Resource Complementarity and IT Economies of Scale: Mechanisms and Empirical Evidence

Although IT has become increasingly commoditized, its cost-effective application remains cumbersome. In this study, we explore economies of scale for IT infrastructure and application services. An in-depth appreciation of economies of scale is imperative for an adequate understanding of the impact of IT investments. The empirical evidence for this study, as derived from the benchmark data of 109 Housing Corporations, indicates that economies of scale of IT infrastructure investments exceed those of IT applications. With regards to IT investments, our findings imply that for low IT spending organizations in the likes of Housing Corporations, management can make a difference by devoting at least 60% of their total IT budget on IT infrastructure in order to foster economies of scale and extract strategic benefits. Our findings proffer a sharper theoretical lens to evaluate the importance of shared IT services in managing the level of IT expenditure within organizations. Insights from this study can guide parallel research into other homogeneous industries such as Hospitals or Municipalities.