Physical IT or IT Skills? Erik Brynjolfsson, Wang Jin, Sebastian Steffen created a novel IT measurements based on industry and firm-level demands for IT skills and occupations from 2010 until 2022. The preference preferred firm-level estimation implies that a one percent increase in IT skills is associated with a 0.009 percent increase in total sales, which translates to an average gain of $540,000 per firm.
For years, IT investment was measured by physical infrastructure, such as hardware purchases and server capacity. However, with the rise of cloud computing, machine learning, and Everything-as-a-Service (XaaS), these traditional measures have become unreliable and outdated.
The Productivity Puzzle
As companies increasingly migrate IT infrastructure to cloud platforms like AWS, Google Cloud, and Azure, traditional metrics fail to capture their technological advancement. Physical IT assets no longer reflect true digital capabilities. This has intensified the "Solow Productivity Paradox"—technology is pervasive, yet absent in productivity data, highlighting the limitations of outdated economic indicators. This paradox highlights the urgent need for a new, more accurate way to measure IT capabilities that reflect today’s digital economy, Measuring IT Skills at Scale.
Measuring IT Skills at Scale
To bridge this gap, researchers analyzed 330 million job postings (2010–2022) to develop new IT metrics. These include:
Occupation-based metrics: Volume of IT-related roles posted.
Skill-based metrics: Demand for specific skills such as AI, cloud computing, and cybersecurity.
Hybrid models: Combining job data with economic statistics.
These metrics provide a clearer picture of how IT skills contribute to firm productivity, something that traditional IT investment data from the Bureau of Economic Analysis (BEA) and Bureau of Labor Statistics (BLS) fail to capture.
Should you hire employees with IT Skills?
Traditional IT capital measures fail to explain why industries with higher IT skill concentrations consistently outperform others in total factor productivity (TFP).
The study links a 1% rise in IT skills within a company to a 0.009% increase in total sales, equivalent to an average of $540,000 per company. High IT-skill firms also report more patents, citations, and innovation output. This underscores the strategic value of human capital in driving productivity, beyond what physical infrastructure alone can achieve.
Rethinking IT’s Role in Economic Growth
Given the study’s findings, it is clear that economic policies and business strategies must shift toward IT skill development. The research underscores that IT human capital, not just physical IT investment, is the key to unlocking higher productivity at both the industry and firm levels. Policymakers should prioritize workforce training in cloud computing, AI, and cybersecurity, as these skills are increasingly essential for economic growth. The study’s new IT measurement framework is scalable, adaptable, and future proof, offering a long-term solution for tracking digital transformation. As businesses and economies evolve, the firms that invest in IT skills, not just IT infrastructure, will be the ones driving the next wave of innovation and economic success.
➤ Glossary:
Everything as a Services (XaaS): Also known as everything as a service, is a term that refers to the delivery of solutions, applications, products, tools and technologies delivered as a service.
References:
Erik Brynjolfsson, Others. (2024). "Do IT Capabilities still drive Productivity and Innovation in the Digital Age?". (Link)
Images (Image-1,2) are generated by pixlr.com
Mesh Flinders, Others, "What is XaaS (Anything as a Service)? | IBM" (Link)
Editor: BUILD IT: Research & Publishing Team
