Information technology has been an inseparable part of Alan Greenspan's era as Federal Reserve chairman. Tech-fueled productivity gains powered the economy, as industries from banking to retail to manufacturing automated transactions, cut inventory, and increased employee output. As Greenspan hands the keys to his designated replacement, Ben Bernanke, on Jan. 31, economists and business leaders are wondering how much IT octane is left.

Greenspan himself is cautious. "Over the past decade, the U.S. economy has benefited from a remarkable acceleration of productivity: Strong gains in efficiency have buoyed real incomes and restrained inflation," he said in his semiannual report to Congress in July. "But experience suggests that such rapid advances are unlikely to be maintained in an economy that has reached the cutting edge of technology."

	IT's been on his side. Photo by David Scull/Bloomberg

U.S. workers' productivity growth slowed last year to 1.8%, down from 3% in 2004, says a study issued last week by The Conference Board, a business group. A narrower government measure of productivity that covers nonfarm businesses--excluding some 22 million public-sector workers--showed an annualized growth rate of 2.7% in the third quarter of 2005, compared with the 3.4% rise in 2004.

If IT is going to keep delivering impressive business-productivity gains, it will likely come from a new source. The gains of the last decade were mostly around transactions--how orders are taken, inventory replenished, payments made. The next big bang could come from helping people and companies collaborate better and more efficiently. "They won't totally automate the processes because they need creativity and thought," Forrester Research analyst Andrew Bartels says. "However, you can use technology to allow faster collaboration and tap into a broader breadth of expertise and resources."

That's what's happening at Procter & Gamble Co. One of its most-sweeping IT projects is rolling out new Microsoft desktop software to help its worldwide workforce of more than 100,000 people work more closely together and with partners. By using technologies such as Web-conferencing services and document-sharing portals, P&G wants to create more-effective virtual teams and ultimately make faster and better decisions.

Untapped Productivity
Not all collaboration and productivity improvements will require major IT spending. Companies have made huge investments in ERP systems, PCs, and Internet connectivity over the past 10 years, and those technologies now serve as platforms for newer technologies. Employees get more productive when they can tap into back-office systems using increasingly common and powerful wireless handhelds. Or they can collaborate via easy-to-use tools like wikis, Web pages that can be quickly set up to foster virtual team collaboration by letting anyone with access post ideas, updates, or deadline changes.

Some of the IT purchased in the last decade may have been bought without a clear idea of how it would pay off, said Susan Schmidt Bies, a Federal Reserve Board governor, in a speech last week before the Tech Council of Maryland. "Firms appear to be realizing further productivity gains as they discover new and better methods for using IT," she said.

Bernanke is likely to speak with the same central banker's prudence for which Greenspan is known, weighing all the factors racking an economy. Bernanke revealed some of his thinking on IT and productivity in a speech a year ago, allowing that productivity optimists may have a "good case," citing the fact that many of IT's benefits haven't spread through the economy, especially to small companies, which account for about half of private-sector gross domestic product. "Even if the technological frontier advances more slowly during the next few years, further diffusion of the existing technologies and applications can continue to raise aggregate productivity," Bernanke said. In other words, tech ain't done yet.