The Baseline 500 Methodology

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The Baseline 500 uses a company's financial efficiency as a proxy for how well it uses technology. We start with a company's profit and look at other measures, including the amount of capital invested, to figure how much value has been added by the company's information technologists (see formula).

One change in the calculation this year is that we use three years of average sales and net income, instead of five as we did last year. The longer time period, stretching back to the recession of 2001-2002, unduly penalizes some sectors, such as technology and industrials.

Our calculation leads to a percentage figure, which we call Information Productivity, or IP.

The formula is the creation of Paul Strassmann, a productivity expert and former I.T. executive at Xerox, Kraft and NASA.

This article was originally published on 2007-10-01
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