IT Productivity Debate: The Forest vs. the Trees

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January 12, 2004 (Computerworld) -- Researchers trying to figure out whether billions of dollars in IT investments have really boosted productivity typically rely on government labor statistics to produce broad, macroeconomic studies.
But critics say such macro-level research provides a limited view of IT productivity and fails to address micro-level factors such as revenue enhancement and customer retention -- key criteria in a services-led information economy.
Most recent studies by academics and economists, such as MIT's Erik Brynjolfsson and Harvard University's Dale Jorgenson, have concluded that IT has had a positive effect on labor productivity overall. But that broad finding isn't specific enough to help IT organizations, business observers say.
The problem with a macroeconomic study is that it's "nothing you can present to a board of directors," says Paul A. Strassmann, a Computerworld columnist and a former CIO.
"The work that's being done on a macro level is fine," says F. Warren McFarlan, senior associate dean at Harvard Business School. "But there's more work that has to occur on a micro level," such as examining IT's effect on revenue retention and growth through new products and efficiencies, he says.
In addition, there are intangible benefits that IT can deliver to an organization. At General Motors Corp., for example, the use of collaboration technology can help "take friction out of working with dealers," says Daniel G. McNicholl, chief strategy officer in GM's information systems and services group.
Carla O'Dell, president of the American Productivity and Quality Center in Houston, says economists should drill down into functional areas within a company, such as manufacturing or finance, to evaluate IT's impact on revenue and output. Problem is, researchers and economists "don't have the money to do that," she notes.
Drilling down would also allow researchers to identify specific productivity problems. For instance, activities such as Web surfing and instant messaging have put some degree of drag on productivity, though it might be difficult to measure, says Chris Truesdell, director of technology at QuikTrip Corp., a Tulsa, Okla.-based operator of 405 convenience stores.
Researchers are cautiously optimistic that microeconomic studies in the future could measure the impact of IT on revenue and customer satisfaction, though obvious obstacles remain, such as getting relevant corporate data.

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• Sidebar: The Lag Effect
• The Forest vs. The Trees
• Sidebar: IT Productivity: The SG&A Debate

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