Transcript IT_Doesnt_Matter

IT Doesn’t Matter
HBR Article by Nicholas G. Carr
Including debate by John Brown, John Hagel III, Paul Strassman, et al
Oregon Executive Dads (OED) Team
IT Doesn’t Matter …or does it ?
Core Arguments of the Article
Do we really need to care about IT?
IT has become ubiquitous and a commodity
Commodities don’t 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 don’t lead industry in IT use
Focus on IT risks not opportunities
IT Doesn’t Matter …or does it ?
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
IT Doesn’t Matter …or does it ?
Premise
Executives continue to spend more on IT
assuming advantage will be available
indefinitely
IT portion of Total Capital Expenditure
One can only hope to get
short term advantage with
competitors eventually
catching up
Even best IT practices are
quickly added or replicated
50
45
40
35
30
% 25
20
15
10
5
0
1960s
1980s
1990s
2000+
Year
US dept of Commerce Bureau of Economic Analysis
IT Doesn’t Matter …or does it ?
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
IT Doesn’t Matter …or does it ?
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
IT Doesn’t Matter …or does it ?
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
IT Doesn’t Matter …or does it ?
Recommendation
2. Follow, don’t lead
Moore’s 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
IT Doesn’t Matter …or does it ?
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
IT Doesn’t Matter …or does it ?
Do you agree… why?
IT Doesn’t Matter …or does it ?
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 IT’s
potential can still differentiate
• Differentiation is in the practice of IT
• Extracting value from IT requires innovations in business
practices
• IT’s economic impact comes from incremental innovations
rather than “big bang” initiatives like in the late 90s
• Cumulative effect of sustained initiatives brings strategic
impact
IT Doesn’t Matter …or does it ?
Analysis
Graph show commoditization of IT
Subject lesson for Darrell Huff’s well-known book –
How to Lie with Statistics
Growth in computing power based on Moore’s
Law is a source of differentiation that can be
leveraged with services, product features and
cost structures
Financials: E*Trade vs Charles Schwab vs Merrill
Lynch
Laptops: Dell vs HP vs IBM vs Toshiba vs Sony
Shoes: Nike vs Adidas vs K-Swiss
IT Doesn’t Matter …or does it ?
Analysis
IT is not about the box as Carr suggests it’s
about what’s 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
IT Doesn’t Matter …or does it ?
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
IT Doesn’t Matter …or does it ?
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!!!
IT Doesn’t Matter …or does it ?
Additional Information
Nicholas Carr’s website
Includes responses to his article by Craig Barrett, Bill Gates, Carly
Fiorina and others
http://www.nicholasgcarr.com/articles/matter.html
Intel’s Business Value Index
http://www.intel.com/it/business-management/it-investmentvalue.htm
IT Doesn’t Matter …or does it ?
Intel Business Value Index Chart