Information Technology Investment in Sustainability and Profitability

1 Written by Yasser Al Mimar, 2014

Sustainability and Profitability

1. Introduction

The world is changing and with it the demands and wants of the customer are also rapidly

shifting based on new services or products and technology. Information technology business is

undergoing a significant change, driven by innovative technologies, liberalization and

globalization (Al Debei & Avison, 2011). In the last the two decades we have seen a surge in

Information Technology and high competitive in technology services in marketplace. Most rapid

and major changes have been witnessed in the IT sector. Numerous countries have overhauled

their legal and regulatory framework for fast privatization and liberalization (Farajian, 2003).

So today’s ICT executives need to get a clear picture about the market and read the

environment in the market accurately and which the industry operates in order to make right

decisions that influence the direction of their organizations in a right way. Therefore, enhancing

their organization competitive positions will be build up through improving their ability to study

the market in right way and respond quickly to rapid environmental changes with high quality

business decisions (Avison 2011).

The Information Technology industry (hardware, software and services) has provided many

tools to help generate and pro cess data, communicate globally, and improve productivity.

However, all the rapid advances in this sector has not made our society more sustainable.

Integrated economic, ecological, and social sustainability issues have been largely overlooked

by the IT se ctor and Silicon Valley leaders, despite the significant opportunities that these

issues present to 21 st century businesses

1.2 Research Background

The Middle East and surrounding emerging markets are continuing to grow, and the

region’s Information Technology and other technology services must rebuild their competency

if they want to survive and capture their fair share of that growth. So in developed markets,

they must develop new value-added services that can differentiate them from competitors


IT companies must work to derive value through innovation and creativity. Simply, offering

competitors’ products, services or pricing plans will not add value, and will have a negative

impact on the market and company profitability as well. Therefore, in order to operate viably,

organizations must thinking outside the box and looking for opportunities outside their markets

and industries to build up a new ideas that promote internal innovation. This can be achieved

through using certain strategy that can achieve the desired goal. Establishing strategy for

business growth must be well studied in light of strong competitive positioning strategy in the

marketplace for Instance, mobile operators are competing head to head on the marketing,

service quality, and also services price. They invest heavily into the marketing (TV ads, road

shows, social media), competing for the latest mobile technology (3G-WCDMA, HSDPA; 4G-LTE,

LTE+) with continuous efforts in bringing the services price down (Khong 2012).

Therefore, the changing business climate found many firms looking for alternative ways to

provide improved quality in their products, improved service to their customers, reduce time

and cost to achieve company’s goals and get profit and reputation (Al Mimar,2012).

Furthermore, the global trade has opened the competition doors for companies, and placed

these companies under unprecedented competitive pressure (Hsuai, 1998). Businesses thus

must understand how to maintain their competitive advantage and overcome the critical

problem of global competition (Al Mimar, 2012). Firms and organizations have been using their

core competencies to gain competitive advantage. Nowadays, computers, laptops and mobile

devices – information technology (IT) is not only a booming economic sector but also an

energy-intensive one. It accounts for 2% of human greenhouse gas emissions worldwide, as

evidenced in a study by Global Action Plan. This figure can be reduced if the green segment, or

Green IT, continues to grow. Therefore, using a blue ocean strategy is considered as has a

starting point for a company to win in the future. (Kim & Mauborgne 2005) and build a compete

others.


1.3 Information Technology Investment and Profitability

Information systems studies as well as other reports have made significant inroads in

trying to relate IT and IT-enabled functions to firm performance (Kohli and Grover, 2008). These

studies have shown that organizations get benefit from investments in IT and IT-enabled

capabilities, prompting Dedrick et al. (2003, p. 23) to call it “the profitability paradox” of IT.

Furthermore, while researchers have found that IT investments can allow firms to achieve both

revenue growth and cost savings (Kauffman and Walden 2001), Previous studies have mainly

focused on investigating direct effect of IT on profitability but they rarely take into

consideration the aspect of cost or revenue. IT has supported cost reduction through better

information sharing and creates new operational process in the supply chain framework.

Profitability in the organization can be enhanced if the costs have been lowered through the

use of IT (Kohli and Grover, 2008). This can either directly or indirectly affect the profitability of

the company depending on the nature of implementing the strategy


1.3 Information Technology Investment and Sustainability

Sustainability today is considered as a topic of vital growing importance in all aspects of

organizational life. Organizations and CEOs are working thoughtfully to adopt new strategies to

incorporate a balance among economic, ecological, and social. Elkington J (1998) first proposed

the concept of the ‘triple bottom line” i.e. a sustainable organization has measureable

economic, environmental, and social impact goals. So we note that there are a lot of

researchers and business people have written and added this concept, and its use in practice

However, not all organizations applied to adopt sustainability with the same totalitarian or way

as described by Elkington. Some firms have applied a sustainability tool for market reasons;

they are adopting "green" services or even products to appease environmentally sensitive

consumers. Furthermore, the recent scholarly research has illustrated that the adoption of

certain strategy toward the protection and activate the role of sustainability will consider as

vital for organizations who want to stay competitive (Marcus & Fremeth, 2009).

