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

Rating:
Summary: Excellent questions with inferior answers
Review: '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.

Rating:
Summary: A look in the mirror
Review: Carr does not diminish the value of technology in this book, but instead shows how it is improperly acquired and managed by most IT departments. As such, this book's central message is an indictment of how [all too common] IT mismanagement erodes business profits, shareholder value, and business operational efficiency.

The key question is, "is it as bad as Carr reports?" I can share my experience as a consultant who has worked some of the largest US and global corporations by answering "unfortunately, yes". I've seen the symptoms Carr cites in one engagement after another. It is not the fault of technology. I've witnessed the implementation of technical solutions that should have added value to business operations, yet were so mismanaged by IT that the solutions never came close to the projected ROI that justified their acquisition and implementation. Indeed, this book is similar to a collection of anti-patterns - common bad practices - which, sadly, reflect a typical IT department.

Although this book is short on solutions (which accounts for the lower rating I gave it), it does provide a conceptual framework from which to derive solutions. For example, much of what IT does can be classified as commodities - services such as desktop support, development (especially for web services), system administration, etc. These activities do not represent intellectual capital within IT in the same manner as architecture, business systems analysis, and service level management, all of which require an in-depth knowledge of technology and business requirements, and are not commodities.

Who will get the most value from this book? CIOs and IT managers who recognize there is a disconnect between IT and business operations, and who have the courage to look in the mirror that Carr provides will benefit. Executives at the COO, CFO and CEO level, or members of corporate governance will also benefit because they will be able to spot common problems in their own organizations that are so clearly reported in this book. The gap Carr leaves between symptoms and problems, and solutions to those can be filled in part by other books that are more solution-oriented (I recommend "RoadMap: how to understand, diagnose, and fix your organization" ASIN 0964163527; and "Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times" ASIN 1578518776).

Rating:
Summary: Yes, technology does matter.
Review: Carr makes a thought provoking but flawed case that technology does not matter all that much. According to him, competitive advantages of companies do not depend on technology. He does point out that many segments of information technology are mature, and have become low return commodities. He also points out that companies are better off not buying the overpriced state of the art technology, but instead should wait till prices come down. Thus, Carr makes many relevant and somewhat self-evident points. Nevertheless, his overall case that technology does not matter falls apart.

Contrary to what Carr suggests, the technological race is endless. There is no finish line. We are in a 24/7 society hooked on perpetual improvement. Whatever gismo you come up with, people are going to imitate it and better it very quickly. Thus, no one can rest on their laurels for long. By the same token, you can't afford to run a business that is not up to date technologically. Technology is both the right of entry, and the key to success for almost any business you can think off.

Also, innovation is the U.S. raison d'etre. You figure everything that can be commoditized is going to be either offshored to China or outsourced to India by American companies themselves as pressured by American stockholders. If the U.S. stops to innovate proprietary technology, our labor force will not remain internationally competitive. We have to add value to our products. We have to constantly innovate and create new markets. If we do, as we have done so far, we will remain the most advanced and productive society. If we don't, we will fall behind just as many high cost Western European countries already have.

If you interested in this subject, here is a couple of books I recommend: "Rational Exuberance" by Michael Mandel. He makes a convincing case that technology does matter, and that the U.S. remains the undisputed leader in innovation, and more importantly in implementing innovation. Another good book is Roger Alcaly's "The New Economy." This is an excellent analysis on the history and prospect of technological innovation. Both these authors get that technology is crucial to the present and future of the U.S. Carr does not [get it].

Rating:
Summary: Interesting and Provocative
Review: Does IT matter? Of course, it does. Simply unplug the servers and mainframes that support the banking, telecom, travel, health-care industries and see if there is an impact.

This book makes sense if viewed from a 100,000 ft, typical academic or macro-economic industrial change perspective. From that perspective this book is both provocative and interesting. Nick Carr has accomplished few writers/researchers in the IT field have done - that is make us think rather than blindly follow the standard party-line (IT investments create long-term strategic value -- just have faith and keep investing).

