Customer Reviews

Does IT Matter? Information Technology and the Corrosion of Competitive Advantage

5 star:		(18)
4 star:		(9)
3 star:		(6)
2 star:		(4)
1 star:		(5)

 

 

This book, as Nicholas Carr has claimed about IT, "doesn't matter". As one reviewer stated, Carr is a good writer but should have kept his assertion to a short article.

Carr claims that IT (hardware and software technologies) is becoming a commodity and therefore that by itself it does not provide competitive advantage. This is eye-opening and insightful only if one believes all the claims of the dot-com era (some of which are still turning out to be true after all) and if one does not understand that the economy is getting more competitive all the time. So what? Isn't everything becoming commoditized? What is left after the Information Age and outsourcing of everything? Some say it is the Creative Age, in which creativity and innovation are what confer true advantage - human mental processes, some of which have to do with using or applying technology differently.

Carr readily admits good USE of IT does confer an advantage - but again, isn't this true with any input or tool? It is management and innovative use of the input rather than the input itself that confers some advantage.

One needs a much more sophisticated hands-on understanding of IT besides the superficial observation that hardware and software technologies are becoming commodities available to all -- besides, this argument is only true in a 30,000 foot view of the world.

When one looks closer, in most cases the "free" open source software that is theoretically available to all is not truly available to all because the expertise needed to use it is very limited. Can all organizations use Linux, Perl, MySQL, etc. equally well? If not, are they really "available to all", or only to those who can actually use them? That everyone can "buy" them does not equate with them being "commodity inputs" -- they are just "technologies" not actual "INPUTS" if they are bought and not used. These questions are intertwined and more complex than they at first seem. For better or worse, one needs an experiential, not an academic or theoretical understanding, of IT in order to arrive at an answer.

In the last chapter, Carr backs off somewhat, saying it is too early to tell the impact of IT - but if it is too early to tell the impact, how can he already conclude it doesn't matter? I suppose that is why he modified his title from the article title of "IT Doesn't Matter" to the book title of "Does IT Matter?". This question seems to be unanswered despite agreement that many information technologies (just as other technologies, products, inputs, processes, and so on) become commodities very quickly, and at an ever increasing rate.

Bottom line: you do not need to bother reading the book. If you wish to understand Carr's argument, read his original article.

As with so many popular "management books", Peter Drucker had already summed up what a manager should know and think about in a more concise way -- for example, that it is the "I" in "IT", not the "T", that matters. Organizations need INFORMATION not TECHNOLOGY and in particular INFORMATION about the OUTSIDE. For better guidance on strategy and IT, see Drucker's Management Challenges of the 21st Century.

Just reading through the reviews already posted here shows how big a stir Carr's ideas have caused. Because of vested interests or emotional ties, some people have a deep fear of any criticism of IT, and it blinds them to the reality of the situation. In my humble opinion, as someone who's worked in the IT field for nearly two decades, I think Carr has it exactly right. It's best to treat the technology as a fairly boring necessity - be frugal, buy standardised components, don't believe the hype. The book is carefully argued, and it makes for quite compelling reading. Ignore it at your own risk.

This is just an article from Harvard Business Review blown up into a book. Get the article reprint and save yourself time and money.

I'm not a technologist and have no particularly strong feelings about information technology one way or the other. In my own experience, computers have good points and bad points. The reason I bought this book in the first place is because I read an interesting review of it in the New York Times. Now having read the book itself, I can say that I think it's really as much about how competition and strategy as about information technology per se. It's a very illuminating and thought-provoking book. It weaves together discussions of history, economics, and technology in an engaging way. The discussion gets complicated at times but it's always clearly written, even when the author's describing fairly esoteric aspects of software production. Unlike just about every other business book I've read, there's little jargon and few wasted words. It moves fast and covers a lot of ground. The book ends with a broader discussion of some of the the social and political consequences of computerization, which is also fascinating. So I can't say whether all Carr's recommendations are valid or not, and I guess that doesn't really matter to me. I enjoyed the book, and I learned a lot from it. I'd recommend it to anyone with an interest in business or business history.

Full Title: Does IT Matter? Information Technology and the Corrosion of Competitive Advantage -- With $2 trillion being spent on computers and communications each year there is an underlying assumption that IT is critical to increasing the competitive advantage and strategic success of a business.

But with the ready availability of computers, storage, software and people, has the IT function perhaps become one of the foundation building blocks of a corporation, just like sales, engineering or manufacturing?

