The Cost and Benefits of Computers in a Business

Automation has costs. These include the costs of purchasing computers hardware, peripherals and software; network development and administration; and database development and administration. Then there are the costs of staff trainig, first in change management and the in computer skills.

Depending on how much automation is required by the business or desired by the management, these costs can be substantial. For many years (in the 1980s and 1990s), there were debates on justification of these high costs of introducing computing into the businesses.

To some extent, the debates continue even today, focusing on the time-tested accounting paradigm of cost/benefit' analysis.
For years information systems researchers have tried to help industry understand why it is important to invest in computers even if the costs are higher than the benefits.

This is because; they say a time has now come when a business cannot afford not to invest in information technologies. The business landscape has changed and the play field is not leveled for those that don't invest in it. For example, a bank can no longer make argument that it does not want to invest in Automated Teller Machines (ATM) because this investment will not prove its bottom line (profits).

This is because the negative consequence of not investing in an ATM machine, whether it will improve profits or not, is migration of customers to the completion, which will have negative impacts on the bottom line. The message these researchers have been sending out to businesses, therefore, is that 'fail to invest in IT at your own peril'.

But is it true that investments in computers have not positively impacted the bottom line? Let us use some exampled to help us answer this question. If a large corporation with an independent accounting function that has 30 employees automates by purchasing computers with associated peripherals, software, networks, and databases by keeping six of its personnel and laying off the other 24, what is the likely impact on its bottom line, both in the year in which it implements these changes and in the future.

Many studies have shown that there will definitely be no change in the year of implementing the changes; that these changes are in fact more likely to have a negative impact on the bottom line in the year of implementing them; that is not clear if the changes will have positive impacts on the bottom line in future years, it is not clear if any of it can be attributed to the automation exercise.

These researchers have therefore urged business not to look at the bottom line but to look at other things instead. Look at, for example, the fact that the company is still in business that its doing things faster and better that its employees are happier (probably) with higher life expectancies; that the company is more productive; that managers have more time in their hands to improve on the quality of existing systems and products and can therefore take longer vacations among other benefits.

These information systems have actually argued that it is not so much that IT has not created more benefits than costs of acquiring the IT are relatively easy to measure. That the benefits are there are intangible, and are spread over many accounting periods compared to the costs that are often incurred in one accounting period.