validation dataset. There are several criteria for measuring performance of RTs. Although the predictive accuracy (R-squared, average squared error) is the most commonly used performance measure for an RT, simplicity and stability are also important measures for an RT. Simplicity refers to the interpretability of the RT and is often based on the number of leaves in the RT, but the chain lengths of the corresponding ru les could also be used to determine this criterion of the RT. On the other hand, a stability of an RT refers to obtaining similar results for the training and validation datasets (Myung Ko, KwekuMuata Bryson, 2002).

3-15. Reengineering Competitions among companies oblige them to employ the new technologies for improving productivity level at their resources. Productivity growth directs companies increase market share. Business process reengineering has been adopted by many firms in an effort to improve their competitive position and enhance their ability to provide customer satisfaction and delight.
Nowadays, demands of customers change continually, and strong competition makes companies retain their customers and delight them. So, hierarchy structures do not able to fulfill companies competitive requirements any more (Javanmard, 2002) and organizational modification is necessary for companies to stay in the competitive market. Radical changes are the main characteristics of BPR to alter organizational structures from duty orientation to business process appr oach. Therefore reengineering is one of the important necessities for companies to fortify their situation in market. BPR involves the fundamental redesign of a business process. It has been called the new industrial engineering in contrast to the old Taylorian industrial engineering based on task decomposition and specialization .BPR could involve a change in the way the process is organized, the roles of the participants involved in the process, elimination of steps in the process or a change in their temporal sequence. In its purest sense BPR initiatives should start with a clean slate (Grover et al., 1994).

49

Companies which are employed appropriate business process reengineering throughout their supply chains will have more effective and efficient IT investment. Furthermore higher productivity l means higher profit with respect to the input resources. So reengineering accompanied by using IT cause companies to use their resources as effective as possible (Chin et al., 2003). Implementing IT in business is traditionally aimed at automating the pre-existing processes in an organization. IT cannot elevate productivity drastically unless management processes, including the very organizational structure, are changed to accommodate and maximize the benefits of the current advances in the IT environment.

3-16. Business process Business process is a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization (Davenport, 1994). Also business process defined as a group of related tasks that together create value for (internal and external) customers. The goals follow in the business process are (a) customer satisfaction, (b) return on investment, and (c) market share (Hales and Savoie 1994, Hewitt 1995). These goals require process inter-dependencies and system dependencies that are established through the integration of various business processes. Main Characteristics of business processes : Cross organizational/departmental boundaries Oriented toward a customer Create value (have a deliverable) Are formed by a sequence of activities Respond to a business objective Have partners Are repeatable Are measurable 3-17. Business Process Reengineering Business process re-engineering (BPR) is not another technique for downsizing an organization. Re-engineering is not another quality improvement, just-in time, or cycle
50

time reduction program. These activities typically focus on improving the existing process, whereas re-engineering has the goal of radically changing the processes. Business Process Reengineering (BPR) concerns the fundamental rethinking and radical redesign of a business process to obtain dramatic and sustained improvements in quality, cost, service, lead time and productivity (Gunasekaran et al., 2002). Hammer (1990), defined BPR as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance-cost, quality, capital service and speed. BPR involves the fundamental redesign of a business process. It has been called the new industrial engineering in contrast to the old Taylorian industrial engineering based on task decomposition and specialization .BPR could involve a change in the way the process is organized, the roles of the participants involved in the process, elimination of steps in the process or a change in their temporal sequence. In its purest sense BPR initiatives should start with a clean slate (Grover et al., 1994). Moreover, the strategic importance of customer satisfaction and delight has prompted many firms to begin examining core processes from the perspective of the customer (Scherr, 1993). Thus, reengineering programs must first concentrate on processes that have an impact on providing customer value, satisfaction, and delight while enhancing a firms strategic advantage over its competitors (Holland and Kumar, 1995). Therefore, the driving force behind effective business process reengineering efforts must be those critical factors which influence the customers perception of value, and improve the firms competitiveness. BPR focuses on the whole process starting from product conceptual stage to final product design. It provides the opportunity to reengineer the process or to reduce radically the number of activities it takes to carry out a process with the help of advanced Infor mation Technology, (Hammer and Champy 1993). Business Process Reengineering Aims to achieve quantum improvements and IT is the primary facilitator to achieve the requested goal of BPR (Limayem, 2006). In figure 3.3, the schematic form of BPR has been shown.

51

Source: (Limayem, 2006) Figure 3.3 : BPR schematic

The BPR analysis task typically consists of the following: 1. Collecting data on the existing process. 2. Breaking the existing process down into activities. 3. Capturing expenses, staff and materials information for each activity. 4. Capturing the sequence and timing of the several activities. 5. Capturing information flow and material flow through the process. (Soliman et al., 1998)

3-18. BPR approach Global competition, customer satisfaction, and environmental and governmental regulations suggest that dramatic changes are required by many firms for future success and economic survival. Firms across a wide range of industries have reengineered major business processes in the pursuit of continuous improvement. Reengineering involves rethinking and redesigning a firms core business processes to achieve dramatic and rapid improvements. However, Holland and Kumar (1995) note that 60-80% of reengineering programs have been unsuccessful. Thus, an approach is needed for the deployment of reengineering program.
BPR approach means that refusing the present system and making radical changes to gain the companies vision and radical improvements in critical measures of performance-cost, quality, capital, service and productivity. Also customers 52

satisfaction is identified the main concentration of BPR approach. In this approach companies are directed to complex duties and simple processes (Soliman et al., 1998).

3-18-1. Importance of BPR approach Nowadays, customers are so intelligent and aware. Besides, there are many choices to fulfill customers needs and desires in competitive market. So, they like to be considered individually. According to Hammer time is about customer not specific group of customers.
Customers have renewal views about the presented services or goods. First, they would like that services or goods are conformed to their needs and desires as much as possible. Second, goods and services are available and usable easily and conveniently. In recent years, improvements and progress in Technology cause that, costs of services or goods come down incessantly and companies propel their business activities to delight customers. So market is much more competitive than before. Therefore, companies should have dynamic structures to conform themselves to continues changes in competitive market. And just strategies and methods which offer dynamic and simple processes are considerable.

3-18-2. Attributes of BPR approach The positive attitudes of BPR approach make companies, especially governmental organizations, to consider it. Business Process orientation In the face of intense competition and economic pressures, corporations are shifting their fundamental unit of analysis from the business function to the business process.
Organizational structures in the old companies and the majority of governmental organizations are pyramidal. Specified responsibilities and duties are assigned to each department. It means that each department just responsible for duties, which are delivered by the upper parts. These organizational levels make the hierarchy structures. Pyramidal structures lead companies to satisfy the mangers rather than customers. Besides, the connections of departments would be at the lowest level. 53

BPR approach focus on business process. It cuts organization levels horizontally and connects different departments to customers. This performance causes to all components and departments, which work under definition of business process, try to cooperate together and to achieve goals of business process and satisfy customers, without paying attention to departments boundaries. Team working is established and all the duties are aligned the business process, and related members are responsible for the performance of business process and organization. BPR approach makes companies to distinguish the excess activities through the business process and omit them. Therefore, the final costs are decreased remarkably (Davenport, 1995). Complex duty ,Simple process Combination of duties and elimination of montage activities through the business process is one of the important attribute of BPR approach. BPR approach attempts to integrate the business process and eliminate all excess members and activities. This approach causes the process to be simple and duties to be complex in order to delete all waiting and wasting times and related errors (Rezaee nejad 1999; Hammer, 1998). Making decision in necessary circumstances All organizational levels are compressed both horizontally and vertically.Vertical compression means that members, of business process, do not need any more execute the organizational decisions which are made by upper parts. On the other word, making decision is identified as one of their duties. Vertical and horizontal compression not only decrease delay times and costs but also accelerate responsibilities and empower experts and executive employees (Pad 1998; Oblinski 1997; hammer and champy 1995). Distributing update information Making decision by members of the business processes, cause companies to facilitate updated information flow through their organizations (Darnton 1997; Jackson 1995; Davenport 1995).

54

 Information Technology IT is the primary enabler of new business process. BPR does not aim to automate an existing business process but to deploy IT to enable a new business process. Therefore we define BPR as a complex, top-down driven and planned organizational change task aiming to achieve radical performance improvements in one or several crossfunctional, inter- or intra-organizational business processes whereby IT is deployed to enable the new business process(es) (Barothy et al., 1995). Radical changes through BPR approach alter the approach of the employees and managers. Relationships among employees, mangers and departments are changed. Besides, evaluation of employees and role of top mangers change dramatically.

3-19. Radial changes, Top management, Strategic thinking Top management plays a critical role in radical organizational change. Radical changes cannot occur without sufficient understanding of the new conceptual objective. Having the skills and required competencies to function in that new objective is another factor to occur the radical changes. Moreover the ability to manage how to get that objective is important factor for radical changes. Theories of organizational change suggest that new top management facilitates radical change, especially if new top managers are from outside the firm (Romanelli and Tushman, 1994).Top managers generally are more exposed to and aware of changes in their business environment than rank and file employees (Brunsson 1995; Thompson 1967), and therefore may perceive the need for change more readily. Strategic thinking by the top management has important role to succeed radical changes and reengineering in the companies (Newman, 1998).
Strategic thinking is meant under pressure of three main aspects: the first aspect is the ability to understand the firms resources and capabilities and how they are relevant in the marketplace. The second aspect of strategic thinking that is the ability to understand the market, assess its characteristics, and adapt the firm appropriately. The third aspect of strategic thinking is the ability to envision and plan for a new future, based on an accurate assessment of the market and the firms resources and capabilities.

55

3-20. BPR Characteristics Seeking of dramatic levels of improvements Break-away from outdated rules and fundamental assumptions that underlie operations. Break-away from the constraints of organizational boundaries One-time change Information technology is the primary enabler Focus is on internal and/or external customers Risky. BPR is risky because the radical changes are done. 3-21. Potential BPR Impacts Dramatic productivity improvements As mentioned before IT is one of the important enabler of BPR so by using requested enabler and successful BPR, companies employ and manage their resources more profitable. Dramatic product and service quality improvements. Cost reduction/efficiency gains. BPR causes that not gainful activities throughout the business process are omitted and the cost of product and services are reduced. Improvement of organizational quality. Increasing market coverage. Reengineering the business process and using IT cause companies to use their resources as effective as possible. BPR helps companies to transform from a bureaucratic to a customer-centered orientation by reducing process time and improving quality. 3-22. Principles in BPR There are some principles and tactics that must be considered through the reengineering in the companies. Streamline By streamlining the business process, the wasting activities will be omitted. Also this tactics let companies simplify their business process.
56

 Lose Wait Squeezing out the waiting time in the business process is one of the important factors for successful BPR. Furthermore this principle assists companies to modify upstream practice to relieve downstream bottlenecks. Orchestrate Synchronizing the physical and virtual parts of the process is the goal of this tactic. Mass Customize In order to retain customers, Companies not only satisfy customers but also try to delight them. So, they should push customization to occur closest to the customers. Digitize The important and effective tactics that have to be used in BPR is digitizing the resources and organizational information and distributing digital information flow through supply chain. Vitrify This principle Provides glasslike visibility through fresher & richer information about the process. Sensitize Feedback loops should be built in order to detect process dysfunction. Analyze and Synthesize Augment the interactive analysis and synthesis capabilities around a process to generate value added. Personalize By employing IT- enabler, companies direct their activities through personalizing the products or services to much more satisfy their customers.

3-23. Impact of IT on BPR Organizations have dramatically redesigned their methods of doing business and their underlying IT infrastructure to compete effectively in todays global market.
According to a survey of business-process redesign (BPR) practices carried out by Business Intelligence, 60% of the companies surveyed considered IT a critical enabler for their BPR efforts In describing ITs role in BPR, Chu et al. (1996, p. 5) state, Most analysts view reengineering and IT as irrevocably linked. Wal-Mart, for 57

example, would not have been able to reengineer the process used to procure and distribute mass-market retail goods without IT. Ford was able to decrease its headcount in the procurement department by 75% by using IT in conjunction with BPR, in another well known example.

