Does IT matter? An essay presented to the Department of Information Systems University of Cape Town By ( Due: March 200x In partial fulfillment of the requirements for Full-Time Information Systems Honours (INF414W) 200x Declaration 1. I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is one’s own. 2. I have used the Harvard Convention for citation and referencing. Each contribution to, and quotation in, this ESSAY: DOES IT MATTER from the works of other people has been attributed, and has been cited and referenced. . This ESSAY: DOES IT MATTER is my own work. 4. I have not allowed, and will not allow, anyone to copy my work with the intention of passing it off as his or her own work Signature …………………….. Date …….. /……….. /………. Full name of student: INTRODUCTION In a controversial article, IT Doesn’t Matter, by Nicholas Carr (2003) the conclusion was reached that Information Technology (IT) is at a point where it has become a necessity for business and no longer offers any strategic advantages.
This document will take a closer look at Carr’s reasoning behind for his argument that IT does not matter and analyse the validity thereof. IT Does NOT Matter Nicholas Carr, editor of the Harvard Business Review, wrote a controversial article entitled “IT Doesn’t Matter”, which sparked off heated debate. A general uproar from the IT industry arguing the contra – resulted in a proliferation of articles attempting to back a claim that IT does in fact matter a great deal.
For the purposes of this document it is necessary to have a clear understanding as to Carr’s argument and his reasoning. The following is a brief summary and clarification of Carr’s argument, “IT Doesn’t Matter”: The main argument which Carr (2003) makes is that IT has become so ubiquitous, universally used, that it’s use no longer offers any strategic advantages in business, being no more than a commodity, similar to electricity or the internal combustion engine. Therefore, IT Does Not Matter, as everybody has access to the same IT resources.
During the growth phase of IT, many companies rushed to computerise their business functions. This was done at the cost of large capital investments, but was deemed to be a strategic necessity for survival. IT posed a strategic resource which could be exploited for huge financial gains, if used or used better than competing organisations. IT’s focus have changed in recent years from the mad rush and spending of millions to develop new innovative proprietary systems to the current struggle by IT managers to use standardised technology infrastructure more ffectively (Wahl, 2004). Carr (2003) argues that IT has since become the backbone of commerce, being firmly incorporated into all the various facets of most organisations, ranging from the supply chain to business-customer interaction. With the dramatic fall in the cost of IT, destroying the cost barrier to entry, IT as a resource, including all core functions (data storage, processing and transport), have become available to most companies (Carr, 2003).
As more companies incorporate IT into their businesses, IT has become strategically invisible (Carr, 2003). Carr (2003) further argues that the only way IT can form a basis for a strategic advantage is through the use of protected rights, i. e. proprietary technologies, which cannot be exploited by competing organisation, thus ensuring a long-term strategic advantage. Proprietary technology does offer a level of strategic advantages, but become more advantages to society when it becomes infrastructural and ubiquitous (unknown, 2004).
This is clearly evident when applied to Carr’s (2003) example; when only one or two factories used electricity, they had a huge strategic advantage, but once electricity became infrastructural the overall economy of the various countries suddenly boomed. IT, however, has become Infrastructural technology, incorporating best business practices and making proprietary technologies obsolete, thus losing its potential to strategically differentiate a company from its competitors (Carr, 2003). Once a technology becomes infrastructural the emphasis changes from strategic advantage to the management of risk (unknown, 2004).
Carr’s (2003) motivation behind IT being an Infrastructural technology follows that IT is in essence a transport medium no different to railway transport, IT is far more valuable when shared openly and standardised, IT is easily replicated and it is far more cost effective to simply buy software (which includes support and best business practices) than writing custom software. In reality IT is very different from electricity or the internal combustion engine, in that there is always the potential for developers to come up with new innovations (unknown, 2004).
The problem arises from the fact that any new IT technologies are easily replicated; eroding any strategic advantages (Carr, 2003). Many companies are now turning to generic off-the-shelf IT solutions as custom system have proven to be to expensive with few strategic advantages (unknown, 2004). Carr (2003) concludes his argument by making three recommendations to CIO’s: firstly to spend less on IT, secondly to follow proven technologies, not leading the development, and lastly to focus on the vulnerabilities of IT, not opportunities.
IT Matters Key to Carr’s (2003) arguments is his statement that a ubiquitous resource cannot be strategic, Carr argues that what makes a resource, like IT, strategic it its scarcity. This is true, but only up to a point. A resource can be universally ubiquitous, freely and equally available to all corporations – in essence an infrastructural commodity, but for a select company or group of companies that resource can also be strategic even though there is no scarcity.
