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Saturday, November 13, 2004Zdnet Blog) recently published a blog about technology spending rate trends. Excerpts with my comments:
The IT boom will never resume. In fact, we are at the twilight of IT – or, at least, IT as we’ve come to know it. Business historian Carlota Perez in the paper titled "The Dynamics of Bubbles and Golden Ages "argues that the frenetic and euphoric "installation" period of IT development is now passing as we enter the comparatively dull and mature "deployment" period.
As the history of steam, the railways, steel, electricity and the automobile all suggest, this inevitable transition is good news for the customer, employment and the economy overall. The twilight must precede a new dawn. This is the period where we begin to extract real, higher level business value from technology. It all has happened before: New levels of commerce as well as new towns, suburbs and cities truly emerged only as transportation (whether the railroad or the automobile) and other technologies were quietly assimilated.
Investors and research analaysts in Wall Street – which seemingly prays for manias, untamed bulls and new, new things – continues to be bullish about information technology "[R]ather than building on its momentum, as it has after past downturns, the [tech] recovery already is losing its steam," states the Wall Street Journal in a piece last week. "The growth in corporate technology spending slowed to 9% in the third quarter. The shift has big implications for the broader economy. It’s terrific news for corporate buyers but it is holding back a major driver of overall economic growth."
We argue that this is completely wrong. Nothing is being held back. Corporate buyers are experiencing extraordinary productivity gains. They are now realizing the value of technologies they bought years before. As Erik Keller, AMR Research Fellow and author of Technology Paradise Lost, has brilliantly outlined, these trends are not temporary. "World-class leaders in IT spending have shown that budgets can be cut 20% to 50% without a negative impact on business processes," he argues. This is a great environment for the introduction of Web services and service-oriented architectures. Such approaches promise to further capitalize on the hidden value of existing technology. Beyond that, they lay the foundations for higher level business innovation. We can now concentrate on rethinking and refining business strategies, processes and operations – and let the changes ripple back through our IT systems. The economic gains to be realized – and the needless costs to be eliminated – through such efforts are truly enormous. As professor Perez suggests, a "great surge of development" remains ahead of us. After twilight comes the dawn. Paul Strassmann and Alinean research also support these ideas.
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