I.T. Productivity Will Arrive (And Sooner Than Godot)

For years, economists debated whether IT enhances productivity. In the past few years, that argument seemed to have been settled. It does. But current thinking suggests that IT-propelled improvements in productivity remain years off. "Adjusting to new technologies takes time," Federal Reserve vice chairman Robert Ferguson said recently.

IT's impact on productivity depends on how it's used, McKinsey & Co. says in a new study. The management consultancy looked at the semiconductor, retail, and retail-banking sectors and concluded that no one killer app improved productivity. Understanding the enabling role of IT in productivity growth involves understanding the environment and dynamics of each industry, its business processes, and key performance levers, McKinsey says.

Among the barriers to IT-enhanced productivity gains is corporate culture, says James Champy, chairman of Perot Systems' consulting group and an early reengineering advocate. Underlying the connection between IT and productivity, he says, are three principles: transparency, standardization, and harmonization. Transparency lets business partners view each others' processes. Standardizing technology furnishes companies with a smooth flow of information, product, and money. Harmonization links partners' systems, encouraging openness, mutuality, and interoperability.

Companies that follow these practices could see significant improvements in processes that could result in 30% gains in efficiency and lower costs, Champy says. But it could take five to 10 years for those types of improvements.

Even tech-savvy Generation X managers resist changes in ways that block IT-enhanced productivity gains. They can be "as traditional as their fathers and grandfathers about trust, power, and openness," Champy says. This works against an environment that fosters improved productivity, no matter how much technology is deployed, he says.

Still, progress will be made, the Fed's Ferguson says. Today's progress "may not seem as revolutionary as five or six years ago," he says. "We all have a natural tendency to look for the next killer application that will once again revolutionize the high-tech marketplace. This is the high-tech equivalent of waiting for Godot, and we shouldn't ignore the many smaller changes to business practices that are continuing to yield real efficiency gains."