Productivity and IT are normally synonymous. Does IT on its own create productivity? The evidence seems to indicate that IT on its own does not lead to productivity.

Does IT really boost Productivity?

The extent that IT has influenced productivity is being challenged. The idea that investment in new IT technology might be a waste of time might actually be true.

This is an interesting question.

Ask a supplier and they will answer with a loud and resonant - Yes. Ask the IT department and they will support this point of view. Ask an economist and he will say - No. Ask an accountant and he will say IT has had an impact on productivity but it has been much slower than expected.
Does this mean that all of this IT investment has been for the cats?
Does this mean that Moore's Law is purely academic?
Does this mean that spending on new technology may be a waste of money?

This cannot be true.

Lets analyse all of this in a more structured way. If we look into history at four periods: 1870-1913; 1913-1972; 1972-1995; 1995-1999 we find that economic data regarding labour, capital output and productivity show that we have some problems. There are two measures: labour productivity and MFP (multifactor productivity) based on the whole being more efficient than the separate parts and constitutes additional output that cannot be attributed to rises in labour or capital.

The analysis shows:
· 1870-1913 Productivity 1.42%, MFP 0.47%
· 1913-1972 Productivity 0.69%, MFP 1.08%
· 1972-1995 Productivity 0.66%, MFP 0.02%
· 1995-1999 Productivity 2.19%, MFP 1.25%

It is interesting to note that in the hay day of IT implementation the productivity actually got worse. The success in the last years is primarily due to the growth within the IT industry itself. This industry is big enough to have its own effect on the economy. Non-IT industry does not have the same growth.

Robert Gordon of Northwestern University says that the main drivers for economic well being are massive technology changes and the birth of new industries. Examples of technology are: electricity; internal combustion engine; chemicals; entertainment and communications, whilst social changes are: health and sanitation. The scale of these changes have driven the MFP. The developments in IT are just not in the same league.

Other analysts are saying that the IT contribution has just taken much longer to bear fruit. The case is looking somewhat dire. IT is a waste of money.

Hold it. Not too fast. We might be looking at the wrong thing.

IT is an enabler not the driver.

The analysis does not measure this. It also does not measure coverage, quality of life or pace. Because the coverage of services is so wide, productivity suffers. Quality of life also impacts productivity as it forces choice and choice forces differentiation, which causes productivity to suffer. Pace cannot be ignored - we want things fast, now and not tomorrow. This means that waiting is not an option so productivity will suffer.

So IT does influence productivity. It allows us to do things that without it we could not. It is getting better at it, which is why the productivity index is rising. Internet is the latest addition to the IT armoury that can be applied to improve productivity.

In the future new technologies will arise; IT will be able to help it be more productive. It will be the process changes that IT will support, it will not always be pure IT.

So the answer to the question is NO. But …………