Net Impact: National Economic Benefit

The Internet already stands as one of the most important innovations of our time, despite the fact that its impacts are just beginning to be measured and understood. Although several studies have been done on the relationship between information technology and aggregate productivity, few studies have looked at firm-level survey data to measure the economic impact of Internet business solutions.

The Net Impact study

The Net Impact study, a project conducted by Hal Varian of the University of California-Berkeley, Robert E. Litan of The Brookings Institution and Momentum Research Group, and sponsored by Cisco Systems, was designed to measure the current and anticipated cost savings and revenue increases that organizations believe have been created by their investment in Internet business solutions. For the purposes of the Net Impact study, the researchers defined Internet business solutions as any initiatives that combine the Internet with networking, software, and computing hardware technologies to enhance or improve existing business processes or create new business opportunities.

The study was conducted in the U.S., the U.K., France, and Germany.

In the U.S., the study surveyed more than 2,000 senior decision-makers charged with implementing Internet business solutions for their organizations and, with the results, created a projection of the financial impact on the entire U.S. economy.

The Net Impact Study was replicated in Europe focusing on the three largest European economies: the United Kingdom, France, and Germany. A total of 634 organizations were interviewed for this portion of the study.

Preliminary results

According to preliminary results of the study, organizations in the U.S., U.K., France, and Germany currently deploying Internet business solutions have realized a cumulative cost savings of $163.5 billion.

The deployment of Internet business solutions has yielded to date a cumulative cost savings of $155.2 billion to U.S. organizations. U.S. organizations that are currently deploying Internet business solutions expect to realize more than $500 billion in cost savings once all Internet solutions have been fully implemented by 2010.

Once all current solutions have been fully implemented, the Net Impact of these cumulative cost savings is expected to account for .43 percentage points of the future increase in the annual U.S. productivity growth rate.

Adoption of Internet business solutions in the United Kingdom, France and Germany has resulted in a current, cumulative cost savings of €9 billion (U.S. $8.3 billion) to organizations deploying Internet business solutions. These organizations estimate Internet business solutions have also helped enhance their revenues by €86.4 billion (U.S. $79 billion) to date.

About the researchers

Hal Varian is Dean of the School of Information Management and Systems at the University of California at Berkeley. Among his many publications is Information Rules: a Strategic Guide to the Network Economy, co-authored with Carl Shapiro.

Robert E. Litan is Vice President and Director of Economic Studies at The Brookings Institution. Among his numerous publications, Litan is co-author of Beyond The Dot.coms: The Economic Promise of the Internet and co-editor of The Economic Payoff from the Internet Revolution, both co-authored with Alice M. Rivlin.

Andrew Elder and Jay Shutter are principals in the Momentum Research Group, which focuses exclusively on market intelligence in the business to business sector. An expert in measuring the impact of Internet technology on businesses and economy, MRG was the first company to measure the size of the U.S. Internet economy. Its flagship research services leverage the Cunningham Momentum Management^SM research methodology from Citigate Cunningham to give technology marketers the intelligence necessary to build highly relevant and differentiated market positions—positions that translate into market leadership. Momentum Research Group can be found at www.momentumresearchgroup.com.