August 6, 2004

By Jason Deign, News@Cisco

Few governments today dispute the need to improve their processes through the application of Internet and network technologies. What many may be less aware of is that the way these technologies are implemented could be critical to success.

Organizations that stick to a series of best practices in adopting new technology for productivity gain can experience an improvement between three and seven times greater than those that do not according to a 2004 study called Net Impact, from Cisco Systems®.

Net Impact is an annual, wide-ranging study conducted by Momentum Research Group that this year surveyed technology and process best practices across European governments and healthcare organizations, which in Europe are mainly part of the public sector.

In a world where surveys are a staple of everyday news, this was no ordinary piece of research. Covering 1,400 responses from eight European countries, it got right to the heart of a critical issue for most governments: how to use technology as a catalyst for productivity improvements.

Net Impact: Europe eGovernment - From Connectivity to Productivity gives government leaders, for the first time, a blueprint for the best practices they need to follow and the kinds of productivity gains they can expect from technology-based projects.

It has also uncovered an important link between process change and application deployments. Change processes before introducing the technology and you can make cost savings of between 20 and 30 percent; the other way round can lead to losses of 50 percent.

Such startling and useful insights are not unique to this year's study, but have in fact been a hallmark of Net Impact since its inception. The first annual survey was carried out in 2002 but it has its roots in an earlier research project, the Internet Economy Indicators.

Launched in 1998 in association with the University of Texas's Center for Research in Electronic Commerce, this was initially a US-based survey aimed at answering a simple (but at the time unanswered) question: do Internet technologies have an impact on economic growth?

"At the time there was still not any agreement on the fact that the whole computer revolution of the last 50 years had had any positive impact on economies," says Douglas Frosst, senior manager of Executive Thought Leadership at Cisco, who took over the research project last year.

The Internet Economy Indicators were successful to the extent that they helped, along with other research, to convince economists that Internet technologies were indeed having a sustained positive impact on measures such as job growth and gross domestic product.

But it soon became clear that more detail was needed on why and how this was happening, which resulted in the creation of Net Impact.

"Overall, Internet technologies can be seen to result in productivity gains of the order of five percent," says Frosst. "But in some organizations this level rises to between 30 and 50 percent.

"We wanted to understand what best practices these organizations were using so they could be employed elsewhere."

The Net Impact studies each cover a discrete area of research. The 2002 study, for example, was designed to measure the current and anticipated cost savings and revenue increases that organizations believe have been created by their investment in Internet business systems.

The research was conducted by Momentum Research Group and academics from the University of California-Berkeley and The Brookings Institution, covering Canada, France, Germany, Italy, the UK and the US.

In 2003, Net Impact evaluated technology alongside other productivity drivers, such as worker skills, tools and environmental conditions, to understand their individual and cumulative effects on corporate productivity in the US.

It found that organizations with IT strategies focused on productivity goals, coordinated with business process re-engineering and supported by formal performance measurement systems experienced four to five times greater improvement than peers that did not.

Over the years, says Frosst, the Internet Economy Indicators and Net Impact studies have acted as a barometer of the preoccupations of the global networked community, first focusing on macroeconomic effects and latterly drilling down to the level of countries and sectors.

There is still much to investigate. Frosst is currently planning next year's Net Impact study, which will focus on the effects of technology on small-to-medium business (SMB) productivity.

The study looks to be Net Impact's most ambitious to date, with global coverage. "We realize we can't study every country in the world, so we will select those that give us the best data," says Frosst.

"Since we are looking at the interplay between IT and SMBs, we are thinking of looking at countries with the highest level of broadband infrastructure in search of industry best practices."

Beyond that, he adds, Net Impact will continue to investigate the links between technology and productivity, wherever they arise.

"We firmly believe that improvements in productivity at a national and a global level are essential for enhancing our quality of life and we want to communicate to people exactly what the recipes are for improving that productivity."

Jason Deign is a freelance journalist located in Barcelona, Spain.