A web of waste and company waffle

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Chris Harman's article on the rate of profit (In perspective, Socialist Review, November 2007) argues against those who see computerisation as resulting only in ever increasing productivity. He points to the need for constant reinvestment in computer hardware and the resulting pressure this puts on future profits.

However, it is not only the purchase of hardware that is a cost here (indeed, as Chris notes, the cost of hardware is falling). Rather it is all the software components that go to make up computer systems. Recent figures show that IT budgets for new projects break down to about 39 percent spent on hardware and 42 percent on software.

Any new components of a system need to be installed and integrated with any current systems and any bespoke software requires investment in its development, installation, staff training and ongoing maintenance.

So an average company spends 4 to 5 percent of revenue on IT. Coupled with this is the amount of waste involved due to the widespread failure of projects. A recent estimate was that 5 to 15 percent of IT projects are abandoned before or soon after they are delivered. In October 2004 the supermarket chain Sainsbury's wrote off a £260 million supply chain management system and employed an additional 3,000 store staff to do the job manually. Those in control of budgets have no choice but to carry on spending, continuing the cycle of replacing old systems with new in the hope of gaining some competitive advantage.

The increase in the importance of the web is also double-edged. Sainsbury's say that the increase in numbers of their sales on the web means they will spend £300 million over the next three years to try and double the number of web customers. They have no choice but to do this, regardless of the likelihood that the 49 percent growth in web customers they trumpet is mostly customers shifting their method of shopping rather than being new customers. If they don't invest then Tesco or Asda or someone else will.

Gary Budgen
East London