what high tech can learn from low tech

Filed in archive Global Economy , Technology on September 29, 2003

is the topic of this article. It basically argues that tech companies should find the way to migrate from 'simple' product innovation to business process improvement.

"A close examination of the numbers shows that most of high tech's productivity gains during the 1990s resulted from extraordinary gains in computing power and a strong demand for products with ever better performance, capacity and features. These advances--along with demand created by phenomena such as the Year 2000 bug, the e-business boom, the restructuring of enterprise computing platforms and the increase in connectivity-led information technology spending growth to accelerate from about 10 percent a year in the late 1980s and early 1990s, to more than 20 percent from 1995 to 2000. As a result, technology spending surged from 22 percent of the total capital expenditures of U.S. companies in 1980, to 39 percent in 2000."

"In the computing and communications equipment sector, for instance, Dell's labor productivity stands at $900,000 per employee, against a subsector average of only $240,000...Meanwhile, offshore players with very low factor costs--especially for labor--are becoming increasingly competitive. Rather than merely playing catch-up, many of these companies, such as Huawei in communications equipment and Wipro and Infosys Technologies in services, offer value propositions almost equivalent to those of their U.S. rivals, at a much lower cost."
"Rather than relying on a "silver bullet," the productivity leaders have adopted an integrated, end-to-end approach--including process innovation and redesign, the targeted application of IT, carefully crafted outsourcing arrangements and offshoring. They generate gains from a combination of organizational change, targeted investment and the ability to measure the right things."

This sounds pretty well reasoned and completes the impression that many tech sectors will have difficulties to rebound quickly as the industry itself is maturing, although I do not share Mr. Ellison's view of the end for software.