Information Technology Costs and Productivity Gains

Abstract

This report is an overview of two strategic issues currently facing the pharmaceutical industry: the high cost of client-server computing and ensuring that investments in information technology result in productivity gains.

This report begins with a discussion of the high costs involved in supporting a client-server architecture (reported by KPMG Management Consulting and Nolan Norton & Co. to run as high as $20,000/year/PC). If a company is to maximize the returns from its current and future investment in information technology it is critical that it carefully limit the number of initiatives undertaken in this area. Companies must only undertake projects targeted at improving processes identified as critical to the success of the whole organization. Three observations drive this conclusion. One is the high cost of ownership associated with the client-server approach to computing. Two, computerization of organizations typically occurs along the vertical lines of the organizational chart and within functional departments. Three, findings indicate that the client-server architecture does not exhibit the same economies of scale associated with more traditional centralized architectures, which provide some forgiveness if trivial or peripheral applications are undertaken. These observations, coupled with the limited amount companies have to invest in information technology resources, make it critical that they carefully limit initiatives in this area.