IT Growth: Exponential No More

BreadMan writes "The Economist has has an article about growth in the IT industry coming off a period of unsustainable growth. Compares IT to growth industries of the past like railroads and automobiles."

Comments

Mis-use of terms

[Hao Wu]

Then maybe the growth was a log function, or sigmoidal.

But most journalists couldn't care about growth models. To them, anything that is "big" or "fast" is considered exponential.

Irruption - Yup, it's a real word

[Anonymous Coward]

When I saw it, I looked it up and it's for real. From reference.com :

\Ir*rup"tion\, n. [L. irruptio: cf. F. irruption. See Irrupted.] 1. A bursting in; a sudden, violent rushing into a place; as, irruptions of the sea.

exponential incompetence

[g4dget]

"Exponential growth" just means that something grows as k^t for some constant k, and just about everything does. Your checking account grows exponentially, even though you probably only get 1% interest: after t years, you have 1.01^t dollars, or about 2^(t/70) dollars, if you like.

Most mature industries grow exponentially because they grow with the economy as a whole. Any economist that would propose that the economy not grow exponentially would be lynched by politicians--our whole economic system assumes that we can sustain at least modest exponential growth indefinitely (whether that is reasonable is a different question).

The IT industry will continue to grow exponentially, just like almost any other sector . What it won't do is have growth rates that exceed that of the economy as a whole. That is probably what the Economist means.

The Economist just lost a lot of credibility in my eyes: misusing the term "exponential" in this way is something that just shouldn't get past the editors of any publication that claims any competence in economics.

Re:Exactly.

[Dolphinzilla]

No big surprise - Management had to wake up eventually.

In addition many computer systems and networks have reached a level of complexity that can no longer be serviced / designed / maintained by an MCSE or some kid who took a few HTML classes at the local community college. Its true that anyone can "throw" a network together - and as my boss often says, "when you want it bad, you get it bad..." At my place of employment, engineers are actively involved in serious systems design and modeling of our networks (before they are deployed) - they are not shopping out of a Black Box catalog and hoping it all plays together.

The parent post makes a good point, and I would add the following - time for less quantity and more quality...

Lots of problems with this

[Anonymous Coward]

1) Factual - the US corporate tax level is not the highest in the world, it is the 4th highest

2) Economic - consumption taxes can just as easily increase, not decrease, the cost of goods. Check out the prices of alcohol in Iceland or cigarettes, or gasoline in the UK versus gasoline in the USA.

3) Fair for who? - why should a low-income person have to pay the same proportion of tax on an item as a high-income person? In effect, a consumption tax increases the relative tax burden on those least able to afford it.

4) Legal - corporations are treated as 'people' under US law in almost every other aspect, why should they also not have to pay taxes like everyone else?

5) A key reason jobs are being located abroad is the cost of employing those people is lower. Salaries will be a major determinant of that cost not corporate tax rates by themselves. Unless of course you are arguing for an across the board reduction in pay levels for all American programmers. Thought not.

Re:Lots of problems with this

[hagbard5235]

First, out of curiosity, which three countries have a higher corporate income tax rate than the US, and what is your source for that statement ( not that I disbelieve you, but I'm curious )?

Second, have you checked out the http://www.fairtax.org site or read HR 25?

In response to your

2) Economic - consumption taxes can just as easily increase, not decrease, the cost of goods. Check out the prices of alcohol in Iceland or cigarettes, or gasoline in the UK versus gasoline in the USA.

please note that the FairTax proposal entails replacing all current federal personal and corporate income tax, capital gains tax, payroll tax, etc with the national retail sales tax. It's undeniable that some chunk of the cost of the goods you buy consists of the hidden costs of those taxes and the cost of complying with those other federal taxes ( current estimate of Federal US compliance costs are in the range of $200 billion or aroudn 2% of GDP, that's not the taxes themselves, just what it costs to comply with current federal tax law). The estimates I've heard for the 'hidden' tax cost on most goods is 20-30%. We can certainly argue over the number there, but it's clear that the cost in our goods and services of the current tax system is non-zero.

In response to your

3) Fair for who? - why should a low-income person have to pay the same proportion of tax on an item as a high-income person? In effect, a consumption tax increases the relative tax burden on those least able to afford it.

please note that the FairTax proposal provides for refunding of the sales tax paid by households up to the poverty level for that household. So if you spend no more that the poverty line for a household of your size, you effectively pay no sales tax.

Additionally note the following perspective on the Fairness of the FairTax proposal:

Income is roughly a representation of what you contribute to society ( yes, I know, one can point to egregious examples of cases where this is untrue, both in terms of overpaid and underpaid persons, but on average it mostly works ). So an income tax taxes what you contribute to society. A retail sales tax taxes what you take out. I find taxing people on what they take much fairer than taxing them on what they contribute.

In response to your

5) A key reason jobs are being located abroad is the cost of employing those people is lower. Salaries will be a major determinant of that cost not corporate tax rates by themselves. Unless of course you are arguing for an across the board reduction in pay levels for all American programmers. Thought not.

while I will not deny that the lower salary cost of programmers is a factor in IT jobs moving overseas, please note that there are very real costs in trying to get your IT work handled overseas. There is a growing realization of these 'non-salary' costs. Please also note that the salary costs for US employees are not even vaguely the full cost per employee. You also have payroll taxes to pay, benefit costs, and the cost of capitalizing that employee ( providing the stuff they need at work to do their job, like their computer ). Eliminating the payroll taxes and complaince costs associated with them would contribute to reducing the overall cost of US employees. How much that cost reduction would reduce the rate of jobs going overseas can be argued, but I would suggest it's clearly non-zero.

Re:Lots of problems with this

[Fallen_Knight]

1) still pretty high, there are alot of nations

2) WTF has this to do with what hes was talking about? he wasn't talking about consumption taxes. and of course consumption taxes are going to increase the cost of goods, because that is what they are supposed to do!

3)If a poor person pays 50%, and a rich person pays 50% the rich person still pays ALOT more then the poor person.

20,000 = 10,000
100,000 = 50,000

I could just as easily say, Why should someone whos rich pay a higher tax rate?? Thats not fair cuz they already will pay more with a fixed %.

A fixed $ amount would be bad, but a fixed % would not be.

4) I dont' belive its makeing corperations pay NO taxes just lowering their taxrate into a more fairer zone.

5) look at the entire picture, lowering the corporate tax rate will drive the cost of goods down, Witch means the cost of liveing goes down, witch means corporations can pay people less because they need less money to live. witch means underskilled oversea workers will be less atractive.

Get that?? You can never just look at 1 aspect and say "that won't work" "thats unfair". Look at the entire damn picture, do be like the rest of the masses. So few people actualy take the time to. I figure i'm missing stuff to, i'm no expect i just use logic with the knowlage i have

(pardon the spelling/typos, i don't have time to check for error, work and all you know)

I disagree..

[marcushnk]

For Australia at least..

In Australia companies have been trying to cut costs in It for about a year and a half now.
You can only do that for so long before you run the risk of having your company fall so far behind that it will never recover (or you have to spend too much to recover).

I believe that companies in Australia will stop out sourcing and start spending large on IT internally very soon.. in the next 6 - 12 months at least.

I reckon we're about to see the second big rise of IT in Australia, right on the heals of broadband and "free to air" wireless networks..