How IT services providers can address a $2.7 trillion productivity gap

Posted by Mike Vizard on Jun 16, 2016 12:00:00 PM

productivity_gap.jpgOne of today's economic mysteries centers on why after years of investment in IT the average worker is actually less productive today than they were before the great recession that occurred earlier this decade. In fact, economists have come to refer to this trend as the “productivity gap,” which they say is having a $2.7 trillion impact on the gross domestic product (GDP).

While just about everyone acknowledges that there are multiple factors contributing to this productivity gap, people are starting to point the finger at a general decline in investment in IT, along with the complexity of existing IT environments, as the root causes of the problem.

In fact, this week the Information Technology and Innovation Foundation (ITIF), a think-tank based in Washington, issued a report that finds net private investment in equipment and software averaged around 2.0 percent of GDP in the 1990s, fell to less than 1.2 percent in the 2000s, and then slid further to 1.1 percent in the 2010s.

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The report also reveals that business investment in basic and applied research has fallen from around 30 percent of total business R&D in the 1990s to approximately 26 percent today, and it notes that from the mid-1980s to present Federal funding for employment and training has fallen by about half as a share of GDP.

The ITIF is calling on the government to essentially employ tax policies to spur more strategic long-term investments that would engender advances in IT that would close the productivity gap.

How businesses are responding

In the meantime, there’s already a marked shift in how individual businesses are responding to productivity issues. For example, growing interest in workspace-as-a-service (WaaS) offerings is being driven by organizations trying to find ways to cope with a myriad of cloud and on-premise applications that wind up doing more to complicate workflows than to simplify them.

At the same time, as many organizations start to recognize the fact that every company is a software company, it's becoming blatantly obvious that most of them are not particularly efficient at building applications. For that reason, adoption of new types of programming environments that make it possible to develop certain classes of applications faster without having to rely on professional developers is starting to gain momentum.

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During the recent downturn in the economy, most businesses focused more of their energy on making their quarterly goals. But in doing so, many of them actually became less efficient as business processes became more extended thanks to the rise of both mobile and cloud computing.

The opportunity for IT service providers

There’s clearly an opportunity for IT service providers to have a much more strategic conversation about productivity per employee and the role IT should be playing in improving those numbers. Naturally, that means IT service providers have to make sure they actually know enough about their customers' businesses to hold up their end of the conversation.

The simple truth of the matter is that faith in the value of IT investments is not all that high among most business leaders. Rather than asking those business leaders to fund yet another IT project, the time has come to have a much bigger dialogue about the strategic role IT should be playing in their organizations. Once that’s established, not only will it become much easier to prioritize one IT project over another, business leaders will become much more enthusiastic about actually making those investments.

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Topics: IT Services Trends

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