Does IT Matter?By Nicholas G. Carr,Harvard Business School Press,191 pages, $40.95
In May, 2003, journalist Nicholas Carr wrote an article entitled IT Doesn't Matter, for the Harvard Business Review, that set off a furious debate when techies reacted to his claim that the importance of information technology has faded.
Now he has revived and expanded his argument in a book, Does IT Matter? While the title is more restrained, he remains steadfast in his view that information technology -- the largest corporate capital expenditure -- is rapidly diminishing, rather than growing, in strategic importance.
"As IT has become more powerful, more standardized, and more affordable, it has been transformed from a proprietary technology that companies can use to gain an edge over their rivals into an infrastructural technology that is shared by all competitors. Information technology has increasingly become, in other words, a simple factor of production -- a commodity input that is necessary for competitiveness but insufficient for advantage," he warns.
We all use similar software office suites with equivalent functions. Large companies tend to have comparable enterprise-resource systems for their business operations. Technological breakthroughs are copied fairly quickly, as consultants and contractors carry the best practices from client to client.
Even the apparent exceptions prove the rule. Wal-Mart Stores Inc. and Dell Inc. are often cited as technology exemplars, but Mr. Carr notes that neither has built its advantage on technology itself. Instead, they beat the competition by better business models and disciplined, efficient execution of their tech-enhanced strategy.
The book quotes Tony Comper, the chief executive officer of Bank of Montreal, noting that his customers and employees use only about 20 per cent of their computing capabilities (and he stresses that's a generous estimate). "Like most A-list organizations, BMO Financial Group has just about all the basic technologies we need to successfully compete right now," Mr. Comper adds.
The author points out that attitude contradicts the views of others in the tech industry who have convinced themselves IT's benefits will escalate indefinitely. "But it's hardly bad news. To say that IT's greatest business innovations lie in the past is not to say that the industry has failed but rather that it has succeeded," he says.
There will still be breakthroughs and elaborations on current technology. He predicts they will be quickly adopted throughout entire industries, offering higher productivity, better products and happier customers, but offer no strategic advantages.
Chief information officers presumably will remain in their posts -- unlike the vice-presidents of electricity for companies early in the past century who disappeared after their coveted technology lost its strategic decisiveness. But the focus on IT, he says, should be on managing the money pit, with four guiding principles:
Spend less: Companies must separate essential investments and activities from ones that are discretionary, unnecessary or even counterproductive. Most companies can reap significant savings by simply cutting out waste, such as updates of staff personal computers that already have sufficient power and capabilities.
Follow, don't lead: One powerful way to reduce costs without forgoing new systems is simply to spend more slowly, buying when prices fall. It also allows you to learn from the early movers and build better systems.
Innovate when risks are low: When innovations make strategic sense, companies should seek ways to reduce or avoid the high costs associated with being a first mover. Wal-Mart is doing that, he notes, by making suppliers pay for much of the cost of its new RFID technology for tagging products. Pursuing innovations that competitors will have difficulty adopting because they are narrow and highly specialized can also reduce risks.
Focus more on vulnerabilities than opportunities: Companies need to focus on security and potential disruptions to operations, as well as the risk of incompatible systems through decentralized IT decision-making.
Over the past year, Mr. Carr has heard all the arguments against his thesis. In this book, he dismisses them one by one, making a strong case that we need to rethink IT, since its importance has waned.
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