| Most companies ought to have an IT department. | | | | expected productivity gains, MIT Nobel Laureate |
| This appears to be an obvious observation. However, | | | | Robert Solow famously remarked in 1987, "You can |
| it is worth recognizing that, in the memories of more | | | | see the computer age everywhere but in the |
| than half the working population of the US, a | | | | productivity statistics." More recent research |
| company department organized solely around | | | | suggests that the productivity benefits from the |
| information technology was unheard of. The IT | | | | deployment of technology have had a massive, albeit |
| department has evolved from a narrowly focused | | | | delayed, impact on the US and world economy. |
| data processing element of the accounting | | | | A variety of researchers have concluded that |
| department to a function that supports and, in many | | | | investments in IT have been instrumental in the |
| cases, drives, nearly every area of the company. | | | | improved productivity seen in the US economy |
| This has happened in a mere 40 years. Stand-alone | | | | beginning in the mid 1990s. In early 2000, the Federal |
| IT departments are a relatively recent development. | | | | Reserve gave information technology investments |
| The number of people working in technology-related | | | | credit for approximately $50 billion in productivity |
| jobs grew six times faster between 1983 and 1998 | | | | improvement, which represents more than 65% of |
| than the US workforce at large. Information | | | | the total $70 billion in productivity gains seen by |
| technology related industries doubled their share of | | | | businesses in the US in the last half of 1990s. |
| the US economy between 1977 and 1998. Practically | | | | The Federal Reserve staff report, by Kevin J Stiroh, |
| overnight, technology related services have become | | | | concluded, "Industry-level data show a broad |
| a global, trillion-dollar industry. | | | | productivity resurgence that reflects both the |
| The principle driver behind this remarkable, rapid | | | | production and the use of IT. The most IT-intensive |
| creation of a vibrant, sophisticated, and enormous | | | | industries experienced significantly larger productivity |
| industry and the attendant inclusion of a department | | | | gains than other industries." The report went even |
| dedicated to it in every credible company, is the | | | | further, attributing most of the productivity |
| quest for business productivity improvement. | | | | improvement to technology. "Results show that |
| The notion of technology investments as a driver of | | | | virtually all of the aggregate productivity acceleration |
| US business productivity has a controversial history. | | | | can be traced to the industries that either produce |
| The benefits of technology investments (and IT | | | | IT or use IT most intensively." |
| departments) were not always so apparent. | | | | Business 2.0 magazine summarized the turnabout in |
| Productivity growth in the US faltered from the | | | | top economic thinkers viewpoints on the productivity |
| mid-1970s through the early 1990s, in spite of large | | | | gains from technology, saying that those gains: |
| technology investments from most major US | | | | ...materialized in force beginning in 1995. What followed |
| corporations. The disconnect between heavy capital | | | | was a five year run in which productivity grew an |
| and expense investment and the theoretically | | | | astonishing 2.8 percent a year, or double the rate of |
| associated improvements in productivity led to a | | | | the previous two decades. (The numbers may sound |
| so-called productivity paradox. In reaction to the | | | | small, but at 2.8 percent, living standards double |
| failure of such large investments to produce the | | | | every 25 years; at 1.4 percent, they double every 50. |