Study Results Identify Shift in Senior Executives' Mindset Regarding Worth of Information Technology Investment

More Executives Say Technology Contributes to Productivity and Growth

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SLEEPY HOLLOW, NY - 04 Feb 1999: -- A growing number of senior executives say that information technology contributes to increased productivity and growth, according to a new study by IBM Global Services and the Economist Intelligence Unit. The results indicate a marked turnaround in executives' attitude toward technology and sheds new light on the debate about whether technology investment can provide a measurable competitive advantage.

The study, "Assessing the strategic value of information technology," drew the following conclusions:

The study comprised surveys of 307 business executives (CEOs, CFOs, COOs, and other non-IT senior managers) in North America, Europe, and Asia, and personal interviews with 43 executives from large companies.

"It is clear from this study that a growing number of executive teams are taking deliberate steps to leverage their firms' technology resources," said Mary Driscoll, Project Director, Management & Finance Division of The EIU. "Beyond increased efficiency, they are pursuing innovations in operating models and seeking new opportunities for business growth. Without question, this subtle but potent shift in mind-set will be hard to ignore in the next few years."

The EIU survey is part of an ongoing study being conducted in partnership with the University of California at Irvine and the Massachusetts Institute of Technology (MIT). The larger study is assessing whether IT is pulling its weight in the economy and whether companies are achieving commensurate returns on their IT investments.

"Our clients have been asking about how they can measure and increase the return on their IT investments, especially as they increase investments in e-business technology," said Paul Lewis, worldwide general manager, IBM Global Services, Consulting Group. "By partnering with these reputable academic and research organizations, we will be providing companies with completely objective findings and ways for senior executives to invest strategically in information technology in order to derive maximum benefits."

Executives surveyed for the EIU portion of the study acknowledged the error in trying to assess information technology's true value using industrial-age tools and traditional financial metrics. Instead, they evaluate technology ROI in terms of the support it provides to strategic plan execution, customer satisfaction, and quality improvement, not as a fixed asset that can be measured with a calculator or stopwatch.

The study introduces a planning and discussion framework it calls the Value Continuum, which can help executives assess the range of IT value and strategic leverage an organization can achieve in the era of pervasive computing. The Value Continuum comprises the following dimensions:

Foundation value:

Innovation value:

"Senior executives today are more interested in what IT can do beyond improving operating efficiency such as enabling and propelling growth strategies by expanding market reach and strengthening customer relationships," Lewis said. "These executives need a practical framework to help them understand clearly what IT should be doing in their organizations."

Executives view external processes and product and service development as areas where IT is not yet delivering value. For example, when posting employment positions on a Web site, most companies do not have the IT mechanisms in place to receive and screen applications electronically, and process the applications through human resources. Manufacturing companies and wholesalers/retailers said that IT can't keep up with changing markets and customer demands, and that they feel hampered by legacy information systems or even new enterprise resource planning (ERP) systems that are not well suited to the task.

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