1. Recently you responded to HBR Editor, Nicholas Carr's provocative pronouncement about information technology being strategically irrelevant. Why do you thing Carr's assertion dont hold true, when all around you can see that the IT industry is still grappling to come to terms with an economy that shows no signs of recovering?

A: Carr bases his conclusions entirely on reasoning, by analogy, that IT must follow the patterns in the adoption of steam engines, railroads, telephones, electric generators and internal combustion motors. 

In rigorous arguments any proof of a proposition that rests entirely on analogies is flawed. This technique was used to uphold medieval dogma and has delayed the advancement of science by centuries. Carr's logic is defective because his examples deal exclusively with capital-intensive goods. Indeed, capital investments in machinery exhibit diminishing returns as market saturate and the difference between marginal costs and marginal revenues disappear. 

It happens that information goods are NOT subject to such diminishing returns. The marginal cost of information goods - especially of software that now takes the dominant share of information technology costs - does not rise with increased scale. It drops asymptotically to near zero. 

Therefore, any firm that can deploy information technologies with the prospect of realizing steadily lowering marginal costs can make information technology investments enormously profitable and in this way generate a rising strategic value. 

The reason why the IT industry is still grappling with growth is traceable to the accumulation of excessive and wasteful spending for I. T. over the past 20 years. From 1980 until 2001 the typical I.T. budget grew anywhere from 10 to 15% per year, in actual dollars. Meanwhile the price/performance of information technologies kept improving at the compound rate of at least 15%. If an organization followed the typical spending patterns, for every $100 dollars of I.T. spending in 1980 it ended up by 2001 with a staggering $16,433 worth of 1980 computing power! No wonder that the dominant characteristic of the last twenty was waste. There is no way how one can extract productivity gains (that is gains in business Outputs) if the I.T. Inputs are injected at an explosive rate. Right now we are trying to catch up with the potential of what we already have in place. 

2. Your book 'The Squandered Computer' was Amazon.com's No1 best selling book on information management in the year 1998. Could you provide an abstract on what the book propounded and its relevance to Information Management in the present scenario?

A: Despite much talk about the cyber economy, information age, or the knowledge-based enterprise, as yet there are no generally accepted economic or financial principles to guide executives in spending money on computers. 

The Squandered Computer offers a new perspective from which to interpret the economics of computerization. It explains the difference between promises and facts. It shows how misperceptions and negligence diminish the worth of perhaps the most potent tool, since the invention of fire, ever placed in the service of humanity. 

The alignment of information technologies with business objectives must take place through changes in the financial planning and budgeting processes. The need to manage outsourced technologies requires shifting the focus from technology operations to the conservation of information assets. The prospective enormous costs for abandoning the recent expenditures for distributed systems calls for the adoption of practices to preserve software and training investments. The need to protect information assets will mandate improved information security. 

3. "Government computerization projects always try to fit information technologies into the framework of existing organizational structures, thus accomplishing little more than welding in the status quo by hard-to-change code." What do you think can be done to actually provide a way out of this archaic way of thought? Do you think there is a change in the way computerization projects are been handled now in Governmental agencies?

A: The E-Gov Act of 2002 sets forth the principles and the logical foundation for process re-design instead of just mechanization of existing processes. This is a vast topic, best understood by looking up the latest outline of the Federal Enterprise Architecture, and particularly the just released Business Reference Model (http://www.feapmo.gov/feaBrm2.asp).

4. "One way of summarizing the last 20 years is to label them as an era of lost opportunities. As private-sector firms came to realize that IT could be one of their most potent weapons in economic contests government computing just kept plodding along in pursuit of so-called efficiencies and effectiveness, sometimes regressing into just paperwork reduction". Looking back what could have been done differently?

A: The application of a rigorous financial planning and budgeting process to all I.T. would have tempered the excesses and increased the credibility of CIOs in proposing increased I.T. spending. I have written a series of books on this topic (see particularly the widely read "The Business Value of Computers". Much of the thinking and analytic methodologies from these publications has now been incorporate in software tools, the most prominent and perhaps most effective one is the ValueIT method now available through www.alinean.com . The ValueIT can be also labeled as the "CIO Survival Kit".

5. Strassmann, Inc. provides consulting services for effective corporate information management. Who are your target customers and what are the areas of service you provide?

A: Since I do not employ any staff and my personal time is oversubscribed I am available primarily for budget reviews and for investment process evaluations as requested by Boards of Directors, their respective I.T. Steering Committees or by CIOs of major government or commercial organizations.

6. Yours has been a long and distinguished career where you held many senior level information officer positions with public, private and government entities. Currently you are CEO of the Information Economics Press, and serve on the Board of Directors and as a Senior Advisor to several companies. How long has the journey been and what are you plans for the future?

A: My involvement with I.T. goes back to 1954 when I authored what is believed to be the first dissertation (at MIT Sloan School) on business application of computers. Last month I completed my 43rd year as a working CIO (for NASA). My plans for the future is to continue writing, lecturing, consulting and helping CIOs in keeping their jobs.


7. Are you willing to make a few prophesies on the future of the Internet revolution? What are the changes or innovations that we can expect in another 5 years?

A: The CIOs of the last twenty years thrived on expansion. The CIOs of the next decades will have to cope with little dollar growth. CIOs will survive through re-deployment, restructuring and re-allocation. The fixed ratios of I.T. budgets that were heretofore devoted to hardware, software, services, support, infrastructure, and telecommunications will shift. Spending more will not create value. Value will be delivered by spending I.T. dollars differently, which will mean shifting a large share of internal I.T. spending to commercial services and particularly to ASP (Application Services Providers.)

About Paul Strassmann 
Paul Strassmann's distinguished career includes senior level information officer positions with public, private and government entities. He is currently CEO of the Information Economics Press, and serves on the Board of Directors and as a Senior Advisor to several companies. He is Lecturer at the National Defense University in Washington and the U.S. Military Academy at West Point and was cited by the Assistant Secretary of Defense of Command, Control and Intelligence for his pioneering work advancing the cause of U.S. information superiority. In 1991, Mr. Strassmann was appointed to a newly created position of Director of Defense Information where he received the Distinguished Public Service Medal - the Defenses highest civilian recognition. 

His books on information management and information worker productivity include Information Payoff: The Transformation of Work in the Electronic Age, The Business Value of Computers, The Politics of Information Management, and The Squandered Computer (Amazon.com's No1 best selling book on information management in 1998). His latest book, Information Productivity describes his proven method for matching a company's financial performance with its IT performance. Strassmann holds registered U.S. trademarks for Return-on-Management®, Information Productivity and Knowledge Capital. A comprehensive career biography and list of Mr. Strassmann's books and articles can be found at http://www.strassmann.com

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