3-24. Role of IT in BPR The role of IT in business process reengineering can be viewed from two perspectives: (a) the role of the IT function (e.g. Internet, E-Commerce, Multimedia, EDI, CAD/CAM, and ISDN), and (b) the role of the technologies themselves (e.g. CDROM, ATM,). IT has played a vital role in the success of the overall reengineering initiative. Information management throughout the company should be encouraged to develop skills in computer-aided systems engineering (Kobu et al., 2002).
IT is enabler of BPR. Without proper use of IT, BPR would be very difficult executed. If BPR is done without understanding the way it is done, then the most likely outcome would be continuing less-than-satisfactory current practice and automating outdated processes (Kobu et al., 2002). BPR can be implemented by constructing an information architecture, which is composed of the data architecture and process architecture of the organization. The data architecture aims to specify what kinds of information are required and maintained. Process architecture on the other hand specifies what an organization does using the information specified in the data architecture. This means information architecture is concerned with the design and implementation of an information system of the enterprise. Data architecture specifies the information needs of business, independent of the functional and geographical boundaries of an organization and is relatively stable even during the drastic change of business re-engineering. The identification and maintenance of the stable data elements of an organizations activities are the main task of building an information infrastructure of business. An organizations process architecture represents the activities of the business. In general process architecture is less stable and can be changeable during and after the completion of BPR work (Soliman et al., 1998). As presented at the beginning of this part IT infrastructure is a vital factor in successful BPR implementation. Adequate understanding and identification of enabling 58

technologies for redesigning business processes, proper selection of IT platforms (Guha et al., 1993), effective overall system architecture, adaptable and flexible IT infrastructure and proper installation of IT components all contribute to building an effective IT infrastructure for business processes (Al-Mashari and Zairi, 1999). IT infrastructure is defined as the extent to which data and applications through communication networks can be shared and accessed for organizational use (Broadbent et al., 1999; cited by Zairi, 1999). The main purpose of IT infrastructure is to provide consistent and quick information support throughout the organization to respond to dynamic challenges in the markets. IT infrastructure consists of a portfolio of IT resources that are shared and used by firms .It consists of both technical and organizational capabilities to provide the opportunities to share IT resources within and across the firms (Broadbent et al., 1999). The IT infrastructure and BPR are interdependent in the sense that deciding the infor mation requirements for the new business processes determines the IT infrastructure constituents, and recognition of IT capabilities provides alternatives for BPR. Building a responsive IT infrastructure is highly dependent on an appropriate determination of business process information needs. This is determined by the types of activities embedded in a business process, and their sequencing and reliance on other organizational processes .Variance in how activities are performed and the flow of materials, people, and information can be a source of competitive advantage (Hammer, 1990). Analyzed IT infrastructure should not only facilitate the development and use of data, applications, and other processing technology, but also provide flexibility to meet the future business demands in workstations, processing types, and applications (Mudie and Schafer, 1985; cited by Akhavan, 2006). At conceptual level, IT infrastructure consists of data architecture, communication networks infrastructure, and support organizations. Based on these studies, Bhatt (2000) used the following four dimensions of IT infrastructure: extent of intrafirm infrastructure: extent of interfirm infrastructure; extent of infrastructure flexibility; and extent of data integration. Theoretically, intrafirm infrastructure refers to the scope of communication networks within an individual organization, and interfirm infrastructure refers to the scope of communication networks beyond an individual organization .Infrastructure flexibility refers to the extent to which compatible standards and protocols exist to allow heterogeneous hardware and software to communicate and meet present and future 59

business computing environments. In sum, infrastructure capability captures the extent to which an organizations units and their respective databases are made accessible internally and externally via electronic linkages (Akhavan, 2006). Intrafirm infrastructure; interfirm infrastructure; and infrastructure flexibility are not separate, rather they are highly correlated to each other. Therefore, for getting a meaningful measure, Bhatt (2000) combined the first three dimensions, and conceptualized it as network infrastructure. The use of widespread network connectivity between different firms makes it difficult to distinguish between intrafirm infrastructure, interfirm infrastructure, and infrastructure flexibility empirically. Interfirm infrastructure, by definition, includes intrafirm infrastructure. Similarly, extensive connectivity between different firms, by definition, meets the requirement of infrastructure flexibility (Akhavan, 2006). Several researchers have discussed the role of IT in BPR from different viewpoints. They categorize them under two groups(a)change technologies and (b)support technologies. They describe support technologies as relating to implementing information system (IS) to support the process configurations needed. By change technologies, they mean analyzing, modeling, and mapping existing processes, assessing their efficiency and effectiveness, measuring performance, and providing structured support for the change projects management and associated planning and control functions. Higgins declared the imperatives for effective use of IT in BPR. He found the role of IT in BPR as having three major aspects: (a) knowing what new business opportunities are made possible with computer-based technologies, (b) building an active platform of systems and capabilities, and (c) focusing on the process of delivering new systems (Akhavan, 2006).

3-25. Benefits of IT-Enabled BPR IT, accompanied by BPR efforts, provides business with a number of benefits, such as reduction of the cost, time elimination, and error minimization. However, there are other benefits that are mostly related to IT-enabled process orientation. These can be summarized in the following:

60

 Enabling parallelism. Moving from a sequential structure of processes into a parallel one reduces the processes cycle time, problems resulting from delays, process disruptions, and handoffs. Facilitating integration. Moving from the division of labor approach into the case management approach (Davenport and Nohria, 1994) eliminates unnecessary tasks and improves communication and quality of services. Enhancing decision making. Reducing the number of levels in an organizations hierarchies enhances the decision-making process. Minimizing points of contact. BPR, when combined with IT, eliminates intermediaries at different levels and reduces time and distance in the exchange of information required in any process (Al-Mashari and Zairi, 2000). Kobu (2002) conceptual model expresses the relationship between IT and BPR and level customer service. At this model other elements such as organizational structuring and behavioral changes for serving better result is declared. Organizational restructuring by simplification eliminates barriers for a smooth flow of information and materials along the supply chains. The smooth flow of information can be facilitated by the use of various ITs to improve the integration of various functional areas. Deliver quality goods at competitive prices in a timely fashion is the basic aim of BPR so the coordination through the supply chain is the important point for achieving the requested aim and IT is the enabler for coordinating all parts of supply chain. The behavioral changes should precede the reengineering. Therefore, issues such as training and education, employee empowerment, teamwork and incentive schemes should be given priority in BPR. As shown in figure 3.4, IT is the important point for improving the customer level because this element has direct influence on BPR and other elements of Successful BPR.

61

Organizational Structuring

Behavioral Changes

Information Technology

Business process Reengineering Process Delivery system

Improved Customer Service Level Source: (Kobu, 2002) Figure 3.4 : Kobu Conceptual model

3-26. IT tools for business process reengineering

For managers to play an active role in reengineering or process changes, they must possess a basic knowledge of the mechanisms for change: the IT tools. This is not to say that non-technical managers need to be experts in each IT tool or system. These managers can focus on familiarity rather than expertise. The role of expertise should remain with the IT organization and expert consultants. Non-technical managers should make an effort to become familiar with IT reengineering tools and methods that can be used to implement process change successfully. There are some IT applications such as: enterprise planning systems (ERP), outsourcing, enterprise software, internet, intranet, EDI, knowledge management (KM), and legacy systems that will be explained as follows.

62

3-26-1. Enterprise resource planning (ERP) systems ERP allows the sharing of real-time information between manufacturers, customers, suppliers and other business partners. Some of the benefits include: shorter manufacturing cycles; increased communication between consumers and business partners; better supply-chain management; and greater control of operation management.
ERP solutions succeed when training are implemented quickly and efficiently. The ability to introduce quickly via functioning system with little business disruption should be an underlying goal of a project. Equally important in ERP systems, especially as employees roles and skills change, is providing adequate training before and after implementation. In the case of ERP system, creating super users can ease the post deployment process by giving a functional department a central source of application information. Super users are user s who are intimately familiar with an application, like SAP, within a single department (Akhavan et al., 2006).

3-26-2. Outsourcing Outsourcing the projects or some activities of the business process is an attractive choice and effective way for the corresponding companies. This procedure allows companies to implement new technologies quickly, cut costs or improve IT services. However, the reality of outsourcing falls short of the perceived advantages. One of the important problems with outsourcing is the high relationship between technology and internal business processes. When systems are outsourced, systems and processes can often become dysfunctional (Caldwell and McGee, 1997). Companies seeking radical change will not find outsourcing a source of substantial productivity gain. Moreover, for smaller projects, outsourcing can be a cost-effective solution (Jafari et al., 2006). 3-26-3. Enterprise software In addition to ERP discussed earlier, other enterprise software solutions exist which can lead company to radical improvements in information and reengineering processing. Supply-chain systems (supply chain management system) allow suppliers, distributors and retailers to connect each other, similar to ERP systems. By using the requested systems, companies can outsource specific portion of the value chain to the best-equipped business partner. Furthermore, supply chain systems focus on
63

Reengineering and information technology supplier issues and are often more affordable than larger, more functionally integrated systems like SAP. Sales and business process automation is becoming an increasingly popular area for reengineering. Although some of these software applications are limited in capabilities, the majority of packages will give companies a good start with the planning aspects of a reengineering project. Software prices begin at low prices for simple flowcharting and can go up to tens of thousands of dollars for sophisticated simulation/modeling software. Depending on the size of the company and the size of the reengineering project, BPR software is well worth investigating ( Ali-Ahmadi et al., 2006).

3-26-4. Internet Companies have been investing heavily in the internet. Many companies agree that using the internet provides a competitive advantage to their business. Communication and customer service area through the internet are the popular areas that companies tend to address their internet applications.
For instance, in the computer industry, the use of the internet has had a severe impact on improving margins. With the internet, a single point of distribution to all customers could be created at a fraction of the cost. Essentially, the internet allows the barrier between the company and customer to be demolished. Some other benefits of using internet include: better communication, cost reduction, increased productivity and a flattening of the organization. Understanding the technical hurdles surrounding the internet are pivotal before any business process strategy can be developed. Security, employee productivity and support are just a few of the main IT concerns. A companys decision to outsource its internet business or develop a strategy internally using existing IT can have severe financial repercussions on a company. Other technical concerns include the reliability of internet-based systems and management concerns.

3-26-5. Intranet An intranet is like an internal internet for the companies. An intranet is a software/ hardware/network system that is accessible to the entire company. The term intranet is used because the information on the system is only accessible to employees within the company. Sophisticated security prevents people from outside the company from
64

gaining access to company-held information. An intranet allows employees to use a software application, like an internet browser, to gain access to a wide variety of information. Employees can access text, images, audio and video. The main advantage of an intranet is its ability to create a single point of distribution to the entire company. If all employees have access to the intranet, then information can be instantaneously distributed to all employees with little effort. Not only does the company save money on distribution, but it also improves information speed and corporate communication (A. Ali-Ahmadi et al, 2006). Many companies are using intranet strategies for application training and for human resource management. When used prior to a new application launch, such as a SAP or ORACLE-based product, an intranet training solution could disseminate important information to all users instantly. In addition, as updates and changes to the system are made, all employees can be notified immediately.

3-26-6. Electronic Data Interchange (EDI) EDI is used in many companies for keeping customers and suppliers in contact with one another. Recently, EDI systems have improved by allowing more information to be communicated from the retailer back to the manufacturer. This function is done by using bar-coding, which allows manufacturers to monitor customer demands in different regions. Effective control of the inventory and purchasing are the another result of EDI.
Many companies have combined EDI solutions with ERP solutions like SAP to decrease their lead time. Not only EDI allows companies to manage inventory, it gives the company the capability to smooth out the peaks and valleys in the normal production cycle. As the combined EDI/internet systems become more secure, more companies will be able to utilize the technology as a source of cost reduction and process improvement (P.Akhavan et al,2006).

3-26-7. Knowledge management The concept of KM is a method that allows employees to gain access to the knowledge base of a company. Essentially, by allowing employees access to clear and tacit knowledge, companies can develop more informed employees, which in turn, will lead to greater innovation. 65

Explicit knowledge is common information. Tacit knowledge explains the difference between an engineer with one year of experience and an engineer with 20 years of experience. Certain types of expertise can only be acquired through extended periods of working knowledge. KM can be achieved through information repositories and specialized networks. With KM, Duplication is reduced, flexibility is increased and the system has added value by generating revenue through an online commercial package connected to an internetbased application.

3-26-8. Legacy systems Legacy systems, or mainframe computer systems, will continue to remain an integral part of corporations. During the 1980s, as computing costs continued to fall, many companies began switching their mainframe applications to less expensive UNIXbased client-server systems. However, the long-term advantages of client-server over legacy systems are open to debate. Many companies switched to client-server in order to reduce costs and improve their functions. 3-27. Digitized information effects on business process Digitization of information flows can generate value in different ways: by rationalizing or totally eliminating activities, by creating new ways to access and analyze information, by re-engineering processes and by increasing the value experienced by customers(Jafari et al., 2006). Now categorized the digitized information flow based on automational effects, informational effects, transformational effects and the effects on value that are perceived by the customer.
Automational effects refer to the efficiency perspective, in which value is derived primarily from productivity improvement, labor savings and cost reductions (Mooney et al, 1996). Informational effects are related to IT as a means of collecting, storing, processing and communicating information. In this perspective, value can be generated through enhanced decision making, employee empowerment, quality improvements an greater organizational effectiveness (Zuboff, 1988). 66

 Transformational effects are derived from using IT to facilitate and support business innovation and development through re-engineered processes. Such effects are manifested, for example, in reduced cycle times, improved responsiveness, redesigned organizational structures and improved competitive capabilities (Mooney et al, 1996). Consumer surplus refers to the difference between the price that a consumer is willing to pay for a product and the market price (Hitt and Brynjolfsson, 1996). In figure 3.5, the impacts of using Information Technology (digital information) on the business benefits are showed.

Figure 3.5 : Impact of using IT on business benefits

3-28. Conceptual framework A conceptual framework focuses on the main dimensions to be studied, the factors of variables, and the presumed relationship between them or, in other words, something that explains, either graphically or in narrative form, the main things to be studied (Miles & Huberman, 1994).The aim of this part is to review the summary of relevant main concepts that will be employed to conduct this research. Also, the frame of reference builds an appropriate framework to study the Impact of IT investment and evaluate BPR factors at Telecommunication Company of Tehran.
67

3-28-1. IT and Productivity Productivity growth is the foundation for economic prosperity, a prerequisite for national development and also an important indicator of organizational competitiveness (Dedrick et al., 2003). Measured productivity therefore shapes the political decisions of national governments and management decisions within organizations.
As investment in IT capital accounts for an ever-increasing share of capital investment, it is important to understand how these investments might pay off. In order to understand the overall impact of IT at the firm level, it is useful to begin by thinking about the qualitative impacts of introducing IT into a firms production processes (Simon Gilchrist.el.at, 2001). IT has been defined as a term that encompasses all forms of technology used to create, store, exchange, and use information in its various forms. It is a convenient term for including both telephony and computer technology in the same word. Besides, previous studies have characterized the impacts of IT as automating, informating and transforming. Automating impacts are primarily the direct substitution of capital for labor, consistent with capital deepening. For example, a cashier at a retail chain store using a computer based information system such as a scanner can process a transaction in less time. Informating impacts are those where an information system provides information that allows decision makers to make more effective decisions. To stay with the above example, information provided by the store-based system allows the firm to make better inventory decisions, which may increase total factor productivity at the firm level. Transforming impacts occur when a firm re-engineers a process to achieve significantly higher levels of productivity. In our example, the firm may redesign their supply chain using a supply chain management system, of which the store system is a key element (Gilchris et al., 2001). The productivity paradox of information technology has questioned the contributions of IT to economic output and productivity, based on the fact that there has been a marked slowdown in productivity growth despite massive and growing investments in IT. During the last decades, several studies analyzed the relationship between IT capitals and Productivity. At first, little evidence was found about the corresponding 68

correlation, but recent studies have shown significant relationship between IT and Productivity. Harzolla (2005) stated that there is no productivity paradox any more.

