nicholas g. carr - it doesnt matter

FACULTÉ DES SCIENCES DE LA SOCIÉTÉ

IT Doesn’t Matter

28/02/2017Dejan Munjin

FACULTÉ DES SCIENCES DE LA SOCIÉTÉInstitute of Information Service Science

1. IT gives strategical advantage in early adoption phase2. Proprietary technology gives an advantage while protected3. When the infrastructural technologies reach the buildout phase they become

commodity4. Strategic advantage shifts to the “risk management”5. Spending less on IT gives a competitive advantage

Main issues addressed


• 1965 – 2000 = 50% of capital• World business spend over $2 trillion a year• Shifting attitude of top management towards competitive advantage• Problem: assumption that as IT’s potency and ubiquity have increased, so too

has its strategic value• By now the core functions of IT have become available and affordable to all• Their power and presence have become to transform them from potentially

strategic resources into commodity factors of production

IT Expansion and strategic shift


• How the technologies influence competition at the firm level• Proprietary technologies: as long as they remain protected, can be a long term

strategic advantage• Infrastructural technologies offer far more value when shared then when used

in isolation• Restricted access and superior insight in technology gives advantages over

rivals (e.g. Electricity, steam train…)• There is an initial frenzy in technology uptake• The trap: assuming that opportunities for advantage will be available

indefinitely

Vanishing Advantage


• After the buildout phase: creation of standards • Standards are beneficial at the macro economic level• Only competitive advantage for forms is cost reduction

End of Buildout Phase


• IT is an infrastructural technology• IT is a transport mechanism: interconnectivity • IT is highly replicable• Most of the business processes become replicable• IT Becomes an utility (e.g. fee based services)• + Investments = Overcapacity consequently surge in productivity• Gordon Moore: predictions about doubling computing power every 2 years

IT Commoditization


• Ex. Sites on WWW has grown from 0 to 40 million in 10 years• Ex. American Hospital Supply (AHS) with Analytic Systems Automated

Purchasing (ASAP)• Standardization leads to lucrative monopolies whereas the vendors are

changing the business model to “Web Services” and subscriptions (e.g. Microsoft Office

IT Commoditization


• When the buildout of and infrastructural technology has concluded?• IT’s power is outstripping most of the business needs it fulfills• IT functionality has dropped and is affordable to all• The universal distribution network has caught up with demand• IT vendors are positioning as commodity suppliers• The investment bubble has burst

Loosing Competitive Advantage


1. Spend less, avoid penalties2. Follow, don’t lead (Moore’s Law)3. Focus on vulnerabilities, not opportunities: even brief disruption can be

devastating

Guideline for the future


• When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides

• Overspending is a risk: focus on essential functions of IT (e.g. personal computers, Microsoft profit margin, waste of storage)

• Spend less get more by buying IT when it’s standards and best practices solidify

• Studies show that the companies who invest the most are not the best performing

Guideline for the future


• Google search engine as infrastructural technology ?• Any other market players and examples ?

Short Case Study


• Limited to economic point of view• What about new business models and market actors ?• What about education/training ?• Other interdependencies of business with IT ?

Critical view


• Nicholas G. Carr “IT Doesn’t Matter”. Harward Business Review, May 2003 Issue

• https://hbr.org/2003/05/it-doesnt-matter

Citations and References

https://hbr.org/2003/05/it-doesnt-matter