"The history of IT is a history of failure"

By David Walker (Google profile)

The most visible effects of the dot-com crash so far have been some shredded reputations and a large pile of worthless stock options. In the medium term, though, the dot-com collapse will also prompt organisations start questioning all those IT spending recommendations from consultants and technology professionals. After all, why trust the geniuses who promised such unrealistic returns on Web site investments? Especially when the same whizz-kids predicted vast damage from the Year 2000 bug and a big payoff on WAP technology?

And as it happens, the IT spending sceptics have a strong case. No-one has ever found a truly convincing way to demonstrate the pay-offs from IT investment. Even before the Internet boom, credible studies of organisational IT spending struggled to find any consistent links to productivity increases.

Summarised one article, in The Journal of Management Information Systems: "Despite the enormous investment in IT during recent years, demonstrating the effects of such investment on organizational performance has proven extremely difficult." Said another, in The Electronic Journal of Information Systems Evaluation: "Notwithstanding all of this effort to come up with a rigorous and replicable 'toolset' of methods, several researchers have found that, when pushed, decision makers, both individual and corporate, often describe their decisions as being based to a greater or less extent on instinct."

Some of the most interesting work has come from Paul A. Strassmann, a former chief information officer of Xerox and US Government Director of Defense Information. Strassman's 1997 book The Squandered Computer sported on its cover a scatter-plot graph showing the clear non-relationship between corporate IT spending and investor returns. Inside, he attacked IT professionals, consultants and academics who accepted strings of anecdotes as proof that IT spending was boosting productivity, instead of finding rigorous ways to assess IT's contribution. Obviously much IT spending was useful - but which spending, and why?

Strassman had fascinating figures but lousy timing. The Squandered Computer launched into a world newly in love with the Internet, a world suddenly keen to believe that computers would make them and everyone else far more productive. Strassman's book went mostly unremarked-on. The debate on IT's pay-off continued quietly in places like The Journal of Management Information Systems and The Electronic Journal of Information Systems Evaluation, but without huge advances.

Meanwhile, macroeconomists were also looking for the link between IT spending and productivity. They couldn't find it either. The Nobel Prize-winning economist Robert Solow declared that "we see computers everywhere but in the productivity statistics".

And it is unlikely that the past few years of the dot-com boom, with its enormous new losses, have improved the situation any. Now that the dot-com boom is over, people like Paul Strassman won't be so easily dismissed. Indeed, the Strassman view is slowly winning converts.

"Most IT departments don't deliver what they promise," says Alan Pelz-Sharpe, a senior consultant with the UK-based IT consultancy Ovum. "The history of IT is a history of failure. The Y2K episode showed us that. WAP was an absolute disaster, though it promised the world." Pelz-Sharpe specialises in content management systems - an IT sector rich in over-promising and under-delivery.

In The Squandered Computer, Paul Strassman called for business managers to take up the responsibility for using IT tools more effectively. Pelz-Sharpe, too, wants firms to analyse and define their business goals much more clearly before they start spending. Right now, he says, "no-one's actually sure what most projects are meant to deliver". IT staffers are slowly beginning to work more closely with business planners to define projects - but Pelz-Sharpe shakes his head at the slowness of the change in attitudes.

Pelz-Sharpe hopes to see more successes like SMS (short message service), which sends small and unglamorous text messages to mobile phones. SMS "gave people what they wanted", he says. "That's the mentality we need - what does the user actually want?"

According to Pelz-Sharpe, most IT professionals still don't want to try to calculate the return on investment (ROI) from individual projects. Web projects present special challenges because they can affect hard-to-measure assets such as a company's brand. But Pelz-Sharpe is encouraged by rising demand for advice on building an ROI case. "Two years ago they (IT professionals) didn't care," he smiles. "Now they care. They have to care. In the US, the chill wind has definitely arrived. Projects are being halted right, left and centre. Customers who in the past would have used every new technology are now changing. They're now brainstorming to identify the best technologies."