Carr is presenting a well known fact that it is not IT that delivers value but how it is implemented in organizations. Take the simple case of Dell. Everyone knows the formula but almost no one has been able to replicate it. The competitive advantage of Dell is not in the IT but its ability to interweave it into a system of doing business. This is classic systems thinking put forth by Jay Forrester in the 60s and Peter Senge in the 90s.

Carr is also simply presenting the obvious fact that segments of the IT industry are maturing and increasingly getting commoditized. Maturing technology markets have unique dynamics and characteristics. Manufacturing automation went through this cycle in the late 1980s. Computer hardware went through this in the late 1990s. IT Services is going through this right now.

Commoditization of IT professional services is clear in application development and maintenance. Evidence of this can be seen in packaged and custom IT application development and maintenance where the rapid rise of onshore, nearshore and offshore IT outsourcing is becoming part of the corporate strategy landscape. I would argue that offshore outsourcing strategies being implemented at many corporations support Carr's thesis well.

The book does an good job of presenting the macro issues. However this book falls short in presenting a case for action/implementation. There is high-level advice in chapter 6 but most of it is useless in the real-world day-to-day operations. What should CIOs do differently when they have millions committed in IT infrastructure projects? When do managers go for strategic projects or tactical projects with immediate payback? What should vendors do to adjust in market segments where they are competing on price and not features?

The IT industry is structurally changing as customers evolve in their thinking. Evidence of this can be found in the business transformation challenge facing Sun. We are finding that executives everywhere are getting more and more skeptical about their internal IT projects. This book will certainly bolster their case and maybe drive them to either conduct more internal ROI analysis or completely outsource operations.

Rating:
Summary: Where is IT going?
Review: 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.

Rating:
Summary: YOU BET IT DOES.
Review: Happened to pick up and browse through this paperweight at the airport and patted myself for not having bought it.

For one thing, in Carr’s world, information technology managers are fools that drain dollars to the tune of 2 trillion every year, slavishly upgrading to whatever new thing vendors want to sell. This is a VERY narrow definition of organizational "IT". The world of technology is much wider and ever-expanding, making a direct or indirect impact into our daily lives, both personal and commercial. So the scope of this book is a bit hog-tied.

For another, these petty cavils are not new. Paul Strassman (Paul Strassman Inc.) has been saying the same things for a while. Morgan Stanley's star analyst Stephen Roach broke into the same bungled song and dance in the early 90s. Even more recently, "the bubble burst, I told you" has been recently toted as the safely wise justification. One could think of the many financial bubbles that have burst to disastrous consequences, but that's for another day.

Is IT unproductive? If the answer to that is yes (which it is not) then there are two possible explanations. That IT investments are ineffective (the author's take) or that we're not measuring productivity right. Nobel laureate MIT professor Robert Solow, with his work on "productivity paradox", has proven that the latter may be just as true as the ineffectiveness of tech spending.

Come to think of it, consider this:

- Without IT, the author would not have the website that promotes this hackneyed refrain.
- Nor would we have the Amazon.com website which allows hundreds of readers to commit the mistake of spending money on his book.
- Or on its PDF ebook version.
- IT was used in the the typesetting of this very book.
- IT is used by his publisher to manage all their accounts, including the royalties the author will get.
- IT is used to power almost every record in the university and the office that pays the author his monthly salary (Harvard)
- It is IT in the car that he drives to work that parks automatically or that aids his navigation
- ...and so on...

Overall, the book didn't catch my attention for more than 15 minutes. Which is about the time I've spent on writing the above.

Rating:
Summary: It's about time!
Review: 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.

Rating:
Summary: Couple of contradictions
Review: I found a couple of contradictions that, to me, undermine the book. Mr. Carr compares the electric revolution of 100 years ago with the more recent IT revolution and argues that since electricity no longer confers a competitive advantage, then IT should be treated the same way. He underscores this by pointing out that "many large companies created the new management post of vice president of electricity...But within a few years...[they] quietly disappeared" (pg 29-30). Later in the book, he states that "the seniormost corporate IT executives...need to lead the way in promulgating a new sense of realism about the strengths and limitations of IT" (pg 133). If VPs of electricity are unnecessary, then why not so for IT executives?

