IT vendors must take onus for output lag

It was the right message from the wrong source.

Hewlett-Packard Canada CEO Paul Tsaparis said what many business professionals at the Economic Club of Toronto last week needed to hear: that Canadian companies are falling back of the global pack in terms of efficiency and productivity.

Mr. Tsaparis then attempted to make the case for increased information and computing technology (ICT) investment, citing statistics showing a 17 per cent productivity gap between Canada and the United States. He further added that per-employee spending by Canadian companies is a mere 38 per cent of similar investment by American businesses.

“Simply put, Canada’s investment in technology is severely lagging that of our largest and closest trading partner and it is affecting our productivity – with the rate of productivity rising faster in the U.S. than in Canada,” he said.

Few would argue the importance of business efficiency and high productivity in a global economy where companies compete against those across the street and around the world. But the point may have been obscured by the perception that the rallying cry was self-serving.

It’s one thing for Mr. Tsaparis to observe that Canada is no longer a leading technology powerhouse and lags behind the likes of Scandinavia in terms market readiness for IT adoption. But as the head of HP Canada, is Mr. Tsaparis – or any ICT vendor for that matter – the right voice to implore businesses to spend more on technology? I think not.

There are also questions surrounding the real impact of ICT investment on business productivity. Jason Livingstone, a senior research analyst at Info-Tech in London, Ont., notes that other issues beyond technology may have more to do with the shortfall in Canadian business productivity. He estimates ICT investment accounts for only about a third of the problem.

Small businesses – companies with fewer than 100 employees – are where the largest gap in ICT spending between Canadian and U.S. businesses exists. The more competitive small business marketplace within the U.S. economy generally drives greater competition, and hence the need for efficiency and greater productivity. And that’s probably the biggest reason why American small businesses spend more on ICT than do their Canadian cousins, Mr. Livingstone says.

He adds that the Canadian business landscape is generally is not as hotly contested as that of other countries, since there exist regulations here that often inhibit competition – specifically laws that shelter certain types of industries. It’s a factor that can lessen the urgency to invest in more productive processes. In addition, U.S. businesses may find it easier to finance ICT projects and upgrades through more readily available investment capital from a much larger venture capital community.

Business investment in ICT also varies dramatically by industry sector. Mr. Livingstone says the IT industry itself, which is a much larger community in the U.S., is among the biggest spenders on technology.

Canada, by comparison, is a more resource-based economy, and industries such as mining and forestry spend significantly less on ICT than their high-tech-sector counterparts.

And when it comes to large businesses, there’s actually not much difference between the proportionate ICT investments made by Canadian and American companies, Mr. Livingstone says.

The relationship between ICT spending and productivity improvement is less about how much companies are investing and more about where. Smart investment is the key, he says, adding many companies have purchased “hot” technologies without seeing any return. They should instead seek to understand how IT spending drives the business forward, and spend accordingly.

In that regard, Mr. Livingstone suggests companies would be wiser to invest in IT people rather than products. A company can make its IT investment go a lot farther and do more through IT staff that are smarter and have better skill sets, he says, pointing out that IT management and leadership are critical to achieving process efficiency in ICT.

“You’ll make the technology investments anyway … [things like] baseline infrastructures and applications. The leadership considers what areas of technology to look at and how it will help the business,” he says, adding that much of IT is a commodity and many IT products – regardless of from whom these are purchased – aren’t much different.

Vendors themselves have an important part to play in helping Canadian business stay productive and competitive. What they can do to help smaller businesses realize greater productivity through IT would have been a good topic for Mr. Tsaparis to address. He might have further suggested where the greatest bang for the buck can be achieved within limited small-business ICT budgets.

Mr. Tsaparis might have discussed the practicality of concepts such as computing utility, for example, where a customer purchases only the computing and IT-enabled applications needed, without actually building and owning the technology.

Many of the challenges involved in realizing the full potential of IT can be traced to the actions of technology vendors. Smaller companies often complain of being treated as second-class customers by the largest of IT vendors, many of whom refuse to directly serve or even sell to small business, and instead rely on a community of third-party distributors and resellers to reach this market.

A lot of smaller businesses would rather deal directly with the vendor, believing they can get quicker resolution of problems through straight-line relationships to the source. Also, too many Canadian IT vendors are top-heavy with sales and marketing staff, and have precious few technical experts.

Another complaint heard particularly throughout the ranks of large business is that current ICT investments – in hardware and software – are underutilized. During the past two years many companies have focused on ways to maximize what they already have in order to achieve productivity improvements and better return on investment. Mr. Tsaparis might have suggested ways for HP and other ICT vendors to help companies deal with these sorts of issues.

Technology plays an essential role in helping companies achieve greater productivity. You won’t get much of an argument about that. But if it’s true that Canada is falling behind the rest of the world in terms of productivity because businesses here are not making the most of the systems they have or the IT available to them, then an ICT vendor should have a whole lot to say about that. And maybe they need to take a look at their own business practices, too.

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