Gain Competitive Edge through Higher Spending on IT

"The past decade has had higher productivity growth than in the 1990s, and most of that is because of information technology," says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology's Sloan School of Business, reported the WSJ on Feb 12, 2012 in “Cut Those Costs! (But Not Tech.) Finance officers are boosting IT spending, hoping to get a competitive edge” by Ben Worthen.

“Dr. Brynjolfsson studied 179 public companies and found that those that invested in technology to collect and analyze company information were 5% to 6% more productive than those that didn't.”

“Additionally, the gap between successful companies and laggards is widening by a variety of measures, including earnings and market capitalization, and that is particularly true in technology-intensive industries like finance and parts of retail. Dr. Brynjolfsson says that there isn't enough evidence to say that the gap is a result of technology investments, but that there is definitely a correlation.”

So what kind of IT is on the buy lists?

• Mobile, for one, which allows employees to access company data easily from multiple locations
• Virtualization and other technologies to allow organizations to consolidate servers
• Tools to improve productivity among customer facing employees such as iPads and call center automation

What activities indicate your competitors are investing in technology? Here are few signs; you can probably add to the list:

1. Employment ads for new staff with key technology expertise
2. Building permits for larger data centers (check for growth or consolidation) or call centers
3. New web site with more features
4. Layoff of employees specializing in older technology that may have been replaced
5. Announcements by vendors that XYZ Company has acquired their product or uses their service
6. Feedback from customers that XYZ Company salespeople are using new mobile or tablet technology.

Obviously, these signs point to different times in the process of acquiring and implementing new technology and the earlier you know, the better you can respond if your firm chooses to. After all, investments in technology may or may not create competitive advantages relative to your organization. But at least you know and can make an appropriate decision.