IT Investment and Productivity Paradox

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
IT Productivity Paradox
Causes of over investment
Conclusion
References

Introduction

Information technology is the technology used by companies for the creation of information, computing and dissemination or storage of information. In the last thirty years, most companies have invested a large sum of money in modern information technology because of the benefits that come with it. The computers, calculators, photocopying machines all fall in this category of IT. Companies and countries have embraced this modern technology in the quest to improve production levels as well as increase efficiency. The investment in this technology has brought about commercial advantages to some companies. However, the increased use of information technology by companies does not mean that there has been improved productivity both in the service and manufacturing sectors (Brynjolfsson, 1994). Production paradox is a phenomenon that has emerged in the production levels of companies. Cases of over investing in IT have been reported. Production paradox is a concept where the level of increased investment in IT by a company is not commensurate with improved production levels (Cummings, 1993). There is a discrepancy between companies investing more in IT and reaping benefits in terms of increasing productivity. Several researches in uncovering the relationship between increased investment in IT and productivity have revealed that there has been a negative correlation between the two (Brynjolfsson, 1994).

IT Productivity Paradox

The level of productivity in a company is the most important way through which economists can ascertain the economic performances of a technologys contribution. The managers have started raising questions whether huge investments in IT have caused a significant increase in productivity. The manufacturing and industry services are the subject of contention with respect to IT and productivity paradox. The comparison of increased investment in information technology capital and manufacturing sectors reveals there is negative correlation. The economic gains made in the manufacturing sectors are cannot be able to justify the huge investments made in the sector by some companies. This is an indication of over-investment in IT by companies but with little gains being realized in productivity. Also there have been cases of poor performance of IT related to a fall in capital productivity especially the production level of labour (Brynjolfsson, 1994). This labour productivity is calculated by getting the revenue that that a worker generates for a company when the investments in IT have been made to the organisation.

Causes of over investment

There are possible reasons why a company can invest heavily in IT but reap fewer benefits in productivity. Several factors contribute IT and production paradox. Firstly, there is mismeasurement between inputs and outputs of a company. There is massive expenditure in IT but the exact contribution of IT cannot be estimated. Secondly, IT really is not productive at the company level. The investments are just made because the decision-makers are not working for the benefit of the company. Instead, they use obsolete systems. It is poor use of technology and misuse of information. Thirdly, when there are delays between the time periods in which the investments cost incurred takes to be recouped back in the company. The short term impacts of IT investments might not show a remarkable increase in the productivity of a firm. The investment in IT takes time to be felt in a company (Brynjolfsson, 1994). This is because there is a need for serious learning, by both employees and companies. The new technologies require learning to be able to utilize them properly. Lastly, other economists have argued that there are no significant benefits present or in the latter, and try justify why CEO would systematically continue to massively spend in IT. Economists believe that the massive investments might only be beneficial to a group of individual people or firms but not the overall performance of the industry (Brynjolfsson, 1994).

Conclusion

The IT Productivity Paradox is the concept that, in spite of huge investment and outsourcing by firms and organizations globally in their IT systems, there is insignificant level of increased productivity Wilcocks 1999). Information technology is no longer being seen as a pillar for an enterprise information technology today has a lead role to play in the strategic planning processes of any organization. With increased investment in IT in the production, manufacturing and service sectors of economies there is a need for assessing the level of production of the technology to firms. The fundamental aspect is how to ascertain ways of measuring outputs-productivity as a result of investment in IT. The use of information technology in monitoring firmss productivity can too assist the organization to keep track of those areas where maximum utility is not being realized.

Therefore, companies have over invested in information technologies. However there are no tangible results that can justify whether the level of IT investment has insignificantly affected the production levels of companies.

References

Brynjolfsson, E. (1994).The Productivity Paradox of Information Technology: Review and Assessment; Communications of the ACM, Center for Coordination Science, Cambridge, Massachusetts.

Willcocks, P. (1999). Beyond the IT Productivity Paradox. Web.

Cummings, T. (1993). The Productivity Paradox: What Is It and How Can We Move Beyond It? www.lifehack.org.

Click Here To Order Now!

IT Investment and Productivity Paradox

Do you need this or any other assignment done for you from scratch?

We have qualified writers to help you.

We assure you a quality paper that is 100% free from plagiarism and AI.

You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)