European Journal of Economics, Finance and Administrative Sciences

ISSN 1450-2275 Issue 16 (2009)

EuroJournals, Inc. 2009
http://www.eurojournals.com

Impact of Information Technology on Organizational

Performance: An analysis of Quantitative Performance
Indicators of Pakistans Banking and
Manufacturing Companies
Muhammad Shaukat
Assistant Professor of Management at Institute of Management Sciences
Bahauddin Zakariya University, Multan. (Pakistan)
E-mail: shoukatmalik@bzu.edu.pk
Muhammad Zafarullah
Vice Chancellor, Bahauddin Zakariya University, Multan, (Pakistan)
Abstract
Information Technology is the key stone of progress all over the world now a days.
Pakistani companies are also utilizing this technology to its great extent by making heavy
investments. This study examined the impact of IT on organizational performance with
respect to increase/decrease in income and in no of employees Vs IT expenses of Pakistani
manufacturing and banking sectors over period of 1994-2005. The primary data was
collected through in-depth interviews and field surveys of 48 companies, 24 in
manufacturing sector(12 local and 12 foreign) and 24 in banking sector(12 local and 12
foreign). The data was tested by applying statistical/financial techniques. The conclusion of
research is that IT has positive impact on organizational performance of all the
organizations but the banking sector performance outstrips the performance of
manufacturing sector. In the banking sector local companies are taking the lead, while in
manufacturing companies multinationals are at the top.

Keywords: Information Technology,

Manufacturing IT systems.

Organizational

Performance,

Banking

and

Introduction
Information Technology (IT) is a general term that describes any technology that helps to produce,
manipulate process, store, communicate, and/or disseminate information William Sawyar(2005).
Other researcher named Shelly et al (2004) say that IT includes hardware, software, databases,
networks and other related components which are used to build information systems. As a need IT
progressed along with socio-economic development in developing countries. In a very short time IT
becomes the back bone in modern industrial society and the major contributor to the progress of both
developing and developed countries (Vasudevan, 2003; Long and Long 1999).
Through declining cost, both in hardware and software, IT has spread very rapidly now into all
industries of Pakistan, in all fields. In 1957 Packages limited has started the process of
computerization in Pakistan and it is considered the first company in Pakistan, which started using
computers. Though, in beginning Pakistani Government was reluctant to adopt IT but now in every

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European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

private and government organization computer is at fore front. In Pakistan internet service was started
in 1995 along with upgrading telephonic infrastructure. IT progress is being monitored by IT Ministry
In Pakistan now(Kazmi, 2003; Rizvi, 2005). Many other departments like Electronic Government
Directorate, Pakistan Computer Bureau, Pakistan Software export board, Pakistan Telecommunication
Authority, Computer Society of Pakistan are also working side by side IT Ministry to boost IT in the
country(Ghauri, 2003, 2006a,2006b).
Financial sector is the major user and large investor in use of IT. It was among the first to
incorporate electronic data processing in its operations, through check handling, bookkeeping credit
analysis and ATMs (Bender, 1986; Martini,1999; Vasudevan, 2003). The computers usage in banking
sector first started in the early 1950s. Bank of America was the first user of computer in banking
sector. Automated Teller Machine (ATM). The use of ATM (Don Wetzel developed it in 1973) was
greatest achievement of online and real time automation by the commercial banks. ATM was first
installed at commercial bank in New York (Shelly and Cashman 2004). In Pakistan banking sector is
also progressing rapidly with growth of local and multinational banks (Mahmood 2006). Many local
banks are working in private sectors and started their operations since 1992 (SBP Report, 2005). It was
year 1965 when computer was introduced first time in banks in Pakistan. The main commercial banks
in private sectors i.e Habib Bank, United Bank, Muslim Commercial Bank started acquiring computer
to regulate their banking work since that year(Hussain, 2003, Akhtar 2006a, 2006b). The most recent
automated banking systems like Misys, Sibel and Fidility etc have been installed in many of the
Pakistani Banks (Kazmi 2004, 2005; Khan, 2005; Shaukat et.al, 2009).
Like banking, IT is the stone corner in every manufacturing industry as well. IT provides many
manufacturing based advantage to different organization to be the world-class manufacturer. In 1957
Packages Ltd was the first manufacturing company in Pakistan which introduced computers. After
that many other companies started using IT and now it is very common in all manufacturing
companies. Within the industrial sector, the use of Enterprise Resources Planning (ERP) software (an
integrated IT software system comprised of several modules that share a central database, designed to
automate business process across the enterprise (Thomas and Michael, 2001)) has increased. E.R.P
software packages such as SAP, Oracle etc. are being commonly used in many manufacturing
industries(Rizvi, 2005; Shahid, 2005)
According to Wheelen and Hunger(2000) the organization performance is an accumulated end
result of organizational process and activity. These are measured by organizations working and
activity. The organizational management manage the organizational performance, control and customer
value, as it impact reputation of organization. Commonly organizational work measures include
organization effectiveness, productivity/efficiency and industry ranking (Wetherbe et.al.1999).
Efficiency is defined as minimum utilization of resources and getting maximum output and
effectiveness is how well job gets done (Robbin and Coulter, 2003).
Many researchers like Parthasamthy and Sethi(1993), Kelly(1994),Earls.al(1996) O Dell and
Elliot (1999) etc. have investigated the impact of IT on quantitative performance variable i.e
incomes/profits of the companies and founds positive impact. Whereas, Frankin (1997), Olalla (2000),
Schmid et. al (2001), Zee and Han (2002), Shaukat and Zafrullah(2009) etc. have seen the
increase/decrease in different qualitative performance indicators i.e. customer satisfaction, company
image, job interest of employees, stake holders confidence, interoffice link etc. and also have found
positive impact. This paper assesses organizational performance with regards to increase/decrease in
quantitative performance indicators i.e. mainly income for Pakistani organizations operating in banking
and manufacturing sectors after using informational technology.
Research Hypothesis IT investments have impact on the performance of an organization.
This can be translated in form of statistical hypotheses as:
H0: IT investments have no impacts on performance of the organizations.
H1: IT investments have impacts on performance of the organizations.

