IT Vendors Inflate Job Creation Claims - InformationWeek
IT Vendors Inflate Job Creation Claims
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Mark Montgomery
Mark Montgomery,
User Rank: Strategist
3/7/2012 | 8:47:09 PM
re: IT Vendors Inflate Job Creation Claims
Hello Rob,

A refreshing bit of journalistic integrity you display here, which is much needed in the IT industry.

A couple of thoughts--

1) Creative destruction only works relative to job creation in my observation when it results in new business creation, or in some cases significant cannibalization of legacy products internally at incumbents. For the latter Apple is the best example in recent years, but the former is far more common and essentially the primary job engine in the economy. Creative destruction has two elements in this context-- one is innovation, another is economic, with significant overlap and interaction. Some incumbents have become extremely sophisticated--masters actually, in playing this game--very very few in my experience are even capable of seeing it.

We've had a decline in new company creation for a great many reasons, but certainly market power with incumbents is chief among them. Dysfunctional economies usually are the result of some sort of market failure, and that is certainly the case in this era both in terms of cause and in terms of recovery (trust me I am very well aware of the obstacles to new innovation and new companies), both of which by extension are a symptom of regulatory failure. By regulatory failure I am not at all limiting to government regulation, but rather all forms of regulation, including the role of media, customers, partners, self-regulation, and innovation from would-be competitors-- unhealthy relationships between corp. research, jobs, etc. with universities is one good example, another is political dysfunction--incumbents have lobbyists in states, not just in D.C., and the revolving door syndrome. Dysfunctional democracies rarely if ever result in functioning markets, eh?

This article I wrote touches on just a few of the issues:

Regulatory Failure on the Web; Consequences and Solutions:

2) Aside from the well-known and sometimes amazing stories of outsourcing, where other countries often tie market access to importing of jobs and IP (placing IT companies in direct conflict with the U.S.), which is then rewarded in the U.S. by contracting from our governments with those same companies.... the enormous issue today is the inefficiencies in reinvesting the hundreds of billions in cash in IT. A large portion of the excess has resulted from the market failure, and in part I admit also includes strong innovation in a few incumbents like Apple.

However, we have a very serious problem in our economy when those who are being rewarded for shipping jobs overseas to develop new markets simply have no viable path to re-investment--this is as much a policy question as an IT leader and fiduciary issue. The last thing incumbent leaders want to do is create real competition for themselves, what little effective regulation that exists won't allow even more over-consolidation, and when market share approaches monopoly levels they cannot then use that position to enter new industries without risking anti-trust backlash. So Houston we have a problem. I don't currently hold stock in any of the IT leaders, but I would strongly favor/recommend some sort of effective pressure for distribution of those excessive funds to shareholders, including both the threat and execution of legislation--otherwise capitalism cannot function properly. We simply cannot experience this level of tectonic shift without at least functional re-investment so that we can achieve some form of creative destruction and let's not forget the essential other half of that dynamic-- creative rejuvenation.

While I am personally very much in favor of free markets, there isn't much freedom in the shadow of global oligopolies, which only can only exist with the nod of national policy that often either presumes alignment due to importing of cash--in which case is dangerously toying with sending new industries to other countries, a more pure form of corruption, or I fear more often a combination of both.

Bottom line is that we are living in substantially new territory than ever before with the expanding neural network economy now representing almost a full half of the global economy, yet so far we have not seen anything like the response to previous revolutions in terms of policy, market behavior, or consumer reaction -- flight, motorization, farm automation, electric grids, interstate highway systems, reservoirs/aquifers, international shipping-- just thinking of standards alone. Frankly I think a few IT leaders think the U.S. is just simply a basket of fools. Unfortunately, most of our behavior in recent times rather agrees.

Mark Montgomery
Founder & CEO
Todd Shelton
Todd Shelton,
User Rank: Apprentice
3/14/2012 | 9:16:04 PM
re: IT Vendors Inflate Job Creation Claims
(Quoting the IDC/Microsoft study):

"The basic rationale for job growth is that IT innovation allows for business innovation, which leads to business revenue, which leads to job creation Gă÷ a premise that is not unique to this study."

There's no doubt that cloud, and especially public cloud economies of scale will take a bite out of the world's 7 million server administrators (~1 million US). While IDC doesn't offer a net-across assessment, the study does look to new jobs of all kinds created in response to bigger business revenues.

Assuming they are close to right, even if *every* admin job goes away, we are still net-up 5 million worldwide, and break-even in US. Not all server admin jobs will vanish, for a variety of reasons, but let's say half go away (and probably retrain to one of the new jobs). We're net-up over 8 million jobs, 500k in the US.

The study calls out "legacy drag"--a nod-your-head notion for any business or IT leader needing new IT capabilities but facing big legacy infrastructure. Upgrading equipment and skill sets is no joke, especially in smaller shops (where IDC suggests there is less legacy drag and so more and faster cloud uptake).

At the end of the study:

"Beyond this, and not measured in this study, is the use that cloud computing can be put to beyond mere capital cost avoidance."

So are net-new jobs more or less than 12 million? Don't know--we'll have to wait and see. But the estimated impact cloud will have on business revenues, plus the un-estimated impact of a new world of IT agility, especially for smaller businesses, makes me pretty confident that the cloud, net-across, is really good news for all of us.

Todd Shelton

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