I learned early in my career in pathology informatics that it was unwise to promise cost savings or staff reductions in exchange for capital investments in IT. Requests for such savings were often the response to my requests for new software. I just came across an article suggesting that the federal government could shrink itself by grater investments in IT which runs counter to my experience, at least in healthcare (see: The Government Found A Way To Significantly Shrink Itself: Invest In Tech). Below is an excerpt from the article:
Techies in Silicon Valley often tell me that if they do their job right, it should cease to exist. The goal of a lot of technology is to reduce the amount of human labor necessary to get something done. A new study finds that this Silicon Valley maxim holds also true for the government — in a massive way. ...[The author of the study] found that for every $1 governments invested in technology, spending decreased by $3.50.....Between 2000 and 2008, [he]...analyzed government spending and the portion dedicated to information technology. After controlling for population, debt, grants and other institutions that tend to bloat government, there was a clear relationship between states that invested in tech and lower-than-expected public expenditures....Indeed, this is why the government is proposing a significant increase in budget for the newly created United States Digital Service, an internal IT consultancy group. The USDS was created out of the Healthcare.gov meltdown fiasco, and pays sizable wages to attract top talent from the likes of Google and Facebook, who build out government web services more efficiently. The government can shrink itself, if it invests wisely. Read a free version of the study here.
On the face of it, it would seem logical that the deployment of IT should be able to shrink departmental budgets and the number of FTEs. After all, computer systems serve as a substitute for human labor and personnel costs account for a large percentage of the cost of healthcare. At least in pathology and for the more than three decades that I was involved with pathology informatics, the number of personnel in my unit was stable or increased across time despite nearly continuous investment in new software. Off the top of my head, here are a few reasons why I think that this was the case:
- Consider the S-shaped curve that governs the deployment of new technology (see: Organizational Innovation with a Political Overlay; Lessons from Microsoft). After new software is installed, productivity is flat or even declines due to the fact that the new product is not well understood. Productivity soon increases exponentially until it tails off again as the software becomes obsolete. It seems that my LIS group was always in the process of deploying new software so that we were not able to take advantage of the near vertical part of the S-curve. In other words, we never seemed to be able to take advantage of the "sweet spot" of the S-curve.
- Secondly and most importantly, the deployment of new software almost always provided new functionality for the department that was not previously available. This increased the demand for the services of my personnel and the need to hire more of them. In short, new and improved software demanded more personnel to install and maintain it.
- Finally and focusing on the cost of personnel, LIS improvements usually decreased the need for entry-level personnel such as those in the specimen processing or phlebotomy units with lower salaries than IT personnel. New software deployment might have been decreasing the head-count in other pathology units but not in pathology informatics.
All of this discussion then begs the question: what type of software applications allow an organization to reduce staff and thus reduce costs. In other words, how can IT help to shrink state and federal government for example? I think that the answer is probably in in various types of service applications such as ordering license plates or applying for health insurance. Needless to say, the latter is not a slam-dunk (see: The Health Insurance Marketplace: A Case Study of Incompetence). In other words, if and when a governmental agency deploys new IT, it needs to employ competent personnel to optimally perform the task of software development and management.