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European Journal of Economics, Finance And Administrative Sciences - Issue 16 (2009)

In order to test the above hypothesis, the performance of an organization has been measured in
quantitative/financial terms: The above mentioned hypothesis has been tested by measuring:
(a) Increase/decrease in net income, after usage of IT.
(b) Increase/decrease in the proportion of employees as the IT is used.
Time series data was available for these variables. Simple linear regression model was used
taking IT expenses as independent and income as dependant variables. Summary of regression results
are presented in Tables 3(a,b,c,d) to 4(a,b,c,d) and 5.

Methodology
There are two population groups for this research. One is the banking sector local and multinational
and the other is large manufacturing organizations again both local and multinationals, which are
making use of IT. In the sample from these sectors 48 companies, 24 in banking sector (12 foreign, 12
local) and 24 in manufacturing sector (12 foreign, 12 local) were taken. List of sample companies is
given in Annexure I. There are about 40 commercial banks operating in Pakistan. Out of these 40
banks, 24 banks are included in the sample because of the reasons that many other banks are either set
up in few years back or do not have well established network in Pakistan, therefore, they do not serve
the purpose of this research. There is no definite information available relating to the size of large
manufacturing sector. It is estimated however that about 1800 large-scale manufacturing units are
operating in Pakistan (Saeed, 2005). Therefore, in the sample, from the manufacturing sector, a total of
24 big organizations were randomly included. The sample size could have been increased but the
nature of problem seems to be similar in each case. So the chosen sample size is considered to be
sufficient. The companies selected are using latest IT and have well established IT set up. The
participants in the study were the senior managers of finance, human resources, marketing and IT
departments of the companies in sample. The data was collected from in-depth interviews using a
structured close-ended questionnaire, and from official documents, financial statements detailing
different aspects pertaining to the study.
In this research, the research problem has been analyzed for the period from 1994 to 2004,
because of the reasons that many companies operating in Pakistan were either not using IT before 1994
or IT had very little introduction and computers were being used merely as a word processing tools. So
it was difficult to measure any of significant IT impact on organizational performance before above
period. Most of the companies initially declined to provide the required financial(IT expenses and
Income) data citing confidentiality and busy schedules as reasons. However, by help of SBP and
SECP, the researchers managed to collect some data in one year period from these companies.
Therefore, Income & IT expense analysis for test of hypothesis is limited to those companies and for
those years for which the data is received. For analyses of Income Vs IT expense, the companies are
therefore divided into two groups as given in Table 1 & 2 below. The response rate for data was 42%
for the year 1990-2004 and 67% for the year 1999-2004.
The statistical software packages named SPSS 12.0 and Minitab 14.0 have been used for
analysis. According to the problem/requirement, statistical/financial techniques such as linear
regression model and ratio analysis have been applied.

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Table 1:

European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

Group 1: (Companies for which data was available for year 1990 to 2004

A. Foreign Banks
1. ABN Amro
2. Bank Of Tokyo
3. Deutsche Bank
4. HSBC Bank
5. HBL AZ-Zurich
C. Foreign Manufacturing
1. I.C.I Pakistan Ltd.
2. Pakistan Tobacco Ltd.
3. Suzuki Pakistan Ltd.
4. Simens Pakistan Ltd.
5. Uni Lever Pakistan Ltd.

