In 1986 Fortune magazine first publicly revealed convincing evidence of the ineffectiveness IT in business. Research conducted in the MIT school of business later confirmed this hypothesis. In his scientific work Max Polyakov says that MIT research showed that an increased amount of computer equipment over the last 20 years did not cause a remarkable increase in the productivity of employees in the information field.
However, the real value of IT for the world economy could be significantly less. If the productivity paradox is not taken into account, expenses can exceed the expected amounts and development may not be completed. This paradox slows down the capacity of information technology in the way of managing the economy and business, making it clear that this is not a panacea.
Max Polyakov gives the example of Paul Strassman’s research conducted in the first half of the 90’s. Paul Strassman the former director of IT department at Xerox, US Department of Defence was seriously concerned about the effectiveness of information technology. Strassman tried to draw attention to the fact that IT costs exceed revenues by 10 times. When he analyzed statistical data he also discovered a paradox that Singapore is considered the first “information island” of the world, despite the fact that the country spends less than 0.5% of its GDP on IT. At the same time, the cost of IT in the US economy was 2.8%. In New Zealand and Sweden was close to 2.6% and 2.4%. “However two areas in which innovations are still the most important factor in the growth of the entire economy are core resources and infrastructure”, Max Polyakov says in his scientific work.
In 1990, based on the research of 292 enterprises, Paul Strassman said that there is only one business indicator that shows the connection between costs of implementing technologies with company profit. In his own research Max Polyakov explains that this indicator was Sales, General & Administrative (SG&A). It is the indicator that shows spending on marketing, sales, management and directly affects the profits of companies.
Companies that ineffectively implemented technologies, for example, showed that the costs of coordinating, motivating and training managers, promoting products and organizing sales at a certain level are key indicators of the company success. Every single business must implement only connected to those business IT, rather than repeat after competitors.