Productivity: Why It's the Missing Link in Communications Evolution
This post, the first in a three-part series on the future of productivity, explores the relationship between IT spending and the ability to make workers more productive.
Since the dawn of IT in the late 1940s, IT spending has grown faster than gross domestic product (GDP) in about half of the years -- but not since 2001. Why that's the case is critically important to the IT industry, vendors and users, and to collaboration and communications. The stagnation in IT spending is probably why we've yet to see the unified communications or collaboration revolutions we've been promised year after year. We need to know why it's happened and what could fix it.
Part of the answer is in a simplified formula of financial justification: Justification equals benefit divided by cost. If you like the idea of increased spending on your favorite technology year after year, or if you want IT spending to grow overall, you have to increase the benefits that your technology, or IT, bring to the table. When those benefits have grown rapidly, they've driven IT spending growth to outstrip economic growth overall, and when they shrink then IT spending grows slower than the economy.
The other part of the answer can be found in a definition question: What term defines the economic value of a worker's output? The answer is "productivity."
The simple truth is that the value of business IT lies in its ability to make workers more productive. The economic value of their increased productivity is the benefit engine that drives IT spending, so when something comes along that makes workers more productive on a large scale, spending bumps up as businesses deploy new technology. Things dip back when they've realized the benefits... till the next big thing comes along.
Closing the Information Gap
Since that dawn of IT, we have seen three "big things" come along in business IT. The first was the mainframe, which drove up productivity through the late 1960s, the time of the seminal IBM System 360 computer. The second, distributed and real-time computing, came along in the early 1980s. It was just dipping away when, 10 years later, highly visual graphical user interfaces and business Internet services drove a bump in IT spending. That spending peaked in 2001... and we're still waiting on the next big thing to take hold.
One interesting thing about these IT waves is that the basis for each was something that directly impacted how people work. You could argue that with each successive wave, IT got information to workers faster and better. It wasn't that a specific kind of information was involved, or that a specific information use was determinant. Closeness seems to be what counted. Collaborative enhancements of the type proposed with UCC aren't revolutionizing IT spending because they're not focusing on that critical process of bringing IT close.
Another interesting thing is the valleys between the peaks. These represent the times when a "new" paradigm is fully exploited, and spending slows because benefits have dipped. In the past, we've seen only a very short one- or two-year period before the next big tech thing ignited new productivity benefits and took IT spending up again... well, in all the cases but one.
The really big change in behavior came along in 2001, and if you dig into your history you'll find that this was the aftermath of the NASDAQ bubble and the advent of financial regulations to prevent stock speculation. Remember Sarbanes-Oxley? That law, passed in 2002, encouraged the valuation of company stocks by objective numbers. Nothing much qualifies but the quarterly financial reports, which focus companies on the present rather than on the future. The dip in IT spending growth versus GDP growth between 2001 and 2002 was historic. Conservatism and cost management ruled then, and now.
For IT spending to change, for new technologies to be truly revolutionary in their impact on business, they have to revolutionize productivity. The short-term profit pressure since 2002 has discouraged companies from investing in long-term improvements to productivity and focused marketing and advertising on simple cost-management improvements. That's made it harder for IT buyers to even learn about possible productivity enhancements. Last year, in asking buyers to identify the key productivity enhancements vendors presented, I discovered that none were actually technologies directed at productivity at all. They listed "the cloud," "analytics," and similar points but couldn't align them with specific productivity benefits.
If we can predict the future by analyzing the past, then we may have an answer in those three early waves of IT spending growth. "Getting information close to the worker" can easily be seen as better harnessing mobile broadband services. When I asked buyers last year whether they thought mobile broadband could improve productivity, more than three quarters of them said it could result in very significant gains, and everyone thought that "significant" gains, at least, were possible.
We have mobile projects today. Companies have invested a lot in mobility, in fact. But to go back to my survey, five out of six buyers said results have been limited. Even fewer think that concepts like Internet of Things, analytics, the cloud or other of today's concepts have generated significant productivity benefits. So where are we with productivity? I'll address that topic in the next installment of this three-part series.
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