IT Doesn

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IT Doesnt MatterHBR Article by Nicholas G.
CarrIncluding debate by John Brown, John Hagel
III, Paul Strassman, et al

• Oregon Executive Dads (OED) Team

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Core Arguments of the Article

• Do we really need to care about IT?
• IT has become ubiquitous and a commodity
• Commodities dont have strategic value
• Greatest IT risk is overspending
• Puts your company at a cost disadvantage
• Instead make IT management boring
• To avoid over investing
• Spend less on IT
• Follow dont lead industry in IT use
• Focus on IT risks not opportunities

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Premise

• IT has moved from being differentiated technology
  to infrastructure technology.
• Core functions of IT data storage, processing
  and transportation are available to all
• Like railroads, electricity and telephone
• IT as a resource therefore cannot offer sustained
  competitive advantage
• There is little value in creating proprietary
  differentiated solution for an advantage
• IT technology as a data transport mechanism is
  more valuable when shared than used in isolation
• E.g. Linking ERM systems for gaining efficiency
  in SCM

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Premise

• Executives continue to spend more on IT assuming
  advantage will be available indefinitely

• One can only hope to get short term advantage
  with competitors eventually catching up
• Even best IT practices are quickly added or
  replicated

US dept of Commerce Bureau of Economic Analysis
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So what should companies do?

• Go from offense to defense
• Late 90s showed significant IT build-up
• Post build-up manage risk instead of overspending
• When A Resource Becomes Essential To Competition
  But Inconsequential To Strategy, Then Risk
  Created Outweighs Advantage Provided
• Stronger cost management is critical

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So what should companies do?

• Reevaluate your refresh cycle
• Push back on vendor driven upgrade cycles
• Drive waste out

• Top performers tend to be tightfisted
• 25 best performing companies spend just 0.8
• Typical company spends 3.7 of revenue on IT
• Data from Alienan Consulting 2002

• Intel spends 2.9 of revenue on IT
• Mark Bryan, Intel Oregon Site Manager

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Recommendation

• 1. Spend Less
• Rigorously evaluate expected returns from IT
  investments
• Penalties for wasteful spending will only grow
  larger as commoditization of IT continues
• Explore simpler and cheaper alternatives

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Recommendation

• 2. Follow, dont lead
• Moores Law gives you bigger bang for your buck
  if you wait
• Let impatient rivals take the burden of higher
  cost of experimentation
• Buy only when standards and best practices
  solidify

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Recommendation

• 3. Focus on risks, not opportunities
• Competitive advantage from mature infrastructural
  technology is rare
• Outsourcing is likely when reducing costs which
  can make your systems vulnerable
• Technical glitches, outages, and security
  breaches are inevitable in ubiquitous systems -
  shift attention from opportunity to risk
  management

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Do you agree why?
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Analysis

• Title perpetuating a misguided view
• IT DOES matter!!!
• Carr is suggesting that IT is diminishing as a
  source of strategic differentiation
• However companies with insight to harness ITs
  potential can still differentiate
• Differentiation is in the practice of IT
• Extracting value from IT requires innovations in
  business practices
• ITs economic impact comes from incremental
  innovations rather than big bang initiatives
  like in the late 90s
• Cumulative effect of sustained initiatives brings
  strategic impact

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Analysis

• Graph show commoditization of IT
• Subject lesson for Darrell Huffs well-known book
  How to Lie with Statistics
• Growth in computing power based on Moores Law is
  a source of differentiation that can be leveraged
  with services, product features and cost
  structures
• Financials ETrade vs Charles Schwab vs Merrill
  Lynch
• Laptops Dell vs HP vs IBM vs Toshiba vs Sony
• Shoes Nike vs Adidas vs K-Swiss

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Analysis

• IT is not about the box as Carr suggests its
  about whats inside the box
• IT has the potential to improve productivity
  dramatically, this time by changing the way
  businesses work together
• First companies used steam engines, then conveyor
  belts, and today we use information systems and
  especially software, to automate business
  activities.  We might call it softwarization
  .. And this softwarization is not a one-step
  affair, like flipping a switch, but an ongoing
  process

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Our Analysis

• Carr trying to instigate a debate which he did!
• Article written in 2003
• Touched a nerve with executives that had made
  large IT spending in late 90s and were
  questioning business value
• IT is more that just infrastructure technology.
  It includes systems and processes.
• Therein lies the differentiation
• Companies must challenge themselves in using IT
  in innovative ways

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Our Analysis

• The combination of business strategy and IT is
  the key
• Examples
• Customer Support Blogs
• Sharepoint
• Google for Intranet search
• Net meeting
• Wireless WAN based tools
• IT MOST CERTAINLY MATTERS!!!

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Additional Information

• Nicholas Carrs website
• Includes responses to his article by Craig
  Barrett, Bill Gates, Carly Fiorina and others
• http//www.nicholasgcarr.com/articles/matter.html
• Intels Business Value Index
• http//www.intel.com/it/business-management/it-inv
  estment-value.htm

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Intel Business Value Index Chart