3-28-2. Production function model In order to better understand IT and productivity debate, it is useful to begin with a discussion of the production process by which inputs are transformed into outputs in firms and economies, and the specific role of IT as a factor of production.. One of the main approaches to understanding the output of an economic system is production economics, which uses specific functional forms, called production functions, to model the production process. This approach uses econometric techniques to relate the output of a firm, industry, or economy to the inputs based on estimation models derived from the production function. Inputs typically accounted for in this approach include labor and capital, including both IT and non-IT capital (Brynjolfsson et al., 2000). 3-28-3. BPR , IT and Productivity BPR is an aggressive idea on innovating a business process or system. It includes change in systems, organization structures, and responsibility of workers to provide a valuable business processes in dealing with customers, suppliers, products and services. Unlike the traditional automation and long-term continuous improvement programs, radical changes through business process and dramatic improvement in the performance are the important goals of BPR approach. In the celebrated discussions of BPR, Hammer and Champy (1993) defined reengineering as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.
IT investment may make little direct contribution to overall performance of companies until they are combined with complementary investments in business activities, human capital, and company restructuring Therefore, according to role of IT in BPR, as a facilitator and enabler, BPR is essential for companies to increase the potential impact of IT to overall performance of a companies. On the other word, both IT and BPR investments, together, are able to improve productivity drastically.

69

3-28-4. Frame of reference Based on the relevant selected literatures and the research questions, this study was conducted in two phases. In the first phase the relationship between IT capitals and output of Telecommunication Company of Tehran was investigated by several hypotheses.
There is a large body of literature devoted econometrics productivity analysis. So, in the first phase a production function framework is used with capital and labor as inputs. A simple Cobb-Douglas production function specification is used because it is the popular and valid production model to investigate the IT capitals. According to Cobb-Douglas model:

Q = A . C . K . S . L
2 3 4

C = IT Capital Employing IT through the organizational levels is one of the important applications. Therefore according to the above definition of IT, IT equipments, which are employed through the organizational levels, communication centers and office automation, are considered in this research rather than other equipments which contribute in producing products. K = non-IT Capital S = IT Labor L = Non-IT Labor A = defined as the Total productivity and calculate by the regression. and are the associated output elasticities.
1, 2 , 3 4

In order to examine the research questions, an appropriate research model was built to conduct the data collection process in the second phase. In this phase, the indicators of BPR approach were evaluated by the experts and employees of Telecommunication Company of Tehran. The reference frame of the second phase has emerged in figure 3.6.

70

BPR approach

Information Technology

Performance Quality

Establishing different work forces in the Accessible information networks organization. (such as Internet). Rate of cession of decision making power to Accessibility to the necessary and common the skillful personnel. information of team working. Rate of the redundant, unnecessary and Rate of forms, reports and paper works in parallel activities. the organization. Rate of the excess and useless employees. Accessibility to the feedback informa tion. Complex duties. Ra te of immediate Accessibility to update information. Overall customers satisfaction. Office automation. Hierarchy levels. Distance among executive employees and top managers. Figure 3.6 : BPR indicators

V. Grover, K. D. Fiedler (1994), Limayem(2006), Ruth Sara and A.Savlen(2004), Leslie.Willcocks(2002), Cecilia Temponi (2005), and James T. C. Zairi(2000) remarked that information technologies with their rapidly improving capacity, quality and cost/performance ratios are playing a significant role in facilitating BPR. Furthermore, they are positioned as a unique resource that can enable automation, monitoring, analysis and coordination to support the transformation of business processes. In other words, IT works as an enabler of BPR to achieve the goals of reengineering such as eliminate the wasting and waiting time, accessing to update information, digitalize the databases and etc 71

Moreover, BPR approach is structured to improve the quality of business performance (M. oleary, 2003). It means that radical changes are carried out to simplify the business processes, omit the waiting and wasting activities, decrease hierarchy levels and empower executive employees to make decision in necessary circumstances. Besides, BPR tries to increase the productivity of activities through each business processes (Hammer, 1993).So all these kinds of attempts are identified as the quality improving of business performance.

72

Chapter Four Research Methodology

Proper research method is important to start scientific research. Research methodology presents the route map to continue the scientific investigation. At the end of the pervious chapter a framework on literature review and related theories to the purpose and research questions of the thesis has been presented. This chapter describes research process, research design and also explains type, approach and strategy of this research. Sample selection, method of collecting data, reliability and validity of this study are other issues which are discussed in this chapter.

4-1. Research process Although there are different methods to conduct the research, all these methods are involved in a sequence of activities that form research process with high dependency together. All activities in research process do not always follow the same order nevertheless the relevant generic pattern is presented in figure 4.1.

73

Source: (Zikmund, 2000) Figure 4.1 : Research process

The conclusion of studies usually generate new ideas for future research .So, it makes research process cyclical.

4-2. Research design The research design is a framework for marketing research (Malhotra and Peterson, 2003). As a consequence, research design is the basic plan that indicates an overview of the activities that are necessary to execute the research project. Research design provides an operational frame within which the facts are placed, processed through analyzing procedures and the valuable research output is produced.
The essential Sources and type of information are specified in research design to answer research questions. Furthermore the provided framework guides the data collection and the data analysis process.

4-3. Type of research Research can be arranged in different types. Based on nature of the problem four types of research were introduced by Cooper and Schindle (2003).The four categories are described below. 74

4-3-1. Reporting research A reporting study may be made only to provide an account or summation of some data or to generate some statistics .Furthermore it calls for knowledge and skill with information sources and gatekeepers of information sources. Purists claim that reporting studies do not qualify the research, although carefully gathered data can have great value. (Cooper and Schindler, 2003) 4-3-2. Descriptive research A descriptive study tries to discover answer to questions, who, what, when, where and sometimes how. The researcher attempts to describe and define a subject, often by creating a profile of group of problems ( Cooper and Schindler, 2003). The objective of this type of research is to provide a description of various phenomenon connected to individuals situations or events that occur (Johansson and Sparredal, 2005), but the intention is not to conduct research toward connection between causes and symptoms (Islam Sheikh, 2006). 4-3-3. Explanatory research The goal here is to develop precise theory that can be used to empirical generalizations (Johansson and Sparredal, 2005). An explanatory research goes beyond description and attempts to explain the reasons for the phenomenon that the descriptive study only observed. The researcher uses theory or at least hypotheses to account for the forces that caused a certain phenomenon occur (Cooper and Schindler, 2003). This type of research must be used when it is necessary to show one variable determine or affect on the value of other variables. 4-3-4. Predictive research A predictive study is just as rooted in theory as explanation. It means that if we can provide an explanation for an event before it occurs, by considering the pervious symptoms, we predict the event. In this type of research, control is defined as its a logical outcome. The complexity of phenomenon and the adequacy of the prediction theory, however, largely decide success in a control study.
As a consequence, the research questions indicate that this study is explanatory. Initially, Literature review was engaged to drill down to the theory of the relationship 75

between IT and productivity and explore the high interrelation between IT and BPR. In the first phase of research, the relationship between IT and productivity at Telecommunication Company of Tehran (TCT) has been investigated. Three hypotheses were tested in order to explain the relationship among IT and the main economic factors of TCT. In the second phase, the BPR factors have been evaluated. Based on hypotheses and cross analysis, the indicators of BPR and expected improvement in each factor have been explained. Therefore, based on data analysis the situation of BPR factors at TCT were discussed.

4-4. Research approach 4-4-1. Deductive vs. Inductive approach

When conducting the research, there are two different types of approach to consider the inductive approach and deductive approach. Deduction is a form of inference that supports to be conclusive. The conclusion must necessarily follow from the reasons given (Cooper and Schindler, 2003). So, the conductive approach implies that the conclusions derived from premise or something known to be true. But in inductive approach the conclusions come from the particular fact (Zikmond, 2000). In this study an inductive approach has been designated. Although the literatures were reviewed and correlated and interrelated aspects were specified, the final conclusions have been concluded based on the results, which were found during the research and at the specific environment (Telecommunication Company).

4-4-2. Quantitative vs. Qualitative research approach Quantitative research is a research strategy that emphasizes quantification in the collection and analysis of data. A qualitative research implies the search for the knowledge that will measure, describe and explain the phenomenon of our reality. Quantitative is about amount and how much or many of something. It is always formalize and well structured. Data in quantitative research are obtained from samples and observation seeking for relationship and patterns than can be expressed in numbers than words (Johansson and Sparredal, 2005).
Qualitative research is mostly exploratory in nature, involving small number of respondents (Rusli and Ali, 2003). This type of research is used when there is concern 76

of understanding how things happen and how they are related rather than only measuring the relationship between variables. Consequently, the qualitative methodology can provide the investigator with meaningful insights by delivering more deeply and examine the intangible aspects of complex issues of the process (Rusli and Noor Azman, 2003). According to the above explanation, this study is a quantitative research. In the first phase, the quantitative data, which are related to the value of IT capitals and non IT capitals, have been collected from Iran Telecommunication research center, Telecommunication Company of Tehran, Management and Planning Organization and Telecommunication Company of Iran. On the second phase, the questionnaires distributed through the employees and experts of TCT in order to evaluate BPR factors. Finally, information was analyzed as the numerical findings.

4-5. Research Strategy The research strategy should be chosen according to the research questions in the particular situation (Yin, 1994). There are several different methods to perform the research, Case study, Secondary data analysis and focus group are the most important of techniques used in this area.
Case study is a method to gain the formation from a few situations that to researchers problem area. This method concerns the intense investigation of problem solving situations in which problems are relevant to the research problem. The underlining concept is to select several targeted cases where an intensive analysis will identify the possible alternatives for solving the research questions on the basis of the existing solution applied in the selected case study. In Secondary data analysis, the data collected for another purposes are employed. The main research questions in this kind of method are how, what, how many and how much. Abdicating the control over the behavioral events is the major characteristics of this method. Experience study is a kind of technique in which individuals who are knowledgeable about a particular research problem are surveyed. The purpose of experience study is to formulate the problem and explains concepts (Persson, 2004). 77

Focus group discussion is the process of obtaining possible ideas or solutions to a certain problem from a group of respondents by discussing and brain-storming the problem. The emphasis in this method is on the results of the group interaction when focused on a series of topics introduced by the leader. Each participant in a group from five to nine people have a possibility to both express points of view in each topic discussed and to elaborate on or react to the views of other participants (Bengtsson et al., 2004) For this research, case study is the most appropriate technique. At the first phase the economic and financial data (secondary and primary) of TCT in the specific period of time have been analyzed to find out the contribution of IT investment. Furthermore, in the second phase, the importance of BPR approach in TCT was tested by distributing the questionnaires through its employees and experts.

4-6. Sample selection Sampling techniques provide a range of methods that facilitate to reduce the amount of data need to collect by considering only data from a sub-group rather than all possible cases or elements (Saunders and Thornhill, 2000). At the time of conducting research, it is often impossible, impractical, or too expensive to collect data from all the potential units of analysis included in the research problem. A smaller number of units, a sample, are often chosen in order to represent the relevant attributes of the whole set of units, the population. Since the samples are not perfectly representative of the population from which they are drawn, the researcher cannot be confident that the conclusions will generalize the entire population (Shahidul and Sheikh, 2006)
The target population is the economic and financial information of TCT for the first phase of this study and the experts and employees of TCT who are working at the head offices of communication zones for the second one. According to the first phase, there are a lot of economic, financial and scientific data in the field of telecommunication in Tehran. Some of them have been collected in data centers. But most of them have no integration. Finding appropriate data bases and assessing information needed to extract them were identified as the important issues to direct research in an effective and efficient way. By considering limitations and boundaries to find suitable information about IT capitals and non-IT capitals of TCT, 78

44 samples were collected from Management and Planning Organization Telecommunication Company of Iran, Iran Telecommunication research center and Telecommunication Company of Tehran. These samples are covered the past eleven years data (1997 2007). After several meeting and discussion with my Iranian supervisor and IT experts of Iran telecommunication research center, these number of samples and information were confirmed. According to the aim of second phase, the judgments of the experts and employees of TCT about BPR factors are approval and valuable because they are directly familiar with organizational and business activities of the company. From 245 dispersed questionnaires, 215 of them were returned. By employing initiate analysis and data cleaning technique, 201 returned questioners were approved. After several meeting with my supervisors and limitation of time and some official barriers, 201 returned questioners were confirmed to employ in the final analysis.

