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Analysis

Why IT is essential for future economic growth
Bob Tarzey By: Bob Tarzey, Service Director, Quocirca
Published: 11th November 2013
Copyright Quocirca © 2013
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The Luddite protests against machinery in the early 19th century are often described in terms of machines replacing people wholesale; whereas in fact the primary concern of the early protesters was that new wide-framed automated looms could be operated by cheaper, less skilled workers, with skilled textile workers losing their jobs. So, the dispute was as much about individual job displacement as overall job loss; in modern parlance, less skilled workers moving up the process ladder.

A more positive view is that the more skilled workers’ time was being freed up so it could be used in more imaginative and productive ways: new product design, market, sales etc. In other words, the new looms would not just increase productivity and profits but open new markets and grow the business to the benefit of all. Whether or not this happened in the 19th century UK textile industry is another matter, but it is often the case put forward when making the 21st century case for more automation driven by IT.

Quocirca reports are no exception. For example, The wastage of human capital in IT operations (Dec 2012) argues that more automation of IT management will free skilled operators to move up the IT process ladder focus on building more business value and Customer automation management (Oct 2013) tells how IT can drive more back office automation, freeing staff to focus more on pro-active communication with customers.

However, is all this talk about freeing staff up to focus on value-add just dressing up the stark reality that more automation means the need for fewer staff overall and the unfortunate losers ending up at the job centre? This will certainly be the short term impact for some as given processes are automated; however, in the longer term successful economies adapt to automation and make use of human capital in other ways. For any one company or country to eschew a given technological advancement would just mean losing out to others that embrace it.

The reality is that more automation leads to improvement at all sorts of levels; living standards, health, even the environment is starting to get something back from technology, having been a victim of its advance for 150 years or so. However, there is a danger of a growing digital divide and, whilst many benefit, there can be extreme losers if the benefits of technology are not extended to all. This is a story well told by Erik Brynjolfsson and Andrew McAfee in their 2011 book “Race against the machine”.

One argument put forward is the power that IT has to drive economic growth is not based purely on the consumption of natural resources. Whereas there are a limited number of atoms available for humans to consume, the number of bytes we can use continues to grow exponentially. Of course, the IT industry itself consumes materials and energy to achieve this, some would say at an alarming rate (more re-cycling and renewables are the long term fix for that). However, the economic growth driven by everyone of the rocketing number of virtual bytes created is greater than that of every atom consumed, as IT systems continue to become more and more efficient and powerful.

Quocirca, like any analyst organisation, is often asked to describe what the future of the IT industry might look like. The current big on-going stories are well described elsewhere; the rise of cloud, mobile computing and social media, the big data challenge and so on. However, what is less often asked is what the future would look like if the IT industry stopped innovating and driving more and more automation; the answer is surely not good!

KPMG’s Tech Monitor UK report published recently (Oct 2013) shows how jobs growth in UK IT sector has outpaced that in the overall economy consistently throughout the last decade. In other words, IT-related jobs are becoming more and more important overall. This will include front line jobs deploying and managing IT systems but, more importantly, it includes jobs and, increasingly, whole industries that only existing because of the IT industry—jobs that are primarily based on the consumption of bytes and not atoms.

The KPMG report also looks at the growing success of tech clusters in the UK that are one of the results of this. Jobs and profits (when they follow) of firms in cloud services, gaming, social media and big data processing all depend more on bytes than atoms; all have fantastic growth prospects. Many of the jobs here are not IT jobs per se but every day jobs; selling, marketing, customer support and so on, driven by our growing appetite for consuming bytes as much as atoms.

Brynjolfsson and McAfee highlight two things that need to be tackled to ensure more of us have a chance to participate in the digital economy: organisational innovation (for new and existing firms to make better use of technology); and investing in human capital (i.e. relevant education). Perhaps this is best summed up by a quotation they reproduce from a book by the great chess player Gary Kasparov.

After the grandmaster first lost to IBM’s Deep Blue computer in 1997, he and other players went on to experiment with playing against each other by co-operating with the machines rather just playing against them. Kasparov reported the following based on this experience “a weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process”. In other words, machines and most humans can work well together providing their co-operation is well planned. Opportunity and growth for all is possible through IT—any latter day would-be Luddites please take note.

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