Burbank, California; September 5, 2001; Joan Marques, MBA
(URL: https://www.angelfire.com/id/joanmarques/PR)
“The Productivity Paradox of IT” (IT stands for Information Technology) is an issue that pertains to the fact that, in spite of all innovations and tremendous investments in automation during the past 20-30 years, there has been a very modest increase—and in some cases even a decrease-- in productivity. Woodall (2000) states that spending on IT equipment and software now accounts for about half of all investment by American firms.
The main reasons
for lack of the initially expected progress in productivity can be summarized
in 4 points:
·
Mismeasurement: it is hard to measure inputs and
outputs in IT, since some of the outputs are not measurable (service-increase,
convenience, etc). It might be good to quote Prizewinning economist Bob Solow
here when he said 15 years ago: “computers are everywhere except in the
economic statistics” (Strassmann, 1999)
·
Lag: It takes years before benefits of
IT-implication can be perceived because of the long learning lags that delay
the productivity gains of the IT-revolution.
·
Redistribution: IT may be good for some companies’
growth, but it makes no difference in the growth of the industry as a whole.
According to Brynjolfsson, professor of economics at the Mass. Inst. Of
Technology’s Sloan School of Management, “government productivity-yardsticks
are out of date because they look at the aggregate economy rather than
individual companies’ performance”.
·
Mismanagement: implementing IT for the wrong reasons,
or without right communication within the organization.
According to
Strassmann (1999), every company can measure its own IT paradox number by
comparing the company’s IT budget today with what it could have been if they
had bought their computing capacity every year for 17.5% less.
It has
repeatedly been proven, that IT only succeeds if the human factor is involved
in the proper way. As long as top-management in a company keeps direct contact
with the IT-department and makes sure that all departments get involved in the
process; as long as the IT-implementation is treated as a tool to enhance the
quality of performance of the company and the people that work in it, it has a
bigger chance to become a success. True productivity-increases have come only
when companies reinvented how they worked; the way WalMart did it, for
instance, by changing their whole process through IT. Besides, companies that
view technology as a continuing process instead of a one-time investment do
much better! Companies that use IT to
improve outside communication, perform better as well.
It is hard to
predict from the very start after IT-implementation in an organization, what
will be right and where it can go wrong, since IT is an evolving, and not a
fixed process: there are constant changes, and appropriately responding to
those may be important for a firm, depending on its activities. The fact that
there are no impressive positive numbers on productivity as a result of
IT-investments, could be explained as follows:
·
Many
progresses and profits from IT are impossible to calculate: we should stop trying to measure an
intangible convenience in tangible terms.
·
People: we tend to play with new toys. The
possibilities of IT are so broad; the people are fascinated by it and often
forget to use it in an optimal efficient or appropriate way. As a result to that, some of the reasons why
productivity-increases in IT have been modest are:
1. Memo’s with fancy fonts and elaborate
formatting that takes longer than the simple typed ones from the past;
2. Emails, used for nonessential messages;
3. Equipment maintenance.
As stated by Woodall (2000), “New-paradigmers who suggest that rates of productivity growth of 3-4% a year are sustainable for the next decade or so are really saying that IT will have a far bigger economic impact than electricity, telephones and cars”. Woodall thinks this is very ambitious. “More likely, America's long-term trend rate of labor productivity and hence per capita growth might be lifted to an annual 2.596. That might not sound much, but it would make IT at least as significant as electricity.” (Woodall, 2000)
Nevertheless, it
is apparent that IT has caused a paradigm-shattering leap in productivity; but
it may be the way we treat it, which is the reason why this productivity has
not been clear yet. After all, the technique and its profitability can only
come out, if humans use it as they should. Goldsborough (1998) suggests some
simple ways to increase our PC productivity:
Conclusion:
The
entire problem may lie in the fact that the profits from IT are sought in wrong
corners. In the nineties, with the rise of the Internet, the real value of IT
became clearer to a great number of peoples all over the world. Computers are
proving their importance even more now, after several decades, because they are
linked together through the Internet. Companies can get strategically necessary
information in an instant. Costs on expensive business-trips can be reduced,
because all information is available in the blink of an eye; global meetings
can be attended from behind your desk.
Yet, to enhance
IT-productivity, control on Internet-usage should be built in, for even though
the web can be an invaluable informational resource, the temptation to surf
from one site to another is almost irresistible. Important for companies to
profit from IT is, an overall better communication from the very beginning,
which in this particular case is the decision to implement IT. The how, when,
and why of IT-implementation should, above all, be made clear and
lectured throughout organizations. And last but not least an approach that
encourages familiarity with, and optimal use of IT in every area of the
organization, should be generally adapted. Once economists, top-management of
companies and Government have come to that insight, IT-productivity will become
visible in a very satisfying way.
References:
Brynjolfsson,
E., & Hitt, L. M. (1998). Beyond The Productivity Paradox. Communications
of The ACM, 41(8), 49-55.
Goldsborough,
R. (1998). Technology, overcoming the productivity paradox. Commercial Law
Bulletin, 13(6), 22-23.
Strassmann,
P. (1999). IT paradox number. Computerworld, 33(18), 44.
Woodall, P. (2000). Survey: The
new economy: Solving the paradox. The Economist, 356(8189), S11-S19.