Convergence of Information Technology, Operations Functions and Performance of Commercial Banks in Kenya

Abstract

Organizations are made up of the different functions which contribute to the performance of the organization. Historically IT and Operations resided in different parts of the organization, though several organizations nowadays still practice that. IT and operations are conversing and in some cases they are sitting at the same floor and blending their capabilities to enable productions of smarter products and services (Causey, Thielbar, and Bart 2012).The objective of the study was to determine the degree of convergence in Operation and Information Technology in commercial banks and to assess the impacts of IT and Operation convergence on performance of commercial banks in Kenya. The study adopted an exploratory research design. The study population consisted of 43 commercial banks in Kenya. Primary data was collected through the use of questionnaires and secondary data was collected from the financial statements of the commercial banks. The data was analyzed by use of descriptive statistics. The Regression analysis was used to assess the impacts of Information Technology and Operations convergence on performance of commercial banks. The study established there was a degree of convergence between Information Technology and Operations in the following areas starting with the highest to lowest; product upgrade, product management, real time implementation, product development, strategic planning, decision making, process development and budget making. The study also found commercial banks had heavily invested in Information Technology in the following areas from highest to lowest; customer requests, core banking systems, cash management and transfers, alternative channels, POS systems and loan processing. The study found out there was s small relationship between the convergence of Information Technology and Operations processes on organizational performance but no relationship at the management practices. The chi-square test indicated a moderate linear relationship between convergence of Information Technology and organizational performance. This implied that convergence of the two functions does not necessarily lead to banks making higher profits. There are many factors which contribute to the performance of commercial banks in Kenya. The study established that the commercial banks which had not converged the two functions but had converged the processes and the organizational structure. The banks which had been in existence for more than 10 years had the highest convergence score either at the processes or at the organizational structure. There was interesting results from the research where most banks merged the two functions at early age but after operating for five years they separated the two functions and after 10 years they converged again. The researcher can argue that the banks understood the importance of having Operations and Information Technology functions working together for effectiveness and efficiency and that’s why they merged the two functions again after separating them