Date:22/09/11

IT the key to boosting European productivity

European economies could achieve productivity gains worth €760bn (£663bn) by 2020, if firms matched the amount they spend on IT with US counterparts, according to new research.

The study, carried out by Oxford Economics on behalf of telecoms giant AT&T, suggests that capital investment in IT produces larger productivity gains than any other form of investment.

“IT’s potential to spur innovation and change business processes sets it apart from any form of capital investment,” said Andrew Logan, senior economist, Oxford Economics.

Currently, the value of capital IT equipment in the US is equivalent to about 30 per cent of GDP, compared to just 20 per cent in Europe.

The research puts pay to the notion that IT investment delivers little more than one-off productivity gains by automating paper-based processes.

“What we actually see is that IT investments provide piecemeal productivity gains, which when added up amount to significant improvements,” Logan told Computing. But the answer to Europe’s current economic malaise is not to simply throw money at IT, Logan cautioned.

“Separate studies have shown that US multinationals typically get more productivity gains from IT investment than their international rivals.

It would seem that there is something about US corporate culture that is more focused on IT-led innovation and business process improvement,” said Logan.

Nevertheless, the €760bn productivity boon that would be achieved by increasing European IT investment levels to match those in the US is not dependent on firms becoming smarter with their IT investments.

That figure is based on the boost to productivity already achieved by investments in IT achieved in Germany and the UK. But by also investing in training staff to get the most from technology, firms can achieve huge productivity gains, said Logan.

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