Information technology (IT) is "the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware" (Information Technology Association of American defined in Wikipedia). For-profits have long recognized IT’s power to reduce costs of coordination, communication and information processing (Brynjolfsson & Hitt, 2000) by incorporating and effectively utilizing IT to increase efficiencies in their management and operations. These efficiencies often lead to an increase in the fiscal bottom line which pleases the owners of the for-profit. The technology tools used most often include computer hardware, software and networks, including the Internet.
Technology is known to have a positive impact on the economy and productivity of organizations in the for-profit sector. A report by McKinsey Global Institute reveals that, although it is complex and varies across industries, IT enables and contributes to growth (2002). Technology gains have allowed for-profits to keep a competitive edge over their rivals, develop new products and services, realize substantial increases in output and productivity (Brynjolfsson & Hitt, 2000), and ultimately provide fiscal savings.
Researchers Brynjolfsson and Hitt found firms achieved productivity gains and savings with IT implementation by incorporating changes in work practices, strategies and products and services. The various studies cited throughout this research also suggest IT helps increase output and productivity. The correlation between implementation of IT and increased productivity and efficiency in for-profits has been well documented (Aral & Weill, 2006; Brynjolfsson & Hitt, 2000; McKinsey Global Institute, 2002; Stiroh, 2002). Successful IT projects have lead to an increase in profits, making it possible for many for-profits to increase their stock market value. Based on this and other research, there is clearly a “triangle of investment” needed to succeed with IT implementations in for-profits: infrastructure, human capital and strategic planning.
First, in relation to the investment in infrastructure, research has shown that it increases profitability and organizational performance in the long term but carries high up front costs (Aral & Weill, 2006). Moreover, when organizations commit to IT infrastructure, they must be ready for the added costs, not just in the short term, but for the long haul. The need to update, upgrade and change the infrastructure is imperative to keeping the machines running smoothly.
Secondly, regarding the investment in human capital, the importance of matching organization staff’s ability with the technology capabilities is illustrated by a case study of “MacroMed”, a medical parts manufacturer. Their IT system fell short because line workers retained many elements of the obsolete work practices. These individuals were unable to let go of inherited patterns of behavior. The company needed to invest in re-training staff to achieve the savings and success desired. This organizational learning and investment in human capital is crucial to the success of IT projects (Brynjolfsson & Hitt, 2000).
Finally, in relation to investment in planning, success of IT projects relies on alignment of the organizational and IT strategic plans. IT projects fail because they do not align with the organization’s requirements as outlined in their organizational plan.
Clearly, investments in infrastructure, human capital and strategic planning are central to the success of the IT implementation.
Nonprofit enterprises are increasingly incorporating IT into their operations (Blau, 2001; Gifts in Kind International, 2001; Finn, Maher & Forster, 2006; Peizer, 2006; Popjoy, 1992; Public Sector Consultants, Inc., 1999; Quinn, Verclas & Hoehling, 2006). The impetus can come from other nonprofits, individual donors, foundations or government requirements and accountability pressures (Saidel & Cour, 2003; Te’ein & Young, 2003). Those nonprofits seeking to grow and expand have taken a cue from the for-profits. These organizations have the hopes of achieving comparable efficiency gains and growth in support of their mission. The central components of success in for-profit IT projects are often in conflict with the core values of the nonprofit whose primary objective is to support an issue for non-commercial purposes.
The three main investments – infrastructure, human capital and strategic plans – are the cornerstone of success in IT implementations in for-profits. Throwing more money or resources at an IT project will not necessarily help it be more successful if there is no strategic plan. Providing more training to staff will not help an IT project if there is no infrastructure investment. Clearly, this triangle of investments is critical to the project’s success, with each point on the triangle playing a vital role. But, equally important is the understanding that the bottom line in nonprofits is different than in for-profits and judging success of IT projects is far more challenging to discover.
The purpose of this research is to examine this triangle of investments and its impact on the effective implementation of IT and how it relates to nonprofit organizational effectiveness. The research design is comprised of in-depth interviews with a group of tech savvy nonprofit leaders, a survey to those same individuals and literature research to identify what nonprofits view as successful and unsuccessful IT project. The large body of research surrounding IT use by for-profits will be applied to nonprofits to reveal patterns and make recommendations.