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IT is critical for economic growth, says UW business dean

Madison, Wis. — To find the catalyst for the United States' economic growth over the past 10 years – including the nation's astounding 26 percent gain in productivity – look no further than market flexibility and incentives, says University of Wisconsin Business School Dean Michael Knetter.

Knetter
For those productivity gains, well the responsibility clearly lies with information technology and the remarkably adaptive environment that allows IT to continue advancing here well ahead of other leading world economies such as Germany and Japan, Knetter told a packed house gathered at Madison's Fluno Center Wednesday for the Fusion 2005 CEO-CIO Symposium.

Just looking at GDP growth, the U.S.'s performance over from 1994 to 2004 was good but does not stand head and shoulders above that of those two nations, Knetter noted. This is especially true when one compares GDP performance with the disparity in productivity growth, in which the U.S. has taken a solid position of world leadership in the past decade, thanks to the flexibility of its labor markets, the accountability for performance built into its markets and a capital market that is "very well-developed ... at every level," Knetter said.

So how exactly does IT raise productivity levels? It helps businesses do things faster, it allows them to do business around the clock, and it helps companies reorganize themselves to they can deploy people and deliver goods and services in new ways, Knetter noted. Of the three, IT's capacity to drive organizational change is the one that really matters going forward.

"That's really where the juice is, and will continue to be for a long time," he said.
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And while much of the private sector already has reaped huge benefits from the IT revolution of the past decade, the public sector -- government agencies, educational institutions and the like -- have yet to enjoy the same experience, he noted. In particular, university environments such as the one he lives in sometimes are loath to accept technologies that disrupt their way of doing things. That inflexibility, which has hampered productivity growth in Japan and Germany, has held many public institutions back in much the same way. For those institutions, whether public or private, the twin $64,000 questions are, does the organization have the stomach and do the company's employees have proper incentives to adopt sweeping changes?

One conference attendee whose company specializes in software engineering and advanced web development for public- and private-sector clients such as the city and county of Milwaukee and Briggs & Stratton said the big issue is working at the grassroots level within an organization to bring people along with technological changes.

"The technology can be done, we know that," said Rick Fessenbecker, managing director of Northwoods Software Development, Inc., Brown Deer. "Can you get people to change how they're going to work? Can you transofrm the organization to use the technology? That's where the productivity comes from."

Getting that done means identifying a champion at the top of the corporation who can sell a vision to his or her people. "Vision has to come from the top, but it has to be fed from the bottom," Fessenbecker said. "[You need to] get a visionary at the top, a champion, to say to everyone, 'OK, you want to accomplish this, you want to accomplish that? This is what we're going to do. Let's get together."

There is no doubt that IT-led growth is behind the latest resurgence in the U.S. economy, Knetter said. However, certain sectors must change the incentives for and the constraints on their people to tap that potential for themselves. For example, while employees at private companies have a profit motive in helping to implement IT changes that make the company more efficient or create better margins or speed delivery of services, employees of a public university are locked into a certain pay scale, no matter how good their improvements to IT are. In other words, someone in a university leadership position is asking employees to change the way they do things and work extra hours merely for pride rather than profit – and that's a hard thing to do.

"You ask them to disrupt their lives," he said.

Fessenbecker said he believes that the private sector has little bit of an easier job of garnering IT buy-in because of the "dynamics of flexible workforces," but he does see some examples of solid entrepreneurial thinking in the public realm, even among his clientele.

"We did collaboration of eight school districts," Fessenbecker said. "We did a launch of eight Web sites and intranets; we did one software project and we split the cost eight ways, we split the cost of a data center eight ways, and we split cost of ongoing support and services eight ways. It's being forced upon them to a certain extent, but the point is, I'm seeing more and more of that, and I think it's a good thing."

Knetter, who voiced strong support for using technology to deliver basic university courses, used a theoretical distance learning accounting course as an example of a good IT idea that might get quashed for lack of buy-in from the necessary parties, such as the accounting faculty of a university, especially if it results in the loss of full-time equivalent (FTE) enrollment and less faculty demand.

In the current university environment, that means a decrease in funding for the department, and why would anyone in the department welcome a change that does that? So why not allow academic departments to keep that revenue and redeploy resources as necessary, Knetter asked. If a department could keep revenue while decreasing demand on itself, online courses would get all the buy-in they need

"People have to have a stake in implementing change," Knetter said. "Otherwise, it's asking a lot."

Lincoln Brunner is a WTN contributing editor and can be reached at lincoln@wistechnology.com.

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