4-7. Classification of data The data collected can be classified as primary data versus secondary data. Primary data are gathered and generated for the project at hand, but secondary data were gathered for other purposes and now are used in the recent project .usually the secondary data are found inside the company, libraries, research centers, internet and etc This study used both primary and secondary data. 4-8. Data Collection There are six sources of evidence that can be focused in case studies. Each of them will be briefly explained below. Interview There are different form of interview, such as open ended, focus interview and survey. Open ended interviews are performed in a conversational manner. The investigator can ask key respondent for the facts of matter as well as for respondents opinion about events (Johansson and Sparredal, 2005).With the focused interview the main purpose is to confirm facts that already have been established and not ask questions of boarder
79

nature and the respondents are interviewed in the short period of time such as an hour. In survey the questions are more structured (persson, 2004). Physical artifact In this king of data collection the physical evidences, which are needed, such as technological device, work of art instruments and etc are observed or collected by visiting the site of case study. Direct observation This can involve observation of meeting, side walk activities, factory works classrooms and etc. Observational evidence is often useful in providing additional information about the topic being studied (Yin, 1994 ; cite: Sparredal, 2005). Archival records This data collection method include organizational records, charts and maps and survey data previous collected. Also the secondary data can be used in this kind of collection. Documentation Different types of documents such as examples, statistics, registration and official publication, letter journals and branch literature are employed to collect data (Yin, 1994). Questionnaire The data in this method will be gathered by sending questions to the respondents. Questionnaires can be distributed in paper form or by email, fax and etcthere is no explanation or influence of researcher in this method .Also, questionnaire is not to be more long and exhaustive, because these happens cause the questions not to be answered. Different methods were used to gather information. The archival records and different documents were used in the first phase. The economic and financial data were collected from Management and planning organization, TCTs databases, Telecommunication Company of Iran and Iran Telecommunication research center. In the second phase, the questionnaires were distributed through the employees and experts to investigate BPR approach in TCT. All questions were designed based on the BPR characteristics. The questionnaire is consists of two main parts. In the first part, the factors of performance quality of company were tested in the current situation and 80

the desirable situation independently. Second part asks respondents to evaluate the current situation and the desirable situation of IT indicators at their organization separately. The five points Likert scale was used, ranging from very low to very much for statements of the mentioned parts of the questionnaire.

4-9. Reliability Reliability is concerned with the question of whether the results of a study are repeatable. The term is commonly used in relation to the question of whether the measures that are devised for concepts in business are consistent. One factor that might run the disc of affecting the reliability of the study is the respondents lack of knowledge. It is further suggested that if a respondent at the moment is tired or stressed, or have attitudes toward the questionnaire / interview it can impact negatively on the reliability of the study (Eriksson and Wiedersheim-Paul, 2001). Moreover reliability is particularly an issue in connection with quantitative research. The quantitative researcher is likely to be concerned with the question of whether a measure is stable or not.
The main concern of the second phase of this research is evaluating the BPR factors at telecommunication Company of Tehran. After consulting with my Iranian supervisor and Iran telecommunication research centers experts, some modifications and adjustments were done. After the final confirmation, a pilot test was conducted by distributing the questionnaire among 21 experts of TCT which ensured that the questionnaire is appropriate and the statements are generally understandable. In order to check reliability of the results, researcher used cronbachs alpha methodology, which is based on internal consistency. Cronbachs alpha measures the average of measurable items and its correlation. The current and desirable situation were tested for IT and performance quality separately. Table 4.1 presents the values of cronbachs alpha.

81

Current

Desirable

Value of Cronbach's Alpha for Value of Cronbach's Alpha for IT (6 items) Performance Quality (8 items) Current Desirable situation situation Situation Situation 0.883 0.879 0.898 0.901 Value of Cronbach's Alpha for questionnaire (Pilot test) (14 items) Current situation Desirable Situation 0.894 0.896

Table 4.1 : Reliability of the questionnaire

SPSS software was used to verify the reliability of collected data. Overall scales reliability of the present situation and the desirable situation were tested by Cronbach's alpha, which were 0.894 for the present situation and 0.896 for the desirable situation and above the acceptable level of 0.70 (Hair et al., 1998).

4-10. Validity The most important criterion of research is validity. Validity is concerned with the integrity of the conclusions that are generated from a piece of research.
Validity is concerned with whether or not the item actually elicits the intended information. Validity suggests fruitfulness and refers to the match between a construct, or the way a researcher conceptualizes the idea in a conceptual definition, and the data. It refers to how well an idea about reality fits in with actual reality. Actually, qualitative researchers are more interested in giving a fair, honest, and balanced account of social life from the viewpoint of someone who lives it every day (Neuman, 2003). On the other words, Validity is concerned with whether the findings are really about what they appear to be about. Validity defined as the extent to which data collection method or methods accurately measure what they were intended to measure (Saunders et al., 2003). Yin (2003) states, no single source has a complete advantage over all others. The different sources are highly complementary, and a good case study should use as many sources as possible. The validity of a scientific study increases by using various sources of evidence (Yin, 2003). The first phase of this research employed the econometric technique to investigate the relationship between IT investment and productivity at TCT. The data were collected 82

from reputable organizations and companies such as Management and planning organization, Telecommunication Company of Tehran, Iran telecommunication research center and Telecommunication Company of Ira. This issue confirms the validity of the data and relevant results. Due to evaluate the BPR factors in Telecommunication Company of Tehran, several steps were taken to ensure the validity of second phase of this study. First, the basis of questionnaire was acquired from valid and scientific research which was run in Iranian Ministry of commerce. This issue caused the questionnaire to be appropriate and valid to employ in the governmental environment in Iran. After the initial preparation, questionnaire was investigated based on the literatures, which are related to BPR, in order to consider validity of the items which were tested in the research. This step was taken directly under supervision of Dr. Beheshti. In the third step, the questionnaire was evaluated by professional experts of Iran telecommunication research center. Measurement of scales, reliability of statement and validity of questions were deeply rechecked, based on the aims of the research. Preparing the valid questionnaire which was localized to employ in Telecommunication industry in Iran is the main achievement of this step. The questionnaire has been pre-tested. A pilot test was conducted by distributing the questionnaire through Telecommunication Company of Tehran. 21 experts of TCT were participated in this part .This test ensured that the questionnaire is appropriate and the statements are understandable. Therefore, the collected data is valid for the second phase of this particular study because it considers the factors of BPR approach that are assumed to be factual, and the reviewed studies are dealing with the subjects that the researcher wishes to address. Besides, the following steps assisted this research to establish correct operational measures for the studied concepts at TCT and find out the creditable relationships.

83

Chapter Five Data analysis

In the previous chapter the research methodology was discussed. In this chapter the empirical findings and data analysis from Telecommunication Company of Tehran (TCT) have been investigated. At the first phase analysis, the details of the production function model were introduced and also the data collection procedure was followed by gathering data from different databases of Telecommunication Company of Iran, Iran Telecommunication research center, Telecommunication Company of Tehran and Management and Planning Organization. Then, the related hypotheses were introduced and the results of data analysis were achieved. In the second phase, the data collected from employees and experts of TCT were presented. After that the relevant hypotheses tested and data analysis procedure was completed. All the empirical findings are in a manner that addresses the research questions.

84

5-1. Telecommunication Company of Tehran Seven Telecommunication zones in Tehran(more than 80 centers) ,capital of Iran, and information and communication centers in Karaj region and other smaller cities of Tehran province are served all communicational services under control of TCT. Telecommunication Company of Tehran has taken great steps in the development of telecommunication networks and it has utilized the most advanced equipments and services such as digital switching centers, data networks, satellite services, internet services and special telephone services in recent years. 5-2. First phase analysis In order to better understand IT and productivity discussion , it would be advantageous to begin with a discussion of the production process by which inputs are transformed into outputs in firms and economies, and the specific role of IT as a factor of production.
Economists use different approaches to model the production process by which inputs are transformed into outputs. One of the important approaches to understand thoroughly the output of an economic system is production economics, which uses specific functional forms, to model the production process. This approach employs econometric techniques to relate the output of a firm, industry, or economy to the inputs based on estimation models derived from the production function. Cobb Douglas model is one of the popular, simplest, and appropriate production functions that satisfies such conditions and has been employed for about a hundred years. Therefore, based on conceptual framework, this model was employed for analyzing the first phase of this study. According to the aim of this research, the Cobb-Douglas function becomes:

Q = A . C . K . S . L
2 3 4

Q = Total income which have been earned by TCT since 11 years ago. (Output) C = Value of PCs , hard wares , servers, internet domains and their related infrastructures data bases (which are used for storing and exchanging information 85

through the Departments and agencies) and value of automation equipments and infrastructures which were employed through TCTs organizations to integrate official and organizational affairs such as Integrated financial system and MAN system (Input). K = Total Capitals of TCT. IT capital and budgets of IT and non IT labors have been subtracted. S = Budget which is devoted to IT staffs. IT staffs are defined as the personnel who work in computer centers (Input). L = Total labor expenses. The budget of IT staffs has been subtracted (Input). A = defined as the Total Factor Productivity and calculate by the regression. and are the associated output elasticities.
1, 2 , 3 4

To estimate the purposes, the original form of Cobb Douglas model was linearized by taking logarithm of its equation and adding an error term.

3 1

Ln Q = A + Ln( C)+ Ln (K)+

4

Ln (S)+ Ln( L) + e Where A, Q, C, K, S and L and - were defined before and e is the error term.
14

5-2.1 Data sources There are various economic, financial and scientific data bases in the field of telecommunication in Tehran. Some of them have been integrated together. However, most of them have no integration.
In order to conduct this research and gathering reliable and valuable information, specifying information needed and finding resources to extract information were identified as the important issues to propel research in an effective and efficient way. Therefore, based on several consulting and cooperation with my Iranian supervisor and experts of Iran Telecommunication Research Center, the information and related raw data were collected from Management and Planning Organization, Telecommunication 86

Company of Iran, Iran Telecommunication Research Center and Telecommunication Company of Tehran .

5-2-2. Hypotheses Three hypotheses were tested to investigate the impact of IT investment on productivity at Telecommunication Company of Tehran.
Hypotheses are: H1: IT Capital makes positive contribution to output (i.e., the gross marginal product is positive) > 0; > 0 versus the null hypothesis that = = 0
1 3 13

H2: IT investment makes positive contribution to output after deductions for depreciation and labor expenses (i.e., the net marginal product is positive) H3: The ratio of the marginal product to the investment in IT capital and labor is higher than it is for the corresponding non-IT investments. - (IT Capital Expenses / Non-IT Capital Expenses)* > 0;
1 2

and - (IT Labor Expenses / Non-IT Labor Expenses)* > 0.

3 4

Second hypothesis allows us to verify that IT investment (IT capital and IT labor) is not just positive, but that it pays more than what we spend on it. This is a stronger test than first one, which only tests for the gross benefits, since we estimate whether there are any positive net benefits (i.e. benefits after we have subtracted the costs from the gross benefits) associated with IT. To direct the second hypothesis, Marginal Product has been defined. Marginal product for IT capital is: = . A.
1

The above equation identifies that how much output will change instead of changing one unit in IT Capital.

87

Marginal product for IT labor is: = . A.

3

5-2-3. Methodology To conduct the study and validate our results, 44 samples have been extracted from data bases since 1997 up to 2007. By employing these samples in Cobb Douglas model, the hypotheses were tested with acceptable confidence interval. The influences of inflation have to be decreased as much as possible in order to achieve accurate and scientific results, Thus, Time Value of Money (TVM) equation was used to remove negative influences of inflation from the values of all mentioned factors.
TVM: P = According to the document of productivity growth in the field of Information and Communication Technology in Iran (2006), the average of inflation coefficients ( ) for the past eleven years are 11% (IT capital), 15% (Non IT capital),10% (IT and Non IT labor) and 11% (output). This technique assisted us to diminish the negative influences of inflation. By employing the above equation values of samples (IT Capital, Non IT Capital, IT Labor and Non IT labor) were calculated based on the constant value in 1997. Weighed Least Square is the method which was used to overcome effects of heteroskedacity and make linear regression to calculate elasticities.

5-2-3-1. Linear regression Linear regression is used to model the value of a dependent scale variable based on its linear relationship to one or more predictors. The linear regression model assumes that there is a linear relationship between the dependent variable and each predictor. This relationship is described in the following formula. Y = + X + ... + X + e
i 0 1 i1 n in i

88

For the purpose of testing hypotheses about the values of model parameters, the linear regression model also assumes the following: The error term has a normal distribution with a mean of 0. The variance of error term is constant across cases and independent of the variables in the model. An error term with non-constant variance is said to be heteroscedastic. The value of error term for a given case is independent of the values of the variables in the model and values of error term for other cases.

5-2-3-2. Weight Estimation Weight Estimation is appropriate when the spread of residuals from linear regression is not constant, and dependent upon another variable. The regression model has the form: Y = + X + ... + X + e
i 0 1 i1 n in i

e In the ordinary least-squares (OLS) model, the error term, , has a normal distribution
i

with mean 0 and variance s . In the weight least-squares (WLS), the error term has a normal distribution with mean 0 and variance s X that is, the variance of the 2 w,
i

dependent variable is related to the value of a predictor. Unlike linear and nonlinear least squares regression, weighted least squares regression is not associated with a particular type of function used to describe the relationship between the process variables. Instead, weighted least squares reflects the behavior of the random errors in the model; and it can be used with functions that are either linear or nonlinear in the parameters. It works by incorporating extra nonnegative constants, or weights, associated with each data point, into the fitting criterion. The size of the weight indicates the precision of the information contained in the associated observation. Optimizing the weighted fitting criterion to find the parameter estimates allows the weights to determine the contribution of each observation to the final parameter estimates. It is important to note that the weight for each observation is given relative to the weights of the other observations; so different sets of absolute weights can have identical effects. Advantages of Weighted Least Squares like all of the least squares methods discussed so far, weighted least squares is an efficient method that makes good use of small data sets. It also shares the ability to provide different types of easily interpretable statistical 89

intervals for estimation, prediction, calibration and optimization. In addition, as discussed above, the main advantage that weighted least squares enjoys over other methods is the ability to handle regression situations in which the data points are of varying quality. If the standard deviation of the random errors in the data is not constant across all levels of the explanatory variables, using weighted least squares with weights that are inversely proportional to the variance at each level of the explanatory variables yields the most precise parameter estimates possible.

5-2-4. Data analysis The average of IT Capital in TCT, is about 219 Billion IR Rials (23.55 million $ ) over the past 11 years. According to the Cobb Douglas model and WLS method the elasticities of related inputs were calculated to test the hypotheses.
Table 5.1 presents the results.
Elasticities IT Labor 0.023 0.164 Non IT Labor 0.199 2.287 IT Capital 0.067 1.114 Non IT Capital 0.726 4.426 Table 5.1 : Coefficients related to Cobb-Douglas model 0.8800 0.0188 0.0386 0.0000 T Coefficients Std. Error Sig.