Similar to other books that are appearing, the author argues that it is time to look at IT with a managerial view. What are you getting for the investment? Is IT simply another cost center or a strategic benefit to the company? How do you control costs and yet get the information you need in a timely manner? The book provides an interesting and timely view of such points.

When I saw the hysterical reaction of some big wigs in the tech industry to Carr's argument (Steve Ballmer called it "hogwash"), it made it seem like the author was an anti-technology extremist. So I was surprised to find this book to be so calmly written and so knowledgeable about the history of information technology. Carr isn't saying that IT is unimportant or that technological progress won't continue but that most companies won't be able to use IT itself to provide a strategic advantage. He shows that companies like American Airlines and Reuters used to be able to use their systems to block competitors, but that's not possible anymore. In fact, he says, trying to get an advantage by creating a customized system will probably backfire by being too costly and complicated. It's better to just find a standardized solution that does what you want it to do at the lowest cost possible. This seems to me fairly sensible advice, and Carr provides a lot of evidence to support it. The book puts IT into a broader context which I found very helpful.

`Does IT Matter' is a difficult book to rate. As to the questions it raises, it deserves 5 stars. But its answers, are two-star, at best.

By way of analogy, most bomb threats are bogus, but each one must be treated as if it were genuine. With that, in his new book Does IT Matter?, Nicholas Carr throws a bomb, and it turns out to be a dud.

Carr's book is an outgrowth of his article "IT Doesn't Matter," which appeared in the May 2003 issue of the Harvard Business Review. His hypothesis is that the strategic importance of IT has diminished. Carr views IT as a commodity, akin to electricity.

He also compares IT to the railroad infrastructure. In the early days, railroads that had their own tracks had a huge advantage, but once the rails become ubiquitous and open, that advantage went away.

Carr feels that since all companies can purchase the same hardware and software, any strategic advantage is obviated. It's true that the core functions of IT (processing, network transport, storage, etc.) are affordable and available to all, but there's still huge strategic advantage to be gained in how they're implemented.

It's much like two airlines that purchase the same model of airplane. If one airline streamlines and optimizes operations, trains its staff and follows standard operating procedures, it can expect to make a profit. If the other has operational inefficiencies, labor problems and other setbacks, it could lose money. The airplane is identical, but the outcome is not.

Carr is correct in that there have been some huge IT outlays of dubious value. But to say that IT is simply the procurement of hardware and software is to be blind to the fact that hardware and software are but two of the myriad components of IT.

To use the railroad metaphor, hardware and off-the-shelf software are the rails of IT; how they are designed and implemented is what provides their strategic value. Carr views IT as completely evolved. But the reality is that although IT has matured, it still is in a growth mode. The IT of today is vastly different from the IT of both 1999 and 2009.

Carr's view that most innovations within IT will tend to enhance the reliability and efficiency of IT rather than provide a competitive advantage is in direct opposition to what is said by every CIO I have met.

Information Technology (IT) has transformed itself from a source of competitive advantage to simply being a cost of doing business.

Despite the spectacular gains during the past 50 years, says Nicholas G. Carr, a former Harvard Business Review executive editor, IT will distinguish no single competitor. This contradicts many executives' perception that IT ubiquity is an advantage. They miss the point the scarcity, not ubiquity, creates an advantage.

IT's core functions - the storage, distribution and processing of data - are available to all. Without differentiation IT is relegated to commodity status. This should force executives to re-think their IT spending plans and their vendor relationships. As this perception gains acceptance, risk and cost control will become more important than investments in innovation. In short, technology is headed down the same path the steam engine, railroad and electricity followed. Only by becoming a shared and standardized resource will IT deliver its maximum social and economic potential.

Carr says the greatest risk that IT represents is overspending. While IT is entwined with many business processes and represents a huge portion of any businesses' expenses, it must be managed. There are several ways:

1. Cut waste. Commoditization permits buyers to negotiate better deals, tie payments to usage and shop among vendors.

2. Use Capacity. The overspending in the 1990 left many companies with more capacity than they need. Find ways to use it.

3. Place tight controls on IT usage. Carr says 70 percent of what is stored on corporate networks represents employees' saved e-mails, MP3s, video clips and spam. Restrict the indiscriminate ability to save files.

4. Become more rigorous in systems planning.

Carr is a distinguished writer and thinker. His book serves as a wake-up call for anyone interested in competitive advantage. Although executives have grown wary of IT spending, they will have to cope with methods that will prevent the commoditization of IT architecture and applications if they are to save their companies' barriers to entry.

