You’d have to be on another planet not to have heard about the provocative debate stirred by independent business writer and former Harvard Business Review editor Nicholas Carr. Earlier this year, he got under the skin of many technology professionals by claiming that information technology is no longer critical to future growth. His argument, in the Harvard Business Review article “IT Doesn’t Matter,” was that information technology has become so ubiquitous, it’s now a commodity. His advice to chief information and technology officers: “Spend less” on IT; “follow, don’t lead;” and “focus on vulnerabilities, not opportunities.”
Carr’s opinion is an intellectual exercise based on the theory that scarcity–not ubiquity–makes a business resource strategic. Unfortunately, this argument ignores the real world. IT continues to open up new opportunities to compete, and it will continue to do so for some time to come. I enjoy an honest debate as much as anyone but not when it ends with advice that’s dangerous to corporate health. In fact, IT’s ubiquity makes it even more necessary than ever. The technotransformations of the 1990s only hint at how the Internet will continue to revolutionize business process change.
Carr fails to recognize that IT alone has never delivered value or competitive advantage. It’s the combination of technology and innovation that helps companies outpace rivals. All infrastructure technologies–from the electric generator to the internal combustion engine–let work be performed more effectively and efficiently, creating value. But it’s the big idea–twined with technology–that makes the difference. Henry Ford showed how to use technology to change how cars are produced, creating lots of value in the process.
There are many contemporary examples of companies that combine innovative business models with technology to grab market share. Consider the Dell model: Build to order while slashing costs and blazing a direct path to the consumer. None of this would be possible without IT, and the Internet now allows a technology-savvy company like Dell to push the model even further, seamlessly linking work with suppliers and providing new channels to customers.
But doesn’t IT’s ubiquity mean that any company can simply copy Dell’s example? Not exactly. One company’s operating model is not easily adopted by a rival. Issues such as fixed and dedicated resources, structure, and culture often prevent a company from mimicking competitors. Even formidable contenders such as IBM and Hewlett-Packard have failed to replicate Dell’s model.
Carr is right to billboard the staggering sums that were blown on IT. By the end of the past decade, U.S. companies devoted almost 50% of their capital spending to IT. Many poured millions into large IT projects with zero value to show for it. I know of one company that has thrown $85 million at an enterprisewide system that still isn’t working.
But when IT spending isn’t producing a good return, it’s usually because a major development effort has been mismanaged or line managers haven’t paid enough attention to how much work change, along with IT change, is required. That argues for leaders spending more time, not less, on IT initiatives.
It’s also important to avoid getting mired in the debate that IT has never been strategic. That’s another empty exercise, since most business gurus can’t even agree on a real definition of strategy: What’s strategic to my company might be irrelevant to yours. Experience shows that IT is critical if it’s used to spark innovation and change how an enterprise competes.
As for considering whether IT infrastructure is a utility, don’t be so quick to compare it to the electric wires that run through your office. Those copper wires don’t hold the information and knowledge–about customers, processes, operations, and markets–that a company’s technology infrastructure contains. One recent study suggests that more industry knowledge may now be stored in electronic documents and databases than in the minds of the industry’s workers. It’s a humbling thought, but what if it’s true? The IT infrastructure that contains such knowledge must be carefully managed and mined.
IT will eventually become a commodity, and some parts of the infrastructure will be managed like a utility. That day will come when companies finally figure out how to fully leverage technology. But the transition will not be complete for another 10 to 25 years. In the meantime, here’s my advice: Manage IT intelligently, and take every opportunity to use technology to innovate.