The importance of Information Technology in Business

Information technology is vital to business. Without it, the modern economy as we know it would grind to a standstill. In fact, information technology is so prevalent that it’s easy to take it for granted.

A World Without Information Technology

As a demonstration of the importance of information technology, imagine you woke up tomorrow and your company didn’t have any computers. What would that look like?

The first thing you might notice is the sheer volume of paper that has appeared to replace the data storage on the computers. This is assuming you still have the data at all. Likely the paper wouldn’t fit in your office and you’d need to rent more space just to hold it all.

Next is the task of digging up relevant data when needed. If a customer calls — assuming that the phones still work — asking about their account, someone will need to enter the labyrinth of filing cabinets and dig out their record. The customer could be waiting on hold for a long time.

When your employee gets back on the phone after their search, perhaps the customer gives them a new address, which they update on the paper record. Then, after the call, it’s back to the warehouse of filing cabinets to put the record in its place.

Meanwhile, other customers will be impatiently waiting on the phone line. Or more likely they’ll get a busy signal because there isn’t a computer system to handle a queue of callers.

Now let’s imagine your company sells widgets. If a customer on the phone says they’d like to buy a widget and have it shipped to them, you won’t be able to take payment by credit card. Instead, you’d need to ask them to mail in a check.

Alternatively, you could tell the customer to come in person and pay cash. Either way, you’d better hire more staff to do this work that a computerized system could have done in no time flat.

And if your company sells digital goods, there’s nothing to talk about: your business is over.

Finally, when it comes to the end of the week, you’d find that you need to issue paper checks to your employees. Worse, you’ll need to write them by hand or more likely hire even more new employees to do that.

What Information Technology Is

Definitions for information technology abound. But roughly speaking, information technology means storing, retrieving, or manipulating data, usually with a computer system, and often for a business purpose.

It’s worth mentioning that information has a technical meaning here. Information and data are basically interchangeable in everyday language, but they relate differently from an information technology perspective. Here, information means organized or contextualized data.

What Information Technology Does for Businesses

Information technology vastly decreases the friction of information flows. While it used to require a letter in an envelope to transfer information, now it’s as simple as clicking a button in your email, and the transfer is nearly as fast as the speed of light.

Of course, the technology that makes email work is far from simple, but that technology is hidden. From the user’s perspective, it’s a very simple process.

A point of sale system is one important application of the fast information flow made possible by information technology. A point of sale system not only generates a receipt with little effort from the employee but also immediately sends purchase data to a company database. This lets the company respond quickly to changes in the store.

For example, consider that a customer enamored with the color of the sky may come in and buy up all the blue shirts in a clothing store. Before the customer has even left the store, the company’s database has the information that this location is out of blue shirts. The computer system can then add blue shirts to the next supply order for that location.

Think about how much longer that would take on paper. Now think what would happen if you were doing this on paper but your competitor had a robust information technology system. You likely wouldn’t be in business for long.

Information technology can also track things like payments to be made or payments received. Then that data can be analyzed by a computer to show monthly income and spending by the company.

Things become even more profound when you accept that money can be represented by information. Then all the aspects of information technology that make it easier to move data around also make it easier to move money around.

Thus, there are systems that automatically transfer money from company accounts into employee accounts at the end of a pay period. In one sense, only information has moved. But in a more important, symbolic sense, money has changed hands.

2019-11-04T08:26:17-06:00