Information Technology (IT) systems for providers of services
The service industry is made up of organisations that deliver services to consumers. The individuals who make up this industry are hired to perform tasks.
Most performance management techniques were developed for manufacturing organisations but might often be useful for service companies.
Both types of organisation turn inputs into outputs:
a. A manufacturing company uses labour and other inputs to transform raw materials and components into finished products which it sells.
b. A service company does not produce/sell products but provides a service.
Both types of company need to determine the costs of output for planning (e.g. activity levels) decision making (e.g. pricing) and control.
There are a number of performance management techniques which have been developed to link the cost of inputs to the costs of production. These can be used in the service industries also.
For example; an accountancy firm provides a variety of services. The costs of the firm can be assigned to cost drivers (e.g. an hour of each staff types’ time) and the cost of each consultancy contract found by multiplying time spent by hourly costs. This is based on Activities Based Costing (ABC) principles which identify cost drivers and job costing which assigns costs to individual jobs.
IT systems and service providers
IT systems can improve the quality of service in a number of different ways.
The service provider has instant access to the customer’s files or to other key information. Instant access means that a customer’s requests can be dealt with immediately. This makes it possible, for example, to sell and renew insurance policies by telephone.
For companies that provide services (rather than manufacturing goods), IT systems can make substantial improvements in the quality of service provision. A key feature of many services is the contact between a representative of the company (the service provider) and the customer. This may be face-to-face contact, or contact by telephone or even e-mail or text message.
The Internet often makes it possible for customers to compare the products or services of different suppliers, and to make an informed choice about which supplier to buy from. It may therefore be important for companies to provide extensive information to customers on their web site, to help them make their purchase decisions.
Some services can be provided through IT systems. In some cases, the customer is given the opportunity to take control over his own service provision. For example, customers can book seats on air flights and at theatres using the Internet and the service provider’s web site or download media items (music and film) through the Internet. Immediate service provision, made possible by IT systems, is likely to increase customer satisfaction with the service.
IT systems and performance management
Performance management systems are information systems, and the development of information technology (IT) continues to have a significant impact on performance management and on:
a. Collecting data
b. Storing data and information: (Note: data is unprocessed, whereas information is data that has been processed into something that has meaning or purpose)
Instant access to performance management data
Another significant feature of modern IT systems is instant access to information.
Information might be held on a central database, and accessible to all authorised personnel through a network connection.
Instant access means that managers do not have to wait for information to come to them, for example in routine reports. They can search for and obtain the information they want at any time. Furthermore this can be done from any location that has an internet connection.
In traditional performance management systems, data was input to the computer system by specialist staff. There was often a high rate of input errors, and data validation checks were included in the software to reduce the error rate. In many systems, the process of collecting data and input to a computer system was fairly slow.
Modern IT systems often provide for automatic input of data by non-finance operating staff, often with minimal risk of errors. One example is the automatic input of sales data and inventory data at check-out points in stores and supermarkets, using bar codes and automatic bar code readers. Information is available about sales and reductions in inventory at the exact moment that the items are being sold.
Instant access to external sources of data
IT systems also provide for access to external sources of data and information. External data can be obtained from the Internet, either:
I. Free of charge, for example, from the web sites of government departments and public news agencies, or
II. Through subscription (payments to an external information provider).
A wide range of complex data analysis can be performed with computer software.
Many managers can use models for planning and forecasting, including the application of sensitivity analysis to plans and forecasts.
IT systems and competitive advantage
In a highly competitive market, service providers are continually looking for ways to manage their costs and increase productivity.
IT systems may be able to give one business a strategic advantage (competitive advantage) over its rivals. The efficiency of IT systems can improve the quality of administration, production and service to customers, and so provide better value for customers, for example by reducing costs or providing a faster service.
Even if an IT system does not provide a competitive advantage, however, a business may need to have efficient systems to avoid being at a competitive disadvantage. A business needs to invest in IT to keep up with what rivals are doing.
Significantly, IT systems can create a competitive advantage by providing management with better information. In this respect, a well-designed performance management system will provide a competitive advantage.
Management should keep their IT systems under continual review, and:
a. Be aware of new developments in IT systems and new opportunities for exploiting IT
b. Review existing systems to ensure that they are of a high quality and are operating effectively and efficiently
c. Monitor the use of IT systems by competitors, and be prepared to respond to any initiatives in IT that competitors introduce.