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Home Market Research Market Analysis

Why Big Tech Economic Impact Studies Fall Short

by TheAdviserMagazine
2 months ago
in Market Analysis
Reading Time: 4 mins read
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Why Big Tech Economic Impact Studies Fall Short
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Big tech economic impact headlines are engineered for attention. Apple recently announced a staggering US$600 billion investment in US manufacturing over four years — complete with fanfare around domestic chip and glass production. But dig deeper, and you’ll find most of the activity was already planned, funded, or happening. It’s more repositioning than reinvention, as Business Insider and others have pointed out.

Closer to home, we see the same playbook from hyperscalers across APAC when it comes to major infrastructure plays. AWS, Google, and Microsoft frequently announce local region investments tied to promises of billions in GDP uplift, job creation, and workforce development. These are strategic moves, yes. They’re also branding exercises.

The recent announcements as part of AWS’s new data center region launch in New Zealand are another example: NZ$7.5 billion in investment, NZ$10.8 billion in GDP impact, 50,000 people trained, 1,000 jobs created. As I noted in a recent article by iStart, “these headline GDP claims often become rallying cries for market share rather than anything designed to prove the delivery of real or measurable outcomes.”

Don’t misquote me — it’s not just Apple or AWS; name a vendor, and I’ll find you an example. Microsoft’s US$2 billion-plus pledge in Malaysia, Google’s US$1 billion investment in Japan, and Oracle’s planned US$14 billion cloud push in Saudi Arabia all follow the same pattern: headline-grabbing numbers, vague timelines, and economic impact projections that rarely face scrutiny after the press release has been archived.

Economic Impact Studies: All Promise, No Proof

At the core of these big claims are economic impact study (EIS) tools built on input-output models originally developed in the 1930s. They work by applying multipliers to direct spending (for example, construction or wages) to estimate wider economic benefits. But these models often assume:

No supply constraints.
No price changes.
Perfect conversion of spend into local value.

That’s not how economies actually work. Academic reviews by institutions such as Cornell University show that EIS often overestimates benefits by 30–60%, especially when they include indirect effects like supplier activity or worker spending without separating what’s truly new from what would have happened anyway. Or sadly, this can even occur through plain old poor estimation. Worse, these studies are rarely revisited. There’s no formal tracking of whether the jobs, GDP, or upskilling ever materialize. The model looks forward but never backward.

Computable General Equilibrium: Better Economics But Not Built For Speed

There is a more sophisticated alternative: computable general equilibrium (CGE) models. These simulate how changes ripple across the economy over time, adjusting for prices, capacity limits, and behavior. Public sector analysts use CGE for evaluating major policy changes or environmental impacts. CGE isn’t without its own issues, however:

It’s slow, expensive, and opaque.
Its complexity makes it inaccessible to most tech and business leaders.
It can be shaped by hard-to-audit assumptions.

In one comparative study of disaster impacts in Italy, CGE, input-output, and hybrid models delivered up to a sevenfold difference in estimated economic loss. The message? The model you choose shapes the story you tell.

Why Forrester’s TEI Is The Better Middle Ground

At Forrester, we take a different approach with the Total Economic Impact™ (TEI) methodology. Our methodology:

Starts with real customer data. Interviews, cost baselines, and quantified use cases form the foundation.
Adjusts for risk. Every benefit is discounted based on likelihood and implementation risk.
Focuses on what matters to your decision-makers. ROI, net present value, and payback matter — not hypothetical GDP boosts.
Is tailored to your context. TEI doesn’t assume national impact; it shows value based on your workloads, staffing, and strategic goals.

Put simply, the Forrester TEI models what’s real, not what’s hoped. And yes, you can and should measure the actual results. For our clients, we will be at your side and by your side when the actuals roll in.

Don’t Be Seduced By The GDP Halo

There’s nothing wrong with companies investing in digital infrastructure or governments welcoming it. Still, let’s not confuse those investments with a universal good. A new cloud region may unlock value — but not for every organization and not at any cost.

My advice? Organizations evaluating these investments shouldn’t rely solely on sweeping economic claims or fall for the idea that jumping into an onshore cloud automatically contributes to some imagined national benefit. Instead, assess the value based on your own cost structures, workloads, and strategic priorities. By all means, make it a total economic impact! Just make sure it serves you and your outcomes.

Macroeconomic splash statements? More often than not, they serve the branding and demand generation needs of the firms that sponsor them. And the headlines that follow? They’re just the sugar coating.



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Tags: bigeconomicFallimpactshortStudiestech
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