MIT finds that investments in IT increase profitability

Below I would like to share an interesting quote from the latest issue of MIT Sloan Management Review : recent study found that more recent information technologies — those deployed since 1995 — have a significant positive impact on profitability.  They write that:

IT investments had a marked positive effect on revenue growth; for example, a $1 increase in IT expenditures per employee was associated in our study with a $12.22 increase in sales per employee. However, the effect of an increase in IT expenditures on reducing overall operating expenses was negligible in our sample of companies.

The article continues:

Further analyses of our data suggest that as industries become more competitive, the effect of IT on profitability increases. IT investments also had a greater effect on profitability in the service sector than in the manufacturing sector. A possible explanation for this finding is that services allow greater IT-enabled customization and personalization.

One key takeaway from their research is that executives should accord higher priority to IT projects that have the potential for revenue growth over those that focus mainly on cost savings.

You can download the full study here

Source: wikibon.org via Jeroen on Pinterest

The X-files of IT

When doing some research for the book "Right-brain strategies for left-brain CIOs" I found an interesting post on the Witsa website:

The global marketplace for information and communications technology (ICT) will exceed $3.7 trillion this year and will top $4 trillion by 2011, according to Digital Planet 2008, a study released by the World Information Technology and Services Alliance (WITSA).

I was under the assumption that global IT spending was in the area of 1,5 trillion this year but hey, what's in a figure. On the other hand, Gartner has calculated the sunk cost of IT projects to amount to 600 billion per year. Roughly forty percent of all IT projects are killed or fail to meet the expectations of the business.
Now, I am not a mathematician but this means that - if we take $ 3.7 trillion dollar to be a correct figure - 20% of global IT investments literally go down the drain.

How is it possible that the GDP of an average country is thrown away? Defective governance, lack of competences in the IT shop or has it got something to do with the lack of executive support for IT?

The purpose of Right-brain strategies for left-brain CIOs is to demonstrate where things go wrong in the left-brain IT shop and how to remediate the situation with right-brain thinking. If you want to find out how communication, culture, competences, collaboration and creativity can avoid this money burning, then keep on following this blog.