Evaluating the impact of IT investments: use of a multi-period profit-linked productivity measurement model

Abstract

Measuring the impact of investments in IT is still elusive. The perplexing productivity paradox phenomenon generated huge interest among IT researchers and produced numerous methods for impact measurement. But there is no robust model which can clarify clearly the business productivity and IT investment issues. In general, the measurement models have failed to show clear linkage between IT investment, employee productivity, operational costs and revenues. This paper explores further the productivity paradox, and then describes a multi-period profit-linked productivity measurement model that can demonstrate to managers the link between IT investments, productivity and profitability. For practical utility, the model is implemented in a spreadsheet application so that managers can test various policy options. The paper presents the benefits of this model and discusses possible future extensions.

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