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3/23/2007
03:10 PM
Rob Preston
Rob Preston
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Down To Business: Heads Up, Tech Management

Money and people once devoted to initiatives that drive new business now get sucked into operational necessities. Time to move out of maintenance mode.

A report this month from the Information Technology and Innovation Foundation argues that the integration of IT into every facet of the economy is the foundation of productivity, employment, and output growth in this country. Nothing startling there--Alan Greenspan and others have made that case for years. A more interesting assertion in this 69-page report is that the IT engine "does not appear likely to run out of gas anytime soon."

While the benefits of new information technologies are often exaggerated at first, the report's authors maintain, there's evidence to indicate that they "exceed initial expectations in the moderate-to-long term." The authors, Robert D. Atkinson and Andrew S. McKay, go on to support their thesis with a convincing anecdotal and quantitative analysis.

Underpinning their argument is Moore's Law: the fact that core technologies such as processors, memory, storage, and bandwidth continue to get better, faster, and cheaper, as well as easier to use. However, if IT advances are to continue driving economic expansion and innovation at or near the historical pace, they will have to overcome another law: diminishing marginal returns, which holds that the extra output achieved from the same additions of extra inputs becomes less and less over time. In the case of business technology, the law of diminishing returns is aggravated by an alarming trend: Many of the organizational leaders applying those IT inputs are taking a heads-down, risk-averse approach.

That's all econ-speak for the thesis of our main story this week--that after a decade or more of driving productivity advances, providing an infrastructure for customer and partner engagement, and exploiting the competitive advantages of information, many IT organizations have lapsed into cost-cutting and system-maintenance mode. Three-quarters of the 150 CIOs and VPs of IT recently surveyed by InformationWeek characterized their organizations' approach to technology investment and strategy as conservative or moderate, and only a third said their budgets let them take risks and make mistakes. The bean counters remain firmly in charge!

Money and people once devoted to initiatives that drive new business now get sucked into operational necessities such as disaster preparedness, governance, regulatory compliance, and security. For the past three or four years, even the most enlightened business technology organizations have been laboring to rebalance their budgets toward innovation.

InformationWeek 500 companies are managing better than most, lowering their ratio of legacy-to-new IT spending from the industry standard 80-20 to around 60-40, mostly by consolidating data centers, standardizing on fewer applications, moving to Web-based and open source alternatives, outsourcing commodity operations--and applying the loose change to programs that make a competitive difference. One small example is Arizona State University, which has freed up more than half a million IT dollars a year by moving students and faculty to free Google applications.

Free Web apps are all well and good, but it will take bigger thinking and commitment to get business technology back on the innovation track. CIOs, CEOs, CFOs, and other leaders could stand to heed the most basic of recommendations Atkinson and McKay offer to policy makers who take for granted the continued economic power of IT: Give the digital economy its due. "Economic policy makers need to view IT issues not just as narrow IT policy, but as the centerpiece of economic policy," the authors maintain. "This means putting issues of digital transformation at the front and center."

There was a time not too long ago that we all lived that credo. Time to live it again.

ROB PRESTON, VP/EDITOR IN CHIEF
rpreston@cmp.com

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