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Inferiority Complex

Inferiority Complex

Even though the importance of IT is continually reaffirmed, CIOs insist on questioning their role.

Im Nicholas Carr's controversial 2003 Harvard Business Review article, he argued that IT had become irrelevant, a commodity - no more strategic, he wrote, than electricity. You needed it, but you didn't have to think about it a whole lot. While the piece certainly generated a lot of buzz, and gave many a beleaguered CIO an unwelcome frisson of insecurity, few people bought the argument in its entirety. (Carr expands his thesis in the book Does IT Matter?, coming out May 18 and will be a keynote speaker at the CIO 04 conference in Sydney.) As one might expect, CIOs, consultants and IT vendors were harshest in their criticism.

Of course, IT does matter, and not because the usual suspects say so but because economic conditions say so. IT may be the single most important driving force in our economy. So, by extension, you'd think that CIOs would be among the most powerful, influential executives around. Somehow, however, that hasn't happened. Or at least that's the perception among CIOs and the reporters and analysts who talk about them.

According to Louis E Lataif, dean of Boston University's Graduate School of Management, IT is a major reason why the latest recession was less severe than previous downturns. From 1998 to 2000, spending on Y2K, the euro conversion and the dotcoms propelled the economy into the stratosphere. When (as it was bound to do sooner or later) the economy tanked in early 2001, the fall was hard yet surprisingly short. Technically, Lataif says, the subsequent US recession lasted only eight months, from March to November 2001.

"Economic recessions are inevitable," says Lataif. "A stop in spending is followed by an inventory recession - a shutdown of manufacturing to work down inventory." Given the heights of the IT-fuelled boom that preceded the recession, it was natural to expect any inventory work-off to last much longer than it did. Yet throughout the boom, inventory levels were 30 percent lower than they'd averaged for the previous 40 years. And we can thank IT for that. In effect, Lataif says, IT took the sting out of the recession - at least in terms of its duration - by enabling inventory-reducing practices during the boom, such as just-in-time manufacturing and automated replenishment.

Yeah, but What About Jobs?

Of course, the impact of IT on business cycles hasn't always been positive. Just ask the multitudes of displaced workers whose employment prospects remain dim even as most economic indicators begin to glow brightly. In many industries, lost jobs are the result of businesses becoming more efficient as workers become more productive - two consequences directly correlated to the effective use of IT. So while IT helps drive down costs for businesses and consumers, the gains in both efficiency and productivity take a personal toll on the unemployed. It's an ironic twist that millions of IT workers themselves have been displaced by (certainly) cheaper and (maybe) more productive programmers and managers in places like India and the Philippines.

Lataif acknowledges that overcoming unemployment is an ongoing challenge. By design, IT is supposed to eliminate jobs. Yet Lataif suggests that IT can help here too.

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