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Does IT Matter? Information Technology and the Corrosion of Competitive Advantage By Nicholas G. Carr ( Harvard Business School Press )
Release Date: 2004-04
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List Price: $29.00
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Product Description
This is a bold and controversial manifesto on where information technology is headed, how its role in business strategy will dramatically change, and what this all means for business managers and IT suppliers. "Does IT Matter" provides the first cogent explanation of IT's dramatically changing business role, its levelling influence on competition, and the practical implications for business managers and IT suppliers. A convincing manifesto on one of the most important business phenomena of our time, "Does IT Matter?" will play a central role in our ongoing debate about the future of IT.
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 Does this book matter? ( vadim_gorelik )
Ok, if you've beem in IT for any length of time (say over 3 years) and what the author is saying here comes to you as a surprise, guess what? You are part of the reason for all the problems that are "revealed" in this book.
To me, the value was about .5 stars - for the past 10 years, every single IT conference at any level is talking about how to make IT more business oriented and start to bring in value. What's new here? And if we're not bringing in the perceived business value, it is only natural for us to be viewed as a cost center and a commodity.
But I will disagree that this is the state of IT everywhere. Furthermore, I will make the statement that if you read this book and nod your head, you're to blame. Get off your bottom and do something about it. I've worked in a few places where IT was not a commodity, did bring value, and were considered business partners. So this book is aimed to those who are still clueless, and for them it might have some value, so three stars it is. Read and learn.
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 Distinctiveness determines a company's profitability and assures its survival ( goldenlionkempo )
1. We dream of some wonderful machine where get all the answers wanted. The dream of technology is human quality answers to hard questions.
2. When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantage it provides. Today, no company builds their business strategy around rail service or electricity but a lapse in the supply of these resources or a spike in cost can be devastating.
3. How important is IT in day to day operations? Oxford Health Plan lost $3 billion in market capitalization in one day , after announcing that software problems had led to widespread errors in billing and claims processing. Delays in rollout of a new ordering system at Snap-on led to a 40 percent dip in earnings. A disastrous implementation of an ERP system helped push FoxMeyer into bankruptcy. Cisco System real time forecasting software failed to spot an imminent freefall in demand for networking equipment, leading to a $2.5 billion inventory write-off and 8,500 workers fired.
4. Nearly ever IT project has been wildly over budget or off schedule. Standish Group, in 1995, studied eight thousand system projects and reported only 16 percent considered successes; nearly a third were cancel outright; and the remainder went off budget and schedule ; 50 percent that were over schedule took twice as long to finish ; and 30 percent provided half the required features. Large companies with $500 million in annual sales - did even worse with only 9 percent of IT projects succeeding. In 1998, KPMG surveyed 1,450 companies discovered that three-quarters of the IT projects exceed deadlines and half were over budget.
5. In 2002, GM no longer employed any in-house programmers-all the work had been outsource. The remaining 1,800 IT staffers managed the herd of contractors and vendors, monitoring the quality of the work and negotiated the cheapest prices on equipment and services. Ralph Szygenda in six years slashed $800 million in IT spending. Ford cut IT spending by 20 percent or $300 million. DaimlerChrysler cuts system costs for crash tests by 40 percent and improved performance 20 percent. Verizon is saving $50 million a year by shifting contract development from the United States to India.
6. Services are being commoditized and processes are highly repeatable. The ability to understand and capitalize on such trends will be a hallmark of effective IT management in the future. Executives need to think about technology changes as waves. The leaders will be always be one or two waves ahead in applications and services and the laggards one or two waves behind. There is no fast follower strategy, you must lead from the front is a fallacy. The fear of obsolescence from failing to invest turned out to be unwarranted. Many of the smartest users of technology stayed far from the cutting edge, waiting to make their purchases until standards and best practices solidified and prices fell.