He also seems to contradict himself regarding ERP and Web browsing software. On page 113 he states, "Yet the vast majority of workers who use PCs rely on only a few simple applications - word processing, spreadsheets, e-mail, and Web Browsing". But earlier he writes, "ERP packages promised to solve, and sometimes did solve, one of the most daunting and expensive problems facing modern companies: the proliferation of narrow, discrete software applications" (pg 46). And on page 115, he describes how one business improved productivity by getting rid of Web browsers.

Rating:
Summary: Step back, read carefully and then decide ...
Review: I read this book because my husband left it laying around and I was mildly curious about the state of IT since I retired over five years ago. It is easy to see why this book has polarized readers in the same manner as some political books because the central theme is IT has an unjustified view of its own importance, and the technology employed is now viewed as a commodity.

There is ample evidence for part one of that theme. Carr's examples of IT disasters rings true with my own experience. From my early years as an RPG III programmer to later career work as a senior network engineer for two major integrators I've witnessed similar disasters in one job, project or client engagement after another. These disasters are relegating IT to a position of suspicion within many companies. The question is not whether IT can matter because of the competitive advantage it can give, but whether IT does matter if it is mismanaged. That is the key point Carr makes.

Carr's views of IT as a commodity may not be easy to buy into at first, but the evidence is all around us in not only personal computing but in data centers. What Carr missed, or failed to emphasize, is that innovation itself leads to the commodity status of technology. Indeed, innovation will assure it. Consider something as mundane as a home wireless network. Five years ago the thought of pumping 11 or 54 mbps over the air, eliminating expensive cabling, in a business setting was advanced. Now, for less than the cost of a circa 1987 3Com 3C501 card you can connect at least five workstations wirelessly to the Internet, with the added protection of a router/firewall. Only innovation could have made that possible, yet such a set-up is a commodity. The same with USB RAM drives, which allows you to dangle 1GB off a keychain. Made possible by innovation, yet because of that very innovation it is a commodity. This is not a new trend. Microsoft put networking itself on the path of commodity status when they released Windows For Workgroups back in 1992. This was the beginning of the end for Novell and Banyan as major networking vendors because Microsoft decided to build in networking with their ubiquitous desktop operating system. Today we take connectivity for granted, but back then it was an innovation in both technology and marketing. These examples should clearly show how right Carr is about IT as a commodity.

Like others I found Carr short on solutions, but he does show the problems and context. It's up to the reader to find the solutions.

Rating:
Summary: Right IT does matter
Review: I will share my experiences as the developer of complex decision support systems and for logistics planning in particular in the past 10 years.

When we tried to model a complex logistics problem 10 years back, we were forced to reduce the model so that we will be able to solve it in reasonable time, though sacrificing the solution. Humans were able to do certain jobs better with their evolutionary problem solving techniques and prior knowledge. But they still lacked the capability to solve a new problem (with thousands of variables and constraints), which leads to inefficiencies and lead time buffers added to each task (from design to product delivery).

Today we have huge computing resources at our disposal (both processing as well as memory) and our core mathematical libraries/solvers have also made tremendous leaps in the past 10 years. These factors allow us to model and solve complex logistics problems with near optimal solution, in reasonable time. Still processes in the companies can not be changed so easily for seeing the best results, which are again driven by humans.

IT companies have made huge $ investments in product development during the last phase and they need to invest more $ to get benefit of today's IT infrastructure, which I doubt will happen in near future. Hence those companies will be stuck with new IT infrastructure with old algorithms (which are written 5-10 years back for old IT infrastructure).

So new wave of companies and applications need to emerge to take advantage of new IT infrastructure and rich modeling of customer problems so that IT products will give real strategic advantage to companies.

Kudos to you as this is the most interesting IT topic I read in last 2 years and hopefully top management rethinks about their IT strategy before spending millions of $ for IT. Unfortunately much management can only understand/estimate immediate returns and not long term returns. That is why you can see their spending on operational tools is more than 85% of their IT budgets.