IT Portfolio Management Step-by-Step: Unlocking the Business Value of Technology

1.4. DOES IT REALLY MATTER? THE IT PRODUCTIVITY PARADOX

Many executives question whether they are receiving full value from their IT spending and whether this spending is being properly directed. In the 1980s, a series of studies found that despite the improvements made by technology, the correlation between how much a company spends on IT and the accompanying productivity generated as a result of IT investments is minimal. This is referred to as the IT productivity paradox. The IT productivity paradox has recently been examined in numerous studies including one by Dedrick, Gurbaxani, and Kraemer, who concluded that "the productivity paradox as first formulated has been effectively refuted . . . greater investment in IT is associated with greater productivity growth."^[] Appendix 1A provides a summary of selected studies on the IT productivity paradox.

^[] Jason Dedrick, Vijay Gurbaxani, and Kenneth L. Kraemer, "Information Technology and Economic Performance: A Critical Review of the Empirical Evidence," Center for Research on Information Technology and Organizations, University of California, Irvine, March 2003, www.crito.uci.edu; http://portal.acm.org/citation.cfm?doid=641865.641866 pp. 1 and 24 for appendix.

One of the more interesting research studies conducted recently is from Mainstay Partners. In 2002, Mainstay surveyed 450 companies across the energy, financial services, health care, manufacturing, retail and consumer products, and telecommunications industries. The survey ...