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Posted on October 21, 2009 by Jason Roskopf | Posted under Software
What good is information technology?
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The principle driver behind this remarkable, rapid creation of a vibrant, sophisticated, and enormous industry and the attendant inclusion of a department dedicated to it in every credible company, is the quest for business productivity improvement. The notion of technology investments as a driver of US business productivity has a controversial history. The benefits of technology investments (and IT departments) were not always so apparent. Productivity growth in the US faltered from the mid-1970s through the early 1990s, in spite of large technology investments from most major US corporations. The disconnect between heavy capital and expense investment and the theoretically associated improvements in productivity led to a so-called productivity paradox. In reaction to the failure of such large investments to produce the expected productivity gains, MIT Nobel Laureate Robert Solow famously remarked in 1987, "You can see the computer age everywhere but in the productivity statistics." More recent research suggests that the productivity benefits from the deployment of technology have had a massive, albeit delayed, impact on the US and world economy. A variety of researchers have concluded that investments in IT have been instrumental in the improved productivity seen in the US economy beginning in the mid 1990s. In early 2000, the Federal Reserve gave information technology investments credit for approximately $50 billion in productivity improvement, which represents more than 65% of the total $70 billion in productivity gains seen by businesses in the US in the last half of 1990s. The Federal Reserve staff report, by Kevin J Stiroh, concluded, "Industry-level data show a broad productivity resurgence that reflects both the production and the use of IT. The most IT-intensive industries experienced significantly larger productivity gains than other industries." The report went even further, attributing most of the productivity improvement to technology. "Results show that virtually all of the aggregate productivity acceleration can be traced to the industries that either produce IT or use IT most intensively." Business 2.0 magazine summarized the turnabout in top economic thinkers viewpoints on the productivity gains from technology, saying that those gains: ...materialized in force beginning in 1995. What followed was a five year run in which productivity grew an astonishing 2.8 percent a year, or double the rate of the previous two decades. (The numbers may sound small, but at 2.8 percent, living standards double every 25 years; at 1.4 percent, they double every 50.) About The Author: Jason Roskopf with osm4.com, offers Techlink Pro software, a Password Tracker and IT Information Management tool, that secure your IT information and manages IT database online. |
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