Journal nelsonal's Journal: Productivity and IT 3
Quick quiz, who is most responsible for the productivity gains of the 1990s Gordon Moore (Intel), Bill Gates (MS), Sam Walton (Walmart), or Jack Walsh (GE)?
The answer is Sam Walton, a recent study found that Wal-Mart accounted for half the productivity improvements over the last two decades. Most people don't think about something so decidedly low tech as retail being a big productivity gainer (and they didn't even install a ton of self serve checkouts to get it).
The odd thing is that while I would guess that Wal-Mart would attribute their gains in no small part to IT products, they don't spend a whole lot on them. Total equipment spending was ~$3 billion last year (including all equipment not just IT) which is pretty tiny compared to revenue ($250 billion), income ($9 billion), or any other measure of company size. Compare this to your company or even other retailers. Another example could be Dell. Their total capital spending was $300 million, that includes all of factories, R&D centers, cars, and servers. Obviously both companies use leases to reduce that number but even doubling those and you aren't coming anywhere near the $400 billion spent on IT in the US in 2003 (according to the BEA).
I guess my question is how come Walmart and dell can spend less than 1% of total technology spending but pull more than half of the productivity gains. I think most technology is sold as a productivity enhancement. That means that the remaining 99% of spending is being wasted on the other half of the productivity gains.
I have several questions as a result of this information:
What makes Dell & WalMart so much better at applying technology?
Is this the real answer to the recent article and book about Does IT really matter? (Perhaps it is not IT that matters so much but the abilty to apply IT that will continue to matter.)
Why do other managers continue to spend so heavily on IT?
After spending it what are the others missing that causes such small improvements?
Of course this is a great time to share your stories about PHBs who wasted a year's worth of budget on a server that remains underutilized and ineffective.
I have my own opinions about the answers (you saw the hints of it in my response to the second question, but I'd love to see what others thought and perhaps we can collectively improve our organizations' ability to improve their own IT spending productivity/cost ratio.
The answer is Sam Walton, a recent study found that Wal-Mart accounted for half the productivity improvements over the last two decades. Most people don't think about something so decidedly low tech as retail being a big productivity gainer (and they didn't even install a ton of self serve checkouts to get it).
The odd thing is that while I would guess that Wal-Mart would attribute their gains in no small part to IT products, they don't spend a whole lot on them. Total equipment spending was ~$3 billion last year (including all equipment not just IT) which is pretty tiny compared to revenue ($250 billion), income ($9 billion), or any other measure of company size. Compare this to your company or even other retailers. Another example could be Dell. Their total capital spending was $300 million, that includes all of factories, R&D centers, cars, and servers. Obviously both companies use leases to reduce that number but even doubling those and you aren't coming anywhere near the $400 billion spent on IT in the US in 2003 (according to the BEA).
I guess my question is how come Walmart and dell can spend less than 1% of total technology spending but pull more than half of the productivity gains. I think most technology is sold as a productivity enhancement. That means that the remaining 99% of spending is being wasted on the other half of the productivity gains.
I have several questions as a result of this information:
What makes Dell & WalMart so much better at applying technology?
Is this the real answer to the recent article and book about Does IT really matter? (Perhaps it is not IT that matters so much but the abilty to apply IT that will continue to matter.)
Why do other managers continue to spend so heavily on IT?
After spending it what are the others missing that causes such small improvements?
Of course this is a great time to share your stories about PHBs who wasted a year's worth of budget on a server that remains underutilized and ineffective.
I have my own opinions about the answers (you saw the hints of it in my response to the second question, but I'd love to see what others thought and perhaps we can collectively improve our organizations' ability to improve their own IT spending productivity/cost ratio.
depends on the company (Score:2)
Re:depends on the company (Score:1)
In finance, I would guess that certain departments and companies are accounting for the majority of the gains (and spending a tiny fraction of the budget) while most of the spending goes to a minority of the productivity improments. This isn't a known fact, but in my experience (admittedly anecdotal) it's very true.
Overall banks and insurance companies have benefited more than other industries, but even there the gains are probably concentrated in a few companies.
Also, from wha
depends on the people running the company? (Score:2)
Companies have to take a gamble on new directions to stay competitive, or they will be left behind. Trouble is, the wrong guess can lead to squandered millions. Not taking a gamble leads to being passed up by c