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

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

by / August 11, 2004
Does IT Matter? Information Technology and the Corrosion of Competitive Advantage
By Nicholas Carr
Harvard Business School Press
$26.95 Hardcover

Is information technology really a money pit gobbling up huge sums of money with little definable return on investment?

In the Harvard Business Review's May 2003 edition, author Nicholas Carr ignited a firestorm of controversy with the article IT Doesn't Matter, which spawned countless reviews and articles in both business and technical journals. In his just-published book, Does IT Matter?, Carr expands and clarifies his controversial theme.

To understand Carr, we must first define what strategic and competitive advantage is. As IT's power has increased, one could assume its strategic importance has as well. It is a natural assumption that as technology becomes more powerful, it becomes more important. Carr argues this is mistaken logic. What makes a business resource truly strategic, he argues, is not ubiquity but scarcity. You gain an edge over rivals only by having something, or doing something, others can't have or do. Carr believes that by now, core technology functions have become available and affordable to all. IT's very power and presence have begun transforming it from a potential strategic resource into what economists call a commodity input: a cost of doing business that must be paid by all, but provides distinction to none.

Carr shares examples from the past where this phenomenon is true. Companies in the 19th century located close to rail lines had a competitive advantage over firms without rail service. As railroads spread, the advantage enjoyed by early adopters diminished. At the beginning of the 20th century, many large firms had vice presidents in charge of electricity. Without a mature electric grid, firms often had to generate their own power, and decisions on where to locate were frequently dictated by the availability of electricity. Could any corporate board -- except a power company -- tolerate a vice president of electricity in the 21st century? Of course not.

Carr points out the danger of adopting and investing in a technology without an alternative. Rail strikes and power outages can still have an adverse effect on profitability. Interruptions in IT can be just as devastating.

Maybe in another decade or two, the CIO role will have outlived its usefulness. We will receive a gold watch upon retirement, and senior management will simply fail to appoint a replacement. Yet no modern Fortune 500 company would dare dream of putting the CIO role out to pasture. Sure, there will always be pressure to do more with less; this is good and natural. Companies have a profit motive; governments do not.

I enjoyed Carr's book, though I often found things to disagree with. In particular, Carr's view of the future is, in essence, a Microsoft-free zone. To paraphrase our 41st president, not gonna happen. As much as I enjoyed the book and see its relevance to corporate America, Does IT Matter? is extremely dangerous for the public sector.

Those of us in and around government know that senior management often acts as if IT doesn't matter. We struggle to get our job done without adequate resources or the political support to make changes necessary for receiving technology's full benefits. Carr is calling our budgets a money pit, and telling your boss that he or she can slash it and still receive the same benefits. Sure that other rich agency or state or county or city could take a hit, but we are getting by on a shoestring and will lose real functionality if our budgets are reduced any further.

Still waiting for that promised IT reorganization? What about your CIO? Legislation was passed creating the position, right? It's vacant again, and the vice president of electricity is in the acting role until after the election or he retires next spring. Brace yourselves, and hope your manager is too busy with election year politics to misapply Carr's book on your organization anytime soon.
Keith Comstock Contributing Writer