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Efficiency

Information Technology for Enterprises. Efficiency

 There are financial, non-financial and statistical methods to evaluate the effectiveness of IT- decisions and to study it. But there does not exist a single universal method for the study. Each company solves this problem depending on the type of IT-decision and specifics of the work. However, there are common approaches. One of the most important and often applicable non-financial indicators is a   ROI ratio:

ROI = (A – B – C)/(B + C), where:

A – Total benefit actually received due to the introduction of IT systems;
B – Cost of equipment and software (SW);
C – Cost of implementing the software.

 Obviously, the ROI depends on the specifics of a company and its geographical location. After introduction, for example an integrated ERP-system, the total benefits (A) is defined as the sum of the benefits of those factors that have a direct influence on the company's activities, i.e. can to optimize it, and the factors that have an indirect influence. The following are some of them.

 a) Factors that have a direct effect:

   1. To improve quality of decision making. ERP-system can quickly collect any objective information for top managers of the company, and such information will help them make optimal decisions.
   2. Optimization of production planning and distribution of productive functions among enterprises, those take part in the production process. As a result, labor productivity increases.
   3. Ensuring an effective corporate procurement policy, optimization of the purchase prices and logistics. Such processes as purchase and import of any raw materials, production goods and equipments, as well as material requirements planning (MRP) become more available for analysis and control.
   4. Reduction of insurance and other stocks in the warehouses. Reduction of storage space and storage costs. There are ability to quickly identify unnecessary and outdated products and accessories in storage. Such products must be realized.
   5. Centralization of Master Data management and other corporate data management. This allows for centralized updating of the data, and to ensure consistency of corporate Master Data databases This factor, on the one hand, reduces the cost of its renewal, and on the other hand, it could be increase the reliability of the information to reduce the conflicts between the departments (divisions) of the enterprise, to help them make the decisions quickly.
   6. Optimization of working time and increase employee productivity, Including through optimal allocation of responsibility between employees of the company. Reducing the cost of staff time associated with performing the secondary functions (sending of information, etc.), because the ERP-system undertakes implementation of such functions.
   7. Acceleration the interaction and improving the interaction between the geographically distributed manufacturing plants and services of the company, and increased control over the activities of such ones.
   8. It becomes possible to conduct a rapid assessment of labor intensiveness, costs and times of new products mastering, based on a comparison with any similar product. Reducing of the time spent developing a new product. Anticipate potential competitors.

 b) Factors that have an indirect effect:

   1. Improving the confidence of investors in the company shares, if the company is managed by well-known ERP-system. This factor, on the one hand, leads to growth in share price on an exchange, and on the other hand, leads to attract loans with a lower interest rate.
   2. A modern IT system allows for users to communicate with contractors effectively and quickly, if they have installed any similar integrated IT-system and both systems can interact with each other.


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