Answer to Question 1
A
Answer to Question 2
While it is easy to quantify the costs associated with developing an information system, it is often difficult to quantify tangible productivity gains from its use. In many cases, IS expenditures, salaries, and the number of people on the IS staff have all been rising, but results from these investments have often been disappointing. It has been difficult to show that these vast expenditures on technologies have led to productivity gains. Information systems may have increased productivity, but other forces may have simultaneously worked to reduce it, the end results being difficult to identify. Factors such as government regulations, more complex tax codes, stricter financial reporting requirements, and more complex products can all have major impacts on a firm's productivity.
Measurement Problems: In many cases, the benefits of information systems are difficult to pinpoint because firms may be measuring the wrong things. Often, the biggest increases in productivity result from increased system effectiveness (i.e., the extent to which a system enables people and/or the firm to accomplish goals or tasks well). Unfortunately, many business metrics focus on system efficiency (i.e., the extent to which a system enables people and/or the firm to do things faster, at lower cost, or with relatively little time and effort).
Time Lags: A second explanation for why productivity is sometimes difficult to demonstrate for some technology investments is that a significant time lag may occur from when a company makes the investment until that investment is translated into improvement in the bottom line.
Redistribution: A third possible explanation for why IS productivity figures are not always easy to define is that a new type of system may be beneficial for individual firms but not for a particular industry or the economy as a whole. Particularly in competitive situations, new innovations may be used to redistribute the pieces of the pie rather than making the whole pie bigger. The result for the industry or economy as a whole is a wash-that is, the same number of products is being sold, and the same number of dollars is being spread across all the firms.
Mismanagement: A fourth explanation is that the new system has not been implemented and managed well. Some believe that people often simply build bad systems, implement them poorly, and rely on technology fixes when the organization has problems that require a joint technology/process solution. Rather than increasing outputs or profits, IS investments might merely be a temporary bandage and may serve to mask or even increase organizational slack and inefficiency.
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