One of my biggest knocks against these huge IT investments is the lack of hard evidence of returns for the companies. The hardest part to swallow is the fact that it may take up to five years for the company to see any positive returns. The duration between the initial implementation and returns post implementation can sometimes cause the company to fall beyond recovery. I feel that it is also important to recognize that all companies will not benefit as far as a cut in required inventory on hand and increased productivity the same.
IT can positively affect a company regardless of their industry as long as it can be aligned with their strategy. The chapter gives the example of an online order costing between $.30 and $1.00 and about $35.00 if it is taken over the phone. This example shows that IT can in some ways reduce the cost of business greatly if a company is able to create a balance IT and productivity.
The productivity paradox presents a multifactor productivity that includes all costs associated with IT implementation. IT has been given the credit for the increase in production and sales. I feel that IT has the capability of not only expanding a company’s ability to increase its production through accelerated methods or higher level of efficiency, but also to increase sales because the company can now fill orders at a faster speed.
Although technology has improved productivity, it is not easy to capture through the measurements of labor and multifactor. The measures do not explain when technology is used in an innovative fashion. The companies however determine how their returns are measured which boils down to their management and behavior within the company.
One of the challenges with spending for IT was if a company was to base the effectiveness and success of an ERP on its level of cost. The question I asked myself was “is it the more you spend the better the system?” I feel that companies are now better evaluating the possible benefit to production of the implementation of IT in relation to their company’s needs.
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It definitely is shocking that decisions for massive investments in IT were made without actually return numbers. It is odd to me that buyers believed all the benefits sellers promised and failed to realize sellers’ concern for their own interests. When consumers make large investments, such as a car, we use much greater caution. First, we realize in advance the self-interested motives of the salesperson. Next, after listening to statements and promises of say a Toyota salesperson, we may visit Honda and Ford to see what they offer. We will probably also use advice from experts, research on the internet, and recommendations from past Toyota customers in our decision. However, decisions regarding investments in a $15,000 car are far less important than the million dollar decisions in IT investments. Therefore, I feel similar to you in your disbelief in how huge IT investments were made without hard evidence of returns. The fact is since it can take years for companies to ever see return, evidence of return exists much less with IT investments and is fair more difficult to measure. Despite spending in technology existing for decades, analysts have failed to determine an efficient way to measure return as they have in almost every other industry.
I guess sometimes people aren't sure what they are looking for and they shop around until the salesperson says what it sounds like the person needs. I think this happens a lot in IT. In my opinion the mind set of some of the investors is lets get something that "does it all" in case we do have that problem later on down the road. Their assumption is that it will pay for itself along with extended benefits.
Technology probably can't increase the productivity if the labor don't how to use the new technology. That's will be another problem about training your labor to use the new technology appropriately. It is difficult to measure the measurements of labor; consequently, the management of the company is a important part to increase the productivity.
That's true, it's one thing to have a new technology that's supposed to increase productivity but that is a concern that how can you tell if it has influenced productivity if you are unable to measure it and use the technology in your organzation. That's a good point.
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