When I was the PC czar for a previous employer, I’d annually have to explain our spending “all this money” on PCs when we’d just spent “all that money” on PCs the year before. I hauled out all the usual arguments, and some unconventional ones besides … all to no avail.

The CFO had prepared counters to the usual arguments, of course, and became irritated at the unconventional ones. Like most executives, he disliked surprises; like many, he found countervailing facts and logic irritating once he’d made a decision. Finally, he presented his clincher: “If PCs increase productivity so much, why hasn’t our headcount dropped?”

When I expressed doubt as to the validity of headcount reduction as a useful measure of productivity improvement, I was told we lacked a good measure of productivity, so he was using that until we got one.

Recognizing the futility of argument, I changed the subject (until now).

Computer backlash seems to be picking up steam again. You can find good examples of this gleeful technology bashing in the writings of Paul Strassmann, whose new book, The Squandered Computer: Evaluating the Business Alignment of Information Technologies, received a glowing send-up in the September/October issue of Harvard Business Review.

Strassmann’s arguments go something like this: Computers are supposed to make companies more productive. If companies are more productive, their sales, general, and administrative cost (SG&A), indexed by the cost of goods sold (COG) ought to have decreased over time. SG&A per COG dollar hasn’t decreased over time, so the benefits touted by IT advocates are, in the terms of Michael Schrage’s HBR review, “… the big lie of the Information Age.”

Every big lie requires a big liar, and since nobody else seems to be around, I guess I’ll have to assume the mantle of responsibility and do my best to perpetuate this big lie.

Strassmann’s argument contains a fatal flaw: There’s no reason to expect SG&A (accounting lingo for overhead) to decrease when you invest in IT. None. Why would it?

You see, capitalist societies include a complicating business factor called competition. It’s a complicated concept, but I’ll try to simplify it. Competitors, you see, are companies that want the same customers you do, and they’ll work hard to get them (unless the company is Novell or Apple, of course, in which case they’ll work hard to give Microsoft their customers … but that’s a different story).

Competition confounds simpleminded productivity measures. Product quality, for example, doesn’t remain constant over time in a competitive environment — it improves or the product fails. And around these quality improvements companies have wrapped extensive service offerings. Why? To stay in business, because their competitors were busy wrapping extensive service offerings around their higher-quality products.

As documented here earlier this year, service isn’t enough either. (See “What customers buy,” 8/11/1997.) Progressive businesses add entertainment dimensions to their products and services; transform sales and marketing into affinity enhancement programs to move from mass marketing to mass one-on-one marketing; and “molecularize” everything to transform manufacturing from mass production to mass customization.

None of this comes cheap. These programs require significant investments in IT. Companies that don’t invest fall by the wayside; those that do stay in business so they can play the game again next year.

So here’s my challenge to those who claim IT investments are worthless: Find one company — just one company — in a competitive industry that’s succeeding while keeping the books on ledger paper, typing correspondence on IBM Selectric typewriters, and managing inventory on index cards.

It’s the nature of competition that you have to keep running faster just to stay even. The measure of IT value, then, isn’t SG&A over COG. The proper measure of success is simply staying alive.

Management speak: It’s just a proof of concept.
Translation: This is something I wanted to work on, but knew you’d say no if I asked.
This week’s contributor didn’t explain whether he was speaker or listener  but did want his identity concealed