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IT’s Impact

May 19th, 2003 · No Comments

A recent HBR article provocatively asked “Does IT Matter?”

As information technology has grown in power and ubiquity, companies have come to view it as evermore critical to their success; their heavy spending on hardware and software clearly reflects that assumption. Chief executives routinely talk about information technology’s strategic value, about how they can use IT to gain a competitive edge. But scarcity, not ubiquity, makes a business resource truly strategic–and allows companies to use it for a sustained competitive advantage. You gain an edge over rivals only by doing something that they can’t. IT is the latest in a series of broadly adopted technologies–think of the railroad or the electric generator–that have reshaped industry over the past two centuries. For a brief time, these technologies created powerful opportunities for forward-looking companies. But as their availability increased and their costs decreased, they became commodity inputs. From a strategic standpoint, they no longer mattered. That’s exactly what’s happening to IT, and the implications are profound.

In this article, HBR’s Editor-at-Large Nicholas Carr suggests that IT management should, frankly, become boring. It should focus on reducing risks, not increasing opportunities. For example, companies need to pay more attention to ensuring network and data security. Even more important, they need to manage IT costs more aggressively. IT may not help you gain a strategic advantage, but it could easily put you at a cost disadvantage.

This is a point rebutted by John Hagel:

  • Extracting business value from IT requires innovations in business practices. In many respects, we believe Carr attacks a red herring few people would argue that IT alone provides any significant business value or strategic advantage.

  • The economic impact from IT comes from incremental innovations, rather than “big bang” initiatives. A process of rapid incrementalism enhances learning potential and creates opportunities for further innovations.

  • The strategic impact of IT investment comes from the cumulative effect of sustained initiatives to innovate business practices in the near-term. The strategic differentiation emerges over time, based less on any one specific innovation in business practice and much more on the capability to continuously innovate around the evolving capabilities of IT.

    We have yet to see a dominant architecture for IT emerge. In fact, we believe we are on the cusp of another major shift toward a true distributed service architecture that will represent a qualitative breakthrough in terms of delivering more flexibility and fluidity to businesses.

  • Adds Phil Wainewright: “Loosely coupled architectures enabled by web services are going to bring the same waves of incremental innovation in IT and in business and the only IT that is going to be shown up as not working is the highly structured and centrally controlled architectures of monolithic, enterprise-scale computing systems, whose design philosophy owes more to the values of the industrial era than to the needs of the emerging information era.”

    Tags: Enterprise Software

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