Economic Impacts of Business Firms 

Now a days information systems have become integral,online deeply involved in the minute-to-minute operations and decision making of large organization. Over the last decade, information systems have fundamentally altered the economics of organization and greatly increased the possibilities for organizing work.
If we think from the point of view of economics, IT changes both the relative costs of capital and the costs of information. Information systems technology can be treated as a factor of production that can be subsititued for traditional capital and labor.

For instance, by using computer links to external product suppliers, the Chrysler Corporation can achieve economics by obtaining more than 70 percent of its parts from the outside. Information systems making it possible for companies such as Cisco Systems and Dell Inc. to outsource their production to contract manufactures such Electronics instead of making their products themselves.  

For example, when Eastman Chemical Company split off from Kodak in 1994, it had $3.34 billion in revenue and 24,000 full-time employees. In 2007, it collected $6.8 billion in revenue with only 11,000 employees. 

Information technology also can reduce internal management costs. According to the agency theory the firm is viewed as a 'nexus of contracts' among self-interested individuals rather than as a unified, profit-maximization entity (Jenson and Mecklig, 1976).

Information technology, by reducing the costs of acquiring and analyzing information, permits organizations to reduce agency costs because it becomes easier for managers to oversee a greater number of employees.