Information Systems and the Economics of Engineering Services

Abstract

The impact of information systems on the economics of engineering services is examined. The discussion focuses on two areas in which technology affects the profitability of a firm. First, information systems can expand the production possibilities frontier to extend the productivity of professionals. The firm can achieve greater productivity in chargeable tasks and marketing. Second, the firm can increase its profit margin by reducing the cost of its services. The discussion of profit margin includes a review of supply and demand functions, including average and marginal costs. The paper addresses the effect of competition on normal and economic profits. The article concludes with a discussion of the tangible, intangible, and unexpected benefits of implementing information systems. Tangible benefits can be directly related to cost savings. Intangible benefits are derived from an enhanced work environment, while unexpected benefits are obtained when new applications are discovered. These benefits provide a framework for a cost‐benefit analysis of implementing information technology.