The impact of computer and information technology to the economy

May 20, 2014 § Leave a comment

Introduction

From economic point of view computer and information technology gave a very positive impact especially for the employment and economic growth. As Patrick Thibodeau stated:

“As the automobile industry sheds jobs, it comes as good news that over the last decade or so the Internet has created 1.2 million jobs, many paying higher salaries than average, a new study finds. ”

Computer: Generated income

In 2012 statistic published by Statista – The Statistics Portal, Apple alone generated 41.7 billion USD. While the combined net profit of Microsoft, Google, eBay, Yahoo, Facebook and Amazon was 34.4 billion USD. In the same period, Dell, Asus, Intel, Acer, IBM, Lenovo and HP, i.e. virtually the entire PC industry, made $19.3 billion or less than half of Apple’s profit.

 This statistic showed how the computer and related industry have a profitable prospect. This industry does not present 60 years ago, yet today it promise a good salary and provide more than 1.2 million jobs. New forms of information intensive enterprises are being created, such as data entry and processing companies, as well as software development and online selling ones (Henault, 1996). The kind of job such as software engineer, social media manager, app developer and network administrator are nowhere to be seen 60 years ago.

 Computer also change the nature on how people do business. Recent years saw an increase of transaction online. Consumers are now making 10% of their retail purchases online, with the exception of groceries, on the Internet, and Internet-based advertising has increased four-fold since 2002 to more than $20 billion, said John Deighton, a professor of business administration at Harvard Business School, and one of the authors of the study along with Hamilton Consultants Inc (Thibodeau, 2009).

 Based on these fact and figures it its well accepted that computer posed a positive impact on the economy, especially in creating new jobs and introducing new market which in an online market.

The outsourcing industry

Although computer gave birth to many new jobs and help solving unemployment problems it also brough some negative impact to economy. Namely – The outsourcing industry. Computer made it possible to transfer digital part of the jobs somewhere else, where the labour is cheaper.Anything that can be digitized can be outsourced. Job will increasingly go to the smartest, cheapest, or most productive worker (Friedman, 2006).

 Outsourcing by definition occurs when a company contracts out a portion of its business to another company; these jobs would have traditionally been done by in-house employees. It’s important to make a distinction between outsourcing and offshoring. Jobs can be outsourced to local companies that specialize in that particular area. Offshoring, though still a form of outsourcing, is when a company outsources portions of its work to be done overseas (Fowler, 2012). This outsourcing industry maybe cut jobs, but it gave additional gains to the company to cut production and operational cost.

Based on Forrester Research in 2004, computer jobs were among the most affected to outsourcing, with 542 000 jobs lost and 34.2 billion USD wages lost. While the top career at risk are computer programmers and software engineers, with 211 700 jobs lost and around 14.4 billion of wages lost. The main reason for this outsourcing is cost saving.

 One of the main drivers for IT outsourcing is the lower cost of operation in emerging economies. Other drivers include the rapid expansion of the telecommunication system during the dot-com boom and the digitization of work process (Aspray et al, 2010). Based on statistic released by Tholons 2013: Top 100Outsourcing Destination Ranking, most of these digital were outsourced to India. The top two cities were Bangalore and Mumbai. Malaysia sits on the 19th place on the list.

 

Reference:

1. Patrick Thibodeau, Study: Internet economy created 1.2M jobs. Computerworld, 2009.
2. Felix Richter, Apple’s Astonishing Profit in Context. Statista – The statistics portal, 2012.
3. Hénault, Georges. “Employment and income generating activities derived from Internet Access.” An IDRC Study. September (1996).
4. Friedman, T. “The World is Flat. Updated and Expanded.” New York, NY: Farrar, Straus and Giroux (2006).
5. Janet Fowler, Most popular outsourced jobs. Investopedia 2012.
6. Internet retailer Forrester’s forecast: Full speed ahead. September, 2004.
7. Aspray, William. “IT offshoring and American labor.” American Behavioral Scientist 53.7 (2010): 962-982.
8. THOLONS. (2013, January). 2013 Top 100 Outsourcing Destinations, Ranking and Report Overview. Retrieved from http://www.tholons.com

 

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