7. Studies of corporate IT spending consistently show that greater expenditures rarely translate into superior financial results. Alinean compared IT expenditures for the top 7,500 largest US companies and found the top performers tended to be among the most tight fist spenders. The twenty five companies with the highest economic returns spent 0.8 percent of their revenues. Likewise, there is no existing correlation between IT spending and business productivity performance. Performance is the result of acquiring the right business software for the existing culture. Competition is the biggest drive of productivity causing managers to take aggressive measures to improve efficiency and effectiveness.
8. Paul Strassman studied 1,585 US firms finding no correlation between how much a company spends on IT and how well it performs. Strassman said, "the relationship between profits and IT is random".
9. Focus on vulnerabilities than opportunities. Overspending is the greatest immediate risk related to the IT infrastructure. No company can take out the IT risks within their company. Companies need to itemize and prioritize their IT risks with regular security audits. They need to integrate a risk abatement program and educate employees about IT vulnerabilities.
10. On the average the US still invests, as much, in IT as all other capital expenditures. Worldwide, business spent $1 trillion on IT gear, software, and services and more than $2 trillion if telecommunications is included.
11. The London School of Economics believes by 2010, 60 percent of the IT directives will focus on achieving competitive advantage rather than staying afloat. What makes a business resource a competitive advantage is not ubiquity but scarcity. Therefore, the IT trend is moving away from advantage and towards free. You gain an edge over rivals by having something or doing something that they can't have or do.
12. Distinctiveness determines a company's profitability and assures its survival. Platforms create frameworks, making software a commodity and serviceable competition fighting over price margins. The achievement of differentiation is the overriding goal and final test of every business strategy. In the long-run, it's the only way a company can boost its earnings and safeguard its future.
13. Information technology is becoming cheaper and more standardized, as its power and capabilities begin to outstrip most companies needs, the advantage it once provided dissipating, and its great transformational power fading. IT will become ordinary and lose its strategic importance as a differentiator of companies, if it is to fulfill it potential. Like the railroad, IT is a transport carrying digital data . Rapid standardization produces tighter interconnectivity and more efficient interoperability. As software standardizes and becomes a platform, overshooting becomes common. Spurred by the need to satisfy customers and protect high-margin sales, vendors add new features and functions to the product coveting the cutting edge. Each new generation of software overshoots the needs of the customer and these buyers switch to cheaper more barebones solutions. Linux displacing Unix and Windows in super computer cluster arrays.
14. Software is the embodiment of human intelligence.
15. Software development is the attempt to realize the latent economies of scale, to amortize high development costs over as many users as possible. Software wants to be shared, usage and cost. Software migrates towards becoming a commodity input. Companies will sacrifice distinctiveness if the resulting cost savings are large enough.
16. By centralizing expertise and serving many different clients, the new software houses provide a much better means of capturing the economies of scale inherit in software development. Knowledge being captured in the software tools.
17. ERP software suites allow executives to get a clear picture of the entire business by using a centralized database to draw information.
18. Developing code is starting to look less like a creative service and more like a manufacturing routine.
19. Two research from MIT examined the IT spending and financial performance from 370 large US companies and found evidence that IT had contributed positively to total outcome. The conclusion being IT investments usual produced high rates of return through improved productivity. Consumers benefit the most from the higher productivity. The research said, "our profitability results suggest that, on average, firms are making the IT investments necessary to maintain competitive parity but are not able to gain competitive advantage."
20. 47 major US retail banks found no evidence that spending on IT had enhanced profitability. Information technology, although a competitive necessity, brings banks no strategic benefit, as measured by equity or return on assets.
21. IT holds a competitive advantage for health care services. The health care industry has been shield from competition, so competitive advantage is possible. Free markets are quite good at motivating entrepreneurs, managers, and investors to see and very quickly exploit big new business opportunities. It does not take long for the optimal way of doing business to emerge in an industry and for all companies to adopt it.
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 IT microeconomics ( shannongaw2 )
Carr has received negative coverage from the IT community for the "Does IT Matter?" Harvard Business Review article and this, a Harvard Business School Press book, but the title is actually a misnomer. He states that IT matters so much in fact that a firm must have it to compete, much like electricity. However, Carr argues, just because it is ubiquitous does not mean it is strategic.
