Tech Sales, Not Jobs, Surging
The recent upswing in corporate technology spending owes its existence to people like Jeff Knight.
The vice president of technology at First Trust Corp. in Denver recently purchased four Hewlett-Packard Co. server computers that will reduce the time it takes to crank out a complex financial report to 90 minutes from 25 hours, and he plans to buy 10 more this year. The investment, he believes, will boost productivity at the company, which administers more than 217,000 IRAs and business retirement plans.
But is First Trust planning to hire new people to tend to the new machines?
“No,” Knight said last week. The 900-member workforce “will stay the same.”
Technology managers at companies across the U.S. economy are loosening their purse strings after three years of tight budgets. The increase in spending on PCs, server computers, software and other gear has boosted quarterly earnings at bellwethers like chip leader Intel Corp., computer giant IBM Corp. and software powerhouse Microsoft Corp.
Before the last recession, expenditures on information technology were eventually followed by upticks in employment. But if First Trust is any indication, the job picture in the U.S. will be different this time around.
A primary reason First Trust bought the new servers was to boost the productivity of workers already drawing paychecks. “Our goal for capital investment is to allow the people we have to do more,” Knight said.
That was the aim at Sears, Roebuck & Co. too when it inked a deal to buy more than 30,000 new cash registers from IBM. The idea was to integrate the inventory management system at the retailer’s 2,700 stores in North America with the software that keeps track of purchases for its website, said Sears spokesman Chris Brathwaite.
“We’re looking at ways of using our resources more effectively,” Brathwaite said.
In fact, the upgrade won’t require Sears to hire more workers to install or maintain the computerized registers. The Hoffman Estates, Ill.-based company will pay IBM to do that. For its part, Big Blue plans to add about 5,000 people to its U.S. payroll this year.
At phone giant Verizon Communications Inc., the decision to spend $3 billion over the next two years to upgrade its wireless and fiber-optic networks means the New York company will be able to keep all its 220,000 employees busy and won’t have to contemplate layoffs.
It doesn’t mean Verizon will be taking applications. Instead, the company is moving workers from its traditional phone business, which is shrinking, to its wireless and Internet access divisions, which are growing.
“We don’t need to hire at this point,” said Verizon Chairman and Chief Executive Ivan Seidenberg.
The uptick in technology spending doesn’t spell universally bad news for job seekers, economists say. Even as the added technology eliminates the need for companies to hire new workers, it has a way of creating enough new jobs to offset losses and then some.
In the 1990s, for instance, thousands of technology manufacturing jobs moved to low-wage countries such as China. That made computer hardware cheaper, which boosted demand for software programmers and technicians who could link computers together into large networks.
And that led to more American jobs, according to a study by Catherine L. Mann, senior fellow at the Institute for International Economics in Washington. For example, she found that the number of computer and mathematics jobs in the U.S. grew to 2.8 million in October 2003 from 2.6 million at the end of 1999.
“Technology has had this dual role in erasing as well as creating jobs in the past,” said Harley Shaiken, a professor of economics at UC Berkeley.
And if history is any guide, the fact that tech companies are benefiting from the corporate spending spree is a positive sign for overall employment.
“Jobs have a tendency to lag profits by a year,” said Roger Kay, an analyst with technology market researcher IDC in Framingham, Mass.
At Walt Disney Internet Group, Walt Disney Co.’s online division based in North Hollywood, higher earnings have emboldened the unit to boost spending on both technology and people.
“We crossed into profitability our last fiscal year,” which ended Sept. 30, spokeswoman Kim Kerscher said. “That’s allowing us to invest.”
Disney Internet Group is buying servers and data storage systems from HP. It is also bulking up its 1,000-person workforce to put sports highlights, movie trailers and interviews on Disney-owned websites. Kerscher wouldn’t predict how many jobs would be created, but said: “I would characterize the hiring as meaningful.”
