In June 2003 acclaimed business writer and Editor-at-Large Nicholas Carr wrote a short article in the Harvard Business Review entitled “IT Doesn’t Matter”. The article became a sensation and was hotly debated in major corporations and large IT suppliers – as Carr appeared to be challenging the justification for ever greater spending on IT. Carr has now published a book expanding on his thesis – but tellingly has chosen the less provocative title of “Does IT Matter?”.
Carr’s central tenet is that IT has become a commodity and is no longer a source of competitive advantage. With global business spending on IT amounting to $2 trillion a year, IT is ubiquitous. However strategic advantage comes from scarcity, not ubiquity.
With IT becoming a commodity – a utility we could call it – managers’ approach to IT should be fundamentally different. They should be focusing on risk and cost, not innovation and return. Carr leaves his reader with three practical suggestions to avoid overspending on IT: spend less, follow – don’t lead, and focus on risks, not opportunities.
So where do I stand?
As the furore over the article was breaking last autumn I was involved with looking at IT Governance. As part of our analysis we decided that there are three types of IT system. There’s infrastructure – the networks, servers and PCs that provide access to, and connect, IT applications throughout a company. Second there are generic applications – payroll, finance, HR management, order processing and even basic customer management – that differ little from company to company. Third are the line–of-business applications, the systems that a business needs for what it actually does – be it manufacturing, booking holidays, providing financial services or whatever. We came to the conclusion that management should approach each of these three aspects of IT differently.
That is my key dispute with Carr. He lumps all IT together and treats it as a whole. I believe that to make an effective analysis we need to look at the different roles that IT plays.
For infrastructure I’m totally with Carr. This should be a ubiquitous and standards based – in particular leveraging the Internet and its associated standards. Managers should look to source and manage infrastructure for the lowest possible cost and the lowest possible risk. There’s little need to innovate, and don’t expect competitive advantage – but do expect problems if you don’t keep up. Generic applications are on a cusp. The market tends to be dominated by package players such as Sage, Oracle and Microsoft. There is little case here for “cutting your own” and innovation. If anything, generic applications are likely to become utility services in their own right over the coming years as more companies move to Application Service Provider (ASP) solutions – with applications being delivered to them over the web.
This leaves line-of-business applications. Even here there are probably two distinct types of investment. There is the “hygiene” need, what you need to participate in your chosen industry or market. Again for these base systems you should look for commonality, standards and low risk. It is only at the final tier, the relatively small aspects of line-of-business applications that can offer the real potential for competitive advantage, that managers should be seeking to invest for innovation, differentiation and return.
Whilst disagreeing with Carr’s ultimate conclusions I do urge IT managers, and their bosses, to read his book, or at least the article. They do challenge conventional thinking. However this is an important subject on which fresh debate and discussion – away from the platitudes and hyperbole of IT sales literature and received wisdom - should be encouraged.
David Burden is Marketing Director at Aseriti, and sits on the ICT Cluster Opportunity Group for Advantage West Midlands.
