Quarterly Business Report: Do Computers Really Save Money?

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There is much debate and no single explanation for the paradox. To begin with, economists generally agree that official figures understate productivity, though they quarrel sharply about how much and why. It is clear too that many buyers fail to get the most out of their computers--some because they try to make the computers perform functions to which they are not really adaptable; others because they buy computers more powerful and more expensive than they truly need; others still because they fail to appreciate how hard it will be to train their employees to use the machines effectively.

But one big explanation is that, as in the case of New York Presbyterian's nurses, computers often improve the efficiency and quality of work--indeed, of life--in ways difficult to express in numbers. That is especially true now that computers have moved heavily into service industries--health care, finance, law, advertising--where productivity was notoriously hard to measure even in precomputer days.

In manufacturing, the effects of computerization are easy to quantify. Take the computerized quality-control systems that the Measurex division of Honeywell Inc. sells to papermakers. The systems continuously measure such factors as the thickness of paper speeding through machines at up to 60 m.p.h. That enables operators to make adjustments that prevent breaks in the paper, avoiding shutdowns that can cost tens of thousands of dollars each. Rick Rowe, vice president of global operations for Honeywell-Measurex, claims that within 12 to 24 months, papermakers recover the $350,000 to $5 million they spend to buy the control systems. If you're in manufacturing, figuring out the cost-benefit ratio for computers is no sweat.

But in service fields the improvements are sometimes measurable, sometimes not--often both. Doug Kinzley, vice chairman of MGA Communications of Denver, figures that his advertising, public relations and marketing firm can put together a business proposal for a client in "maybe half the time it used to take" before the firm brought in a staff computer expert and installed individual computers for its 28 employees. That, he says, "gives us more thinking time. Our time is better spent on the actual work." The time saved is measurable, the benefits of proposing better-conceived ad campaigns to clients less so.

Dixie Cleaners, which operates three dry-cleaning shops in Pensacola, Fla., was losing $100,000 a year because clerks were failing to add "up charges" (surcharges for hard-to-clean clothes such as linen or silk garments) on sales tickets. Now a computer enters the extras automatically. Dixie also mails monthly computer-prepared bills to customers who open charge accounts. That pleases customers, who save a few minutes on every trip to the store. But how does one measure their increased satisfaction?

Cops in Blue Earth County, Minn., like those in many other places, carry laptops that enable them to tap into a statewide database and find out if a driver they've stopped for a traffic violation has any arrest warrants outstanding. The officers make 10 to 12 arrests a week, vs. two or three in pre-laptop days. That might count as measurable productivity, but how to quantify the benefit to society of haling lawbreakers into court rather than letting them roam free?