Max Polyakov on the IT – Productivity Paradox

Information Technology plays a significant role in the economy of the world. But, productivity and effectiveness of IT has surprisingly not been proven.

This problem was first mentioned in 1986 by “Fortune” magazine. According to the results of the research conducted at MIT, there was no growth in the productivity of employees in the IT sector, although the amount of computer equipment had been increasing for 20 years. Similarly, the average return on investment in this industry during 1985-1995 was only 1%.

Max Polyakov, managing partner of Noosphere Ventures, in his work refers to research by P. Strasman, who studied the influence of innovative technologies on the profitability of companies. He has monitored hundreds of corporations that implemented modern technologies in their activities and concluded that the financial success of enterprises does not depend on IT spending.

The phenomenon of Singapore, which spends only 0.5% of its GDP on data, is noteworthy and is an excellent example for other countries in terms of efficiency. Japan, in spite of high productivity growth rates, allocates only 1.4% of GDP to the IT sector, while the US spends about 3% and the European countries spend about 2.5%.

Max Polyakov, PhD in international economicscitescases of the “computer revolution” and the “productivity boom” in his work in the United States in 1996. This year, IT expenditures amounted to more than 1 trillion dollars while the profit of 13,409 global corporations for the same period amounted only 750 billion dollars.

Max Polyakov also noted that companies with high computerization may lose profit. Even though their profitability may be high, this has nothing to do with the implementation of IT in their businesses. Moreover, Max Polyakov, managing partner of Noosphere Ventures studied companies from different countries, with different profiles of activity (health, industry, trade, services, banking etc.).

He supposes that a significant number of companies use information technology inefficiently, which negatively affects their financial performance.

The modern world needs information technology. Max Polyakov believes it is our future, but it is necessary to take into account all the details. It is useless to increase the amount of new IT, because, as proven above, this is not in favor of the economy.

First of all, we should study the human factor to properly trainqualified specialists. Information technology is a tool of labor, which is completely useless without the proper application. Furthermore, the success of the economy depends on the effectiveness and success of its individuals.