How software can help slay inflation

ARTICLE | May 19, 2023

How software can help slay inflation

Automation lowers development costs while boosting labour productivity

By Peter Burrows, Workflow contributor

Uncomfortably high inflation isn’t likely to go away anytime soon. India has been navigating high core inflation for more than a year now and while there’s comfort in the release of the country’s March figures showing inflation rate easing to a 16-month low – a stubborn pressure on prices is compounding global pressures from the Russia-Ukraine war and lingering effects of the pandemic.

 For companies navigating the disruption of business as usual, who could blame leaders for feeling defenceless against forces outside their control? At times like these, businesses should remember they have a tool at their disposal to temper the impact of inflation: digital technology.

How so? There are two main forces at work: First, the costs to build technology—particularly software—usually rise more slowly than goods and services that require lots of repeated labour and physical parts. Second, investments in technologies like AI, robotic process automation, and natural language processing (NLP) can provide a powerful boost to productivity and help blunt the impact of inflation for businesses.

Global research indicates that companies with mature digital transformations have a distinct advantage over those that have not, posting almost 20% average contribution of digital investments to revenue growth, compared to others (11%) and improved customer experience (55%), according to EY-Parthenon 2022 Digital Investment Index research report.  

When you have so many variables changing at the same time, digital is the only way forward. Given software’s inflation-fighting qualities, companies still at an earlier stage of their digital evolution would do well to lean in now.


Digital gold rush

“Tech has been a deflationary force for the past 20 or 30 years,” notes Marshall Reinsdorf, a former International Monetary Fund economist who has studied the impact of low digital inflation on the US economy. “The fact that information technology products have not been going up in cost like everything else makes this a good time to consider how you can leverage technology.”

Mark Settle, former CIO of Okta and author of
Truth from the Valley: A Practical Primer on IT Management for the Next Decade. “Anything that lets you get more out of your existing investment in talent can have big payoffs.” 

Sanjay Menon, the India MD of global digital transformation consulting company Publicis Sapient believes there is no bigger deflationary lever and no greater enabler of agility than digital. Menon spoke in a recent webinar with the Times of India about the enormous efficiency gains achieved by digital business (through automation and eliminating middlemen and opening up new streams as a result (enabling greater economies of scale).

The whole reason IT exists in the first place is to automate business processes, says Mark Settle

Reinsdorf notes that data on the deflationary impact of technology probably understates the true economic effects over the long run. That’s because it’s difficult to account for the impact of new features and improvements except through the rear-view mirror. For example, current measures don’t factor in how companies will use generative AI tools like ChatGPT to augment future labour productivity.

Economic data is continually adjusted to reflect improving quality of products and services. For software, the data might change once it becomes clear that newer versions are much less costly to deploy. “If the price stays the same but the quality goes up, we consider that a price decline,” says Reinsdorf.

India in many ways is defining how global companies continue to transform digitally - growing research and development hubs based largely in Bengaluru are leading the way with great talent who are also masters in using technology to improve.

While software has always been a hedge against inflation, we live in a time of technical breakthroughs that make it particularly potent. As anyone who has played with ChatGPT will tell you, emerging foundational models can rapidly search and synthesise vast amounts of information and present the results in human-friendly terms.

CarMax, an international used-car marketplace, has used AI to cull consumer reviews to add short summaries about particular car models. As a result, an activity that would have required 11 years of work by its editorial staff took only a few months, according to a customer case study published by Microsoft. With results like that, it’s no wonder 44% of enterprises plan to spend more on AI in 2023, according to Brian Jackson, principal research director at Info-Tech Research Group.

The rapid maturation of low-code software development is also allowing organizations to drastically reduce the cost of building software. These tools provide drag-and-drop interfaces that noncoders can use to build apps, allowing companies to leverage their expertise more efficiently. Low-code tools can accelerate development timetables by 50% to 90%, according to 451 Research.

“Speed is a competitive advantage, and hyperautomation can be a powerful tool to help speed up the most important processes and operations in a company,” says Chris Bedi, chief digital information officer at ServiceNow. 

Hyperautomation can be a powerful tool to help speed up the most important processes and operations in a company.

“It also has the power to improve the productivity of a company and the experiences of customers and employees. Financial impact is a by-product of those forces.”

Of course, launching expensive digital initiatives in times of uncertainty is easier said than done. A recent Gartner report says that for the remainder of 2023, Indian CIOs would remain cautious, targeting spend on IT modernisation and growth initiatives, which typically involve business-led investments in applications and software-as-a-service (SaaS).  

This period of sustained inflation is an opportunity to harvest the business value of software now to drive productivity improvements and create new revenue streams rather than put it off for another day.


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Peter Burrows is a long-time technology journalist and author who has written for Business Week, Bloomberg News, MIT Tech Review and other publications.

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