Erik Keller: IT and productivity can make for an uneasy relationship
By Erik Keller -- Manufacturing Business Technology, 8/1/2007 12:00:00 AM
Common wisdom has always assumed that high U.S. productivity was associated with high spending on information technology, particularly during the late 1990s. So to many IT productivity proponents, it may have come as a surprise to find that first-quarter annualized productivity growth (year-to-year) was an anemic 0.7 percent even though IT spending, while slowed, is still growing.
The fact is manufacturing continues to carry the productivity burden for the economy, with year-to-year growth of 3.5 percent. Now as a curmudgeon, I could say: "Look, I told you so!"—but that would be too easy. It also would distort the importance of IT within companies.
Information technology continues to be a foundation that companies must invest in. The more important fact that most companies fail to consider is productivity and IT are like industry averages: Unless you are significantly beating them, you will probably go out of business sooner or later.
To beat these averages, companies need to deploy and run their IT assets in a way that seems somewhat counter to the business models of IT sellers. To be productive with your IT assets, you need to get more from them while paying the same amount of money, or do the same with them for less money each year.
This is a very simple view of productivity, but when you examine the nature of technology upgrades and seemingly planned obsolescence of software and hardware packages, it is hard for technology to fall so neatly into place.
Instead, many sellers and technophiles like to talk of enhanced capabilities, three-letter acronyms and buzzwords, and why the next generation of technology is so hot. All of that may be true, but unfortunately such statements and programs do not deliver the productivity benefits that companies need to stay in business.
It is no small coincidence that some of the biggest growth areas in IT include software-as-a-service (SaaS); virtualization; and open source (avoidance of large capital expense); as well as outsourcing and strategic sourcing (avoidance of large cost expense). As the next generation of IT is coming from the consumer side of life, it will be dirt cheap and reliable. Amazon.com is charging less than 20 cents a gigabyte for corporate storage, which is just the beginning.
If you want to better link IT and productivity within your company, you will need to look beyond the usual big-name suspects and rethink how you want to deploy technology. You also need to think about how much money you will spend on it.
By the way, the government's productivity statistics assume all full-time employees work a 35- to 40-hour work week, and include the Moore's Law-driven price-performance advances of computers.
If you remove the productivity benefits of IT goods—as well as all of the "extra" non-compensated time that workers give to their employers—productivity actually is much worse than stated by the government.
Take that into account when you are looking to make new investments to better your manufacturing capabilities.
