Linking the impact of IT investments to productivity and profitability

Rao, Mohan P., and Mandal, Purnendu (2011) Linking the impact of IT investments to productivity and profitability. International Journal of Enterprise Information Systems, 7 (2). pp. 34-47.

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Implementing IT (information technology) systems such as ERP (enterprise resource planning) requires huge investments. Measuring the impact of these investments on productivity and profitability is extremely important for business managers. Many studies have failed to show the direct relationship between IT investments, organizational productivity and profitability, a phenomenon known as productivity paradox. The failure might relate to problems with the measurement techniques. This paper describes a measurement model, known as the PPP model ("Profitability = Productivity + Price Recovery"), that can fill the gap and show a link between IT investments, productivity, and profitability. The spreadsheet-based implementation of the PPP model, using multi-period data, generates performance trend charts of productivity, price recovery, and profitability. These performance charts provide a multi-period perspective to managers in identifying and understanding the impact of IT investments. This model is useful to managers considering heavy investments in IT as well as for managers interested in assessing their organizational performance and taking corrective actions in a timely manner.

Item ID: 33557
Item Type: Article (Research - C1)
ISSN: 1548-1123
Date Deposited: 02 Jul 2014 03:00
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1503 Business and Management > 150301 Business Information Management (incl Records, Knowledge and Information Management, and Intelligence) @ 70%
15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150105 Management Accounting @ 30%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9104 Management and Productivity > 910402 Management @ 100%
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