Table 2:

B. Local Banks
1. Allied Bank Ltd.
2. Bank Of Punjab
3. First Women Bank Ltd.
4. Muslim Commercial Bank Ltd.
5. National Bank Ltd.
D. Local Manufacturing
1. Atlas Honda Ltd.
2. D.G. Cement
3. Lakson Tobacco
4. Service Industries
5. Packages Ltd

Group 2: In this group three more companies in each sector of group 1 are added and the data is
available for the years 1999-2004.

A. Foreign Banks
1. ABN Amro
2. Bank Of Tokyo
3. Deutsche Bank
4. HSBC Bank Ltd.
5. HBL AZ-Zurich
6. Citi Bank
7. Standard Chartered Bank
8. Oman Bank Ltd.
C. Foreign Manufacturing
1. I.C.I Pakistan Ltd.
2. Pakistan Tobacco Ltd.
3. Suzuki Pakistan Ltd
4. Simens Pakistan Ltd.
5. Uni Lever Pakistan Ltd.
6. Bata Pakistan Limited
7. L.G Pakistan Limited
8. Reckitt Benkiser Limited

B. Local Banks
1. Allied Bank Ltd.
2. Bank Of Punjab
3. First Women Bank Ltd.
4. Muslim Commercial Bank Ltd.
5. National Bank Ltd.
6. Askari Bank Ltd.
7. Bank Al-Habib Ltd.
8. Metropolitan Bank Ltd.
D. Local Manufacturing
1. Atlas Honda Ltd.
2. D.G. Cement
3. Lakson Tobacco
4. Service Industries
5. Packages Ltd
6. General Tyre Ltd
7. Indus Mtors Ltd
8. Honda Atlas Ltd

Results and Discussions

In the discussion below we examined the impact of IT on organizational Performance by performing
quantitative analysis of net income Vs IT expenses, total Vs IT employees. In interpretation, results of
each company are discussed separately then comparison has been made between local and foreign
banks, local and foreign manufacturing companies and banking and manufacturing sectors overall.
i. Banking Sector
a. Foreign Banks
The regression analysis shows that IT has no impact on the incomes of the Bank of Tokyo, Deutsche
Bank and HSBC bank as p-values or marginal significance levels for these banks are above 0.05. IT
has positive impact on the incomes of ABN Amro and Habib Bank AG Zurich as p-values or marginal
significance levels for both these banks are far below 0.05. All regression coefficients are positive
showing that with the increase in expenditure on IT, the incomes of these banks have substantially
increased. Analysis is also made for all foreign banks as a whole for group 1 and group 2 (Table 1 &
2). For both groups, it was found that IT has significant impact on income of all foreign banks
operating in Pakistan (p-value < 0.05).

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European Journal of Economics, Finance And Administrative Sciences - Issue 16 (2009)

Table 3(a): Regression Results Summary ( = 0.05) For Banking Sector

Year 1990-2004 Income = a+b(IT expense)
S/No
1
2
3
4
5
6
7
8
9

Bank Name
All Banks: n=10
All Foreign Banks: n=5
All Local Banks: n=5
ABN Amro
HBL AG Zurich
Bank of Punjab
First Women Bank
Muslim Commercial Bank
National Bank of Pakistan

coefficient
7.179
4.458
7.726
7.487
12.919
3.214
8.264
10.791
7.316

Results
t-Statistics
8.661
10.573
5.929
15.187
9.829
2.574
3.673
8.871
2.510

p-value
.000
.000
.000
.000
.000
.023
.003
.000
.026

Table 3(b): Regression Results Summary ( = 0.05) For Manufacturing Sector

Year 1990-2004 Income = a+b(IT expense)
S/No
1
2
3
4
5
6
7

Company Name
All Companies: n=20
All Local Manufacturing: n=5
Atlas Honda
Lakson Tobacco
Suzuki
P.T.C
Siemens

coefficient
4.357
4.148
12.157
12.509
61.397
1.956
1.624

Results
t-Statistics
4.357
3.071
2.686
7.885
4.898
2.182
5.927

p-value
.000
.003
.019
.000
.000
.048
.000

Table 3(c) Regression Results Summary ( = 0.05) For All Companies

Year 1999-2004 Income = a+b(IT expense)
S/No
1
2
3
4

Company Name
All Companies: n=20
All Banking Sector: n=10
All Local Banks: n=5
All Foreign Banks

coefficient
0.02.798
0.04.57
0.03923
0.155

Results
t-Statistics
2.685
6.159
4.432
9.453

p-value
.008
.000
.000
.000

Table 3(d): Regression Results Summary ( = 0.05) For All Companies

Year 1999-2004 Income = a+b(IT expense)
S/No
1
2
3
4
5

Company Name
All Companies n=32
All Banking Sector n=16
All Local Banks n=8
All Foreign Banks n=8
All Local Manufacturing n=8

coefficient
0.03496
0.04879
0.04024
0.09181
0.03068

Results
t-Statistics
4.258
7.903
4.953
10.714
2.680

p-value
.000
.000
.000
.000
.010

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European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

