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Why IT can’t seem to deliver measurable productivity
Categories: ROI

In his ZDNet blog, Joe McKendrick posits “Perhaps IT can’t deliver measurable productivity because the measurements are wrong.” Excerpts below. Full post at http://blogs.zdnet.com/service-oriented/?p=3329&tag=wrapper;col1.

I want to know how have you seen IT measure productivity?

“Every time I’ve spoken to a CIO and IT manager over the past decade, one question I always ask is if he or she has been able to measure the results of programs, be it service oriented architecture, CRM, Web-to-host, what have you. And, I have to admit, I rarely hear measurable numbers — it’s usually anecdotal evidence, such as speedier processing, or positive end-user or customer feedback.

Don’t blame the CIOs, though — it’s just that the benefits of IT are inherently difficult to quantify at any high level. In this vein, Janne Korhonen just published an interesting piece over at ebizQ, explaining why it’s so hard to measure the productivity impact of information technology.

Janne quotes MIT’s Erik Brynjolfsson, who in 1993 published a landmark paper on why the productivity impacts of IT is so hard to measure: 1) measurement error due to use of conventional productivity-measurement approaches; 2) time lags in IT payoffs; 3) localized optimization; and 4) lack of explicit measures of the value of information.

We don’t seem to have come too far in the 16 years since Brynjolfsson published that analysis — at least in Janne’s opinion…even with a lot of IT, “both innovation and replication require a combination of leadership and insight from executives. Take innovation: Many companies use IT to capture huge amounts of data from their operations, but relatively few have been able to use this data creatively.”

And it takes perceptive management to identify the technology solutions that will make a difference, and be able to effectively measure the impact of those solutions. As Janne put it: “Not all IT projects are productive. They may even be detrimental to the business, but misaligned incentive schemes and other structures sustain non-optimal IT decision-making with predominantly short-term planning horizon and focus on operational and cost efficiency. IT investments should be judged by their overall bottom line impact, including not only cost reductions and efficiency gains but also the indirect impact that IT has on increasing business effectiveness.”

The bottom line is that there has never been an expectation that IT would be solely responsible for a company’s rise or fall. Adroit management, supported by the right IT tools, makes the difference. A company that smartly and innovatively leverages its IT in new and creative ways will move to the head of the pack. And, thanks to IT, you don’t need a workforce of thousands to do so. And we need to measure these changes in more holistic ways.

Posted by Kathy Sandler on Thursday, November 12, 2009 at 12:01 AM

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