Keynes called it the paradox of thrift. During recessions, spending cutbacks by individuals, households and firms are to be expected. Yet, for society overall, this type of mass austerity tends to make the downturn worse. Keynes and his disciples have long argued that the only practical way to resolve this paradox is through substantial government spending. But boosting spending in today's debt-laden western economies requires a big and counter-intuitive bet: that even more debt today will lead to more prosperity tomorrow. Many of us are deeply sceptical, hence our vacillating national leaders.

Today's business/IT dynamics are characterized by a similar austerity/spending dilemma. Despite often vast cash holdings, western companies are mostly in a state of mass austerity. But they also rely upon an IT sector that has entered a heightened phase of innovation and expansion that is now too strong to ignore. These conflicting demands also call for a counter-intuitive bet: that IT investments can increase austerity and innovation at the same time. Fortunately, unlike the public sector where the austerity/spending debate rages on, the evidence with IT is much more conclusive. For many modern IT applications, reducing costs and creating value are now two sides of the same coin.

Of course, "cheaper and better!" has been an IT marketing mantra for more than 50 years. But this claim has traditionally been limited to the price/performance of computer hardware. The economics of software, services and the wider economy were largely unaffected. This is no longer the case. Today, the internet and its descendants are virtualizing (and often replacing) huge swathes of business activity (which means costs) – meetings, offices, products, sales, marketing, finance, education, support, etc. – with powerful as-a-service offerings. As these digital services mature, the traditional choice between lower costs and more value is giving way to a world where being cheaper and better is the norm. In such an environment, investment in IT can grow even if the economy falters. This is what we are seeing today.