The IT challenge: how do organizations maximize the return of their Information technology investment?

• Author: Coryell, Bryce
• Position: TECHNOLOGY

[ILLUSTRATION OMITTED]

Every business manager who is responsible for his or her organization's spending on computers and computer networks should read the book "Does IT Matter" by Nicholas G. Carr.

Carr examined organizations' investments in technology and what return on their investment in technology they received by way of increased profits. Carr rather conclusively showed that many organizations fail to receive results from their technology investments.

I agree with Cart and think that many organizations in Alaska need to rethink how they manage technology if they're to get the most for their money.

Returns on technology are significantly hampered by two factors that a competent business manager can mitigate. First, technology investments that result in a boost to productivity often fail to increase profits. Second, technology investments often don't work as advertised and can even do more harm than good.

This article is intended to provide a brief overview of the challenges and how to overcome them so that your organization can get the most out of its technology investment.

MAXIMIZING THE RETURN BY MINIMIZING THE INVESTMENT

Organizations spend money on technology to increase productivity. Computers that are slow are worth replacing since employees' productivity will increase with a faster and more reliable system. Servers that are unreliable are worth fixing since employees need timely access to key information in order to be productive. Companies could make endless upgrades based on this logic since there is always better technology available. Since other firms are likely making the same upgrades and receiving many of the same benefits, any competitive advantage gained is rapidly eroded.

For example, pretend I own a widget factory and spend $100,000 on a new computer system that will increase my factory's productivity by 20 percent. Assuming that I don't plan on changing the price of widgets, this increase in productivity should yield higher profits since I will have to put less effort into producing each widget.

However, six months after I make my technology upgrade, a competitor makes an upgrade to their factory that only costs $80,000 and increases productivity by the same amount. Both firms subsequently cut their prices to compete with one another. Who reaped the benefit from both firms' investments in technology?

It was their consumers who benefited by way of lower prices, not the companies.

How do firms make sure that they keep...