IT's business value endorsed

Official figures affirm the benefit of IT investment on productivity

Technology investment has a substantial, quantifiable impact on business productivity, according to the Office of National Statistics (ONS) and the London School of Economics (LSE).

There is some differentiation between sectors – use of technology by service companies generates 14 per cent increased productivity compared with 10 per cent in manufacturing, for example. But all businesses make ‘significant statistical returns’ on IT capital investment, says the ONS and LSE report.

Networked computers have an even greater effect: employees with internet access contribute 2.9 per cent in productivity gains, compared with 2.2 per cent for staff using standalone systems.

But UK businesses still have lessons to learn from their US counterparts. US multinational subsidiaries in this country experience an eight per cent higher productivity gain from IT investment than domestic UK firms. More than 80 per cent of this advantage is explained by better use of IT, says the ONS report.

The research is relevant to both business and government, according to Jeremy Beale, head of ebusiness at the Confederation of British Industry.

‘It shows IT investment and use is a macroeconomic issue, and the Treasury needs to start looking more systematically at what could be done to help companies implement good online working practices,’ he said.

‘From a business perspective there is a lesson about how US firms have learned to use technology and combine that with the optimum business processes.’

The ONS figures confirm the common sense perception that IT is good for business, says Beatrice Rogers, ebusiness programme manager at supplier trade body Intellect.

‘This is a chance for the government to put IT at the heart of policy development, to put these measures in the set of statistics used to track the economy, and to take decisive action on the UK’s exploitation of IT,’ she said.

But IT investment by itself is not enough, says Jim Norton, senior policy adviser at the Institute of Directors.

‘If you just invest in IT, it does not help much,’ he said. ‘Unless you look at the way people use it you don’t necessarily reap benefits. Multinational US firms lead through a combination of IT investment and working practices.’