UW News

March 4, 2003

Companies must roam to stay competitive, say corporate information chiefs

The high-tech industry may be mired in a slump but it continues to stoke a business revolution that could leave some regions behind, University of Washington researchers have found.

The researchers interviewed the chief information officers (CIOs) and information architects of 28 companies in five metropolitan areas, and found that even “old” manufacturing industries were accelerating their use of information technology to automate tasks and scatter operations around the world.

Their 54-page study, prepared for the Brookings Institution Center on Urban and Metropolitan Policy, offers a rare inside look at how companies actually use information technology and how they decide where to move pieces of their operations.

The study’s goal: to help regional officials understand how to keep their economies healthy.

“The information technology revolution extends far beyond the technology sector,” said co-author Paul Sommers, a senior research fellow at the UW’s Evans School of Public Affairs. “I would tell economic-development people: ‘Don’t give up on tech.’ “

Companies in the study, entitled “What the IT Revolution Means for Regional Economic Development,” were based in Atlanta, Cleveland, Minneapolis/St. Paul, Phoenix and Seattle.

Sommers and UW colleague Daniel Carlson, a senior lecturer at the Evans School, learned from the corporate information bosses that technology has hastened their companies’ fragmentation — the splitting off of key functions around the world.
Regional clusters still exist, the study reports, but that increasingly means clusters not of whole companies but of functions, such as data processing or distribution.

Federated Department Stores, for example, maintains its headquarters in Cincinnati but located its design and product development operation in New York City and its data and financial management group in Atlanta.

Similarly, The Boeing Co. moved its headquarters to Chicago but left its commercial airplane production facilities in Seattle and Southern California — traditional sites for aerospace manufacturing.

“The upside of this trend is that metropolitan areas now gain an opportunity to specialize,” Sommers said. “Regions can focus on key niches, market them globally and cultivate linkages with corporations abroad.”

The downside, according to the study, is that cities like Seattle or Cleveland may lose high-powered intellectual capital — as well as civic leadership — as top executives move to headquarters meccas like New York or Chicago.

Other findings:

— Success in the new economy does not depend upon attracting high-tech clusters, because “old” industries also are finding ways to cut costs by automating tasks. A manufacturing firm offers a Web-based ordering system for its customers, while an airline loads 767s twice as fast by streaming passenger data to gate agents, baggage handlers and cleaning crews. “Information technology enables firms to analyze data of customer patterns so they can anticipate their needs and optimize production,” Carlson said.

— The information and communication technology revolution is still underway, and regions that have invested in education and infrastructure are likely to prosper when the economy rebounds.

— Financial and other services firms increasingly have joined manufacturing in going global. Regional leaders cannot stop that trend, but they can work to create a competitive setting for business survival in a high-tech era.

“Almost every company we talked to complained about lack of broadband capacity in certain places,” Sommers said. “They were moving their operations because of this.”


For more information, contact Sommers at (206) 685-0307, (206) 854-5116 (cell) or psommers@u.washington.edu, or Carlson at (206) 616-8785 or kareli@u.washington.edu. The full study is at www.brookings.edu/dybdocroot/es/urban/publications/sommers.pdf