As we saw in an earlier article, the Information Services industry is the most “intensive” user of information technology (IT). In 2015, the Information Services industry invested (per worker) over 8 times has much as the average and nearly 300 times as much as the least intensive industry.
This is not just a single year phenomenon but the result of strong upward trends in IT investment by the Information Services industry since at least 2000.
The information services industry
The industry classification system used by the US government largely changed in 1997. As a result of NAFTA, Canada, Mexico and the US collaborated on a new classification system called the North American Industrial Classification System (NAICS) (the US was previously using the Standard Industrial Classification (SIC) system). Many sub-industries were reorganized in the new system. And a new “industry” was created representing sub-industries involved in some way with providing “information” services.
Although there are officially six, 3-digit NAICS Information Services sub-industries, the US Bureau of Economic Analysis (BEA) collapses these into four: Broadcasting & Telecommunications, Information & Data Processing, Motion Picture & Sound Recording and Publishing. Since our investment data come from the BEA, we will focus on these four sub-industries here.
One of the IT investment themes in recent years has been the transition to “cloud-based” solutions. In the case of software, Software as a Service (SaaS) is supplanting software installed on local computers (aka “packaged software”). The BEA does not break out SaaS spending from other types of software investment. So, unfortunately, we cannot tell whether SaaS is simply cannibalizing packaged software or whether it is contributing to net growth.
However, we can see that there has been strong growth in software investment in the Information Services industry since 2000. As the interactive dashboard below shows, software investment grew by 9.8% per year per worker (measured in 2009 $) between 2000 and 2015, the most current year for which BEA data are available. This is higher than the national average rate of growth in software investment of 7.9%.
As you read our analysis below, we invite you to follow along by making changes to the dashboard to show the trends we are discussing. Changes are made in the “filters“ “Select industry”, “Select years” and “Select investment type” found at the top of the dashboard. Also selecting “Select sub-industry to highlight” will bring the selected sub-industries to the forefront in the bottom two line charts.
There is wide variation, however, within the Information Services industry. Software investment by the Information & Data Processing sub-industry has been growing by a whopping 15.9% per year per worker since 2000. However, this has moderated some in recent years (8.0% per year over the 2010 to 2015 period). In 2015, the Information & Data Processing sub-industry invested over $65,000 per worker in software (2009 $).
At the other end of the scale, Broadcasting & Telecommunications has been investing at only a 3.5% annual rate since 2000 (5.1% since 2010). In 2015, this sub-industry was investing over $12,000 per worker in software.
Another but related IT investment theme has been the transition away from physical storage to virtual or cloud-based storage…think DropBox. As we saw in a previous article, according to BEA data, total investment in physical storage (in 2009 $) began to decline in the US private sector in 2000.
However, not all industries (and sub-industries) have shown the same effect. In the Information Services industry, physical storage investment per worker has declined by 1.4% per year since 2000 (3.8% since 2010). Use the “Select investment type” filter to affect this change in the dashboard.
The Information & Data Processing sub-industry continued to invest in physical storage at a 6.7% annual rate since 2000. It was the disinvestment by the Broadcasting & Telecommunications sub-industry (-7.3% per year) that is reflected in the overall Information Services industry negative growth of 1.4% per year.
However, in recent years, since 2010, the annual rate of change in storage investment has been negative across the entire Information Services industry, with Motion Picture & Sound Recording sub-industry leading the charge at -19.1% per year.
There are many more stories the data can tell. And we invite you to play with this dashboard to uncover them.
For example, a previous article discussed investment trends in the Healthcare industry. Does using investment per worker (the above dashboard) change any of our conclusions in that article?
Drop us a line and let us know what you find.