Table 4(a): Regression Results Summary ( = 0.05) For Banking Sector

Year 1990-2004 Income = a+b(IT expense)
S/No
5
6
7
9

Bank Name
Bank of Tokyo
Deutsche Bank
HSBC
Allied Bank Limited

coefficient
15.788
-.466
11.273
.288

Results
t-Statistics
2.128
-.172
1.405
.047

p-value
.053
.866
.184
.963

Table 4(b): Regression Results Summary ( = 0.05) For Manufacturing Sector

Year 1990-2004 Income = a+b(IT expense)
S/No
1
2
3
4
5
6
7

Company Name
All Manufacturing Companies: n=10
All Foreign Manufacturing: n=5
D.G. Cement
Packages
Service
I.C.I Pakistan
Uniliver Pakistan

coefficient
.118
-.275
1.171
70.706
-.701
.496
-.960

Results
t-Statistics
.285
-.423
.374
1.869
-.112
.226
-.761

p-value
.776
.674
.715
.084
.913
.824
.460

Results
t-Statistics
-.648
1.165
-1.210

p-value
.519
.254
.236

Results
t-Statistics
-.203
.073

p-value
.840
.942

Table 4(c): Regression Results Summary ( = 0.05) For all Companies

Year 1999-2004 Income = a+b(IT expense)
S/No
1
2
3

Company Name
All Manufacturing Sector: n=5
All Local Manufacturing: n=5
All Foreign Manufacturing n=5

coefficient
-0.0153
0.01588
-0.03544

Table 4(d): Regression Result s Summary ( = 0.05) For all Companies

Year 1999-2004 Income = a+b(IT expense)
S/No
1
2

Table 5:

Company Name
All Foreign Manufacturing n=8
All Manufacturing n=16

coefficient
-0.005.53
0.001141

Regression Results Summary For Total and IT Employees (n=20)

Year 1990-2004: IT employee % of the total employee = a+b(time)

Results
t-Statistics
1
All Companies
20.886
2
All Banks
13.576
3
All Foreign Banks
-1.288
4
All Local Banks
13.953
5
All Manufacturing
16.565
6
All Local Manufacturing
12.428
7
All Foreign Manufacturing
17.500
Years: Independent variable IT Employees %age to Total Employees: Dependent variable
S/No

Organizations

P-value
.000
.000
.220
.000
.000
.000
.000

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European Journal of Economics, Finance And Administrative Sciences - Issue 16 (2009)

As given in Annexure II, total no of employees in foreign banks have been increased
continuously from the year 1990 to 2004, despite of the facts that IT has been applied in all operations
of the banks. The IT has not reduced the number of employees as anticipated by some circles due the
reasons that most of the banks in this sector have introduced new products or services during this
period, so the work load has also increased, therefore, staff strength has increased. It has also been
observed that there are floating trends in the strength of IT employees. As shown in Annexure II IT
employees have increased for years 1990-1993, decreased from 1994 to 1998 but again increased from
1999 onwards and that increase is due to increase in IT activities because of raised volume of
transactions, introduction of new products/services and increasing competition with the local banks in
offering online/ computerized services. The net income for these banks for the years 1990-2004 is PKR
11.429 billions and IT expenses are PKR 1.716 billions which comes to 15.02% of net income but net
income for these banks for the years 1999-2004 comes to PKR 18.616 billions and IT expense are PKR
2.460 billions which are 13.21% of net income.
b. Local Banks
It is revealed from regression analysis that IT has impact on the income of most of the local banks i.e.
Bank of Punjab, First Woman Bank, Muslim Commercial Bank and National Bank of Pakistan (p-vale
or marginal significance level is far below 0.05). But IT has no impact on income of one bank, i.e
Allied Bank (p-value > 0.05). Overall it is also found that IT has positive impact on income of all the
local banks for group 1 and 2 as for both groups (p-value <0.05).All regression coefficients are also
positive which shows that with the increase in expenditure on IT, the incomes of these banks have
increased significantly. Table 3(a).
As shown in Annexure II, there has been decrease in total no of employees of local banks. It is
not because of IT but it is due to restructuring and privatization of most of local banks during that span
of time. For right sizing purpose many employees were laid off by offering golden hand shakes
schemes. Contrary, as also presented in Annexure II, there has been gradual increase in the IT
employees, due to increase in workload for up gradation, computerization/making online of many
branches as per industry or customer need. Moreover, net income for these banks for the years 19902004 is PKR 28.040billions and IT expense are 4.186 billions with a ratio of 14.93%, whereas net
income for these banks for the years 1999-2004 is PKR 28.710 billions and IT expenses are
4.479billions with an increased ratio of 15.60%.
c. All Banks
Turning to the overall performance of all the banks for group 1 & 2, it is observed that IT expenditure
has impact on the income of all these banks (p-values< 0.05). A positive regression coefficient
supplements our results that increase in expenditure on IT significantly increases the incomes of these
banks.
To further examine the performance, trend analysis for IT spending and net income is carried
out. It is noted that there is increase in income with proportional increase in IT expenditure of all
banks. Detailing it, the net income for all the banks for the years 1990-2004 is PKR 39.470 billions, IT
expenses are 5.902 billions, which are 14.95% of net income. The net income for all the banks for the
years 1999-2004 for group 2 is PKR 47.327 billions and IT expenses are 6.939 billions, which are
14.66% of net income. While the net income for all foreign banks for the year 1999-2004 is PKR 7.44
billions and IT expenses are 1.050billions which are 14.12% of the net income for the same period, but
these expenses are 61.20% of total IT expenditure out of the year 1990-2004. That means that the
companies have been spending large amounts during the last six years in their IT operations. The same
case is for all local banks i.e. the net income for all local banks for the year 1999-2004 is PKR 18.773
billions and IT expenses are 3.454billions which are 18.40% of the net income for the same period but
these are 82.53% of total IT expenditure from the year 1990-2004. That also shows that there are high
increasing trends in IT expenditures in local banks in the past six years (1999-2004). Surprisingly, the
same results are found for the entire banking sector i.e. the net income for all the banks for the year