The author compares the last two decades of the information revolution and associated computing/Internet infrastructure with the birth and maturation of the steamship, railway, telegraph, and electric grid infrastructures. The key factor of all of these technologies is how they influenced - or failed to influence - competition among individual companies. Having access to these technologies was for a time a massive competitive advantage. However, as the infrastructure is rapidly built out and more and more gain that access, standards and best practices are published and adopted, components are homogenized, and the technology begins to fade into the background and out of the minds of chief decision makers. As a telling example which he cites often, many companies once had a "vice president of electricity" position in the management ranks.
Carr spends a few chapters discussing how IT has become a commodity. The proliferation of standards inherently limits differentiation and the economics are just too hard for users to resist. As Michael Dell said, "In the long run, all technology tends towards low-cost standards." However, Dell was not just referring to hardware, but IT services too: "The fact is that you can put some mystical notion on lots of these services, but if you look at them in detail... many of the things are highly repeatable.... We are in effect commoditizing services." And Carr says that "most corporate software will be a commodity good churned out by anonymous factory workers spread across the globe."
Far from not mattering, IT is essential to competition; however, because of its ubiquity, it is inconsequential to strategy and the risks it creates become more important to manage than the exploiting of the advantages. Accordingly, in the future, the successful firm will increasingly be one that pragmatically plans and executes its IT endeavors rather than one who pursues innovation. It will focus more on vulnerabilities rather than opportunities. "Does IT Matter" provides a relatively concise academic summary confirming what I am already empirically seeing as an IT professional.
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A Must Read for all IT People
This book is truly inspiring. If you are an IT Specialist in any capacity, this book is like spending a session in a Therapist office. It forces you to talk an honest look at your profession and if you are really adding value to your customers or not.
It should be a required reading for all IT college graduates. Although there are certain statements I did not agree with, however, Nick is truly a mind-set shifter whom with a single article set in motion a global debate.
I cannot wait for his next book
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Written by an author who never managed an IT organization ( illini012 )
Although Nicholas Carr has some good eye opening arguments, most of it is based on theory, and not practice. As usual, although such arguments are worthy of thought and debate, it should never be taken at its face value as the new paradigm.
For example, Nicholas Carr makes an argument there are huge amount of IT "waste" because of excessive disk capacity and CPU capabilities. People who have worked in IT for any reasonable period of time knows that excess capacity rarely remains wasted, especially when many organizations experience 50%+ growth in disk storage needs every year. The same thing goes for the CPU and memory capacity. Having excessive hardware capacity for the future needs is called "capacity planning" and not a waste. Anyone who has been taken off guard (and paid a dear price with costly downtime) due to lack of disk storage, memory, or CPU horsepower knows the value of having some excessive hardware capacity. Minimizing the risk of critical downtime is hardly a "waste".
Some of Nicholas Carr's argument, admittedly, is at least somewhat, if not mostly, true. For example, he argues that IT, particularly its infrastructure, offers little competitive advantage because IT has become a commodity. This is true of SAN, OS, RDBMS, email, routers, switches, and servers (among others). If one's competitors have better and faster storage, for example, all one needs to do is buy the same storage from the same vendor at the same price to negate that competitive advantage.
Nicholas Carr does not address two important factors enough in the competitive forces of IT:
1)The power of innovation. Although competitive advantage via better hardware is becoming non-existent, a superior code written by a good developer is much more difficult to duplicate. Carr seems to dismiss the idea of innovation in IT since it is a "commodity". This is only partially true.
2)The competitive advantage of having superior IT personnel. The quality of the Knowledge Worker has become a key component, and perhaps the main key component, of competitive forces. In an era where it is increasingly difficult to gain competitive advantage, the quality of a company's Knowledge Worker is becoming more crucial. Despite the increasing commoditization of IT, the quality of IT depends largely on the quality of the IT personnel.
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