BIM 5013 Management Information Systems

Case Study - IT Doesn’t Matter by Nicholas Carr Background This article “IT Doesn’t Matter” written by the Harvard Business Review’s editor-at-large, Nicholas G. Carr in May 2003 highlighted and that the power and ubiquity of information technology has grown inevitably so much so that the technology by itself will unable to deliver the competitive advantage. The article did not anywhere affirmed IT is not important, but rather argues that the strategic value of IT is diminishing as it gets harder and harder to utilize IT as an edge over competitors. In other words, it is scarcity that allows companies to use it for sustained competitive advantage. Carr viewed that when IT is truly an infrastructural technology, it is therefore prone to commoditization – a process which is already evident and reflected by its high replicability and sharp reduction in IT prices. He further added that the more IT becomes pervasive and companies view it more critical to their success, the more heaving spending on IT itself underscores risk than generating competitive advantages.

Why Carr’s Claims are not Wrong Carr said that it is the ‘scarcity’ that makes a business resource truly strategic and allows companies to use it for a sustained competitive advantage. According to him, it is only by doing something that your rivals can't that one gain an edge. Core functions of IT such as automation - data storage, data processing, and data transport - have now become available to all, and in fact becomes a necessity in business. He is absolutely right to say that the functionality of IT have transform into a factor of production that is necessarily be adopted, i.e becoming a cost of doing business that must be paid, irrespective by of its worth. Companies have now adopted technology to work smartly and such daily IT essential have become a utility (like electricity or water) that the company must ensure it never gets disrupted. In such situation, Carr has proven a point that from a strategic point of view, IT then becomes less visible and rather nothing to shout about (so, does it matter?). What Carr is trying to emphasize is that many businesses are using the same business technology systems which are supplied through different or same IT vendors, but yet their businesses differ in terms of performance. For example, most banks have invested in technology to ensure network and security in banking services, and some banks in Malaysia are even linked through MEPS (Malaysian Electronic Payment System) to provide customers the convenience. But really, what sets them apart? It is clear that it is not technology that determines their performances, but rather the management of technology and people that set apart these businesses. Hence, the presence of technology does not matter since these businesses are already using similar technology. Carr raised a very valid point when he highlighted that since the opportunities for gaining strategic advantage from IT is disappearing, he advised companies to “follow than to lead” in order to reduce the risk of having invested in something that technologically flawed or
1

BIM 5013 Management Information Systems

doomed to rapid obsolescence. He couldn’t be wrong if one were to take a moment to consider the IT platform that ‘old timers’ like Dell has invested and has been improving for their timely delivery business model versus the latest platform like E-bay, Amazon or Face book that are more powerful driving forces. Needless to say, E-bay and Amazon are considered as latecomers when compared to Dell or Wal-Mart, but such new IT applications are actually a re-design or an improvement over existing technologies, which more importantly are so popularly used. So, Carr is not wrong when he says that it is better to follow than to lead. In the article, it was revealed that technology is moving towards standardization especially so when vendors are pushing similar software suites and web-based services. Carr's notion of the commoditization and homogenization of infrastructure is accurate, since a lot of organizations are joining the bandwagon of using those generic IT to help them to be highly competitive. Firms are concern over IT resort to purchasing ready made state of applications for a fraction of the cost vis-à-vis incurring high expenditure on excusive technology that may put them at cost disadvantage against their competitors. Furtherance to the earlier point, imagine a company who has succeeded in penetrating its products overseas because it was the very first to tap on Facebook to promote its products or services. But, not for long as others also begin to see Facebook as a way to build advantage and began to access Facebook. So, Nicholas Carr was not wrong to say that IT doesn’t matter when it is highly replicable, and this is proven for example by the way Internet has act a driver to such homogeneity. The Internet is more valuable when it is shared than used in isolation, and this prompted everyone towards this shared system. In other words, this IT window to gain advantage is short lived, and at the end nobody really gets a distinct advantage by having the Facebook applications. Nicholas listed out some of the signs that support the fact that IT build out is much closer to its ends than its beginning. Some of these valid points are (i) the price of IT functionality has dropped significantly (ii) supply has caught up with the demand, e.g. having more fibre-optic capacity than required, and (iii) IT vendors are pushing hard to position themselves as commodity suppliers or even as utilities. The pessimism view of IT already had its sunny day and approaching the golden age couldn’t be erroneous if one were to link it to the potential growth of this sector itself. Hyper growth like in the 1990s is highly unlikely to be seen again according many economists and investors, which conceivably reflect why IT doesn’t matter. Finally, executives in business or marketing would agree latest gadgets like iPhone or Blackberry are here to stay rather than being only a fad to own them, simply because they have become a basic necessity for the job and more so for those on the run. Indeed, wouldn’t such situation imply that it has positioned IT as a basic utility needs just like water and electricity to run our daily operations? In this scenario, we couldn’t disagree more with Nicholas Carr.