Table 5.1 shows the coefficients of IT Capital, non IT capital, IT Labor and non IT Labor. Based on the results, each coefficient indicates the portion of corresponding input in output of TCT. For example, 72.6% of total revenue of TCT is obtained by non IT capital. Significant Std. errors points out that the value of each coefficient has enough and approvable contribution to the model and their values are acceptable.
Multiple R .949 R Square .901 Adjusted R Square Table 5.2 : Strength analysis of findings

.891

90

Table 5.2 shows the strength of the relationship between the model and the dependent variable. R, the multiple correlation coefficient, defines the linear correlation between the observed and model-predicted values of the dependent variable. Its large value indicates a strong relationship .R Square, the coefficient of determination, is the squared value of the multiple correlation coefficient and its value demonstrates the vigorous relationship between observation and model predicted value. About 91% of variations are explained by the model. According to the H1, its null hypothesis is rejected. So IT Labor and Capital make positive contribution to output. ( = 0.067 > 0; = 0.023 > 0)
1 2

In order to test the second hypothesis, marginal products of IT Labor and IT Capital were generated. So:
Aspect IT Capital Labor Capital Marginal Product Annual IT Expenses 0.3083 0.146 1.02 1

Table 5.3 : Findings for relationship between IT and productivity after deducting the IT costs

Table 5.3 indicates that 0.3083 unit of output (total revenue) increase instead of investing 1unit in IT capital. Furthermore 1 unit augmentation in IT Labor makes the output increased about 1.02. IT depreciation costs are considered as the expenses of IT capital. So, with regard to the total depreciation costs of Telecommunication Company of Tehran, the ratio of IT capital to non IT capital and getting advice from experts, the average of annual depreciation of IT Capital was calculated about 14.6% .It means that 14.6% of IT capital in each year is equal to its depreciation costs. On the other words, after 6.8 years the depreciation costs covers the IT capital. Thus, after converting the value of 91

annual depreciation to constant value 1997, the net marginal product of IT capital was achieved: Annual depreciation: 15,832,485,300 IR Rials (constant value)

0.3083 - 0.146 = 0.1623 > 0 IT labor is flow variable. It means that the standard of Labor expenses is about 1unit instead of 1 unit Labor investment. Thus: 1.02 1 = 0.02 > 0

As a consequence, the null hypothesis is rejected and IT investment makes positive contribution to output after deductions for depreciation and labor expenses. The following equations were employed to test H3 hypothesis. - (IT Capital Expenses / Non-IT Capital Expenses)* > 0
1 2

- (IT Labor Expenses / Non-IT Labor Expenses)* > 0.

3 4

Avg. Non IT capital Avg. Non IT labor 3,622,829,370,000 131,661,411,200

*The variables were calculated based on constant value of 1997 **The exchange rate of IR Rial to Us Dollar is about 0.00010752

IR Rials Avg. IT capital 108,441,680,300

Avg. IT labor

11,228,339,480

Table 5.4 : The average of IT and non IT capital

By using the figures from table 5.4 and the coefficients from table 5.1, the net marginal product is: 0.067 0.0217 = 0.0452 In the same way, the third hypothesis for IT labor is: 0.023 - .016 = 0.07 Therefore, the null hypothesis is also rejected. So, the ratio of the marginal product to investment in IT capital and labor is higher than it is for the corresponding non-IT investments. 92

In the first phase of data analysis, the relationship between of IT investment and output (productivity) of TCT was tested. According to the hypotheses ,not only the positive impact of IT investment on output were found out but also its positive contribution were proved after deductions for IT capital depreciation and IT labor expenses. Besides, in the third hypothesis, the positive returns of IT investment were found higher than non IT capital and labor. All these results points out the positive impact of IT investment in economic growth and productivity of TCT. Another important conclusion of this part is about non -IT investments. Although 70% of Total income of TCT is earned by non- IT capital, the productivity level of non-IT capital is lower than IT capital.

5-2-5. Further productivity analysis In this part, further analysis is accomplished. Total Factor Productivity and labor productivity are two mains economic factors in Iran. 31.3% GDP growth in Iran must be obtained by Total Factor Productivity. Hence, at least 2.5% and 3.5% annual growth in TFP and labor productivity are necessary to achieve 8% annual economic growth in each year. Therefore, investigating the correlation between IT capital, TFP and labor productivity will assist us to better analyze the impact of IT investment on productive factors of TCT. 5-2-5-1. Total Factor Productivity Theoretically, TFP is a relevant measure for technological change by measuring the real growth in production value, which cannot be explained by changes in the input of labor, capital and intermediate input (Pedersen, 1994). TFP is the ratio of net output (pure output) to the sum of associated labor and capital input. Net output means total output minus intermediate goods and services purchased. TFP can be measured from different methods. 5-2-5-1-1. Method of Kendrick Kendrick presented the special way to measure the TFP.
Q or V TFP =
t t

a
t

L + K
t

Q output with constant value or the real value-added.

t=

93

K = Real Capital L = Number of persons or working hours of labors are defined as the portions of labor and Capital in production or value added. 5-2-5-1-2. Method of Dujea Dujea presented the following method. Q or V TFP = t
t

L Ka
t t

Q output with constant value or the real value-added.

t=

K = Real Capital L = Number of persons working hours of labors are defined as the portions of labor and Capital in production or value added. In this approach a + = 1. So, by measuring one of elasticities, the other one will be calculated. According to Production functions, Dujea is an appropriate method to investigate the TFP of projects which employ Cobb Douglas model.

5-2-5-1-3. Method of Solow Solow introduced following way to analyze Total Factor Productivity: a = - - TFP Q L K
t tt t

According to the above equation, if labor and capital stay constant, the output will be changed only by Total Factor Productivity. By taking logarithm from the Dujea model and then using differentiation, Solow approach will be achieved. The Cobb Douglas model is an appropriate method to identify the portions of the labor and capital which are remarked in the last two patterns.

94

In order to direct the productivity analysis of TCT, Dujea method was designated to employ in this research. Therefore, figure 5.1 and 5.2 indicate TFP in Telecommunication Company of Tehran.

*Quantities of TFP were calculated based on value constant - 1997. **44 samples were calculated in this figure.

Figure 5.1 : TFP of Telecommunication Company of Tehran

* 2001 has been identified as the basis year and other years have been compared with 2001.

Figure 5.2 : Indicators of TFP

As shown in Figure 5.2, although TFP had negative growth during 2001 and 2005, the average growth of TFP was about 16.2% during the past 11 years. Also, the average of annual growth of TFP has been about 8.6% since 2005.

5-2-5-2. Labor Productivity

95

Labor productivity is regarded useful as it is relatively easy to apply and reflects the degree of efficiency in the combination of labor and other resources (OECD Statistics Directorate, 2001) besides it is identified as one of the effective economic factors in Iran. Based on the fourth cultural, social and economic development plan (2005-09), 3.5% annual growth in labor productivity is one of the main goals to achieve 8% economic growth in Iran. Labor productivity is the ratio of output to labor input (number of persons or total working hours of labors). In order to obtain the labor productivity of TCT, the ratio of total revenue of TCT to the number of personnel was calculated. All data were converted to constant value-1997 to reduce the influences of inflation. Figure 5.3 shows the Labor productivity results of TCT.

Figure 5.3 : Labor productivity of Telecommunication Company of Tehran

96

*2001 has been identified as the basis year and other years have been compared with 2001.

Figure 5.4 : Indictors of Labor productivity

As shown in Figure 5.4, the average of annual growth of labor productivity was about 29.8% during 11 years ago. Besides, the average of annual growth of labor productivity has been 16.4% since 2005.

5-2-5-3. Correlation The annual economic growth of Iran was determined 8% in the fourth plan of economic, social and cultural development (2005-09). 5.5 percent of this growth has to be obtained by developing and creating new investment resources and 2.5 percent of growth must be created by productivity growth. So, based on corresponding plan, 31.3 percent of GDP growth of each government organization has to be conducted by TFP. By considering these two goals, Labor productivity, Capital productivity and TFP of each company have to be ,at least, 3.5, 1 , 2.5 percent growth in each year (Iran Productivity Association, 2006).
According to the economic indicators which were issued by Management and Planning Organization, TCT is one of government companies which has positive balance of finance in recent years (profitable). Hence, in order to achieve the mentioned economic factors, the annual growths of TFP and Labor productivity of TCT have to be more than 3.5 and 2.5 percent to compensate the other companies which are not profitable.

97

Therefore, productive resources which direct TCT to achieve the above goals are considered by Top managers. The correlations between Labor productivity, TFP and IT capital are indicated in table 5.5 and 5.6.
IT Capital Labor productivity Pearson Correlation 0.430 0.032 Sig. (2-tailed) IT Capital 44 44 N 0.430 Pearson Correlation 0.032 Labor Productivity Sig. (2-tailed) N Table 5.5 : Correlation coefficient of IT capital and Labor productivity 44 44 1

TF P IT Capital IT Capital Sig. (2-tailed) TFP 44 Pearson Correlation 0.002 Sig. (2-tailed) 44 N 0.869 44 Table 5.6 : Correlation coefficient of IT capital and TFP 1 44 N Pearson Correlation 0.002 1 0.869

As shown in 5.5 and 5.6, IT capital has approximately the considerable correlation with labor productivity and the significant correlation with TFP. The above results confirm that IT capital is able to make the meaningful impact on productivity level of labors and capitals. According to the economic report ,which was issued by Telecommunication Research Center, the labor productivity and TFP of Telecommunication industry in Iran have strong correlations with valueadded (0.99 , 0.98).Therefore, investing on IT should be considered as much as possible. 98

5-3. Second phase analysis As discussed in literature review, complimentary investments are urgent to stabilize the impact of IT investment. Especially continuing IT investment in the current business processes of governmental companies at third world countries may cause to fall down the positive impact of IT investment and convert its opportunities to threats.
Reengineering examines the private and government organizations from different point of views. Customers pay the final costs of the services or products in this approach. So, they are the principal beneficiaries of organizations. According to this point of view, all organizations and companies in developing countries have to reduce the mechanical views and initiate to analyze and reengineer their organizational structures. BPR approach is recognized by two main characteristics. These characteristics not only cover the goals of BPR but also direct the successful BPR efforts. Figure 5.5 shows the relationships of the requested attributes.

Information Technology

BPR approach

Performance Quality Figure 5.5 : BPR main factors

Information Technology (V. Grover, K. D. Fiedler (1994), Limayem(2006), Ruth Sara and A.Saven(2004), Leslie.Willcocks(2002), Cecilia Temponi (2005), and James T. C. Zairi(2000) stated that information technologies with their rapidly improving capacity, quality and 99

cost/performance ratios are playing a significant role in facilitating BPR. Furthermore, they are identified as a unique resource that can enable automation, vitrifying, analysis and coordination to support the transfor mation of business processes. In other words, IT works as an enabler of BPR to fulfill the goals of reengineering of business process such as omit the wasting and waiting time, accessing to updated information, digitalize the databases and etc. Performance quality (Hammer and Champy ,1990,1993) , (M.Oleary ,2003), (Archie Lockamy, W. Smith ,1997) ,(Holland; Kumar ,1995) stated that a business process represents distinct activities whose outcomes are characterized to meet the business goal of the business process. They believe that each process activity tries to perform its commitments by adding the value added on it and satisfy its own clients. BPR approach tries to improve the business performance to enhance the corporations ability for satisfying their customers. Therefore, customer satisfaction is the main goal and attribute of BPR approach and all BPR efforts are conducted to achieve it. BPR approach is also organized to improve the quality of business performance (M. Oleary, 2003). It means that radical changes are carried out to simplify the business processes, omit the waiting and wasting activities, decrease hierarchy levels and empower executive employees to make decision in necessary circumstances. Besides, BPR tries to increase the productivity of activities through each business processes (Hammer, 1993).So all these kinds of attempts are identified as the quality improving of business performance.

5-3-1. Hypotheses Based on the conceptual framework, the BPR factors were tested at Telecommunication Company of Tehran. The main hypothesis is: H4: There is a meaningful difference between the current situation and the desired situation at TCT, based on BPR approach. In order to evaluate the main hypothesis, two secondary hypotheses are:
H4a: Based on Information Technology, there is a meaningful difference between the present situation and the desired situation. 100

H4b: Based on Performance Quality, there is a meaningful difference between the present situation and the desired situation. 14 questions were established to direct hypotheses. 8 questions were related to H4a and 6 numbers of them investigated the H4b. In each question, Respondents were asked to evaluate independently the corresponding factors in the current situation and the desired situation, with respect to BPR approach. The questionnaires were set by five points Likert scale.