Anyone - be he or she a business executive or IT worker - should give this tome a close examination. Its implications will be mighty.

You may recall the uproar in 2003 around a short Harvard Business Review article entitled "IT Doesn't Matter". Various IT company leaders spoke out against the article, with Carly Fiorina calling it "dead wrong" and Steve Ballmer calling it "hogwash". There were also many lengthy rebuttals. Nicholas Carr, the author of the original 8 page article, expanded the argument into a well-written book, explaining his claim more thoroughly and responding to his critics.

The book (like the article) has a provocative title, but in fact Carr's claim is much narrower than the title suggests. Carr is only focused on *corporate IT*, the systems that companies build and deploy for their own use and the use of their customers and suppliers. He is not looking at consumer IT --- the digital wonders that are showing up in our living rooms, cars, and in our pockets. And he is not looking at governmental IT --- the systems that are used to find terrorists, wage combat, or evaluate welfare eligibility.

More significantly, Carr is also focused on one corporate use of IT, to attain a *competitive advantage*. Can Coke achieve some competitive advantage over Pepsi by implementing a new application? Carr is not asking whether IT can add value to a company --- clearly there are thousands of examples of IT saving money, providing value to customers, to suppliers, and adding value in other ways. Instead, Carr asks whether we can expect IT to add this value in a way that competitors cannot quickly realize the same added value. Can Coke do something significant with IT that will not be quickly replicated by Pepsi?

Finally, Carr agrees that in the past IT has been used to gain competitive advantages. By automating reservations, pricing, and seat assignments in the 1960s, American Airlines really did achieve a lasting advantage over its rivals. By creating logistics applications in the 1980s, Walmart really did achieve a lasting advantage over Sears and Kmart. Carr's claim is that *those days are gone*, that the days of using IT for competitive advantage are over.

His claim rests on three broad trends, each of which undercuts the opportunities for competitive advantage. First, the time needed to replicate a particular IT application---the "technology replication cycle" in his words---has shortened considerably over the last few decades. Hardware, tools and platform technologies have made it increasingly easier, faster, and cheaper to replicate a successful application built elsewhere. This declining technology cycle is likely to continue, and make any advantage in the ownership of a particular application to be short-lived.

Another reinforcing trend is the push toward standardization. 40 years ago every company built their own applications. Since then software products have emerged. These products can always be customized to particular situations, but they often are not. It is often cheaper and easier to adapt the business to the best practices in SAP, rather than to customize SAP to the specifics of the business. The economics of standardization --- the cost advantages for companies to be like their competitors --- trump the advantages of maintaining differences. BPOs further this push to standardization, and away from competitive advantage via IT.

A third trend is the spread of IT business insight. It is much better understood today how to achieve value with IT. The secrets of how to do this spreads with individual experience, with analysts, with books and trade rags, and with consultants. If a company has success with a particular technology, everyone in their industry knows about it quickly.

These three trends (Carr claims) are reducing IT to a role much like electricity. Electricity is critical to all businesses today, but (aside from mishaps like the recent problems in California) no one would expect to find a competitive advantage in superior use of electricity.

Does Carr make his case? I think he does, although there are some big exceptions to his argument.

I am one of the legions of IT managers who by association has contributed to the mess Carr so accurately portrays. This book in on the mark. IT is too technology focused. Worse, IT is blind to its own faults and fails to see that the technology we use and the services we provide are commodities as Carr claims.

Make no mistake, Carr does not make claims that technical innovation is unimportant, nor does he claim that technology properly applied is useless. At issue is the way that technology is misused, which goes back to the fact that IT is so focused on technology that business suffers from unfulfilled promises, application of technology to non-problems, and plain arrogance of those who are supposed to be providing services and solutions to support business imperatives.

This book is must reading by the CxO community. It should wake up the business executives to the fallacies foisted upon them by IT to the point where CIOs and senior IT executives will be held accountable for how well they support business initiatives instead of how technically advanced their shops are. To that end the fact that this book is published by Harvard Business School Press, meaning that it stands a chance of being read by outsiders who do have the power to demand changes in IT, is one of the valuable aspects of this work.

Summarizing, this book is about chronic problems that plague most IT shops, and is also about looking at IT in a more objective way. Do not expect solutions because they are in short supply in this book, but do expect an honest look at the way IT has diverged from being a business support function to being a money pit for corporate resources. Also expect to see technology and IT services placed in their proper context, with all of the hype and mystery stripped away.