“Does IT Matter” – It does!! A Seminal piece by Nicolas G Karr

In May 2003, Harvard Business Review published an article of Mr. Nicholas G. Carr “IT Doesn’t Matter” wherein he disputes the critical importance conferred upon information technology, which he believes is now fast becoming commercialized and too much hyped.  He further argues that IT, in its present state, no longer gives the sought-after differentiation and competitive advantage to its clients.  This seminal article stirred up a lot of controversy and has been the subject of numerous impassioned intellectual debates. 

Following are some of the salient points presented in this article:

IT has lost its strategic value.  Mr. Carr believes that IT has ceased to be strategic because it has be  come available to everyone and has lost its scarcity factor, making whatever profit margins negligible.

I think…..Any organization can enjoy from significant and strategic and competitive benefits as long as  IT is used effectively.  Strategic advances do not come from the use of IT alone but if it is used with organizational cultures and creativity.  Thus, the strategic benefits of IT investment will be achieved through the synergy of efficient management by highly motivated and skilled individuals and a continuing initiative to disrupt innovation.

IT  has been turned into a commodity that no longer offers a competitive distinction and no longer provides a competitive advantage.  Mr. Carr argues that while companies are spending way too much for IT, it no longer gives its users a unique differentiation and sustained competitive advantage over their competitors.  As everybody can have access to the technology, it no longer offers competitive distinction.

I think…..

It is a well-known fact that Intel processors have been extensively used to run Microsoft desktops and has indeed become a commodity.  But this just account for 12% of the total budget spent on IT.  Majority of other IT products are distinct and cannot just be dismissed as cheap commodities.

A Classic example for retailing is Wal-Mart, one of the biggest companies in the world today which has become synonymous with the idea of a successful supply chain.  Wal-Mart has welcomed and supported information technology innovations as they developed big data marts to be able to connect their stores to the largest data warehouses in the world.  They have developed systems to improve responsiveness to client demands.   Wal-Mart uses superior data analytics to be able to forecast what customers will want and need next.  With its fusion of social, mobile and retail Wal-Mart is creating a whole new and exciting consumer and commerce experience.

Let us look at Amazon.com, the world’s largest online retailer.  Amazon.com has set its website apart from the others through the utilization of specific information technology processes.  Superior algorithms are the heart of Amazon’s system and have actually patented an algorithm-based logic named “method and system for anticipatory package shipping” which will deliver products before the customer even before they order them.

IT has become an infrastructural technology rather than proprietary technologies.  While tagging a technology as being your own (proprietary) can become a sustained strategic advantage, an infrastructural technology, which IT has become, cannot offer more than what is being shared to the others.  As the resource becomes fair game it will offer insignificant strategical advantage and becomes a risk more than an opportunity.

Mr. Carr proceeds to compare IT to other infrastructural technologies such as the electricity, railroads, and steam engines, among others, which were widely built until it reached its maximum capacity.   The comparison is in-congruent as these technologies have limited functionality.  Take for instance electricity and railroads.  They have not transformed much since they were first put to use.  IT, on the other hand, was a lot different 20 years ago and it continues to evolve, expand, and become more in demand. Strategic advantage can occur depending on how you make use of IT; combining information technology with intellectual resources,  the organizational philosophy, business models and disruptive innovation.

IT as an infrastructural technology is nearing its build-out.  IT managers who have assumed that the opportunity for capitalizing on an emerging technology for strategic potential will be available forever, will be at a losing end because as soon as the technology becomes widely available, build-out will soon follow.

I think….

Academic research shows that we are more on the beginning stage of the IT build-out rather than being on the last stage which started in 1971 in the United States, spreading through Europe and then Asia.  Practically, there are still millions of people and businesses worldwide which still cannot afford to access IT.  They will have to, at some point in time, turn to IT even just to be able to automate their processes and organize their information-handling activities or they will have to do every task manually.  Contrary to Mr. Carr’s argument, after 50 years of continuous development, we just can’t see as of yet any form of IT build-out looming in the horizon.

In the final analysis, the cost for acquiring IT requires big capital outlays as the technology and its method of use become commoditized.  Companies can just hope that after the infrastructural technology build-out, they can gain some sustained cost cutting, which cannot also be guaranteed.  Mr. Carr further argues that it will do well for company managers to delay further IT acquisition than run the risk of being weighed down by a technology that will soon be obsolete.

I think …….

While it is true that executives have to take notice of the risks presented by IT, particularly its burgeoning acquisition cost, it would be unwise to totally withdraw from it in the name of cost cutting.  Everyday new opportunities that could be aligned with the company’s business model are developed and it will be ill-advised not to consider them.   Complete withdrawal just to avoid risk is a cowardly stance that could slow down innovation and value-creating prospects that would benefit both business and consumers.  Managing the cost for IT acquisition, or any cost for that matter, is a must for any business to survive; but IT is too important and its benefits too encompassing to be totally disregarded.

IT Still Matters 

Mr. Carr himself admits that IT has reshaped the industry for over four decades.  It has played a crucial role in creating processes enabling businesses to create and deliver their products and services to their clients.  IT has made it possible not only for clients to know about any business, but more importantly for businesses to know everything (presumably?) that they have to know about their clients.

With deference to the esteemed Mr. Carr, nowhere do we see the near-demise of information technology’s relevance.  On the contrary, it remains important and strategic because it continues to create options and possibilities that we can only dream about before.  IT remains to be an integral part of all business processes.