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Technology’s Future

May 16th, 2003 · No Comments

Has Technology Lost Its ‘Special’ Status is the question being asked by many, including NYTimes’ Steve Lohr.

The question is stirring a lively debate among industry analysts, investors and economists. The answer will be important not only for technology companies, but for the economy as a whole. The industry represents about 10 percent of the economy and roughly 60 percent of investment in the kinds of equipment that companies buy to run their businesses.

Since the 1960’s, spending on information technology computer hardware, software and services has on average increased at two to three times the rate of economic growth, said John Gantz, director of research for IDC, a technology research firm. So the issue is whether that multiplier will prove to be alive and well in the future.

That assumption about technology’s special role is questioned in a provocative article this month in The Harvard Business Review, titled “IT Doesn’t Matter.” The article asserts that information technology, or I.T. for short, is inevitably headed in the same direction as the railroads, the telegraph, electricity and the internal combustion engine becoming, in economic terms, just ordinary factors of production, or “commodity inputs.”

“From a strategic standpoint, they became invisible; they no longer mattered,” Nicholas G. Carr, editor at large of The Harvard Business Review, wrote in the article. “That is exactly what is happening to information technology today.”

That realization, according to some analysts, will mean a slower rate of investment in technology over the long term more in line with the pace of economic growth instead of double or triple it. “That’s the debate is technology just another crummy factor of production dressed up in new clothes or is it really an agent of continuing change in the way we do business and communicate?” said Stephen S. Roach, chief economist at Morgan Stanley.

Mr. Roach, a skeptic on technology, added, “My view is that it is a modern-day version of a factor of production.”

The present markets for technology may be maturing, but the new markets for technology are just emerging. They are in the consumers and SMEs in the world’s developing countries, who have so far been left out of the value chain. Their lower purchasing power is made up by their numbers. They represent the next big opportunity for tech companies, but few are waking up to this “invisible” market.

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