IT Will Continue to Drive Productivity and Long-Term Job Growth, But R

IT Will Continue to Drive Productivity and Long-Term Job Growth, But Recent Slowdown In Investment Having Short-Term Impact, Says MIT Professor Eric Brynjolfsson

    Business Editors/High-Tech Writers

    STAMFORD, Conn.--(BUSINESS WIRE)--April 14, 2005--

    In Gartner Fellows Interview, Adviser to Federal Reserve Says Effective Policies To Support Economic Growth Are Key Ingredients for
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    Information technology will continue to contribute significant gains in productivity and long-run job creation, despite near-term disruptions in job growth, according to Eric Brynjolfsson, management professor and director of the Center for eBusiness at the Massachusetts Institute of Technology's Sloan School of Management.
    "Productivity growth comes from new technologies and new ways of doing things - new techniques of production," Professor Brynjolfsson said in an interview posted this month on gartner.com. "There are certainly specific cases where companies haven't needed as many workers. Technology has allowed them to do that. But the real culprit is the lack of output. Slowing down productivity growth would be no solution to preventing people from losing their jobs."
    Prof. Brynjolfsson, who has advised Federal Reserve Chairman Alan Greenspan on the relationship of IT and productivity growth in the economy, has studied the relationship of IT and productivity in more than a thousand companies. He said effective policies to support economic growth are key ingredients for continued job growth. High productivity growth has been consistent with high employment levels in the job force for the past century. Productivity growth has averaged near a comparatively high 4 percent a year since 2000, compared with 1 percent between 1973 and 1995. "There's no reason" high productivity gains and high levels of employment can't continue, he said.
    "We haven't reached a point where computers are such good substitutes that there isn't anything left for people to do," he said. "There are plenty of jobs that people are better than computers at. So we can have both." He said, however, reduced IT investment in the 2001-2003 period when companies focused on cost cutting will limit IT-driven job growth in the short term. "Ultimately, I'm optimistic about productivity growth being at the high end of economists' estimates," he said. "But it's not necessarily going to be a smooth and steady path."
    In the interview, conducted by Gartner Fellow Kenneth G. McGee, Prof. Brynjolfsson said information technology adds to productivity in several ways. One is through the technology itself, allowing work to be completed faster and more efficiently. The second "more interesting" way is by changing how work gets done, allowing new techniques of production to be created. Another is the "micro-inventions" that millions of information workers and blue-collar workers in organizations make when they are given new tools. "There are millions of those innovations that collectively have added up to a tremendous amount of productivity improvement," he said.
    Prof. Brynjolfsson said companies that invest heavily in IT do not necessarily improve their productivity and competitiveness, although the majority do. His research at the Center for eBusiness has identified seven factors separating companies that generated significant productivity gains from other heavy IT investors that achieved mediocre or poor results.
    These seven practices define what Prof. Brynjolfsson describes as "the digital organization":

--	Convert analog work practices to digital work practices. The shift to electronic-based systems from paper-based systems speeds up the organizational metabolism.
--	Distribute decision rights broadly throughout the organization. Quantifiable, rule-based can be centralized through computer-based systems; decisions requiring human interaction, judgment, exception processing and creativity need to be pushed out.
--	Establish strong performance-based incentives. Reward initiative that generates productivity improvements.
--	Create more open access to information and communication. High productivity organizations have more lateral and more vertical sharing of information through e-mail messaging, Intranets, and so on. This support distributed decision-making, as do performance-based incentives.
--	Focus more on business lines. Prune out unprofitable lines, invest heavily and explicitly in corporate culture, and create clarity on goals for the organization.
--	Invest in hiring the best employees. Spend more senior and middle-manager time and more money on recruiting; seek candidates with high analytical ability, verbal skills, and teamwork and people skills.
--	Invest heavily in training. More training days per year, more use of internet-based training systems contribute to increased levels of human capital.

    "In my research, nine-tenths of the costs and nine-tenths of the benefits of big IT projects are not in computer hardware or even software," he said. "They're in the organizational and human capital changes" of creating business process change. "Those are the ones that tend to be the roadblocks to success or the ones that allow you to really do things differently."
    The April Gartner Fellows Interview with Prof. Brynjolfsson is available on Gartner's Web site at www.gartner.com/fellows.
    The Gartner Fellows Interview features Gartner analysts each month in discussions with leaders in technology, business and government on significant industry issues. The Gartner Fellows are 15 Gartner research analysts, distinguished by their reputations as innovators and thought leaders. They collaborate with 600 Gartner research analysts worldwide to identify and examine emerging trends and technologies.
    Mr. McGee is Group Vice President and Research Fellow at Gartner. He is author of the best-selling Heads Up: How to Anticipate Business Surprises and Seize Opportunities First (Harvard Business School Press, 2004.) The book, selected by CIO Insight magazine as one of the best business books of 2004, details how businesses can avoid repeatedly falling victim to surprises by detecting critical events in real time. Mr. McGee, also a consultant to major corporations and government institutions, is scheduled to speak on emerging IT trends, real-time infrastructure and concepts outlined in Heads Up at Gartner's Spring Symposium in San Francisco, May 15-19, and in Barcelona, May 22-25.

    About Gartner

    Gartner, Inc. is the leading provider of research and analysis on the global information technology industry. Gartner serves more than 10,000 clients, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company focuses on delivering objective, in-depth analysis and actionable advice to enable clients to make more informed business and technology decisions. The Company's businesses consist of Research and Events for IT professionals; Gartner Executive Programs, membership programs and peer networking services; and Gartner Consulting, customized engagements with a specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has over 3,900 associates, including more than 1,100 research analysts and consultants, in more than 75 locations worldwide. For more information, visit www.gartner.com.

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CONTACT: Gartner, Inc. Wanda Whitson, 408-468-8312 wanda.whitson@gartner.com

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