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European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

1999-2004 is PKR 26.213 billions and IT expenses are 4.505 billions which are 17.19% of the net
income for the same period but these expenses are 76.33% of total IT expenditure for the year 19902004. It indicates that there is high increase in IT expenditures in the entire banking sector during the
years 1999-2004.
To investigate the linkage between IT expenditure and increase/decrease in number of total and
IT employees, we observed that during the sample period, the number of IT employees have increased
in the banking sector but total employees have been decreased Annexure II. Further, our regression
analysis also shows (Table 5) that this increase has positive impacts on income (p-value < 0.05).
Table 6(a,b,c) and Figures 1 to 3 report the summary of net income/ IT expenses and %
increase/decrease of income to expenses.
Table 6(a): Income & IT Expense Comparison for All companies for the year 1990-2004
For Group 1: n=20
Sector
Foreign Banks
Local Banks
Total Banking Sector
Local Manufacturing
Foreign Manufacturing
Total Manufacturing Sector
Total All Companies

Net Income
11,429,932,000
28,040,686,000
39,470,618,000
14,118,508,000
22,371,542,000
36,490,050,000
75,960,668,000

IT Expenses
1,715,997,260
4,185,681,800
5,902,679,060
1,374,077,480
10,453,731,000
11,827,808,480
17,730,487,540

Expenses %of income

15.02
14.93
14.95
9.73
46.73
32.41
23.34

Series1

Total All

Companies

Sector

Tatal

Manufacturing

Foreign

Manufacturing

Local

Manufacturing

Sector

Tatal Banking

Local Banks

Com paris on of Incom e & IT Expe ns e s for Com apanie s for the ye ar 1990-2004
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Foreign Banks

Expense % of Income

Figure 1:

Series2

Series 1 Show the Income Series 2 Show the Expense % of Income

Table 6(b): Income & IT expense Comparison for all companies for the year 1999-2004
For Group 1: n=20
Sector
Foreign Banks
Local Banks
Total Banking Sector
Local Manufacturing
Foreign Manufacturing
Total Manufacturing Sector
Total All Companies

Net Income

IT Expenses

7,440,175,000
18,773,824,000
26,213,999,000
9,791,169,000
16,439,359,000
26,230,528,000
52,444,527,000

1,050,855,000
3,454,532,500
4,505,387,500
950,434,480
5,934,785,000
6,885,219,480
11,390,606,980

Expenses %of
income
14.12
18.4
17.19
9.71
36.1
26.25
21.72

%age of 1999-2004 expenses to

1990-2004 Expenses
61.2
82.53
76.33
69.17
56.77
58.21
64.24

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European Journal of Economics, Finance And Administrative Sciences - Issue 16 (2009)

Com paris on of Incom e & IT Expe ns e s for Com apanie s for the ye ar 1999-2004

100%
80%
60%
40%

Series1

Total All

Companies

Sector

Tatal

Manufacturing

Foreign

Manufacturing

Local

Manufacturing

Sector

Tatal Banking

0%

Local Banks

20%
Foreign Banks

Expense %of Income

Figure 2:

Series2

Series 1 Show the Income Series 2 Show the Expense % of Income

Table 6(c): Income & IT Expense Comparison for all Companies for the year 1999-2004
For Group 2: n=32
Sector
Foreign Banks
Local Banks
Total Banking Sector
Local Manufacturing
Foreign Manufacturing
Total Manufacturing Sector
Total All Companies

Net Income
18,616,763,000
28,710,716,000
47,327,479,000
16,455,436,909
17,604,147,000
34,059,583,909
81,387,062,909

IT Expenses
2,460,082,000
4,479,494,500
6,939,576,500
1,436,243,780
6,055,853,900
7,492,097,680
14,431,674,180

Expenses %of income

13.21
15.60
14.66
08.73
34.40
22.00
17.73

Com parison of Incom e & IT Expe nses for Com apanies for the year 1999-2004

100%
80%
60%
40%
20%

Series1

Total All

Companies

Sector

Tatal

Manufacturing

Foreign

Manufacturing

Manufacturing

Local

Sector

Tatal Banking

Local Banks

0%
Foreign Banks

Expense % of Income

Figure 3:

Series2

Series 1 Show the Income Series 2 Show the Expense % of Income

ii. Manufacturing Sector

a. Local Manufacturing Companies
The regression analysis shows that IT has positive impacts on the incomes of the local manufacturing
companies i.e Atlas Honda and Lakson Tobacco (p-values < 0.05). But IT has no impact on the income
of D.G. Cement, Packages and Services Industries, (p-value > 0.05).
Further analysis for all local manufacturing companies for the years 1990-2004 and 1999-2004
shows that IT has positive impacts on income of all the local companies as p-value is far below .05 for
group 1 and 2 (Table 1 & 2). The regression coefficient for these companies is positive, which
indicates the decisive impact of IT on income. At the same time, net income for these companies for
the years 1990-2004 is PKR 14.118 billions and IT expenditures are 1.374 billions which are only
9.73% of net income. Whereas, net income for the year 1999-2004 is 9.791 billions and IT expenses

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European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

are 950,434,480 that are 9.71% of the net income of 1999-2004 but 69.17% out of total IT expenditure
of 1990-2004. For group 2 the net income for these companies for the years 1999-2004 is PKR 16.455
billions and IT expense are 1.436 billions which are low as 8.73% of net income.
As seen in Annexure II, there is a gradual increase in total and IT employees till year 2002. It
is due to the facts that some of these companies have expanded their operations during these years and
consequently the volume of transaction/job has been increased, resulting therein an increase in staff
strength. After year 2002, there is a slight decrease in IT employees because of the reasons that some
of these companies have implemented S.A.P and their major IT systems are being maintained by
outsourced staff of SAP provider.

b. Foreign Manufacturing Companies

It has also been observed from regression analysis that IT has no impact on the incomes of I.C.I and
Unilever Pakistan Ltd (p-values > 0.05). Furthermore there are three companies, SIMENS Pakistan
Ltd, Suzuki Ltd and P.T.C for which IT has positive impacts on the income (p-value< 0.05). Our
analysis for group 1 and for group 2 presents that IT has no impacts on income of foreign companies as
overall (p-value>0.05). The net income for these companies for the years 1990-2004 is PKR 22.371
billions and IT expense are 10.453 billions, which are high as 46.73%. Where as net income for the
year 1999-2004 is 16.439 billions and IT expenses are 5.934 billions, which are 36.10% of the net
income but 56.77% of the total IT expenditure from 1990-2004.
For group 2, net income for the years 1999-2004 is PKR 17.604 billions and IT expense are
6.055 billions, which are 34.40% of net income.
Like local companies, there has been an increase in total and IT employees. Annexure II
represents these results. Again this increase is considered due to expansion in production over the
period of last ten years. It is because of this, that the volume of transactions/jobs and employees have
been increased
c. All Manufacturing Companies
The overall analysis of all the manufacturing companies for group 1 & 2 further validated that IT has
no impacts on income of all the manufacturing companies (p-value >.05). But surprisingly, there is
marvelous increase in the net income for all the manufacturing companies for the years 1990-2004, i.e.
PKR 36.490 billions and IT expense are 11. 827 billions being 32.41% of net income. For the years
1999-2004 net income for these companies is 26.230 billions and IT expenses are 6.885 billions which
are 26.25% of net income. There is an increase in the IT expenses during the last six years i.e. 19992004 as IT expense ratio of net income is 58.21% out of the total IT expenses for the years 1990-2004
despite of the above facts that IT is not contributing more to incomes of these companies. There is an
increase in total and IT employees and this increase is due to the same reasons as mentioned above.
Annexure II presents these effects clearly.
For group 2 the net income for all the manufacturing companies for the years 1999-2004 is
PKR 34.059 billions and IT expense are 7.492 billions which are 22% of net income. The regression
coefficient is positive for this group. Similar to group 1, the same pattern of increase in total and IT
employees appears.
It is more obvious if we look into the computer usage statistic of manufacturing companies that
only those manufacturing companies (local & foreign) dominate the scene which have excellent IT
systems and have also implemented world class S.A.P (ERP) systems.
iii. All Companies in Both the Sectors
After analyzing the performance of individual sector, the analysis is made to know about performance
of all the companies in banking and manufacturing sectors for group 1 and 2. As discerned, IT has
positive impacts on income of all the companies (p-value<0.05) Table 4(c,d). The regression
coefficient is also positive which shows that there is an increase in income after increase in IT
expenses. So far net income for all the manufacturing companies for the years 1990-2004 is concerned,