5-3-2. Data sources Experts of Telecommunication Company of Tehran are eligible to conduct the investigation of BPR, because the main goal of questionnaire is to evaluate the BPR approach and its main factors deeply, accurately and validly. Besides, experts and employees of TCT are directly familiar with organizational and business activities, so their judgments about factors of BPR are approval and valuable for this research. 5-3-3. Methodology Questionnaires were distributed randomly through the experts of head offices of communication zones in Tehran province. These offices are controlling and supporting organizational and business activities throughout Tehran province. 245 questionnaires were distributed and 215 of them were completed and delivered to the researcher. The response rate is about 87.75%. After initial analysis and dada cleaning 201 questionnaires were prepared to final analysis.
Table 5.7 presents the preliminary information about respondents at Telecommunication Company of Tehran. According to table 5.7, most of the respondents work in department of official and financial affairs (69). Also, more than 91% of respondents are men. Table 5.7 shows that about 66% of respondents hold bachelor degree. Besides, more than 53% of respondents have 10 to 20 years work experiences.
Variable Classification Administrative Clients Contracts Computer Engineering o f variables and financial affairs affairs & Center affairs procurement Freq Per Freq Per Fre Per Freq Per Fre Per q q

101

% % % % % Gender Male 59 93.7 60 87 33 94.3 18 85.8 13 100 Female 4 6.3 9 13 2 5.7 3 14.2 0 0 Diploma 3 4.76 5 7.24 4 11.42 1 4.7 0 0 Education Junior college 8 12.69 9 13.04 12 34.28 1 4.7 6 46.15 level Bachelor 45 71.48 50 72.46 17 48.57 15 71.43 7 53.84 6 Masters 9.54 7 10.14 1 2.5 3 14.28 - 0 PhD 0 - 0 - 0 1 4.7 - 0 Work 1-10 11 17.46 19 27.53 12 34.28 10 47.61 5 38.46 experience 10-20 42 66.66 39 56.52 15 42.85 6 28.57 6 46.15 (Year) > 20 10 15.87 11 15.94 8 22.85 5 23.80 2 15.38 Table 5.7 : Descriptive findings of Second phase analysis

5-3-3-1. 2-paired T-test In order to direct the Questionnaires analysis 2 paired samples T-test was used. This method compares the means of two variables for a single group. The procedure computes the differences between values of the two variables for each case and tests whether the average differs from 0.
One of the most common experimental designs is the pre-post design. A study of this type often consists of two measurements taken on the same subject, one before and one after the introduction of a treatment or a stimulus. The basic idea is simple. If the treatment had no effect, the average difference between the measurements is equal to 0 and the null hypothesis holds. On the other hand, if the treatment did have an effect (intended or unintended), the average difference is not 0 and the null hypothesis is rejected. The Paired-Samples t-test procedure is used to test the hypothesis of no difference between two variables. The data may consist of two measurements taken on the same subject or one measurement taken on a matched pair of subjects. H==
0 1 2

Additionally, the procedure produces: Descriptive statistics for each test variable A confidence interval for the average difference (95%). 102

Table 5.8 and 5.9 present 2 paired t-test briefly.

X
i i i ii

d (x -y )

X
1

Y
1

d
1

X
n

Y
n

d
n

Mean Table 5.8 : 2-paired t-test

Mean

Mean

Parameter
N

Sample
i

=
Nd

d=
(d - )2
Nd
(d- d ) -d n 1

n
2

s =2
2

i d

S2

s s
= =

S2

S2 d2 d nn

dd

Table 5.9 : Parameters of 2 paired t-test

Similar paired samples for specific variables cause to reduce the numbers of outside resources of variance, as much as possible (Azar,1998).

5-3-4. Data analysis

Table 5.10 and 5.11 indicate the correlation and difference between the current situation and the desired situation, with the respect of Performance Quality at TCT.
Performance N Mean Standard Std. Error Samples

103

Quality Deviation Mean Correlation

Current situation Desired Situation

201

16.69

1.314

0.093

0.032 0.032

201 33.29 1.325 0.093

Table 5.10 : Statistic findings for performance quality

Paired Differences Performance t df Sig Maximum Quality Mean Standard Std. 95%confidence Error interval of Mean difference Lower Upper Desired situatio n 16.602 1.836 0.129 Current situation 128.21 200 0.00* 32 16.347 16.857

(2- Difference tailed) Deviation

*significant at 5% level of probability

Table 5.11 : Paired test findings for performance quality

As shown in table 5.11, the difference between the current situation and the desired situation of performance quality has been calculated as 16.602. By considering the maximum difference, the presented difference covers more than 50% of the maximum (16.602/32 = .5188). Besides, based on t distribution table, the exploratory rate of t for 104

95% confidence interval and related degree of freedom (200) is about 2, but the real rate of t has been substituted by 128.21.So, the difference is Significant. By taking in to account the significance (2-taield), it could be concluded that the average of differences is not due to the chance variation and it can be attributed to the respondents believe. Therefore, null hypothesis of H4a is rejected and there is a meaningful difference between the current situation and the desired situation with the respect of Performance Quality.
Information Technology Current situation Desired Situation N Mean Standard Std. Error Samples Deviation Mean Correlation 1.660 2.359 0.117 0.166 0.043 0.043

201 201

11.94 24.63

Table 5.12 : Statistic findings for Information Technology Sig t df (2- Maximum tailed) Difference Mean Standard Std. 95%confidence Deviation Error interval of Mean difference Lower Upper 63.678 200 0.00* 24 1 2.299 13.085 Paired Differences

Information Technology

Desired situation Current 12.692 2.826 0.199 situation

Significant at 5% level of probability

Table 5.13 : Paired test findings for Information Technology

Table 5.12 and 5.13 demonstrate the relationship and difference between the current situation and the desired situation of Information Technology at TCT. Based on results, more that 50 percent of the maximum difference, in the field of Information Technology, is also covered by the difference between the current situation and the desired situation of Information Technology (12.692/24=.52). 105

Moreover, based on t distribution table, the exploratory rate of t for 95% confidence interval and related degree of freedom (200) is about 2, however the real rate of t, was substituted by 63.678. So, there is a meaningful difference between them. According to significance, it could be concluded that the average of differences is not due to the chance variation and it can be attributed to the respondents believe. Therefore, the null hypothesis of H4b is rejected and there is a meaningful difference between the current situation and the desired situation, based on Information technology. As a consequence, H4a and H4b confirm that there is a meaningful difference between the present situation and the desired situation of Telecommunication Company of Tehran, with the respect of BPR approach. On the other word, BPR is identified as an important complementary investment for Telecommunication Company of Tehran. Furthermore, the above analysis reveals that IT investment through TCT is not enough. Thus, According to the deep relationship between IT and BPR, reengineering improves the present situation of IT investment at TCT.

5-3-5. Cross analysis This part presents more information about the BPR factors. 5-3-5-1. Performance Quality Establishing different work forces in the organization, rate of cession of decision making power to skillful personnel, distance among executive employees and senior managers, redundant, unnecessary and parallel activities, excess and useless employees, complex duties, hierarchy levels and rate of overall customers satisfaction, are the indicators of performance quality, which were evaluated in Telecommunication Company of Tehran by its experts and employees.
Table 5.14 Points out the difference between the current situation and the desired situation in each performance Quality factor. The respondents believe that the present situation of unnecessary and parallel activities has the most difference from its desired situation. By taking in to account the significance (2-taield) of each factor, it could be

106

concluded that the average of difference of each factor is not due to the chance variation and it can be attributed to the respondents believe.

Difference based on Likert scale. Performance Quality indicators

Paired Differences t df Sig (2- (Desired Present ) Mean Standard Std. 95%confidence taield) Deviation Error interval of Mean difference Lower Upper

107

Establishing different work forces in the organization

1.83 0.882 0.062 1.71 1.95 29.50 200 0.00*

Rate of cession of 2.28 1.08 0.076 2.13 2.43 30.06 200 0.00* decision making power to skillful personnel Distance among 1.78 0.861 0.061 1.66 1.90 29.38 200 0.00* executive employees and senior managers Rate of unnecessary and parallel activities Rate of excess and useless employees 2.62 1.01 0.071 2.48 2.86 36.78 200 0.00* 1.53 0.975 0.069 1.40 1.67 22.36 200 0.01*

Rate of hierarchy levels 1.78 0.838 0.059 1.66 1.89 30.142 200 0.00* Complex Duty 1.79 1.10 0.058 1.64 1.94 23.11 200 0.00*

Rate of overall 1.91 0.938 0.070 1.77 2.04 27.47 200 0.00* customers satisfaction
*significant at 5% level of probability

Table 5.14 : Paired test findings for performance quality indicators

Figure 5.6 shows the desired improvements which are expected by experts and employees of TCT. The maximum of desired improvement is about unnecessary and parallel activities (178%). Experts and employees of Telecommunication Company of Tehran believe that there are a lot of unnecessary and excess activities through their company. With the respect of evaluated factors, Respondents expect BPR approach to improve the present situation 102% averagely.

108

Fig ure 5.6 : Expected performance quality improvements

5-3-5-2. Information Technology Accessible Information Networks such as Internet, Accessibility to necessary and common information of team working, forms, report and paper work in the organization, Accessibility to feedback information, rate of immediate Accessibility to updated information and office automation were evaluated by personnel of Telecommunication Company of Tehran. Figure 5.7 exhibits the improvements of each mentioned factors which are desired by experts and employees.
Table 5.15 presents the differences between the current situation and the corresponding desired situation of Information Technology factors. By considering the significance value (2-taield) of each factor, it could be concluded that the average of differences is not due to the chance variation and it can be attributed to the respondents believes. Experts and employees believe that the current situation of accessibility to necessary and common information team working and rate of paper work in TCT is not good enough.

109

Difference based on Likert scale. IT indicators

Paired Differences t df Sig (2- (Desired Present ) Mean Standard Std. 95%confidence taield) Deviation Error interval of Mean difference Lower Upper

Accessible Information 1.40 0.945 0.051 Networks Rate of Accessibility to necessary information of team working 2.05 0.947 0.067

269.94 200 0.00* 1.27 1.51 30.67 200 0.00* 2.18 1.91

Rate of paper work in 2.04 1.00 0.071 the organization Rate of accessibility to feedback information 1.82 0.908 0.055

28.65 200 0.00* 2.18 1.89 32.86 200 0.00* 1.69 1.94 29.42 200 0.00* 1.68 1.92

Rate of immed iate 1.80 0.870 0.061 accessibility to updated information Office automation 1.90 0.917 0.064

29.57 200 0.00* 1.02 1.77

*significant at 5% level of probability

Table 5.15 : Paired test findings for Information Technology indicators

Figu re 5.7 : Expected Information Technology improvements

110

According to figure 5.7, experts and employees of TCT expect BPR approach to create about 90.5% improvement in the current situation of IT factors.

5-4. Summary of the results Data analysis was directed in two phases. The first phase analysis not only indicated the positive relationship between IT investment and productivity at TCT but also exposed that the positive return of IT investment is higher than non IT investment.
In the second phase, the BPR factors were tested by the experts and employees of TCT. So a meaningful difference between the present situation and the desired situation of TCT were found, based on BPR approach. Ultimately, IT investment showed its positive impacts at TCT. Besides, BPR was identified as the necessary complementary investment to develop, support and stabilize the positive IT influences in this study.

111

Chapter Six Conclusions and Future suggestions

In this chapter answers of the main research questions will be provided, based on the relevant data analysis. First of all results and findings for each research questions will be provided and after that, the conclusions that I have drawn based on data analysis will be presented. Finally, managerial implications and future research will be suggested . The aim of this research was to shed light on the relationship between IT investment and productivity. Telecommunication Company of Tehran is not only pioneer in telecommunication industry, but also identified as one of the successful government companies in economy environment of Iran. Evaluation of IT investment provided an insight into the role of IT for improving economic factors of Telecommunication Company of Tehran.

112

The business activities of Telecommunication Company of Tehran are concentrated to serve information and communication technologies across Tehran province. However, in this research, IT was identified as the equipments to exchange, store, distribute the information of organizational levels, communication centers and also to automate office activities. Investigating BPR in Telecommunication Company of Tehran caused to understand the situation of BPR factors. Furthermore, this research revealed the expectations of the experts and employees from BPR approach.

6-1. What is the relationship between IT investment and productivity at Telecommunication Company of Tehran? Productivity growth is identified as the foundation for economic prosperity, a prerequisite for national development and also an important indicator of organizational competitiveness (Dedrick et al, 2003). Evaluation and measuring productivity organize the management decisions within organizations.
In order to better understand IT and productivity discussion, it would be useful to initiate with a discussion of the production process by which inputs are transformed into outputs in firms and economies, and the specific role of IT as a factor of production. So, Cobb- Douglas model was used to investigate the impact of IT investment on productivity in this research. It is identified as a kind of econometric techniques. Impact of IT investment was evaluated by three hypotheses. The results shows, IT investment not only makes positive contribution to output of Telecommunication Company of Tehran but also this contribution is positive after deducting the IT capital and its labor costs. The final hypothesis also indicates that return of IT investment is higher than corresponding non IT investments. The mentioned results imply that IT investment improves productivity. Total Factor Productivity and Labor productivity are the main economic factors that assist companies to manage their resources and business activities. Therefore, the correlation of IT investment with TFP and labor productivity was analyzed, in order to understand deeply the role of IT capital in Telecommunication Company of Tehran. 113

The results indicate that the correlation between IT capital and labor productivity is in medium level however, TFP has strong correlation with IT capital. Besides, the previous studies have proved the significant correlation of value added with TFP and Labor productivity in Telecommunication industry of Iran. Therefore, IT capital not only improves TFP and labor productivity growth of Telecommunication Company of Tehran but also, has strong potential to create value added.

