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Research finds Internet technology investments can boost business financial performance, productivity

A new study of how businesses use the Internet suggests there are still vast opportunities for financial and productivity gains that could power corporate profits and global economies for years to come, benefiting companies and consumers alike.

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AUSTIN, Texas —A new study of how businesses use the Internet suggests there are still vast opportunities for financial and productivity gains that could power corporate profits and global economies for years to come, benefiting companies and consumers alike.

Sponsored by Dell, the study from the Center for Research in Electronic Commerce (CREC) at The University of Texas at Austin surveyed more than 1,000 U.S. and European businesses and found they have barely scratched the surface of the gains to be achieved from effectively using the Internet to become more efficient and productive.

The researchers said the biggest benefits still can be obtained by increasing technology investments targeted at areas such as building online supplier relationships and redesigning business processes that are mostly invisible to consumers but have a major effect on quality, price and service.

The study found a “strong relationship between financial performance and e-business technology drivers” such as system integration, customer orientation and supplier-related processes and trading partner readiness to engage in electronic business.

“If businesses focus their technology investments in the right areas, there is no reason they can’t achieve significant productivity gains for the foreseeable future. These gains can power global economic performance for years to come,” said Dr. Anitesh Barua, a co-director of the study along with Dr. Andrew Whinston and Dr. Prabhudev Konana.

Results of the study, one of the largest and most in-depth ever conducted on e-business value, were released today by the CREC at the McCombs School of Business at UT Austin, during Dell’s annual DirectConnect event. The three-day gathering in Austin of the company’s customers is focused this year on e-business.

Dell, the world’s leading direct computer systems company and a leading supplier of Internet-infrastructure technology, estimates that global Internet-infrastructure spending will reach $370 billion annually by 2003.

“This research shows what some people have suspected all along, that integrating the Internet to meet operational objectives does lead to improved financial performance,” said Michael Dell, chairman and chief executive officer of Dell, which does more than $50 million in sales daily through its Web site. “So far, most companies have only taken baby steps, so there are still huge gains to be made by making the right Internet technology investments.”

Most businesses have developed Web sites, the UT researchers found, but they said the findings showed most have failed to redesign their processes for e-business practices such as information sharing, quality monitoring and supplier selection.

“This research shows that firms have to make prudent investments in synergistic areas of e-business technologies and processes to achieve operational excellence and financial performance,” said Dr. Whinston. “Technologies and process are synergistic, and investing in one without investing in the other is unlikely to provide a significant payoff.”

“While firms have made significant progress in developing online customer relationships, there is an untapped potential to gain efficiencies with suppliers and the entire value chain,” said Dr. Konana.

For example, the study found that most companies — 74 percent — provide basic product information online, but only 55 percent provide any online customization. Only 44 percent notify customers of their order status, and only 29 percent have any capability to report customer feedback and quality issues to suppliers in real time.

Other key findings of the study:

  • Businesses have substantial potential to exploit the Internet and related technologies for internal process efficiency in areas such as administration, human resources and sharing information among employees.
  • A majority of firms has yet to fully exploit the power of customization of products and services through the Internet for customer value creation.
  • Companies must educate and train their customers to adopt e-business practices.

The researchers found similar benefits of e-business practices across firms in the United States and Europe, and predicted the finding would be similar had they studied other regions.

An executive summary of the research and additional details are available at: .

About CREC

The Center for Research in Electronic Commerce (CREC) at The University of Texas at Austin has been the leading research institution in generating critical knowledge and understanding in the fields of Information Systems and Management, Electronic Commerce and the Digital Economy. The Center’s current research activities seek to provide an efficient and effective framework for global electronic commerce and the digital economy through an integrated research agenda that focuses on correlative effects among network infrastructure, products, processes, payment systems and policies, using markets and economic analysis as the central unifying theme. Additional information is available on the Web at http://crec.bus.utexas.edu

About Dell

Dell Computer Corporation (Nasdaq: DELL) is the world’s leading direct computer systems company, based on revenues of $28.5 billion for the past four quarters, and is a premier provider of products and services required for customers to build their Internet infrastructures. The company ranks No. 56 on the Fortune 500, No. 154 on the Fortune Global 500 and No. 3 on the Fortune “most admired” lists of companies. Dell designs, manufactures and customizes products and services to customer requirements, and offers an extensive selection of software and peripherals. Information on Dell and its products can be obtained on the World Wide Web at www.dell.com