A researcher from Temple University’s Fox School of Business found that investments in information technology (IT) can reduce overall spending by state governments.
According to Dr. Min-Seok Pang, Assistant Professor of Management Information Systems, American state governments could stand to save $3.49 from their budgets for every $1 that’s invested in IT.
Pang’s paper, titled, “Do CIO IT budgets explain bigger or smaller governments? Theory and evidence from U.S. state governments,” was co-authored by Dr. Ali Tafti, of the University of Illinois at Chicago and Dr. M.S. Krishnan, of the University of Michigan. Their paper has been accepted for publication in top academic journal, Management Science. A related study by Pang has been published by MIS Quarterly.
Pang and his fellow researchers analyzed the IT budgets of chief information officers from each of the 50 states, during a five-year period from 2001 to 2005. Pang said he and his team chose to analyze the spending patterns of state governments, as opposed to those of federal governments, because state governments spend on similar services, like education, police, recreation, finance, human resources, and facility management.
“One could argue that because government has no comparative motive, meaning state governments are not competing with one another, there’s no imperative need for survival and, therefore, no value in making IT investments,” Pang said. “But my research shows that is not the case. In fact, IT has demonstrated that it can generate value.”
IT has the potential to make a state government’s processes more efficient and transparent, thus leading to a reduction in spending, Pang said. The digitizing of traditionally paper-based processes, for example, could help a state government trim its manpower and waste production, he theorized. A state government also could elect to disseminate data or publish its annual budget through digital mediums, he said, creating a level of transparency that would prevent a government from spending too much.
Overall, Pang said, the implementation of IT by a state government would free up additional resources that can be best applied to areas like police, education, human resource and more.
“In the government sector, the use of IT would lead to improved transparency and, in the long run, would help governments refrain from wasteful spending,” Pang said.
Pang’s research study is believed to be one of the first of its kind, in examining the benefits of IT spending by state governments.