Delta’s Recent Computer Outage Reveals the Biggest Problem in Corporate AmericaAugust 16, 2016 / byArs Lexis / Categories : Economist's View
On August 8, Delta Airlines experienced a massive computer outage in its Atlanta headquarters, causing the cancellation of 1,800 flights over two days. Bloomberg’s Thomas Black and Michael Sasso reported the next day that the computer failure could hurt Delta’s revenues this third quarter by as much as 10%. Black and Sasso also mentioned that this incident should serve as a wake-up call for many airlines that are still using outdated computer systems. However, business experts say that this issue is broader than the current setbacks in the airline industry. It has, in fact, revealed the biggest problem in corporate America – the lack of capital investment.
The Fall of Capital Expenditure
In the recent report on US gross domestic product, it was shown that the private nonresidential fixed investment fell at an annualised rate of 1.3% at the end of the second quarter. The report also revealed that the economy grew at a rate of only 1.2% in the second quarter, despite the strong consumer spending these past few months.
Neil Dutta, a Renaissance Macroeconomist, noted last month that business expenditure in equipment and structures fell during the second quarter of this year. However, Dutta stated that investment in research and development has increased by 4.8% in the same quarter.
With these numbers, it looks like the business investment trends have been focusing on other expenditures rather than addressing the problem of outdated equipment, technologies, and structures. Experts say that businesses are more enthusiastic in investing millions of dollars in the future of their companies than spending a few thousand dollars for things that can improve their present operations.
The Drop in Productivity
On August 9, news reports stated that non-farm productivity in the U.S. declined by as much as 0.5%. Business experts couldn’t help but associate this significant drop to the computer outage in Delta. After all, many members of the workforce weren’t able to work that day as they were stuck in the airport.
In a report, Dutta highlighted that one of the few ways to enhance productivity is to increase the capital spending. Businesses need to realise that by keeping everything functional on their end, they don’t only increase the productivity of their organisation but they also contribute to the overall economic productivity, as well as growth, of the country.
Dutta and other business and economic experts are hoping that the computer nightmare of Delta will encourage businesses to address their own lack of capital investments.