Report: IT Spending Effective Productivity Driver

March 13, 2007 ( - A new report by a Washington, D.C.-based research group finds that organizations with robust information technology (IT) spending benefit from significant productivity increases.

The report by the Information Technology and Innovation Foundation, Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution, said its impact is seen in a variety of areas.

“(IT) lets organizations automate tasks, freeing workers up to create value in other tasks,” the report asserted. “IT also has widespread complementary effects, including allowing organizations to fundamentally reengineer processes and lets organizations more efficiently use capital and natural resources. IT also has a number of indirect effects, which in turn spur higher productivity, including enabling larger markets and better organizational decisionmaking.”

IT also boosts economic output by enabling more people to work, the report said, including disabled people and people who cannot work full time, but who can work part-time or from home.

The IT industry itself appears to be playing a key role in reducing the severity of the business cycle, allowing the economy to run at full capacity more of the time.

IT enables more information about quality to be collected, giving organizations greater opportunity and incentive to boost quality. IT also makes it easier for organizations to design more customized products and services, which by definition are of higher quality because they more closely fit the desires of consumers, the report said.

The report noted that IT lets workers do more things at the same time ( e.g. , reading e-mail while sitting in on a conference call). Likewise, IT allows people to work where and when they previously could not, such as talking by cell phone while traveling on a train or checking e-mail in the airport, the report noted.

IT appears to be “super capital” that has a much larger impact on productivity than other capital. As a result, public policies should focus on spurring additional investment in newer generations of IT, the document said.

As a result, there is a now a strong consensus among economists that the IT revolution continues to be responsible for the lion’s share of the post 1995 rebound in productivity growth, the study found. Researchers have found that the more firms invest in IT the higher their productivity.

The bottom line, according to the researchers, is that ITs benefit on productivity levels is far from running its course.

“In short, while the emerging digital economy has produced enormous benefits, the best is yet to come,” the report said. “The job of policymakers in developed and developing nations alike is to ensure that the policies and programs they put in place spur digital transformation so that all their citizens can fully benefit from robust rates of growth.”

The report is here .