Economic Stimulus Programs Put IT Under the Microscope

Published: April 20, 2009

by Dan Burger

Information technology has been a clear advantage for the United States as the global economy--weak as it is--drives business decisions. But the unevenness of how IT is applied is retarding much of the progress in businesses. Americans debate whether the government's economic stimulus programs are the wisest investments given that it's piling up the national debt like never before, but few question that the IT industry will benefit and that companies fitting into certain niches stand to gain the most.

Implications of the economic stimulus plan are being studied by analysts at IDC, and an early report titled Business Strategy: Capturing Your Share of the American Recovery and Reinvestment Act, is available at that company's Web site.

Technology has always benefited from government spending, but the significance of that spending is dramatically different during a time when private sector spending has shriveled.

Specific details of the American Recovery and Reinvestment Act (ARRA) have yet to reveal the exact amount of technology spending that will be allocated. However, the industry watchers at IDC have estimates of technology spending that will likely be applied to ARRA's key initiatives in energy, healthcare, and government.

According to IDC, the more than $40 billion targeted for the energy industry will stimulate approximately $77.6 billion in technology spending. The energy initiatives that will experience the most growth will be related to intelligent grid, renewable energy, and energy efficiency.

The healthcare industry is forecasted by IDC to receive a $21.1 billion bump in technology spending, with the largest portion concentrated on promoting deployment and usage of electronic medical and electronic health records, including incentive payments to physicians who implement and use these tools. Additional funds will be steered to technology solutions that measure the comparative effectiveness of programs and clinical intelligence solutions.

Within the government sector, ARRA will provide approximately $2.5 billion in technology funding to federal agencies for new and existing programs, including allocations for the Social Security Administration, the Department of State, and the Department of Homeland Security.

IDC estimates $101.2 billion will be spent on technology during the next five years thanks to ARRA. That figure includes things that are not related to information technology, and it also includes multiplier effects of the IT investments that the Federal government is underwriting and the consequent and follow-on IT spending that will result from those investments. (Think of it as the Wal-Mart effect. Once Wal-Mart embraced RFID technology, its suppliers had to, and that meant spending lots of dough on RFID hardware and software.)

You can bet that IT projects will receive close scrutiny due to the heated debates over the level of government spending being poured into ARRA's technology programs. Executives from every major IT vendor have publicly stated the wisdom of including IT infrastructure improvements in the stimulus package. Money talks, doesn't it?

But the key to the stimulus packages are that they continue to stimulate on into the future. Therefore, the success or failure of IT projects will sway decisions affecting private investments that follow. With a good showing, advancements attributable to IT could be a springboard for this industry. But that means IT projects must demonstrate real improvements. Areas such as electronic health records and the administration of Social Security benefits, to name just two, will be under the microscope. Whether they prove to be wonderful examples of the benefits of IT progress or just the opposite, the ripple effect in the private sector will be substantial.

The IT industry is never short of breath when it comes to talking about the ways new technology can be used to build revenue and drive down costs. These stimulus programs will come with high expectations.

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