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Prof. Strassmann, IEEE Lecture, March 20, 2007 1
Information Economics MetricsInformation Economics Metrics
Prof. Paul A. StrassmannGeorge Mason University, March 20, 2007
Prof. Strassmann, IEEE Lecture, March 20, 2007 2
Information Technology and Profits
Prof. Strassmann, IEEE Lecture, March 20, 2007 3
No Correlation Between I.T. and Profitability
Prof. Strassmann, IEEE Lecture, March 20, 2007 4
Information Technology and Profits in Banking
Prof. Strassmann, IEEE Lecture, March 20, 2007 5
I.T. and Salaries are Unrelated in Banking
Prof. Strassmann, IEEE Lecture, March 20, 2007 6
I.T. Accounts for a Large Share of Salaries in Banking
Prof. Strassmann, IEEE Lecture, March 20, 2007 7
Comparison of I.T. Ratios and Performance for Banks
Prof. Strassmann, IEEE Lecture, March 20, 2007 8
Information Technology Spending
Prof. Strassmann, IEEE Lecture, March 20, 2007 9
Wide Range of I.T. Spending
Prof. Strassmann, IEEE Lecture, March 20, 2007 10
Benchmarking I.T. Costs
Benchm a r k I .T . Spending = Con sta nt + Va ria b leA * SG&A +
+Va ri ab leB * Num ber o f P er sonal C om puters +
+Va ri ab l e C * Numb e r o f Profe ssiona l E m p loy e es +
+Va ri ab l eD * Num ber of Of fic e C leri c al Em ployees +
-Va ri a ble E * Num ber of E x ecutiv e a nd M anageri al Em ployees +
+Va ri ab l e F * Prof i t af ter T axes
Prof. Strassmann, IEEE Lecture, March 20, 2007 11
Calculating Over- and Under-Spending on I.T.
Prof. Strassmann, IEEE Lecture, March 20, 2007 12
Information Productivity ®
® Information Productivity is a Registered Trademark of Strassmann, Inc.
Prof. Strassmann, IEEE Lecture, March 20, 2007 13
Transaction Costs and Profits are Unrelated
Prof. Strassmann, IEEE Lecture, March 20, 2007 14
Distribution of Information Productivity is Symmetric
Prof. Strassmann, IEEE Lecture, March 20, 2007 15
Calculation of Information Productivity
Prof. Strassmann, IEEE Lecture, March 20, 2007 16
Outsourcing
Prof. Strassmann, IEEE Lecture, March 20, 2007 17
Distribution of Corporate Costs
Prof. Strassmann, IEEE Lecture, March 20, 2007 18
Purchases Is a Significant Cost Component
Prof. Strassmann, IEEE Lecture, March 20, 2007 19
Higher Compensation Does Not Call for More Outsourcing
Prof. Strassmann, IEEE Lecture, March 20, 2007 20
Cascading of Outsourcing Through the Value-Chain
Prof. Strassmann, IEEE Lecture, March 20, 2007 21
Significance of International Outsourcing
Prof. Strassmann, IEEE Lecture, March 20, 2007 22
Method for Calculating the Outsourcing Ratio
Prof. Strassmann, IEEE Lecture, March 20, 2007 23
Knowledge Capital ®
® Knowledge Capital is a Registered Trademark of Strassmann, Inc.
Prof. Strassmann, IEEE Lecture, March 20, 2007 24
Knowledge Valuation and Shareholder Equity for 5,913 Firms (2005)
Total Valuation $24.5 Trillion
$14.4 Trillion
$10.1 Trillion
Prof. Strassmann, IEEE Lecture, March 20, 2007 25
Knowledge Value per Employee
Prof. Strassmann, IEEE Lecture, March 20, 2007 26
Knowledge Value, Compensation and Net Worth of Employees
Prof. Strassmann, IEEE Lecture, March 20, 2007 27
Most of Profits Derived from Knowledge Assets
Prof. Strassmann, IEEE Lecture, March 20, 2007 28
Sector Distribution of Knowledge Capital/Employee
Prof. Strassmann, IEEE Lecture, March 20, 2007 29
Concept of Knowledge Conversion Efficiency - Abbott Laboratories
Prof. Strassmann, IEEE Lecture, March 20, 2007 30
Calculating the Worth of an Employee
Prof. Strassmann, IEEE Lecture, March 20, 2007 31
Social Issues
Prof. Strassmann, IEEE Lecture, March 20, 2007 32
Employment is Shifting to Females
Prof. Strassmann, IEEE Lecture, March 20, 2007 33
Increased Importance of Females in Information Occupations
Prof. Strassmann, IEEE Lecture, March 20, 2007 34
Summary
• Corporate information economics offers methodsfor assessing the contributions of I.T. and ofTransaction Costs.
• Corporate information economics offers anapproach to budgeting of I.T. and in the planningfor information resources.
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