Anurag Jain's Blog on Bangalore Events, Travel, IIM Bangalore, IIM, IIMB, Management

Thursday, December 04, 2003

Posted 8:44 AM by Anurag

IT doesn't matter? Oh, believe you me, it does.

(I wrote this piece a few months back when the heat was on about Carr's article. Got around to putting it at my blog only today.)

Nicholas Carr, HBR's editor-at-large, has captured the attention of the IT community worldwide with his article IT Doesn't matter. For the right reasons, I guess. And, for saying the wrong things, I am sure.

As you can see on Carr's page and all over the web, CIOs, academicians, and others in IT profession have been reviewing the article critically. Coming to my own, very personal critique, I am not saying he's wrong just because I am from IS community. I am saying this because some of his text does not stand ground. As IS professionals, I think its imperative for us to join the debate. Debate not for the sake of debate, but to put the issue on record. Here's my opinion on the subject.

By now, the whole world knows that Carr's thesis is that IT has become a commodity and hence it has stopped being important in a strategic way.

Now, let us see what makes him say that. Major support for his whole argument is derived from parallels drawn with the earlier technologies in the history -- railroads, electricity. He presents beaten-to-death growth figures of kilometers of railroad, megawatts of electricity, and hosts on internet. With all this, Carr seems to be implying (actually he's quite explicit) that IT is a mature technology today, and hence going the commodity way. Even Moore's law is mentioned to support the falling-costs-and-hence-commoditization theory. But he forgets to mention the Moore's IInd Law, which says that the cost of manufacturing chips (putting up plants for new fabrication technologies) is going up by a huge magnitude. And, in any case, if we are saying that we will stop at the current level of available processing power, then just wait till the next MIPS-hungry utility comes along. And this is not the vendor-speak kind of talk here: Jim Gray, Turing Award winning scientist says (Ringing the death knell on tech's high-growth era), "I've seen the 'end' at least twice in my career - only to be surprised by the next wave. My guess is that this computer thing has just gotten started". Look around. People are already talking about non-silica processors, and even clockless silica chips. Hence, even though its a fact that IT is widely available today, there still would be innovations in hardware and software, rocketing the pricing upwards that would make it more available to some firms than others. But does that matter for strategic advantage? According to HBR article, it (scarcity) does. And more importantly, 'only' this matters for competitive advantage. But as you will see in the argument in the following paragraph, its just not so. Its true in short-term only and that's where Carr's got it wrong: He has taken a myopic economics-only view of IT (investment, cost, return) and hence, the inevitable conclusions.

Coming to the issue of IT becoming 'boring', even though IT might have become an 'infrastructural technology', the reason of strategic advantage to firms is not the availability of technology (or non-availability to competitors: 'scarcity' as the article says), but how firms put IT to use, a critical aspect of the whole startegic IT argument, and something that Carr mentions only in the passing! There will be another American Airlines, another American Hospital Supply reaping strategic benefits as long as they 'get IT right' and not by making sure that their competitiors don't have the same technology.

In her Oct 1987 piece - "Infotech and Corporate Strategy", Prof Rosabeth Moss Kanter (HBS) classified the effects of IT into two categories: 1) Transaction efficiency (TE), and 2) Communication Control (CC). Further, she said that "In the long run, the CC area will be the one in which the greatest strategic possibilities wil be found." Now, not by any reckoning has that 'long run' ended yet. In fact, it just got started. After putting enterprise-wide systems in place, firms are discovering that inter-organizational collaboration is becoming more and more important and increasingly the source of competitive advantage for all players in the supply chain.

The point is that predicting demise of IT - a technology with high innovation and growth potential even today - as a differentiator by showing the growth charts similar to historical technologies is highly misleading. Taking the dotcom/investment bust of late 90s as the sign of maturing of technology is even more so. There are occasional blips in every technology's journey and what we are witnessing for last few years could sure be just that for IT, nothing more. Predicting too much on that basis alone combined with historical parallels, without taking into account the vibrancy, current developments, and innovations going on in the industry/technology, is quite a dangerous proposition and should be criticized.

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