U.S. Tech Leadership Seen Slipping

America’s standing as a world leader is under attack.

No, not because of the damage the Iraq war or the plummeting dollar have done to our global reputation. We’re losing our leadership in corporate adoption of new technologies to drive productivity and earnings growth. American CIOs, says Accenture Chief Technology Strategist Bob Suh, have become followers rather than leaders.

Suh reached that conclusion after reviewing results of a survey of more than 500 global CIOs that the business advisory firm conducted late last year. Only 6 percent of American CIOs surveyed responded that they wanted to be leaders in adopting new technologies vs. 15 percent among European and 19 percent among Chinese IT leaders. But 54 percent of American CIOs said they would rather be followers in adopting technology, compared with 44 percent in Europe and 27 percent in China.

The American approach of spending mostly to bolster older systems could hurt productivity. “New systems will simply outperform refurbished ones for two reasons: Technologies have improved substantially in five years, making them easier to implement, integrate and change,” Suh writes in a just-published online article. “As a result, more business processes will be online, driving levels of productivity.”

Suh says U.S. productivity is weakening. Between 2001 and 2005, he says, employee growth outpaced the rise in revenue and profit among S&P 500 companies. By comparison, the S&P European 350 companies have kept revenue and profit growth above employee growth. In China, productivity growth is more than triple the U.S. and European rates.

Why are American CIOs so gun-shy in adopting new technologies? Suh reckons that some CIOs are waiting for the returns promised from an earlier spending wave on Internet technologies. Others recall the damage failed projects have had on their careers.

Suh analogizes CIOs’ reluctance to build new systems to patients who avoided heart surgery 30 years ago. “Taking no action, with a 100 percent chance of gradual death, is far more palatable to undergoing a procedure that could deliver a 66 percent chance of sudden death,” he says. “Today, heart transplant procedures occur without complications 95 percent of the time. If systems projects were as predictable as heart surgery, far more capital would pour into technology.”

It’s not too late for U.S. companies to regain their leadership in productivity by investing in new technologies rather than window-dressing legacy systems. “As with stock portfolios,” Suh says, “cutting your losses and redeploying the capital to fresh investments is often a better strategy than thinking the stock owes you a return.”