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Silicon Follies
Silicon Follies
Chapter 46: Green tea and red ink -- Barry loses millions over breakfast
By Thomas Scoville
[08/21/99]

Six-packs, macaroni and software
Does stuff you like make for stocks you should hold? And why do companies offer "affinity groups" cheap stock when they go public?
By Mark Gimein
[08/20/99]

A PC in every pot
When we have free computers in every room, will alternative operating systems like Linux, Be and Amiga rule the world?
By Janelle Brown
[08/19/99]

Column
More on "deep links," journalists and IPOs
Why you don't need lawyers to block links -- and hot reactions to the Chris Nolan story.
By Scott Rosenberg
[08/18/99]

Silicon Follies
Silicon Follies
Chapter 45: The bad news -- WHIP gets whipped by pundits
By Thomas Scoville
[08/18/99]

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In fact, new research shows that technology rarely saves businesses time or money. In fact, innovations often come at considerable expense. But they do help companies do new things that would otherwise be impossible.

This may explain why productivity statistics haven't increased along with investments in information technology. For years, economists have puzzled over what they call the productivity paradox. U.S. companies have invested billions of dollars in computer technology since the 1970s. Yet government statistics show they reaped no productivity gains until 1997. This is perplexing. We expect computers to make companies more productive by allowing workers to get more done in less time -- that is, by increasing production without increasing costs.

In the last two years, productivity has risen by 2 percent. The business press has gushed that investment in computers is finally paying off. Federal Reserve Chairman Alan Greenspan recently told Congress that productivity is up and that information technology is responsible for the current economic boom.

A look at technology projects company by company, however, shows that costs are going up, not down. Companies are spending more to do more. Their technology investments are bringing not cost savings or increased productivity, but increased capabilities. They invest in technology to stay competitive and grow market share.

Consider the evidence: First of all, many large-scale information technology projects fail outright. A 1998 survey by Standish Group International, a Massachusetts research firm, found that only 26 percent of all information technology projects are considered successful by the companies that contracted them. Some 28 percent were considered failures; 46 percent were considered "challenged" -- for taking too much time, going over budget or lacking desired features and functions. They are as risky as junk bonds and oil exploration, says Jack Ross, a consultant with the Chicago Research and Planning Group who studies ways to measure the "intangible" benefits of computer systems.

Typically, the projects that do succeed enhance a company's output in some way, but at greater expense than the old system. It is rare, if not unheard of, for new technology to allow a company to do exactly what it did before, only faster and less expensively.

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