Investigating the information technology productivity paradox in the heavy metal engineering industry

Thesis (M.B.A.)--North-West University, Potchefstroom Campus, 2012.Studies have shown that computers have a positive impact on productivity, but the reality remains that the productivity figures have not yet changed. This aforementioned irregularity is referred to as the “productivity paradox”. The question of how productivity is measured is complicated when, for example, a company connects all their computers onto a network or installs an information system to keep record of customer information or even supplier information, for there are no input and output ratios that can be measured. In these cases, productivity is not so evident, and some might argue that it does not exist. Companies always look for the competitive advantage and it is therefore important to show whether investing in information technology does in effect give them a greater return on investment. The question of why it is important for information technology to increase productivity is answered by looking at what all companies seek, which is sustainable growth. This can be measured by the accounting return on investment, economic value added (EVA), and growth in sales or assets. The goal of this study is to determine the impact the information technology productivity paradox has on the heavy metal engineering industries, whether it be good or bad. Information technology has expanded to such an extent that more people are starting to rely on information technology in order to do their work and communicate with one another. This is what makes this study so important, especially from an organisation's perspective, as the organisation is spending more money on expanding its information systems. One of the aspects to be covered in this study is the evolution pertaining to the history of information technology and how it has improved over the years. It also looks at the laws of information technology like Moore's Law which explains that the transistors on a chip would roughly double every two years, and Gilder's Law that explains in total communication a system triples every twelve months. Within this study the knowledge expansion and how human knowledge had to expand in order to keep up with the ever escalating information technology is covered. When looking at the future and the rate at which knowledge increases people tend to assume that the current rate of progress will continue in future periods. This, however, when looking at the rate at which technology progresses, is evident that the progress is not constant. The research topic for this study is the information technology productivity paradox. This term suggests that there is no correlation between a company’s investment in information systems and its business performance measured in terms of productivity. This phenomenon was shown to exist within this study. Open source systems are covered, which is a method of developing software that harnesses the power of distributed peer review and transparency of process. Open source systems have the following advantages like easing of licensing restrictions; cross–platform simplicity; possibility to run modules on any operating system; low cost due to no licensing fees; modification of system is possible; and disadvantages like lack of necessary expertise to do modifications; less user–friendly, support is not always available; security might be a problem. In this way open source systems will affect productivity in information technology due to the less user–friendly interface. Some of these open source systems might take longer to do the task than it would on the commercial software. Implementation of the open source system might take longer than that of a commercial system as there might be a lack of support for the system. Another topic covered within this study is the development of human capital, which is a necessity for employees in an organisation in order to enhance both knowledge and skills within an organisation. This is, however, a double bladed sword as even though the combined knowledge and skills of an organisation are expanded, it takes time which inevitably leads to productivity loss. Finally this study investigates social networking, which is defined as the application of websites that support the maintenance of personal relationships, the discovery of potential relationships and should aim in the conversion of potential ties into weak and strong ties. List of key terms: Information technology, productivity paradox, social networking, competitive advantage, knowledge expansion, development of human capital.Master