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European Journal of Economics, Finance And Administrative Sciences - Issue 16 (2009)

it is PKR 75.960 billions and IT expenses are 17. 730 billions which are 23.34% of net income for
1990-2004. For the years 1999-2004 net income for all companies is 52.444 billions and IT expenses
are 11.390 billions which are 21.72% of net income. Similarly, net incomes for group 2 for all the
companies for the years 1999-2004 are PKR 81.387 billions and IT expenses are 14.431 billions which
are 17.73% of net income. There appears to be constant increasing trends in the IT expenditures during
the last six years i.e. 1999-2004 in both the sectors. As the IT expense for these years for both the
sectors are 64.24% out of total IT expenses for the years 1990-2004.
So far as total and IT staff strength is concerned as reported in graph in Annexure II, there is
an increase in IT but decrease in total staff and reasons for this increase have already been discussed in
detail in individual banking and manufacturing sections.

Conclusions
IT has revolutionized the entire world. It has turned world in global village. The companies are using
IT to improve organizational performance. This use has grown at an astonishing rate over the past three
decades with latest IT techniques and spending on IT has increased tremendously by the companies. It
would appear from above analyses that IT in Pakistan is being applied aggressively both in
manufacturing and banking sectors as these companies investing billions of rupees on it. It is also
evident that it is being used more efficiently in banking sector than the manufacturing sector. The
following salient points of above discussion are worth stressing 1) the local banking sector of Pakistan
is using IT more than the foreign banks because of intensive competition and increased branch network
2) though multinationals in Pakistan are seen as a means of bringing in new technology and work
practices and providing training grounds for the work force but there is high rise in IT investments in
local baking sector in the latest IT systems in the recent years as compared to foreign banking sectors
percentage of IT expenses for the years 1999-2004 for total banking sector, are 76.33%, out of their
total IT expenses for the years 1990-2004. 3) the percentage increase in IT expenses in local banks is
82.53% for the year 1999-2004 out of expenses of the years 1990-2004, which is much higher than the
foreign banks where %age increase is 61.20%. 4) in comparison of local versus foreign manufacturing
companies mixed trends have been observed in IT spending. The IT expenses percentage is 69.17%
and 56% respectively for both the sectors out of incomes of years 1990-2004. But surprisingly,
percentage of IT expense for local and foreign companies as a whole for the years 1990-2004 are
29.73% and 42.33%. For group 2 these expenses %ages are 18.33 and 34 respectively. It is, therefore,
evident that overall foreign manufacturing sector is investing more in IT than the local manufacturing
sector. 5) overall, there is remarkable increase in the IT expenses and in income in return, of all the
companies, given to the facts that IT expenses are 17.730 billions in 1990-2004 and in 1999-2004,
these are 11. 390 billions which are 64.24% of total IT expenses. The net income is 75.960,668,000 in
the years 1990-2004 and for the years 1999-2004 it is 52,44,527,000. The percentage increase in net
income thus comes to 69.04% for year 1990-2004.
We found strong evidence through above facts that though manufacturing sector is investing
much more in IT but the banking sector surpass the manufacturing sector in performance as their
incomes are very high. On the other hand the study also detected that there is an increase in IT
employees in both the sectors due to increased work because of expansion of operations of the
companies over the years but decrease in total employees because of implementation of down/right
sizing policies in local baking sector since 1990s. In line with above results, in conclusion, we say that
IT investments have positive impacts on the performance of the organizations and we accept our
research hypotheses.

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European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

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Annexure I
List of companies in sample: Banking Sector.

1
2
3
4
5
6
7
8
9
10
11
12

List of Local Banks

Habib Bank Ltd.
National Bank Ltd.
United Bank Ltd.
Muslim Commercial Bank Ltd
Bank Al Habib Ltd
Metropolitan Bank Ltd.
Bank Of Punjab
Askari Commercial Bank Ltd.
Bank Alflah Ltd.
Allied Bank Ltd.
Faisal Bank Ltd.
First Women Bank Ltd.

