Rowan Crozier, chief executive of the $125-$year$-$old UK manufacturing company Brandauer, based in the Midlands, pauses

for a moment while describing the company$$s shift to a new state$-$of$-$the$-$art computer system. $$We switched from a highly

flexible, largely paper$-$based, system to one that was a lot more rigid $...$ there was a lot we had to go through,$$ he says.

Brandauer$$s business is based on technical excellence. Its precision presses make metal components, from dental floss

cutters to ethernet connector pins, with such efficiency that it is one of the rare UK companies to export parts to China

rather than import them. But the IT challenges Brandauer has faced reflect a wider struggle among businesses overhauling

creaking, but functional, software systems in order to become more productive. Changes have meant that practices that

were once second nature must be relearnt, old shortcuts no longer work and executives doubt whether it will all be worth

it$.$

Meanwhile, software has continued to improve. Applications that only a few years ago would have not been out of place

in a science fiction movie $$ such as video calls $$ are now commonplace. Yet across the developed world productivity

growth has fallen since the financial crisis began in $2007.$ The great age of productivity growth was between around $1920$

and $1970,$ an era that saw technological advances from telephones and washing machines to cars and aircraft. There

was a second boost in the $1990$s$,$ when wider use of workplace computers helped companies produce more goods and

services per worker $$ and ditch whole classes of employees such as secretaries$.$

The expectation was that the internet revolution of the early $2000$s meant another rise in productivity was on its way. But

it has not worked out like that. In the UK$,$ the output of the average worker has not risen for nearly a decade. The Center

for American Progress estimates the US will produce $$2\mathrm{.}8$tn less in goods and services than was forecast before the $2008$

financial markets crash, slower productivity growth being the main reason for the shortfall.

Productivity growth matters because without it companies will struggle to increase wages. This affects both workers and

a nation$$s tax receipts.

There is no agreement among economists about the reasons for the decline.

Professor Robert Gordon, of Northwestern University in the US$,$ believes some inventions, however flashy, are just not as

significant as others. His argument is in the ascendance, partly because alternative suggestions on their own $$ from a

lack of business investment to mismeasurement of the digital economy $$ do not seem sufficient. Global corporate IT

spending had been rising, but research company Gartner forecasts it will be flat in $2016.$ Despite this, Gartner still

estimates that $$3\mathrm{.}41$tn will be spent on IT this year, more than the UK$$s GDP$,$ up from $$2\mathrm{.}6$tn four years ago.

In terms of economic output generated by each employee, John$-$David Lovelock, an analyst at Gartner, says the research

shows a clear relationship with higher corporate IT spending. But it is not a perfect fit by any means. On the question of

mismeasurement, former deputy governor of the Bank of England, Sir Charlie Bean, concluded, in a review of the digital

economy published this year, that official statistics were not capturing all of the benefits of the digital economy. If these

were fully accounted for, the average annual UK growth rate over the past decade would have been between $0\mathrm{.}4$ and $0\mathrm{.}7$

percentage points higher, the review said. Though this is significant, productivity growth has nonetheless stalled.

$2$

Chad Syverson at the Chicago Booth School of Business has calculated that the unrecorded value of the digital economy

to the average US citizen would need to be $$8,400$ per year $$ or a fifth of net disposable income $$ to make up the

difference in the productivity gap. Despite the apparent gloom, there is a more optimistic argument: that we are in a

temporary pause before the gains from improved IT begin to show. Professors Erik Brynjolfsson and Andrew McAfee at

MIT argue there has always been a delay between the time when technology arrives and when it really begins to make a

difference. The gains are on the way, they argue.

Brandauer$$s Mr Crozier takes this view. His company$$s $400,000$ IT investment was necessary even if it took time to bed

in$.$We$$ve gone from making decisions based on gut instinct, to judgements based on data,$$ he says. The company is

seeing measurable benefits and expects the investment to have paid for itself inside $18$ months, he says. This is just as

well. All of our future living standards depend on this small example becoming commonplace.

Answer ALL the following questions

QUESTION $1(15$ Marks$)$

In light of the case study above, discuss the relationship between the use of information technology and productivity.

QUESTION $2(10$ Marks$)$

Is it important to consider individuals