6-2. Is there a meaningful difference between the present circumstances and the desired circumstances of Telecommunication Company of Tehran , with regard to BPR approach? Although IT investment makes contribution to the overall performance of companies, combining the complementary investments in work practices, human capital, and company restructuring with IT investment is essential to stabilize and support the positive contribution in future. So, according to the role of IT in BPR, as a facilitator and enabler, BPR is one of the fundamental approaches to increase the impact of IT to overall performance of companies. On the other word, both IT and BPR investments, together, are able to improve productivity drastically.
Moreover, Companies in Iran have invested in IT through their organizational levels since at least 10 years ago. Especially, government companies which have positive balance of finance, are pioneers in this area. Furthermore, most of the organizational levels of government companies in Iran are pyramidal. These kinds of levels make a lot of waiting and wasting times. Therefore, heavy IT investments in the current processes may fall down the positive IT influences. In order to prove the importance of BPR, as a complementary investment in Telecommunication Company of Tehran, evaluation of its indicators is important. Thus, in the second phase of this research, the main BPR indicators, IT and performance quality, were tested. Questionnaires were distributed through its experts and employees and asked them to evaluate the BPR factors. Based on IT and performance quality, the results indicates that there is a meaningful difference between the present situation of Telecommunication Company of Tehran and the desired situation. Therefore, a meaningful difference between the present circumstances of 114

Telecommunication Company of Tehran and the desired circumstances was founded, with regard to BPR approach. Furthermore, as shown in table 6.1, my research respondents expect BPR approach to improve the situation of evaluated indicators 97.2% averagely. The mentioned results were also visible and understandable while the questionnaires were distributed to the experts of Telecommunication Company of Tehran. They complained about excess activities and personnel, paper work, lack of accessing to update and feedback information and etc.
Variable Value (percentile) 29.8%

Average of LP growth (1997-07) Average of LP growth (2005-07) Average of TFP growth (1997-07) Average of TFP growth (2005-07) Correlation IT capital & LP

16.4%

16.2%

8.6%

43%

Correlation IT capital & TFP

86.8%

Average of expected Improvement (BPR indicators) Average of expected improvement (Performance quality) Average of expected improvement (IT) Table 6.1 : Summery of final results

97.2%

102%

90.5%

115

6-3. Conclusion Based on fourth plan of cultural, social and economic development (2005 -2009),8% has been calculated as the annual economic growth of Iran.5.5 % of the mentioned growth should be achieved by new investments and developing resources and 2.5% of it have to be created based on productivity growth. Hence, government companies and organizations must cover 31.3% of their GDP growth from TFP. Besides, in order to achieve the above economic factors, companies should at least 1%, 2.5% and 3.5% growth in their capital productivity, total factor productivity and labor productivity in each year.
According to the fourth economic development plan, ICT sector has the considerable impact on economic growth of Iran. Hence, 7.9%, 9% were calculated as the annual growth of TFP and labor productivity in this sector. Moreover, TFP and labor productivity have remarkable correlation with value added in ICT sector (correlation coefficient: 0.98 and 0.994). Telecommunication Company of Tehran (TCT) is one of the powerful government companies in Iran. Based on this research, the impact of IT investment in economic factors of TCT was investigated in the first phase. The findings show that IT investment not only makes positive contribution to productivity but also its return is higher than non IT investments. The correlation between IT capital and labor productivity is in the medium level (0.430) however, TFP has considerable correlation with TFP (0.868). As shown in table 6.1, Although the average of labor productivity growth in the last two years has been obtained more than standard level specified in forth development plan(2005-09),it is lower than the average of its growth in the past 11 years (19972007).This issue can be concluded for the average of TFP growth too. These symptoms may cause worry for TCT in future. Finally, Based on the mentioned correlations, IT investment is able to reduce the uncertainties in future. Although IT investment makes the positive contribution to overall performance of Telecommunication Company of Tehran, combining the complementary investments 116

in work practices with IT investment is essential to stabilize and support the positive contribution in future. Therefore, the factors of BPR were tested by the experts and employees of TCT in the second phase of this research. After final analysis, a significant difference between the present situation and the expected situation were proved, with regard to BPR approach. According to table 6.1, the experts and employees of TCT expect 97.2% improvement in the current IT and performance Quality situations. As a consequence, by considering the positive return of IT investment and the average rate of IT capital to non IT capital in TCT (2.99%), IT investment should increase to achieve goals of the fourth development plan, create much more value added and gain more profits. Moreover, BPR approach is a necessity, as a complementary investment, for TCT to improve the current IT and performance quality situation.

6-4. Implications Top managers play the critical role in employing IT and radical organizational change. They have to think strategically. It means that they should recognize their companies resources and assess the target market and its characteristics .Finally they are able to make an image for new future. Therefore the managerial implications are:
Iranian top managers should consider IT usages through their organizational levels and try to expose the positive influences of IT in their organizations. Moreover, this research indicates that the return of IT investment can be higher than non IT capitals so, it is the time to employ this remarkable power. On the other words, IT should be developed its usages from the new technologies to produce products towards the effective enabler for increasing productivity growth. Although IT implementations through organization are able to improve productivity, managers should aware that without complementary investment this opportunity may change to threat. Many companies in Iran are using continuous improvement methods such as Total Quality Management and etc. So ,top managers of Iranian companies should consider that Business process reengineering is the essential issue because, continuous methods make little improvements in the current process, however the successful BPR efforts 117

are able to make radical improvements in business. Moreover IT investment in the current business processes may reject the positive impact of IT on productivity. Therefore, top managers should provide appropriate infrastructures in order to reengineer the business processes and stabilize and support the positive contribution of IT in productivity.

6-5. Recommendations for future research Nowadays, IT investments become much more important for companies not only as the new technologies to produce products but also as the enabler to increase productivity growth.
This research investigated the impact of IT investment at Telecommunication Company of Tehran. An econometric technique was used to conduct the research. Besides, BPR factors were evaluated by its experts and employees. As the recommendation for future research, researchers should investigate this approach in the private telecommunication sectors or other governmental companies in Iran to compare the findings. Furthermore, economic view is the approach that directed this study, it is suggested that future researchers investigate the impact of IT from other perspectives, such as influences of IT in creating value for customers or impact of IT on other resources like labors. It is also useful to investigate the impact of IT in organizational culture. This study have been conducted based on financial values (total income , IT and non IT capitals), so investigating the impact of IT on other intangible outputs such as product(service) quality or variety, is highly recommended for future research. IT readiness in companies is another issue that is suggested for future. Not least but last, this research has focused on BPR approach as a complementary investment. It is useful that future researchers evaluate other complementary investments such as education.

118

Reference
Albadvi, A. and Keramati, A. (2006) A proposal for a framework or research approach on Information Technology impact on corporate level productivity Information technology journal,. Al-Mashari, M. and Zairi, M. (1999) BPR implementation process: An analysis of key success and failure factors Journal of business process management. Al- Mashari, M. and ZairiI, M. (2000) Creating a Fit Between BPR and IT Infrastructure: A Proposed Framework for Effective Implementation International Journal of Flexible Manufacturing Systems. Akhavan, P. Jafari , M. and Ali-Ahmadi Ali, R. (2006) Exploring the interdependency between reengineering and information technology by developing a conceptual model Business Process Management Journal. Azar, A. (1998) statistics and its application in management Samt publication. IR. Baily, Barua, A. , Kriebel, C. and Mukhopadhyay, T. (1991) Information Technology and Business Value: An Analytical and Empirical Investigation, University of Texas at Austin Working Paper, Austin, TX, May. Barrett, J.L. (1994) Process visualization: getting the vision right is the key Journal of Information Systems Management. Becker, S.W. and Gordon, G. (1996) An entrepreneurial theory of formal organizations Journal of Information systems management. Bengtsson, Anna. and Paskhina, A. (2004) Designing a new storage facility in health care industry: A case study at the Surgery Department of Varberg Hospital School of Economics and Commercial Law, Gothenburg University. Berndt, E. (1991) The Practice of Econometrics: Classic and Contemporary, AddisonWesley, Reading MA. Breiman, L. and Friedman, J.H. (1984) Classification and Regression Trees Belmond, California, Wadsworth International Group. Broadbent, M., Weill, P., OBrien, T. and Neo, B.S. (1996) Firm context and patterns of IT infrastructure capability, Proceedings of the Seventeenth International Conference on Information Systems, Cleveland, OH. Briynolfsson, E. (2003) The Information Technology productivity gap Journal of economic performance perspectives. Brynjolfsson, E. (1993) The Productivity Paradox of Information Technology Communications of the ACM. 119

Brynjolfsson (2003) When Information Technology Faces Resource Interaction. Using IT Tools to Handle Products at IKEA and Edsbyn Department of Business Studies, Uppsala University, Sweden. Brynjlfsson, E. and Hitt, L.M. (2000) Beyond computation: Information Technology, Organizational transformation and Business performance Journal of economic perspectives. Brynjolfsson, E. and Hitt, L. (1996) Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending Journal of management Science. Brunsson, M. (1995) Ideas and actions: justification and hypocrisy as alternatives to control Research in the Sociology of Organizations. Caldwell, B. and McGee, M. (1997) Outsourcing backlash, Information Week, September 29, National Bureau of Economic Research. Caesar, B. and Cororaton, B. (2002) Total factor productivity in Philippines, Philippine institute of development studies, discussion paper. Cheng, J.L.C. (1984) Organizational coordination, Uncertainty and Performance: An Integrative study Human relations journal. Chin, C. Y. (2003) Organizational Transformation through CRM Implementation: a descriptive case study School of Information Systems, Deakin University, Working Paper. Clark, L. and Pregibon, D. (1992) Tree-Based Models California, Wadsworth & Brooks / Cole Advanced Boorks & Software. Cooper, Donald.R. and Schindler, P.S. (2003) Business Research methods Mac Grow-Hill. Darton, G. (1997) Business process analysis International Thomson business press. Davenport, T.H. (1997) Business Process Reengineering: What it has been, What it is going Idea group publishing. Davenport, T. and Nohria, N. (1994) Case Management and the Integration of Labor, Sloan Management Review. Dedrick, J., Gurbaxani, V., Kraemer, K. (2003) IT and Economic Performance: A Critical Review of Empirical Evidence ACM Computing Services, March. Dewan, S. and Min, C.K. (1997) The Substitution of Infor mation Technology for Other Factors of Production: A Firm Level Analysis Journal of Management Science. Dinardo, J.E. and Pischke (1997) The returns to computer use revisited MIS Quarterly. 120

Egelhoff, W.G. (1982) Strategy and structure in multinational corporations: An Information processing approach Administrative science Quarterly. Eubank, R. (1998) Spline Smoothing and Nonparametric Regression Mercel Dekker, Inc., New York, USA. Fornell, C. and wernerfelt, B. (1987) Defensive marketing strategy by customer complain management : A theoretical analysis Journal of marketing research. Gilchrist, S., Gurbaxani, V., and Town, R. (2001) PCs and the productivity revolution Working paper. Center for Research on Information Technology and Organizations, University of California, Irvine, Irvine, CA. Gordon, B. (2000) Exploring the relationship between information technology, infrastructure and business process reengineering Business Process Management Journal. Grover ,V. and Kirk, D. Fielder, and James Teng, T.D. (1994) Business process reengineering charting a strategic path for information age IEEE transactions on engineering management. Guha, S. , Kettinger, W. and Teng, T. (1993) Business process reengineering: building a comprehensive methodology, Journal of Information Systems Management. Gunasekaran, A. and Kobu, B. (2002) Modeling and analysis of business process reengineering Industrial journal of production research. Hales, H. L. and Savoie, B. J. (1994) Building a foundation for successful business process reengineering Journal of Industrial Engineering, USA. Hammer, M. and Champy, J. (1993) Reengineering the Corporation London: Nicholas Brealy. Hammer, M. (1990) Reengineering work: dont automate, obliterate Harvard Business Review. Hand, D. Mannila, et al. (2001) Principles of Data Mining Han, J. and Kamber, M. (2001) Data Mining Concepts and Techniques Academic Press. Harker, P. (2000) Examining the Contribution of Information Technology Toward Productivity and Profitability in U.S. Retail Banking the Financial Institutions Center of The Wharton School, University of Pennsylvania, Philadelphia. Hastie, T.J., Tibshirani, R.J. and Friedman, J.H. (2001) The Elements of Statistical Learning: Data Mining, Inference, and Prediction. Springer-Verlag, New York. 121

Hastie, T.J. and Tibshirani, R.J. (1990) Generalized Additive Model, Chapman & Hall, London. Hewitt, F. (1995) Business process innovation in the mid-1990s.Integrated International journal of flexible manufacturing Systems. Hitt, L. and Brynjolfsson, E. (1996) Productivity, Business Profitability, and Consumer Surplus: Three Different Measures of Information Technology Value MIS Quarterly. Horzella, Asa. (2005) Beyond IT and productivity Linkoping Studies in Science and Technology Department of Computer and Information Science, Linkoping university, PhD Thesis. Islam Sheikh, Shahidul. (2006) Mobile Commerce Department of Business Administration and Social science, Lulea University of Technology, Master thesis. Jackson, N. (1997) Business process re-engineering, Journal of Management Services, February. Jahangard, E. (2004) Impact of ICT on economic growth and productivity: Evaluation at industry level of Iran Department of Economics, Allameh Tabatabae University, PhD thesis. Johansson, J. and Sparredal, J. (2005) CRM in e-business Department of Business Administration and Social science, Lulea University of Technology, Master thesis. Jorgenson, Dalew. and Stiroh, Kevin. J. (1999) Information Technology and growth American economic review, papers and proceedings. Jorgenson, Dalew. and Stiroh, Kevin. J. (2000) Razing the speed limit: As economic growth in the information age Brooking papers on economic activity. Kim, H. and G. J. Koehler (1995). "Theory and Practice of Decision Tree Induction." Omega 23 Kraemer, Kenneth, (1998) International dimension of productivity paradox The Communication journal of ACM , August. Lichtenberg, F. (1995) The output contributions of computer equipment and personnel: A Firm Level Analysis Journal of Economics of Innovation and New Technology. Limayem, M. (2006) E-strategy course Tarbiat Modares University. Lockamy, A. and Smith, W. (1997) A strategic alignment approach for effective business process reengineering: Linking strategy, processes and customers for competitive advantage International journal of production economics. 122

