The It Productivity Paradox – Evidence from the Uk Retail Banking Industry

THE IT PRODUCTIVITY PARADOX – EVIDENCE FROM THE UK RETAIL BANKING INDUSTRY

ABSTRACT

This article addresses causes of the so-called 'Information Technology Productivity Paradox ' in the context of UK retail banks. It investigates why massive investments by retail banks in information technology are not being translated into significant productivity gains, given that successful implementation of new technology is particularly important in increasingly competitive banking environments.

Total Word Count 8113

INTRODUCTION

This article addresses the causes of the so-called 'Information Technology Productivity Paradox ' in the context of the UK retail banking industry. It is argued that the importance of banking to the economy as a whole, and the position of the industry as the UK’s leading investor in information technology, make it a particularly suitable arena in which to study this phenomenon. Successful implementation of new technologies is particularly important in an increasingly competitive banking environment where the major players are also under threat from new market entrants. The pivotal position occupied by banks in society also means that lessons learned from the cases studied may have relevance in a wider context than is usually provided by research within one specific industry.

The article begins with a brief examination of recent changes in the UK retail banking industry. It then reviews the productivity paradox literature and draws upon a major recent empirical research project in the UK retail banking industry to address the question of why the massive investment by retail banks in information technology is not being translated into significant productivity gains. The research findings suggest that it is the way in which IT projects are managed which contributes to the maintenance of the IT productivity paradox by inhibiting organisational learning. The article concludes that even IT project successes will have a

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