Subject: RE: A few here may have an opinion on this
From: "Wendel de Joode, Ruben" <r.vanwendeldejoode@tbm.tudelft.nl>
Date: Thu, 24 Oct 2002 17:23:00 +0200

 Thu, 24 Oct 2002 17:23:00 +0200
	Yes.  I have a student who has figures that say that in Japan,
where overall investment has 	an internal rate of return (IRR) of
about 20%, IT as a whole has an IRR of 75%, and 	software has an
IRR of 200%. We know that both the IT and software numbers are huge
overstatements, but we expect the qualitative result (IT is "much more"
productive than 	general investment, and software "much more"
productive than hardware) to hold up.  So ...

I do not understand why a high IRR implies high productivity... can
someone please explain this to me, as I feel that a high IRR could also
imply that software companies simply charge too much money compared to
the costs they have to incur to build the software? This means that
customers end up paying (too) much money. The productivity of the
software industry is not higher, instead, they are simply able to
overcharge for their products.
I do not see how this (IRR) leads to the conclusion that proprietary
software is more productive for a country and leads to a higher GDP.
Therefore I totally agree with Forrest to question why it is:

	"appropriate to start by looking at the IRR for software
producers?"

---------------
Ruben van Wendel de Joode
Delft, University of Technology	rubenw@tbm.tudelft.nl 
0031 (0) 15 278 1105 (telephone)
http://www.tbm.tudelft.nl/webstaf/rubenw/index.htm