We believe this is an important article because it very effectively captures the backlash sweeping through executive suites against IT spending. Certainly much of what Carr writes is spot on: companies have spent too much on IT in the past with only minimal (if any returns) and there is a need to focus on the increasing vulnerabilities we face as we become more dependent on automated operations. But Carrs article is also dangerous because it endorses the growing view that IT offers only limited potential for strategic differentiation.
We would briefly recap the three key points we made in this rebuttal:
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.
Previous technology innovations began to stabilize and commoditize as a dominant architecture emerged (e.g., think about the standard railway gauges that helped to connect tracks and establish a national railway system). 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.
Bottom line, far from believing that the potential for strategic differentiation through IT is diminishing, we would maintain that the potential is increasing, given the growing gap between IT potential and realized business value.
A Users Perspective
Ralph Szygenda, CIO of GeneralMotors, is quoted in InfoWorld):
Nicholas Carr may ultimately be correct when he says IT doesn’t matter. Business-process improvement, competitive advantage, optimization, and business success do matter and they aren’t commodities. To facilitate these business changes, IT can be considered a differentiator or a necessary evil. But today, it’s a must in a real-time corporationIt’s getting much harder to achieve a competitive advantage through an IT investment, but it is getting much easier to put your business at a cost disadvantage. I also agree on spending the minimum on IT to reach desired business results. Precision investment on core infrastructure and process-differentiation IT systems is called for in today’s intensely cost-conscious business versus the shotgun approach sometimes used in the past.
Yes, IT has aspects of commoditization. PCs, telecommunications, software components such as payroll, benefit programs, business-process outsourcing, and maybe even operating systems and database-management systems are examples. But the application of information systems in a corporation’s product design, development, distribution, customer understanding, and cost-effective Internet services is probably at the fifth-grade level.
Tomorrow: NYTimes and Gartner
TECH TALK IT’s Future+T