This is because there is in fact very little correlation between the scarcity of a resource and its strategic advantages, what makes a resource strategic is how a company use/apply/manage that resource (Schrage, 2003). Carr (2003) separates the resource from the company and how it is managed, this is pointless, as that which makes any resource strategic, may it be; electricity, the internal combustion engine or capital, is how that resource is used and managed (Schrage, 2003).
This is a crucial factor which many companies forgot during the IT boom; many companies spent millions on state of the art technology, but lacked the skills to manage and used the technology effectively. This resulted in very low Returns on Investments (ROI) and the inevitable demise of many companies. This is the basis for Carr’s (2003) recommendation that less should be spent on IT, but the converse is also true. Many companies lost even more money, some even having to close, due the fact that they did not computerise their business functions and as a result could not compete with those who did (Schrage, 2003).
If you take Carr (2003) seriously, you have to accept his claim that all companies have equal access to IT, which is far from true, but then the management of the resource becomes even more important (Schrage, 2003). IT has several attributes which can lead to competitive advantages, these include; access to capital, proprietary technology, technical IT skills and IT management skills (Mata et al, 1995). Differentiating a company from its competitors by the use of IT management skills is the one of the best methods which can lead to a sustainable competitive advantage.
This is because of the fact that IT management skills are build up over time, socially complex and cannot be written down or transferred without the loss of richness or understanding, thus not easily replicated by competing firms (Capon & Glazer, 1987). Good IT Management skills enable company to effectively manage the risks related to the use of and investment in IT (Capon & Glazer, 1987). Another prominent method of gaining a strategic advantage in a ubiquitous IT environment involves the mitigating of the risks involved with the use of IT.
By simply being able to keep all IT within a company running flawlessly 24/7, that company would strategically be miles ahead of any competition. As of date this have not been achieved by any international company, currently companies aim for a IT uptime of 99. 99%. Carr (2003) is well set in his opinion that all IT is easily replicated, which results in the erosion of strategic advantages, this is however false (Champy, 2003). Not all IT is easily replicated, take for example Dell’s business model (build-to-order, and interact directly with customers) which is almost entirely based on IT (Champy, 2003).
Now, according the Carr, this business model should be easily replicated, but this is not the case. IBM and Hewlett-Packard are two of the big players who have attempted to copy Dell’s business model, but failed due to the fact that other issues such as fixed and dedicated resources, corporate structures and culture which forms part of the model cannot be easily be copied (Champy, 2003). IT is one of the dominate factors leading to new innovations and is constantly affecting and changing the competition strategies of businesses world-wide (Champy, 2003).
Carr ignores the real-world; IT is far from reaching a state of ubiquity and continues to open new opportunities to compete with the internet revolutionising business processes (Champy, 2003). CONCLUSION Does IT matter or not? In a world where IT was perfectly ubiquitous Carr (2003) would be justified in his argument that IT does not matter. However, Carr’s argument is incomplete. Carr (2003) neglects to look at how the various companies manage and use their IT resources.
In a world where IT was perfectly ubiquitous, IT would not matter, the management of that IT resource would however matter a great deal to determine its strategic advantages. It should also be noted that the development of IT and the creation of new IT have not reached its end and will not do so in any short period of time. IT, in its nature, allows for continual development as each new development opens new avenues of Research and Development. Each new development generally takes the form of proprietary technology, for a short while at least, allowing for strategic advantages.
Carr’s (2003) belief that these new proprietary developments cannot sustain a strategic advantage for any company is true, but again it should be noted that the IT industry is in a constant state of change. It is the companies, like Microsoft, Hewlett Packard and Sun Microsystems with their ability to constantly make progress in the development of IT, which have the strategic advantage. The general sentiment amongst IT professionals is that IT matters a great deal. This statement is liable to a great deal of bias as to state otherwise s equal to asking IT professionals to concede that they, their jobs and livelihood, do not matter. In fact, however, the IT professional are correct in stating that IT matters, this due to the fact that IT is not perfectly ubiquitous, as Carr (2003) would like to believe. All companies do not have the same capital resources, thus do not have access to the same proprietary technology other companies have. On the other hand, some companies, with the use of open source software, have a strategic advantage in their respective industry. Thus to state that IT is ubiquitous, world-wide, is incorrect.
Probably the most damning part of Carr’s (2003) argument involves his belief that IT does not matter – due to the fact that IT is apparently universally ubiquitous. If IT was universally ubiquitous, it would matter a great deal for that exact reason. A firm being innovative, while the rest of its competition is simply following generic business processes, is in an excellent position to capturer a huge market share. Therefore, IT MATTERS a great deal, irrespective of ubiquity.
