IT: A Bright Spot in an Economic Slowdown
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The economy might have slowed to a crawl, or even begun to recede, but productivity remains solid, thanks to technology. It's a lesson CIOs must share with their bosses. |
"Typically in recessions, productivity--the output squeezed from each hour of each worker's day--shrinks, because output stalls faster than companies can trim fat," writes Mark Gongloff in The Wall Street Journal. "That changed with the 1990s technology boom; productivity grew like it was on steroids in the 2001 recession. Something similar, though less dramatic, has happened in this slowdown. Even as the economy has spun its wheels for the past three quarters, productivity has surged."
The government reported Tuesday that nonfarm business productivity rose last quarter by 3.2 percent from the first quarter of 2007, the biggest jump since the second quarter of 2004.
Gongloff sees the gain was a testimony to the lasting power of the tech boom. But the nearly two-decade-old productivity boost from technology may soon vanish. "The catch is that after gorging on tech in the 1990s, businesses have invested more daintily in recent years," he writes. "That could eventually hurt productivity."
Indeed, as long as CEOs and corporate boards see technology spending as an expense and not an investment, the true value IT brings to the enterprise in productivity and costs savings won't be realized. "Companies understand that IT produces value, but they view IT as a cost because it's so much harder to figure out where the value shows up in terms they can get their hands on," says economist and metrics guru Howard Rubin, in an interview with CIO Insight. "They gravitate to what's tangible, and what's tangible is the budget item.
"When you look at annual reports, go to 'operating expense.' First you find 'compensation,' and then you find 'communications and technology.' IT, also through accounting principles, just makes itself look like a cost. The businesses themselves aren't necessarily cost-focused: IT shows up as a cost and finding the value is much more elusive; it's a self-feeding system."
Comments (1)
This is a perennial problem that all IT veterans should recognize: the costs are (mostly) clear and (mostly) attributed (perhaps solely) to the organizational entity known as "IT," but the value is diffused throughout the whole business and to partners and to customers.
How many people and businesses, though, are more often making the economic substitution of a teleconference or webinar instead of a face-to-face meeting (that may have otherwise involved air travel, hotel, rental car, etc.)?
Technology (and the Web especially) enable these kinds of economic substitutions and will be more and more embraced than not. There's a lot more productivity to leverage from existing and new technology. And, thanks to Moore's Law, new technology is typically cheaper than old. There's much more that can be automated and Web-enabled than has been so far.
And, quoting Peter Drucker: "The best way to predict the future is to create it."
Posted by Jerry Daniel | June 5, 2008 3:14 PM