How to invest in information technology.

The efficiencies gained from investments in information technology will not ensure organizational success and prosperity. While ROI is important, there are other key dimensions to consider as you prioritize your investments in IT.

When I first started working in information technology in Toronto, our company had a $2-million mainframe computer with 512 thousand bytes of main memory. We used this massive computer to pay insurance claims, maintain our financial records, and write new computer software. Today, my 11-year old plays games on a machine with more memory than that $2 million mainframe. Moreover, these games provide graphics capabilities that we would not have thought possible 20 years ago, and, at $9 billion annually, they have become a larger industry than the motion picture business.

However, information technology's rapid advances in price/performance have done a lot more than make video games possible. Within business, investment in information technology has enabled significant improvements in efficiency, and more value for the customer.

Undermining profits while improving efficiency

A recent Massachusetts Institute of Technology study of 370 large firms …