Proprietary IT spending key to success, report says
- Companies that went all in on hiring tech talent, building their own hardware and developing proprietary software and processes have emerged the winners of the modern economy. These companies include the likes of Google, Facebook and Amazon as well as nontraditional technology companies, such as General Motors and Pfizer, according to research by James Bessen, economist at Boston University School of Law, reported by The Wall Street Journal.
- IT intensity, a measure of company spending on proprietary IT, rose over the last three decades to about 24% of net investment in 2016 — the equivalent of almost $250 billion. IT intensity goes alongside widening productivity and innovation gaps that are creating a "winner take most" economy, according to the report.
- The growing gap in wages is "almost entirely attributed" to increasing wages at more productive companies and stagnant wages at less productive companies, according to research from the National Bureau of Economic Research reported by the Journal. In general, the larger a company is, the greater a percentage of IT workers it will have. And a 1% increase in the population of IT workers at a company corresponds to an increase in revenue per employee, according to Bessen's research.
Nary a week goes by that a lawmaker, regulator or tech-pessimist does not suggest breaking up big tech. Like the haves and have-nots of technology in the consumer world, as big tech companies gobble up talent, resources and startups, the small players can be left with little room to grow.
Spending on IT talent and proprietary tech helps a company grow, but with the lead attained by companies like Google, that formula won't be enough to crack the highest echelons of business. Cloud strategy, investment in newer technologies like artificial intelligence and security are among the other business factors that influence whether a company stays in the pack or leads it.
But the productivity and revenue gains attributed to the IT workforce reinforce the business imperative of a strong technology foundation and innovative spirit for overall success. Many tech workers come with an increasingly high price tag, especially ones in niche disciplines like AI or blockchain, but their value add is clear.
- The Wall Street Journal Why Do the Biggest Companies Keep Getting Bigger? It’s How They Spend on Tech
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