Does IT Matter?

I had a chance Friday to hear Nicholas Carr speak on the subject of "Does IT Matter?". His basic premise (assuming I understood him right) is that IT is a commodity and no longer provides companies a strategic advantage.

Dr. Carr gained fame a few years ago with an article in the Harvard Business Review. His article bluntly stated that IT doesn't matter. It sparked significant discussion. He recently published a book entitled "Does IT Matter?" that drives the same message.

His line of reasoning is that the effort involved to gain a competitive advantage from IT is so large - and the project's ROI so long - that it's extremely difficult for companies to gain an advantage. When you combine that with what's typically a low barrier for your competitors to copy you, you've lost. Using some assumptions (Moore's Law, etc), he rationalizes that the first movers on a technology actually lose in the long run. First adopters incur high costs since whatever the technology is hasn't reached commodity status. Due to the high cost, the ROI is drawn out. To the extent competitors wait a bit for commodity status, they can gain a faster ROI and take away any advantage you had - leaving you not only without your competitive advantage, but also with less-than-realized ROI.

There are a few assumptions in here of course. For example, not all technology quickly moves to commodity status. I agree with his fundamential argument, which is very simple. If you have a project that costs a lot, gives you only small advantages over competitors, and it's easy for competitors to get onto equal footing with you, that's not a great project to get into. But, I would argue to the extent that you can gain a fast ROI, a substantial competitive advantage, or where there are barriers to competitors entering, companies can use IT as a competitive advantage. Unless there are early adopters and many followers, no technology will ever gain commodity status. So, it certainly is reasonable for companies to continue searching for ways to use IT as a strategic and competitive advantage!

Anyway, Dr. Carr is an engaging speaker. While I don't agree entirely with his arguments, they are certainly thought provoking.

Comments

• Anonymous
  November 06, 2004
  I bet companies like Wal-Mart and Dell would say that their JIT inventory control systems are of strategic importance.
• Anonymous
  November 06, 2004
  It's happening more and more though.
  
  Many organizations seem to be in a phase where they are milking in-house development staff of the business rules locked within existing application suites. Once this is captured and combined with the analysis of the extra-IT portions of the business processes, it is being turned over to a major IT house.
  
  Once developed, ostensibly through reuse of large and small bits of logic factored out of the systems of peers and competitors, the new and improved system will be owned by the vendor. The carrot here is that the vendor subsidizes the development process in exchange for ownership and the right to re-rent it to others.
  
  The customer organization then "rents" or leases back application services, including ongoing operational employee training in the new system - in theory forever. After all, who wants to dirty their hands by being "in the IT business?"
  
  Whether this makes any sense at all long term remains to be seen. It is based upon the premise that there is no competitive and little intrinsic value to proprietary systems, and thus no reason to invest much in them. I suspect this will only prove viable in monopolistic and governmental environments, due to the inherent lack of competitive pressure.
  
  I believe a good part of the motivation for this arises from IT decision making by those utterly ignorant of IT issues from the big picture down to coding and operations. I think it stems from several years of frustration due to a lack of comprehension. The MBA types simply cannot accept that building and maintaining a custom solution costs more than buying shrink-wrapped, mass-market software products, since they perceive the values as relatively equal.
  
  One would think the situation should be reversed. Innovation should bring competitive advantage and thus be jealously guarded as some of the most valuable of IP. Maybe this just isn't compatible with today's business climate, which fosters globalization and mega-corporate conglomerates - further removing competition from a supposedly capitalist system.
  
  This translates to the vendors as well. When "all food is Taco Bell" one may as well be selling Java on Linux - you're the only game in town.
  
  So do you take the red pill or the blue pill?
  
  "Hello, Mr. Anderson."
• Anonymous
  June 07, 2009
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