• Technology
  • The Economist

Men and Machines

Technology and economics have already revolutionized manufacturing. White-collar work will be next.

The spread of computers through companies has added a third layer of complexity: the task of managing the information systems themselves. The work of company IT departments is particularly complicated at older and larger firms that have bought different sorts of computer systems at different times. The core processing systems of insurance companies, airlines and banks, for instance, are built on a mainframe-computer technology that celebrated its 40th anniversary this year. Companies have added extra systems as they have sold new products, grown abroad or acquired competitors. Most IT departments at most large companies spend most of their time simply fighting to keep this tangle of systems going.

In all three areas of white-collar work, companies are struggling to manage growing complexity. The chief reason for the recent recession in corporate IT spending is that the IT industry’s customers are no longer able to absorb new technologies, thinks IBM’s Mr. Harreld. Entangled in new products and the computer systems that support them, banks cannot even do something as basic as ensuring that customers who asked one department not to send junk mail do not receive it from another. “If a bank was making cars, every tenth car would come out without a steering wheel,” says Myles Wright of Booz Allen Hamilton, a consultancy.

Just as in manufacturing, the solution to the growing complexity of white-collar work is to do less of it in-house. Some companies have outsourced the work of their IT departments, from managing the physical hardware to maintaining and developing business software and managing corporate computer networks. Up to half the world’s biggest companies have outsourced some IT work, reckons IBM.

As well as outsourcing their business systems, some companies are doing the same with the workers who operate them. This is called business-process outsourcing (BPO). First Data Corporation (FDC), for instance, will handle some or all of the administrative work involved in running a credit-card business, from dealing with applications to authorizing credit limits, processing transactions, issuing cards and providing customer service. Few bank customers will have heard of the company, yet FDC employs nearly 30,000 people, who administer 417 million credit-card accounts for 1,400 card issuers.

Likewise, companies are outsourcing chunks of administrative work and their supporting systems. Accounting departments are farming out tasks such as processing invoices and collecting payments from debtors. HR departments have shed payroll work. ADP, a payroll-outsourcing company, pays one in six private-sector workers in America. Increasingly, big companies are handing over entire HR departments and the systems that support them to outside specialists such as Hewitt, Accenture and Convergys, says Duncan Harwood of PricewaterhouseCoopers.

One way for manufacturers to manage growing complexity is to adopt common standards. Carmakers, for instance, have reworked their manufacturing processes so they can assemble different car models from the same production “platform”, with several cars sharing a number of parts. This allows parts companies to specialize more and produce fewer parts in larger numbers.

