Some observations on IT investment and productivity in financial services

Is Information Technology investment paying off in terms of increased productivity? Economists studying national productivity measures say no, while prestigious articles say yes. This paper offers a technological contribution to the debate. We briefly review some of the productivity measurement problems that we believe cause productivity growth to be understated, but we nevertheless trace the development and application of IT to explain our belief that the productivity paybacks from IT to date have not been as large as they will yet be since they have been oriented primarily toward the denominator of the productivity ratio. To the extent that the numerator of the ratio measures revenue, we expect the next decade to bring productivity paybacks from revenue-enhancing technology applications.