Challenges include initial costs, the sometimes lengthy periods before companies see a return

on investment, and the need to keep up with fast-moving technology and to re - educate

employees—whether these be the chief executive officer or rank-and-file workers—about the

benefits of sustainability. Special attention must also be paid to ensuring transparency and

good governance throughout all sustainability initiatives to make sure that policies are followed

and goals are met.

“Sustainability is without doubt the most significant reorientation of global business strategy

and operations since the high-tech and biotech booms of the 1990s,” according to a report

released in September 2008 by AMR Research, a US-based supply chain and IT consulting

company. “It is inextricably linked to both the contemporary and future challenges of global

climate change and the anticipated low- carbon economy.”


1.3.1 Sustainability in economic aspect

In economic aspect, for example Economists David Pearce and Edward Barbier define economic

sustainability as “ensuring that future generations have at least the same potential economic

opportunities to achieve welfare as the current generation” (2000, 21). In addition and

according to Denis Darragh, chairman of the Institute for Market Transformation to

Sustainability (MTS), profitability and a clean environment are complementary, he says

“Sustainable products increase corporate profits," for many reasons, such as lower cost, fewer

regulatory restrictions and quicker introduction to enter the marketplace. He also mentioned

that sustainability has always been a core value because it is good for a company business

1.3.2 Sustainability in environmental aspect (Green IT)

In environmental aspect, Researchers have estimated that information and communications

technology (ICT) is responsible for at least 2 percent of global gas emissions, such as,

datacenters, computers and other technologies (Alcatel 2010). The environmental sustainability

of IS has been considered as a main topic in the core of IS research (Elliot, 2007). It has become

clear that there is growing trend towards sustainability as it considered as driver of new growth

and contributes to raise the demand of consumers for environmentally friendly and energy-

efficient products. On the other hand it was found there is growing interest from different

sectors such as business and academic toward development of green services and products

(e.g. Baumann et al., 2002).

We can say, that sustainability in an enterprise can mean small adjustments or a major

reorientation. Information technology (IT) is not itself a big part of the problem, as it is

estimated to contribute only a small percentage of global carbon emissions. But it can be a big

part of the solution. In addition to data- center optimization and other operational issues such

as teleworking, companies are now leveraging IT capabilities to facilitate sustainability

initiatives across the enterprise in new areas, including fleet management, paperless billing,

and construction and facility management, among others.


“IT has a huge opportunity in terms of reducing its consumption and complexity and utilizing IT

assets more effectively to drive down the carbon footprint,” says Vijay Sankaran, Ford’s director

of infrastructure operations (The Economist , 2009).

To be sure, IT has already helped companies take their first steps towards energy conservation.

Simple measures, such as having lights or computers shut off automatically at set times, or

setting room temperatures to an automated schedule, bring significant savings. More complex

undertakings include the consolidation of data centers, upgrading to more energy-efficient

hardware and supporting teleworking initiatives. From the above argument, we can realize that

there are organizations or companies have started to understand the benefits of running or

managing IT-related power consumption. For instance, the cost of keep powering up PCs over

its life can exceed its real price, with over 70% of this cost coming from when the computer is

not being used (Sviokla and McGilloway, 2008).

There are a number of companies are expected to enter the Green operation field and working

to make a quantum leap of Green IT services market to an estimated US $4.5 billion by 2013

[Mines, 2008]. Therefore, working on new innovations in the field of green products and

services will have an efficient role in supporting companies and economies towards

environmental sustainability (e.g, Commission of the European Communities, 2001). For

instance in 2010 and 2011 video conferencing efforts an environmental savings of more than

87,500 metric tons of CO2 emissions.

1.4 Conclusion

Over the next few years, executives expect companies to maintain their focus on sustainability,

deploying more IT resources and establishing positions of accountability within their

organizations to ensure that they reach important milestones.

Therefore, as a business owner, you constantly try to find money-saving opportunities.

Sustainability provides the same issue; you can always find new ways to reduce costs and run a

green services or business. For instance, in IT industry being that your product specializes in


some services that differentiate your brand in market place, by using a technology that put into

consideration the cost consumption, carbon consumption and energy consumption.

With sustainable operations, small businesses are offered many opportunities to stay

profitable, and the customer is that deciding factor. The client or customer wants to make the

choice of not causing any adverse effects when it comes to their dollars and cents, and this

drives them to the brand that can perform sustainability the best. The association of your

sustainability enterprise keeps you accountable with your customer base.