Its been a problem economists, IT companies and IT professionals have puzzled over for years. We all know that applying computer technology to business processes make them more efficient, but how can it be proved?
To provide an answer, some of the world's leading IT suppliers have joined forces with a group of US academics to prove that technology investment can deliver real returns.
Backing the project is an A-list of global suppliers including Microsoft, Accenture, BT, Cisco Systems, Hewlett-Packard, Intel, SAP and Xerox, who have created the Information Work Productivity Council, a research centre at the Massachusetts Institute of Technology's Sloan School of Management.
With European corporate IT spending levels stagnant and spending in the US falling in 2001 and 2002, the enterprise IT industry is anxious to develop ways of justifying investment - something businesses have been doubtful of since the dotcom crash and the Y2K problem.
But in the UK the initiative provoked a sceptical reaction from users and analysts. IT directors and chief financial officers have never been less inclined to believe suppliers when they urge new investment today on the promise of jam tomorrow.
However, despite the universal mantra of return on investment, IT funds are still being spent as an act of faith while the business case is being developed.
The £2.3bn investment in NHS IT, for example, is supposed to revolutionise the provision of healthcare. Whether the new systems are appropriate, are wanted by users or will be used by them, remains to be seen.
Erik Brynjolfsson, professor of management at the MIT Sloan School, who will head the new research centre, has for the past 15 years championed the power of IT to improve business productivity. Now, with funding from Microsoft et al, he aims to develop analytical tools to prove it.
The Information Work Productivity Centre will examine business processes and enabling technologies used by successful organisations to create a standard method for measuring and increasing information work productivity.
"In the industrial era, researchers and executives developed scientific management principles to improve the productivity of their factory workers. Today, success depends on developing new practices to increase the productivity of information workers," Brynjolfsson said .
The key, he said, is IT-based business process re-engineering. "The productivity benefits of IT spending are relatively modest compared with those achieved when IT solutions are combined with innovative changes in work organisation."
Danny Garvey, vice-president of BT Global Services agreed. "Despite current technology innovations, most companies are not achieving their highest potential. The centre will play a critical role in providing insight into where disconnections exist between technology and business processes," he said.
However, David Roberts, chief executive officer of Tif, the Corporate IT Forum, said the new centre and its supplier sponsors are "seriously missing the point".
"The real issue for users is the cost of software, not the productivity of labour. IT departments are being told to get value from what they already have before spending more," he said.
Richard Holway, director of analyst organisation OvumHolway, is sceptical about what the centre might produce. "We are always dubious of any research funded by interested parties to prove their point," he said. The question of whether IT has produced any productivity gains may be "unanswerable", he added.
"We actually suspect that most IT is implemented because it is there."
Response from the IT profession
Senior IT professionals in the UK are sceptical about the value of the Information Work Productivity Council and the findings it might produce.
Paul Barnett, group IT manager of nationwide car dealership Reg Vardy, said, "There is a long way between this initiative and the real world."
Setting up organisations to tell IT departments about the importance of IT spending and the need to constantly re-evaluate business processes is like "teaching your grandmother to suck eggs".
"We are very business focused already," said Barnett. "Any IT manager worth their salt and backed by a progressive board can turn IT into a business benefit."
Dominic Connor, head of IT at King & Shaxson, a firm of bond brokers in the City of London, said, "What IT managers need is tools that predict ROI, not documents that sound like a factory for happy stories.
"They just send these documents to technical people, telling them that spending money on computers is good." Elaine Clark, group IT manager at the Chelsea Village complex, which houses Chelsea Football Club, said she would take anything the centre said "with a pinch of salt".
Businesses understand the need to spend on IT and technology can deliver real returns. "You can't use a quill pen any more," she said.
She also criticised suppliers such as Microsoft for bringing out too many products and upgrades.
Rather than try and convince corporate users to spend more, Clark said, "[Microsoft] should slow down a bit and make sure its products are more stable before putting them on the market."
Have your say
Who benefits the most from IT spending, users or IT suppliers? E-mail firstname.lastname@example.org