Productivity should rise as offices turn to tech
An enduring mystery since the financial crisis has been that although technology is increasingly central to how we live, we seem not to become better workers because of it. Productivity has been stubbornly low. Economic output per hour rose at just 0.3pc a year in the 2010s, according to the Office for National Statistics, disastrous compared with the 2pc in the decade before 2007. Global figures are hardly better, suggesting this is not a problem unique to the UK.
That this has happened during a technological boom makes it all the stranger. Computers are better than before the financial crisis, and they fit in our pockets, making information and communication pervasive. Internet connections are faster and more reliable.
It’s possible that this is part of the problem – a Bank of England analyst suggested in 2017 that a “crisis of attention” from emails and social media could be behind the productivity stagnation – but it is unlikely to be the entire answer. Some parts of the world have dramatically increased productivity, Silicon Valley in particular, and staff there are likely to spend as much time as anywhere on their smartphones.
An alternative theory has been that not enough technology, rather than too much, is to blame. For decades, the most advanced piece of tech most white collar workers came into contact with was the one in their office. Today, it is far more likely to be a consumer product – the latest iPhone or the highly addictive TikTok algorithm. Nothing in the corporate world comes close. Obsolete versions of Microsoft Windows are far more common in offices than at home. Access to crucial software is still often hardwired to physical networks, making them inaccessible when away from a company’s base.
If a lack of investment in IT is part of the productivity problem, it is even less understandable because new office technology has exploded over the past decade. Business software is a thriving, ultra-competitive market.
Firms such as Slack, Zoom, Dropbox, Stripe and Okta have all been founded since the last crisis. They differ in the technology provided, but all count as “software as a service”, a broad term meaning programmes licensed to companies and provided over the internet rather than being manually installed and updated.
The idea is not new – Bill Gates called it the “next sea change” 15 years ago – but has been adopted relatively slowly, given the benefits of regular updates and ubiquitous access it promises. The companies most likely to embrace online software have been similar types of businesses, in particular tech start-ups. Slack and Zoom were common in Silicon Valley well before the pandemic sent them exploding across the mainstream. Such software is better designed and easier to use, since it has had to compete against established incumbents, and because its most active users are opinionated techies. Updating online, rather than requiring companywide installations, it can more quickly introduce the latest developments in machine learning and automation. Last week, for example, Microsoft added a feature to its online version of Word that automatically transcribes phone calls and recordings. Office dwellers using a hard copy of Word installed from a CD-Rom will miss out.
It is hard to conclusively say that software as a service makes workers more productive. How does one compare the potential distractions of Slack, which lets workers communicate in chatrooms, to the time-consuming meetings it has helped replace? But we can say that the start-ups and tech companies that have embraced new systems to date have been a more vibrant part of the economy than average.
Either way, the pandemic has thrust demand for better IT into the wider world. Companies are investing heavily in online business software on the back of widespread working from home, and the prospect is this pattern will continue in future, allowing them to continue operating while workers are not at their office desks.
Last week, customer service software maker Salesforce became the world’s first software as a service company to enter America’s Dow Jones Industrial Average stock index, a landmark moment. A day later, it announced a 29pc rise in quarterly revenues, partly due to signing more contracts with big businesses such as AT&T.
A suite of online software companies followed during the week, most saying the rise of working from home had forced companies to sign up.
Okta, a digital identity service that prevents impostors and hackers from logging in to important work systems, said sales had risen 43pc. Since it integrates with most other services, it can be seen as a barometer for the wider rise of online business software. A stock index that tracks software as a service companies has more than doubled since mid-March.
Today, many businesses are being encouraged to bring their staff back to work. Whether that happens this year or next, or indeed at all, remains to be seen.
But the big change might be in how we work, not where. Even if there is a migration back to the physical office, many workers will be going back with better digital tools and ways of working – more video meetings, online access and the latest features.
That might not be enough to solve the productivity conundrum. But it is at least a start.
Many will be going back to offices with better digital tools and ways of working