Networking And Information Technology Research And Development

Networking And Information Technology Research And Development – Assessing the Impact of Change in the Information Technology R&D Ecosystem: Maintaining Leadership in an Increasingly Global Environment (2009) Chapter: 2 Information Technology: An Essential Enabler for the Information Society

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Networking And Information Technology Research And Development

Networking And Information Technology Research And Development

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Assessing the Impact of Change in the Information Technology R&D Ecosystem: Maintaining Leadership in an Increasingly Global Environment

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2 Information Technology: An Essential Enabler for the Information Society The importance of information technology is indisputable with the economic contribution of information technology (IT). Simply put, information technology is the technology of the 21st century. Effective use of information technology is now recognized as an important component of economic growth and innovation in society and the economy. As the President’s Council of Advisors on Science and Technology’s 2007 Assessment of Federal Network and Information Technology Research and Development (R&D) Programs Recognized: Information Technology Leadership for U.S. Economic Prosperity, Security, And quality is essential. life . . It is difficult to overestimate the contribution of [network and information technology] to the security, economy, and quality of life of the United States. . . . The cumulative impact of this technology on life in the United States and around the world is enormous and beneficial. Since 1995, the networking and information technology industry has accounted for 25 percent of US economic growth, measured as the real change in gross domestic product (GDP), although it represents only 3 percent of GDP. Science and Technology, Leadership in Challenges: Information Technology R&D in a Competitive World, Executive Office of the President, Washington, DC, August 2007, p. 1, 5. Ibid., p. 9, citing National Research Council, Productivity Growth in the Information Age: Measuring and Sustaining the New Economy, National Academy Press, Washington, DC, 2007. 22

Information Technology: A Key Enabler 23 Advances in information technology and its effective use can be expected to sustain economic and social gains and be the key to innovation and future growth. IT is distributed throughout the economy: essential for or supporting production in all sectors. IT supports all areas of scientific and engineering endeavor from basic and applied research to product development, sales, and distribution (see also the discussion of pervasive IT in Chapter 3). The Economic Case: The Contribution of Information Technology to the Economy Although economists debate the exact nature of its impact, the permanent, positive contribution of information technology to economic productivity and growth is now beyond doubt. Income and output calculations are epitomized in the 1987 Nobel Prize-winning economist Robert M. Solow’s statement: “You can see the age of the computer anywhere but in manufacturing statistics.” In economics circles, this is known as the paradox of solitary production. However, developments in the way national income accounts and productivity are constructed have convincingly demonstrated the fundamental contribution of information technology to productivity and growth. Over the past decade, labor productivity has increased dramatically due to investments in information technology and, perhaps more importantly, to the efficient use of this technology by companies. For a resolution of the economic debate over whether the impact of information technology is a positive but temporary shock to the economy or a permanent improvement, see Dale W. Jorgensen, Information Technology and the U.S. Economics (President). s Address to the American Economic Association, January 6, 2001), American Economic Review 91(1): 1-32, March 2001. Also Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System, Statement before the Joint Session Look. Economic Committee, Congress USA, June 14, 1999: “Innovations in information technology, called ITâgeus, are changing the way business is done and creating value, often in ways that were not easily possible even five years ago. nor predicted. findarticles.com/p/articles/mi_m4126 /is_8_85/ai_55671973; accessed March 24, 2008. Robert M. Solow, “Watch Us Better,” New York Review, July 12, 1987. This development in Beginning in 1999 with a review that first identified software costs. Investments are written off as current income rather than as an expense. Dale W. Jorgensen, Moon S. Ho, and Kevin J. Stero, Information Technology and the American See Growth Reconstruction, MIT Press, Cambridge, Mass., 2005. Jason Diedrick, Vijay Gurbaksani, and Kenneth Kramer, Information Technology and Economic Performance: A Critical Review of the Empirical Evidence, ACM Survey of Computing 35(1): 1- 28, March 2003.

What Are Some It Job Titles?

24 assesses the impact of changes in the foundation of the R&D ecosystem for the revival of US growth. The capital-investment/capital-services analysis begins with technology-driven patterns of relative decline in quality-adjusted semiconductor prices. the time. A significant drop in semiconductor prices is driving down the prices of computers, software, telecommunications equipment, and information technology services, which in turn lowers the cost of all kinds of advanced products, from airplanes to cars. Jorgensen also notes the pervasive nature of information technology and that the impact of information technology investments is felt widely throughout the economy, transforming product markets and business organizations. But the impact of information technology is more than just productivity. Cost reductions in traditional products and productivity gains in the service sector. Information technology is merging with other sectors and its discipline is no longer self-contained: it is broad. According to Apt and Nath, information workers now make up 70 percent of the U.S. workforce and contribute more than 60 percent of the value added to the U.S. economy. Data processing by workers represents a growing part of GDP, and it is estimated to be related to information technology. For example, financial analysts use search engines and databases to gather information about investments, retrieve it for analysis with spreadsheets and other modeling tools, and share their results via email and websites. Routes to other employees. At the company level, integrated supply chain management enables communication and coordination between customers and suppliers, which allows customers to find the most cost-effective supplies subject to delivery constraints, reduce inventory, and increase production efficiency. make it better This capability brings direct benefits to customers, not just in terms of cost reduction. For example, it is now possible for customers to purchase a custom-built car with color, trim, and other options, and track its progress through production to dealer delivery. Brynjolfsson offers an interesting comparison between two major retailers in their use of IT. 10 By investing heavily in IT per employee, one of these competitors has also enabled decentralized decision-making, pushing purchasing decisions to lower-level employees. This com- Dale W. Jorgensen, Information Technology and the US Economy, American Economic Review 91(1):1-32, March 2001. Ibid. U. Apte and H. Nath, Size, Structure, and Growth Economics of the United States, Center for Management in Information Economics, Business and Information Technology (BIT) Working Paper, December 2004, at http://www.anderson. Available at ucla.edu/documents/areas/ctr/bit/ApteNath.pdf. Accessed October 28, 2008. 10Erik Brynjolfsson, âThe Productivity GAP,â Optimize, Issue 21, July 2003, available at http://ebusiness.mit.edu/erik/Optimize/pr_roi.html; Accessed October 28, 2008.

Information Technology: An important 25 combination of technology and business processes has contributed to higher levels of productivity and business value for these companies. Brynjolfsson also found that from 1995 to 2005, productivity in the US economy increased by more than 3 percent per year, basically doubling over the previous 20 years. This growth rate continued through the recession in the latter part of the period, when productivity grew at an impressive and counterintuitive rate of 4.8 percent. Brynjolfs-son attributes this extraordinary productivity growth to the ever-increasing investment in information technology by companies. 11 Furthermore, it is not just the amount of IT investment, but the way technology is used to affect work organization. It is important to realize increased productivity. One dollar spent on IT equipment generates $9 in fixed assets. For example, computerized business processes produce better data that can be mined for analysis and decision support. An example is online customer support that generates valuable information about customer needs that can lead to insights for developing new types of products. Therefore, information technology affects the economy not only in terms of the value of information technology goods that are sold, but also has a multifaceted effect on the efficiency and quality of economic activities. As Brynjolfsson also argued, the effective use of information technology places high demands on competences.

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