Mavericks in the Organization

How does investment in IT affect the organization's structure? How about interesting tidbits like this, "Firms with more PCs per employee had a more decentralized allocation of decision rights for several key technology decisions."

Or how about this juicy number? "Information use was positively correlated with increased revenue and project completion."

And this is particularly telling, "Asynchronous information seeking (such as email and database access) promoted multitasking, while synchronous information seeking (such as phone and face-to-face contact) showed a negative correlation." Now that's a statement I could discuss for quite a while.

It's a nice piece of research that you should read for yourself.

Measuring the Business Value of IT - Including Intangible Benefits

Here is a very interesting work done by Forrester Research on the behalf of SAP. In particular, the author - Craig Symons - has a lot to say about measuring those pesky intangibles. Registration may be required.

Time for Orderly Dismemberment

This is off topic for this blog but please forgive me this transgression. Is it time for orderly dismemberment of the larger, now obviously failed, financial institutions in America? The most obvious way to do this is through a Chapter 11 bankruptcy. The large banks like Bank of America are quickly becoming a cancer in the economic world and the U.S. government appears to be doing more harm than good in this regard.

There are few people in the world more in favor of free markets than I am. But the actions of arrogant bankers like John Thain are reminiscent of Worldcom and Enron. I think Adam Smith would tell you that the only way guys like Thain can so egregiously mismanage a company is because normal market signals aren't working here. I'm not sure why that is - except that the government is now playing a major role in the management of the large banks.

But in any market where the signals are not clear there are huge opportunities to make money. This is where day traders and hedge funders make their livings. There is an old Steve Martin routine about how to avoid paying taxes on a million dollars. It starts with "first get a million dollars". Oh, that I had a million dollars to play with in this market ... but first I must get a million dollars.

Perhaps after I got my MBA in Finance, I should have gone to Wall Street. I did have a couple of calls from recruiters, after all. But, no, IT seemed more interesting and a lot less stressful. (Well, that and a young family to support who certainly didn't need the breadwinner changing careers and starting over.)

So, I don't have a million dollars to play with on Wall Street. Too bad because I think today I'm smarter than those guys. Not more clever, mind you, but smarter. They are clever, like cunning animals.

I once worked for a company that will remain unnamed. We had an executive who did terrible, long-lasting damage to the organization through extended mismanagement. He was finally relieved of his duties and the rest of us had to pick up the pieces and turn the operation around.

One day we were discussing this around the coffee machine. One colleague commented on how much money the guy was certainly making. Another quipped, "Gee, I would have done half the damage and only charged half as much. I would have been a bargain."

Read the link. I would have done one-tenth the damage these guys have done and only charged one-tenth as much.

What Does the Future Hold?

What do the near and long-term futures hold for IT investment given the current recession and governmental responses around the world? I see two significant events unfolding. Underneath these opinions are an interesting and undereported fact: the large Asian economies of China and India are not in recession but are, in fact, growing at a very aggressive pace. Their rate of growth is declining but a declining rate of growth is not a recession. (Wouldn't it be nice if news agencies put some perspective on their reporting once in a while.)

First - the United States will lead the developed economies out of recession in Q3 of 2009. The equities markets will start to predict this in mid-Q1 2009. (Remember that stock markets are leading indicators and labor markets are lagging indicators. The unemployment rates will lag the return to growth by many months.)

The return to growth will be weak at first (maybe 1 percent in all of 2009) but will pick up speed in 2010 as the Federal Reserves money printing takes hold. (I just looked at the Monetary Base numbers for 2009 and the almost-no-growth line up until August 2008 has been replaced with positively explosive growth since then. The Federal Reserve was truly asleep at the wheel regarding the Monetary Base this year --- but at least they seem to have awakened now. http://www.federalreserve.gov/releases/h3/Current/)

This revving-up of the Monetary Base is not yet showing up in the other supply numbers like M1, M2, etc. (http://www.federalreserve.gov/releases/h6/Current/). Students of monetary policy will recognize this lag.

There are two potential results - both of which are already being discussed in the financial media. This governmental response will cause a 70s like stagflation or a rocketing return to growth. We won't know which for several months.

Second - How does this affect IT investment where you work? IT is to a modern organization like the Monetary Base is to a financial system - it is a multiplier. I don't have the research at hand but I personally accept it as gospel that every dollar wisely invested (caveats beware!) will return several dollars in increased productivity and profit.

Good managers understand this relationship. A business school staple is that research and development investment should increase in a recession so that when strong economic activity returns, the business has better products to sell and an edge on the competition. There is a similar perspective in IT.

It is best to invest in IT when an economy slows for two reasons. The first is a personnel issue. It takes the best and brightest on the business side to correctly implement a complex IT system. These people are in high demand when business is good. When business is slow, they are better able to work on large IT projects. The second is similar to the R&D perspective: investing for the IT multiplier in a slow economy will create larger productivity and profit multipliers when growth returns.

So, here's my prediction. Good companies are taking advantage of the current recession to increase (yes, increase) their IT capital investments right now, December 2008. They understand the IT multiplier and want that productivity boost when the economy resumes growth. Which companies are these? More on that in a moment.

Unfortunately, it is only the wise market leaders that will do this. Your average company looks at its diminishing cash pile and pulls in its horns. R&D investment diminishes, new plant and equipment investments diminish, people get fired, and IT spending declines. These are tough decisions made by smart people doing the best they can. But, these are the companies who will perform weakly when an expansion returns.

Now, who are the companies that are investing in IT right now? Let me take a cue from market analysts. Even in this current market turmoil, there are many companies with stock values at all time highs. These are companies with solid balance sheets (i.e., low debt ratios) and steady income streams. I will try to find a few examples and revise this post later.

The reason these companies are performing well even in a bad economy is that their managers understand these macro-economic trends and use them to pummel the competition. Right now they are investing in R&D. Right now they are hiring the best-and-brightest being shed by the weaker companies. Right now they are looking for the IT multiplier and starting up the productivity enhancing IT projects.

I just wish I could figure out how to make money off of this trend.

Simulflation

Is there an emerging trend of capital substitution in the greater worldwide economy? As some areas deflate (oil, houses, etc.) do other areas inflate (medicine, health care)? Financial market watchers call this trading asset classes (selling one like oil and using the proceeds to buy another like health care).

The link is a very speculative but still very interesting look at these trends and the author calls it Simulflation. The web site is not terribly well organized for linking but follow the link and search on the term "Specunomics".

Good IT Governance is Profitable

Good IT governance can improve your bottom line. Check it out.

The Art of Technology Due Diligence

Here is a series on best practices for IT due diligence during an acquisition.

Part 1 - http://articles.techrepublic.com.com/5100-10878_11-1038683.html

Part 2 - http://articles.techrepublic.com.com/5100-10878_11-1038700.html

Part 3 - http://articles.techrepublic.com.com/5100-10878_11-1038685.html

Part 4 - http://articles.techrepublic.com.com/5100-10878_11-1052267.html?tag=rbxccnbtr1

From the introduction, this appears to be an article in seven parts. However, I can only find four on the TechRepublic website. Even so, it appears to be worth a look.