Uncovering the Economic Advantages of ICTs in Business

Understanding the Economic Benefits of ICTs

There is no question that the IT revolution has had a huge impact on the business world. ICTS in business affect many people. They influence internal operations of businesses, transactions between companies, and transactions between individuals. ICTs create tools that manipulate, organize, transmit, store, and act on information in new ways and organizational forms. ICTs have significantly enhanced the ability to develop new business models (i.e.., outsourced business processes, e-businesses, new logistics systems, etc.), ICTs have enabled business to offer new products and services (i.e., smart phones, the iPod and digital media services) and design and implement new processes (i.e., self check-in at airports and self check out at grocery stores).

Using ICTs can circumvent common communication barriers like illiteracy by displaying concepts in visual and accessible ways. ICTs have impacted businesses using many types of devices. From telecommunication devices to PCS, ICTs act as aids in facilitating communications while allowing for the better diffusion of information. Today about 11.5 million websites are accessible to the public; many of those are online shopping website where businesses sell their products directly to the consumer, eliminating travel costs and the need for a middleman. But ICT in business is not just limited to PCs and phones, it includes the applications of the same technologies in things like radio and television that can help keep consumers and suppliers updated; SMS, voice mail, and email to facilitate communication, GPS devices to track products and shipments, credit cards to increase convenience, online banking tools, online bill pay, machines in factories, and the likes. These devices boost growth indirectly through creating larger markets and enabling better decision-making. Also, higher quality goods and services become attainable through software that allows for quality monitoring and mass customization.

As demonstrated by the info-diagram above, ICTs enhance the quality of life in many ways. IICs increase efficiency by facilitating communication, which ultimately leads to enhanced livelihoods. ICTs boost competitiveness because they allow access to a global economy in which businesses can tap into global trade. They help establish self-reliance and exponentially increase both business and consumer convenience. The enhanced flow of data allows people to compete in today’s society. The diffusion of ICTs has shown to be a significant impact on economic growth. In fact, IT capital impacts productivity at about 5 times that of non-IT capital (Digital Prosperity). ICTs create faster productivity growth, which leads to lower inflation, increased economic competitiveness, more jobs, higher wages, lower prices, more consumer spending, and higher government tax revenues. They allow people to create innovative products and services that lend to better quality of life for everyone.

Of course, the potential for ICTs in businesses throughout the developing world is huge, but the introduction of ICTs must be done with care. Government as the front line need to acknowledge the need for IT as a key component of the modern economy and actively encourage use in the private sector. The tax code should be used to spur investment, and digital literacy should be a priority. Necessary policies should be implemented to hedge the risk to privacy and community that results from things like identity theft and measures should be put into place to prevent displacement of current workers.

The positive benefits outweigh the downsides of ICT, and it is of growing important that governments take the necessary steps to make sure the digital divide does not further increase.

Source: Digital Prosperity: Understanding the Economic Benefits of the IT Revolution, ITTF http://www.itif.org/files/digital_prosperity.pdf

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