Information Technology Reference
In-Depth Information
Productivity
Developing information systems that measure and control productivity is a key element for
most organizations.
Productivity
is a measure of the output achieved divided by the input
required. A higher level of output for a given level of input means greater productivity; a
lower level of output for a given level of input means lower productivity. The numbers
assigned to productivity levels are not always based on labor hours—productivity can be
based on factors such as the amount of raw materials used, resulting quality, or time to
produce the goods or service. The value of the productivity number is not as significant as
how it compares with other time periods, settings, and organizations. A number of politicians
and healthcare professionals hope that keeping electronic medical records (EMRs) on com-
puterized databases will increase the productivity of doctors and healthcare professionals as
well as reduce healthcare costs.
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productivity
A measure of the output achieved
divided by the input required.
Productivity = (Output / Input) × 100%
After a basic level of productivity is measured, an information system can monitor and
compare it over time to see whether productivity is increasing. Then, a company can take
corrective action if productivity drops below certain levels. An automotive company, for
example, might use robots in assembling new cars to increase its labor productivity and reduce
costs. In addition to measuring productivity, an information system can be used within a
process to significantly increase productivity. Thus, improved productivity can result in faster
customer response, lower costs, and increased customer satisfaction. A study of Canadian
productivity increases, for example, showed that more than half of the country's productivity
caused by worker improvements.
Return on Investment and the Value of Information
Systems
One measure of IS value is
return on investment (ROI)
. This measure investigates the
additional profits or benefits that
are generated as a percentage of the
investment in IS technology. A
small business that generates an
additional profit of $20,000 for the
year as a result of an investment of
$100,000 for additional computer
equipment and software would
have a return on investment of
20 percent ($20,000/$100,000).
Because of the importance of ROI,
many computer companies pro-
vide ROI calculators to potential
customers. ROI calculators are typ-
ically provided on a vendor's Web
site and can be used to estimate returns. According to Megan Burns, an analyst for Forrester
Research, “What ROI models allow you to do is run through the what-if scenarios...”
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Paris-based PPR, France's biggest
clothing retailer, recently acquired
Puma AG, Europe's second-biggest
sporting goods maker. The merger
can help the company create a
global brand that straddles sports
and fashion.
(Source: Courtesy of AP Photo/
Christof Stache.)
return on investment (ROI)
One measure of IS value that
investigates the additional profits
or benefits that are generated as a
percentage of the investment in IS
technology.
Earnings Growth
Another measure of IS value is the increase in profit, or earnings growth, the system brings.
For instance, a mail-order company might install an order-processing system that generates
a seven percent earnings growth compared with the previous year.
Market Share and Speed to Market
Market share is the percentage of sales that a product or service has in relation to the total
market. If installing a new online catalog increases sales, it might help a company increase