1
2
3
4
5
6
7
8
9
10
11
12

List of Foreign Banks

American Express Bank Ltd.
Citibank N.A.
Habib Bank AG Zurich
Algemene Bank Netherland (ABN Amro)
Internaional Islamic Bank
Deutsche Bank A.G.
Rupali Bank Ltd.
Standarad Charterd Bank
Oman International Bank Ltd.
Bank Of Tokyo Ltd.
Mashraq Bank Ltd.
Hong Kong & Shangai Bank Ltd.

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European Journal of Economics, Finance and Administrative Sciences - Issue 16 (2009)

List of companies in sample: Manufacturing Sector.

1
2
3
4
5
6
7
8
9
10
11
12

List of Pakistani Manufacturing Companies.

Packages Ltd
General Tyres Ltd.
D.G. Khan Cement Ltd
Atlas Honda Cars Ltd.
Pakistan Steel Ltd.
P.E.C.O Ltd.
Lakson Tobacco Ltd.
Indus Motor Ltd.
Service Industries Ltd
P.E.L Ltd.
Dawllance Pakistan Ltd
Honda Atlas Ltd.

1
2
3
4
5
6
7
8
9
10
11
12

List of Foreign Manufacturing Companies

Uni Lever Pakistan Ltd.
Reckett Benkiser Pakistan Ltd
Procter & Gamel Pakistan Ltd.
Philips Electrical Company Ltd.
Siemens Pakistan Ltd.
I.C.I Pakistan Ltd.
Nestle Pakistan Ltd.
Colgate Pakistan Ltd.
Pakistan Tobacco Ltd.
Suzuki Pakistan Ltd.
Bata Pakistan Ltd.
L.G Pakistan Ltd.

Total and IT Employee Statistics

Annexure II
Years
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05

All Foreign Banks

IT emply %
Tot Emply
4.176904177
407
5.213270142
422
5.882352941
442
5.052631579
475
5.350553506
542
4.915254237
590
4.380664653
662
3.362391034
803
3.369434416
831
4.026845638
894
4.057017544
912
4.618689581
931
4.771784232
964
4.688995215
1045
4.523026316
1216

All Local Manufacturing

Years
IT emply %
Tot Emply
1990-91 0.357698289
12860
1991-92 0.392821382
12983
1992-93
0.4
13500
1993-94 0.420044215
13570
1994-95 0.438308131
13689
1995-96 0.427890011
14256
1996-97 0.463251054
14463
1997-98 0.495799477
14522
1998-99 0.528592023
14567
1999-00 0.581037665
14629
2000-01 0.610727562
15064
2001-02
0.64618225
15166
2002-03 0.611192462
15707
2003-04 0.631911532
15825
2004-05 0.600529879
16985

All Local Banks

IT emply %
Tot Emply
0.397944681
45735
0.435039241
45743
0.484961834
45983
0.507420225
47101
0.524067097
47513
0.530067262
49805
0.550511879
51770
0.677014899
44903
0.74828114
41161
0.801463767
38804
0.814461154
39167
0.893144512
37284
1.083914002
33582
1.148781997
33949
1.170427016
34261

All Foreign Manufacturing

IT emply %
Tot Emply
0.611028316
13420
0.62193605
13667
0.614549092
13994
0.624699664
14567
0.682035193
14662
0.758807588
14760
0.790460879
14928
0.819399107
15011
0.849087894
15075
0.952569954
15117
0.95444971
15192
0.984445757
15237
0.969397453
15783
1.004548901
15828
1.032030709
15891

IT emply %
0.431277361
0.478717643
0.53634895
0.552799731
0.578503798
0.581406886
0.598870919
0.72419376
0.80015241
0.874099451
0.888245715
0.983906843
1.186823366
1.256295788
1.285339798

All Manufacturing
IT emply % Tot Emply
0.487062405
26280
0.510318949
26650
0.509202008
27494
0.525997796
28137
0.564353991
28351
0.596222774
29016
0.629444388
29391
0.660278333
29533
0.691586263
29642
0.769851409
29746
0.783315706
30256
0.815708976
30403
0.790727215
31490
0.818247875
31653
0.809100864
32876

All Banks
Tot Emply
46142
46165
46425
47576
48055
50395
52432
45706
41992
39698
40079
38215
34546
34944
35477
All Companies
IT emply % Tot Emply
0.451520256
72422
0.490283595
72815
0.526251708
73919
0.542839407
75713
0.573253409
76406
0.586820466
79411
0.609852975
81823
0.699105517
75239
0.755227964
71634
0.829445308
69444
0.843107983
70335
0.909382378
68618
0.846507965
66036
1.047308956
66647
1.056281363
68353