IT Investment Returns
Paul Strassmann is a highly respected, but not widely known figure in the IT industry. For many years he has painstakingly mapped the performance of companies against their IT spend. In the US he has gone through this procedure every year, analysing over three thousand companies. His results have consistently shown the same thing – there is no correlation between IT spend and performance. Take a dozen banks, look at the percentage of their turnover they spend on IT and then map this against profits, return on equity, earnings per share, or whatever you wish, and the results are always the same – no correlation. This somewhat shocking revelation has been conveniently ignored by the IT industry for many years, and senior managers will often just shrug their shoulders as if they knew it anyway. I have spoken at events with Paul on a number of occasions and was always surprised at the lack of response to his revelations.
There are many reasons for this phenomenon and most of them derive from behavioural issues, well understood in behavioural finance and economics. I will be treating these issues at length in various posts. Some of them are not pretty, and I’m well aware that treating issues such as IT careerism may ruffle a few feathers.
Paul Strassmann has a web site at www.strassmann.com
