IS investment priorities in contemporary organizations
Communications of the ACM, Feb 1998, Vol. 41, Issue 2, p40, 9p
Grover, Varun; Teng, James T. C.; Fiedler, Kirk D.
The productivity paradox, hyped in the general news media and by prominent economists just a few years ago, questioned the wisdom of corporations going high tech when little impact was observed on the bottom line. This was particularly true in the service sector, involving white-collar productivity, where more than 85% of the investments in information technology (IT) were made [4]. Now, with an estimated one trillion dollars invested in information technologies since 1980 in corporate America, we are beginning to see significant gains in productivity [3]. Confronted with a slowing economy, increasing global competition, and pressure to leverage investments in the increasingly powerful myriad of information technologies, businesses have responded by undertaking fundamental change. These changes in both structure and process, catalyzed by consultants and the media, and subsumed under banners like reengineering and rightsizing, are finally reversing the productivity paradox. Data presented by a study commissioned by the U.S. National Research Council, involving researchers from MIT, does indicate that IT has an impact on productivity [6]. Much of this impact is fueled by changing rather than automating work in order to take advantage of the capabilities of ever-improving technology. And many of these technologies are being used as strategic tools to compete effectively in the marketplace. The irony is that while the power of IT in the information age is becoming readily apparent in the growing use of terms such as "cyberspace," "electronic commerce" and "paperless society," the power of information system (IS) departments is not. And yet these are the traditional entities within organizations with the expertise to control deployment of these very information resources. Today, IS departments deal with a growing and often bewildering array of technological choices, a more literate user group with many demands and little patience, and pressure from executive levels to expeditiously deploy and support critical organizational needs. Further, a majority of firms still rely on financial criteria to evaluate new IS projects [2] and, according to a survey by the International Data Corporation, less than half the major U.S. companies have supported increases in IT investments over the past few years [3]. Therefore, making good investment decisions for information systems and technology is as critical and as difficult as ever. This article reports on an empirical study of IS investments, presenting a snapshot of the investment priorities of 313 contemporary U.S. organizations. The objective of the study is simple—to observe how IT investments are being prioritized and to examine factors that might affect the prioritization. Doing so facilitates evaluation of the deployment of critical information resources.

ISE Categories:  Productivity Paradox, Productivity Analysis, Investment