Loveman, G.W. (1994) An Assessment of the Productivity Impact of Information Technologies, in T.J. Allen and M.S. Scott Morton (Eds.), Information Technology and the Corporation of the 1990s: Research Studies, MIT Press, Cambridge, MA. Malhotra, N.K and Petersson, M. (2003) Basic Marketing Research: A decision making approach Prentice Hall Inc. Mann,P.S. (1995) Statistics : For Business and Economics John Wiley & sons Inc. McGuckin, R., Spiegelman, M. and van Ark, B. (2004) The US advantage in retail and wholesale trade performance. How can Europe can catch up? De economist, The Conference Board. Milgrom, P. and Roberts, J. (1992) Economics Organization and Management Prentice Hall, Englewood Cliffs, NJ. Mooney, .J , Gurbaxani,V. and Kraemer, (1997) A process oriented framework for assessing the business value of Information Technology Advances in Information systems journal. Morrison, C.J. and Berndt, E. R. (1990) Assessing the Productivity of Information Technology Equipment in the U.S. Manufacturing Industries, National Bureau of Economic Research Working Paper. Mukhopadhyay, T. , Lenrch, J. and Manger, V. (1997) Assessing the impact of IT on labor productivity Journal of Decision support systems. Myung,K. and Bryson, Kweku-Muata.(2002) Regression tree based exploration of the impact of information technology investments on firm level productivity ECIS 2002 , June, Gdansk, Poland. Namchul shin, (2000) The impact of IT on coordination Costs: Implication for firm productivity Rowan University, Neuman, W. L. (2003) Social research methods: Qualitative and Quantitative approaches Allyn and Bacon, Boston , MA. NPC productivity report (2003) Total Factor Productivity and its determinants Newman, Karen L. (1998) Leading radical change in transition economies Leadership & Organization Development. Oleary, M. (2003) Simplify business process before deploying IT Pro Quest science journals Oblinski, N. (1994) Business Reengineering Koyan page , London. Oliner, S. and Sichel, D. (1996) Computers and Output Growth Revisited: How Big is the Puzzle? Brookings Paper on Economic Activity. 123

OLiner, S. D. and Sichel , D. E. (1994) Computers and output growth revisited: How big is the puzzle? Brookings Pap. Econ. Act. Oliner, S. D. and Sichel, D. E. (2000) The resurgence of growth in the late 1990s: Is information technology the story? Journal of economic perspectives. Oliner, S. D. and Sichel , D. E. ( 2003) Information technology and productivity: Where are we now and where are we going? Journal of economic perspectives. Pad, A. (1995) Redesigning Companies: Commercial revolution Industrial management organization. Parsons, D., Gotlieb, C.C. and Denny, M. (1993) Productivity and computers in Canadian banking in Griliches, Z. and maresse, J. (Eds) productivity issues in services at the micro level, Klumer,Boston. Peppard, J. and Rowland, P. (1995) The Essence of Business Process Reengineering Hertfordshire, UK: Prentice-Hall Europe. Persson, Petra. (2004) Customer Relationship Management Department of Business Administration and Social science, Lulea University of Technology, Master thesis. Pohjola, M. (2001) Information technology and economic growth: A cross-country analysis. In Information Technology and Economic Development Pohjola, M., Ed. Oxford University Press, Cambridge, U.K. Porter and Miler E. (1985) How Information gives you competitive advantage Harvard business review, July. Pourmirza, A. (2006) Adoption of Internet banking by Iranian Customers Department of Business Administration and Social science, Lulea University of Technology, Master thesis. Qobadi, A. (2006) A Comparison between the Impact of Information and Communication Technology (ICT) on Productivity in the Asian and European Countries Department of Economics, Tarbiat Modares University, Master thesis. Reichheld, F. and Sasser, W.E (1990) Zero defection : quality comes to services . Harvard business review. Rezaee Nejad, A. (1999) Reengineering Rasa Inc. Romanelli, E. and Tushman, M.L. (1994) Organizational transformation as punctuated equilibrium: an empirical test Academy of Management journal. Ross, J. (1998) IT infrastructure management, paper presented at the 98 Annual Conference of Information Systems Management at the London Business School Centre for Research in Information Management, London.

124

Rusli, A. and Noor Azman, A. (2003) The use of cognitive mapping technique in management research: Theory and practice management Research News journal. Rutha, Sara. and Saven, Aguilar. (2004) Business process reengineering modeling: modeling and framework International journal of production economics. Sabherwal, R. and King, W. (1991) Towards a theory of the strategic use of information resources: an inductive approach, Information and Management journal. Satti, Samia. and Nour, O. M. (2002) ICT Opportunities and Challenges for Development in the Arab World UNU/WIDER Conference on the New Economy in Development, May Saunders, C. and Jones, W. (1992) Measuring Performance of the Information Systems Function, Journal of Management Information Systems. Saunders, M. and Thournhil, A. (2003) Research methods for business statements Financial Times/ Prentice Hall, Harlow. Siegel, D. (1997) The Impact of Computers on Manufacturing Productivity Growth: A Multiple- Indicators, Multiple-Causes Approach, Review of Economic Statistics. Shao, B. and Lin, W. (2000) "Examining the Determinants of Productive Efficiency with IT as a Production Factor." Journal of Computer Information Systems. Shao, B. and Lin, W. (2001) "Measuring the Value of Information Technology in Technical Efficiency with Stochastic Production Frontiers." Information and Software Technology journal. Soliman, F. and Youssef, M. A., (1998) The role of SAP software in business process reengineering. International journal of operations & production management . Solow, R. M. (1987) Wed Better Watch Out New York Times Book Review. Solow, R.M. (1956) Technical change and the aggregate production function Review of economics and statistics journal. Steinberg, D., Colla, P.L. and Martin, K. (1999) MARS User Guide Salford Systems, San Diego, CA Stiroh, K. J. (2001) Information technology and the U.S. productivity revival: What does the industry data say? Federal Reserve Bank of New York. Sumanth, D. (1984) Productivity engineering and management McGraw-Hill publication Ltd , chapter one page 20. Sumanth ,D.J. (1991) How to measure productivity in manufacturing and service organizations fall industrial engineering conf .

125

Tabatabae, A. (2000) quick productivity appraisal Tehran ,Manshor bahrevary publication Ltd. Tabesh, Y. (2004) Innovation model in Information and communication context Tehran University, Master thesis. Temponi, C. (2005) Scalable enterprise systems: Quality management issues International of production economics. Thompson, J.D. (1967) Organizations in Action McGraw-Hill, NY. Torgo, L. (1997) Functional Models for Regression Tree Leaves. International Conference on Machine Learning. Willcocks, L.P. (2002) How radical was IT-enabled BPR? Evidence on financial and business impacts International journal of flexible manufacturing systems. Yin, R. K. (1994) Case study research: Designs and Methods Sag publications, Thousand Oaks.CA. Yin, R. K. (2003) Case study research- Design and methods Third edition , Applied social research method studies , Sag publication. World Information Technology and Services alliance (2003) Digital Planet 2003 The Global Information Economy and Global Insight, Inc Worth, B., and Triplett, jack. (2000) IT economy growth and productivity brooking institution. Zikmond, W. (2000) Business Research Methods The Dryden press. Zhi, Goh Bee Hua, Wang Shouqing and George Ofori (2001) Forecasting Construction Industry-level Total Factor Productivity Growth using Neural Network Modeling National University of Singapore. Zuboff, S. (1998) In the age of the smart machine the future of work and power Hein professional publication Ltd ,Oxford.

126

Appendix A
Weighted Least Squares Analysis DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\Ahmad1.3_1.sav [ Power Summary Log-Likelihood Values(b)
-2.000 1.758 -1.500 1.796 -1.000 1.833 -.500 1.870 .000 1.907 .500 1.943 1.000 1.978 1.500 2.013 2.000 2.047(a) a The corresponding power is selected for further analysis because it maximizes the log-likelihood function. b Dependent variable: Revenue, source variable: Non IT capital Power

Best Model Statistics Model Description

Dependent Variable Revenue Independent 1 IT Labor Variables 2 Non IT Labor 3 NonIT Capital 4 IT Capital Weight Source non IT capital Power Value 2.000
Model: MOD_2

Model Summary
Multiple R .949 R Square .901 Adjusted R Square Std. Error of the Estimate 2.047 Log-likelihood Function Value

.891 .008

127

ANOVA
Sum of Squares df Mean Square F Regression .027 4 .007 Residual .003 39 .000 Total .029 43 Sig. 95.367 .000

Coefficients
Unstandardized Standardized Coefficients Coefficients t B Std. Error Beta Std. Error B (constant) ITLabor .023 .140 .022 .134 .199 .0.87 .119 .047 Sig. Std. Error .725 .164 .880 2.287 .0188

.473

NonITLabor

NonITCapital .726 .164 .778 .175 4.426 .000 ITCapital .067 .060 .075 .067 1.114 .0386

CORRELATIONS VARIABLES=TFP IT Capital /PRINT=TWOTAIL NOSIG /MISSING=PAIRWISE.

Correlations [DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\Ahmad1.3_1.sav Correlations

IT Capital Pearson Correlation 1 .869(**) Sig. (2-tailed) .002 N 44 44 ITCapital Pearson Correlation .869(**) 1 Sig. (2-tailed) .002 N 44 44 ** Correlation is significant at the 0.01 level (2-tailed). TFP TFP

CORRELATIONS /VARIABLES=IT Capital Labor Productivity /PRINT=TWOTAIL NOSIG /MISSING=PAIRWISE . Correlations [DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\Ahmad1.3_1.sav 128

Correlations
IT Capital 032 LaborProductivity N 44 Pearson Correlation Sig. (2-tailed) N 44 44 .430 .032 44 1 IT Capital Labor productivity Pearson Correlation 1 .430 Sig. (2-tailed)

2- paired T-test GET FILE='C:\Ahmad Sobhani\FINAL ANALYZE\1233455.sav'. DATASET NAME DataSet1 WINDOW=FRONT. GET FILE='C:\Ah mad Sobhani\FINAL ANALYZE\12.12.sav'. DATASET NAME DataSet2 WINDOW=FRONT. T-TEST PAIRS = lastCSQuality lastCIT WITH lastDSQuality lastDIT (PAIRED) /CRITERIA = CI(.95) /MISSING = ANALYSIS. T-Test [DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\12.12.sav Paired Samples Statistics
Std. Error Mean N Std. Deviation Mean Pair 1 lastCSQuality 16.69 201 1.314 .093 lastDSQuality 33.29 201 1.325 .093 Pair 2 lastCIT 11.94 201 1.660 .117 lastDIT 24.63 201 2.359 .166

Paired Samples Correlations

N Pair 1 Pair 2 lastCSQuality & lastDSQuality lastCIT & lastDIT 201 201 .032 .043 .338 .465 Correlation Sig.

129

Paired Differences t df (2-

Sig tailed)

Mean Standar Std. 95%confidence d Error interval of Deviatio Mean difference n Lower Upper

Pair 1 lastCSQuality lastDSQuality -16.602 1.836 0.129

-128 .21 200 0.00 -16.857 -16.347 200 0.00 -13.085 -12.299

Pair 2 lastCIT lastDIT

-12.692 2.826 0.199

-63.678

130

Appendix B
Dear Respondent: The question which is accessible for you is in direction of a student research. The purpose of this research is to evaluate the impact of employing Business process reengineering on some parameters which are effective on the function of Telecommunication Company of Tehran. The intension of Reengineering" in short is transformation of organizational structure from the form hierarchy to process structure ,that its final purpose is just attracting the customers satisfaction and providing their needs and desires with the assistance of establishing active working teams and increasing the rate of organizational productivity. Please help us for performing this research by answering to the fallowing questions. Incidentally, please write your proposal or opinion at the back of this questionnaire. We are so thankful because of your attention and patience for completing this questionnaire. Best regards, 1- Gender: Male 2- Level of Education: Diploma Master Junior college PhD Female Bachelor

3- You have had work experiences in Telecommunication Company of Tehran for: 1-10 years 10-20 years More than 20 years 4- Section that you are working in Telecommunication of Tehran is : Administrative and financial affairs Clients affairs Contracts & procumbent Computer center Engineering affairs Others 5- Establishing different teams in the executive portion of organization for accomplishing client's affairs without any requisite for following all phases of customer's affair by themselves. The present situation The desirable situation Very much medium low Very Very much medium low Very much low much low 6- The rate of cession of decision-making power to skillful and with work experience personnel; and their ability for freely decision-makings in necessity occasions. The desirable situation The present situation Very much medium low Very Very much medium low Very much low much low 131

7- The distance between senior managers and executive employees. The desirable situation The present situation much medium low Very Very much medium Very low Very much low much low 8- The rate of the existence of excess, unnecessary, parallel or repetitions activities in the organization. The present situation The desirable situation Very much medium low Very Very much medium low Very much low much low 9- The rate of the presence of excess work forces and useless personnel in the organization. The present situation Very much medium low Very much low much The desirable situation Very much medium low Very low

10- The situation of official hierarchy and the number of organizational levels. The desirable situation The present situation much medium low Very Very much medium Very low Very much low much low

11- The rate of successive and interconnected activities under one job title (complex duties). The desirable situation The present situation Very much medium low Very Very much medium low Very much low much low 12- The rate of general customers satisfaction from performing and fulfilling the process of their affairs(quality) in the organization. The desirable situation The present situation Very much medium low Very Very much medium low Very much low much low 13- The rate of accessibility to information networks such as internet. The present situation The desirable situation Very much medium low Very Very much medium much low low Very much low 132

14- Rate of simultaneous accessibility to necessary and common information for all of the persons who are implicated( as a team) for doing a specific work in the organization. The present situation The desirable situation Very much medium low Very Very much medium low Very much low much 15- The rate of forms, reports, paper work and excessive bureaucracy in the organization. The present situation Very much medium The desirable situation low Very much low Very much low much medium low Very

low

16- The rate of accessibility to feed back information (opportune)for personnel of the organization in order to awareness from the deficiency of their functions and correct them. The present situation The desirable situation Very much medium low Very much medium low Very much low Very much low 17- The rate of fast, instant and immediate accessibility of personnel to the information. The desirable situation The present situation Very much medium low Very Very much medium low Very much low much low 18- Office automation and accomplishing the automatic activities in the organization. The desirable situation The present situation Very much medium low Very Very much medium low Very much low much low

133