Information technology: Increasing productivity in services

For nearly two decades, despite massive investments in information technology (IT), the overall service sector showed minuscule gains in measured productivity.1 Were managers previously simply wrongheaded? Were results just delayed?2 Or are the data so flawed that any simple conclusions are misleading? Our studies suggest the latter. They also provide a practical reference from which top managers and information officers in service companies can learn to both answer unwarranted attacks and improve future performance. As with any other new technology, there have been some serious mistakes, much duplication of effort, and undoubted inefficiencies as executives learned to manage the new information technology (IT). However, there is strong evidence that the U.S. service sector received high performance payoffs even during the period when it was most criticized. U.S. service companies' performance has compared very favorably with European and Japanese competitors.3 There have been demonstrably large performance gains in all major service industries using IT. Why then was there an apparent problem? First. IT is like many other technologies; it often takes years to decades for aggregated industry data to show positive payoffs.4 Second, in the case of IT. macro-data do not capture many of the most important payoffs businesses have achieved from its use. What are the helpful lessons for managers? How can businesses improve their IT payoffs in the future?