Dell has succeeded by exploiting the commoditization of the PC market and is now extending that strategy to servers, storage, and even services. Using Porter's Five Competitive Forces would have provided subject matter support as to why Carr believed that non-proprietary technologies cause an organization to lose strategic competitive advantage. Every year, businesses purchase more than 100 million PCs, most of which replace older models. Best practices are now quickly built into software or otherwise replicated. IT Doesn’t Matter Zach Evans August 11, 2003 3 of 5 Infrastructural technologies, however, “offer more value when shared than when in isolation”. On the agenda, we've been told, should be three kinds of items. When companies buy a generic application, they buy a generic process as well. Library availability. We can only hope that the analogy ends there. Businesses worldwide pump $2 trillion a year into IT. It underpins the operations of individual companies, ties together far-flung supply chains, and, increasingly, links businesses to the customers they serve. Hardly a dollar or a euro changes hands anymore without the aid of computer systems. Many technology vendors are already repositioning themselves and their products in response to the changes in the market. Explore simpler and cheaper alternatives, and eliminate waste. Yet the vast majority of workers who use PCs rely on only a few simple applications—word processing, spreadsheets, e-mail, and Web browsing. By the early 1990s, it had reached more than 30%, and by the end of the decade it had hit nearly 50%. As long as they remain protected, proprietary technologies can be the foundations for long-term strategic advantages, enabling companies to reap higher profits than their rivals. Add to My Bookmarks Export citation. A leading distributor of medical supplies, AHS introduced in 1976 an innovative system called Analytic Systems Automated Purchasing, or ASAP, that enabled hospitals to order goods electronically. They need to prepare themselves for technical glitches, outages, and security breaches, shifting their attention from opportunities to vulnerabilities. You are currently offline. That is exactly what is happening to information technology today, and the implications for corporate IT management are profound. The challenge will be to maintain that discipline when the business cycle strengthens and the chorus of hype about IT’s strategic value rises anew. Even if that’s true, the picture may not be as bleak as it seems for vendors, at least those with the foresight and skill to adapt to the new environment. A recent study by Forrester Research showed, similarly, that the most lavish spenders on IT rarely post the best results. Landes. His invention of the microprocessor spurred a series of technological breakthroughs—desktop computers, local and wide area networks, enterprise software, and the Internet—that have transformed the business world. As IT’s power and presence have expanded, companies have come to view it as a resource ever more critical to their success, a fact clearly reflected in their spending habits. But as their availability increased and their cost decreased—as they became ubiquitous—they became commodity inputs. The introduction of electric power again provides a good example. ISBN: 978-1422157978 READ: Jan 15, 2015 ENJOYABLE: 6/10 INSIGHTFUL: 7/10 ACTIONABLE: 7/10. https://ivypanda.com/essays/it-doesnt-matter-by-nicholas-carr The staff of HBR voted “IT Doesn’t Matter” the best article to appear in the magazine during 2003. He examines the evolution of IT and argues that it follows a pattern very similar to that of earlier technologies like railroads and electricity. And as for IT-spurred industry transformations, most of the ones that are going to happen have likely already happened or are in the process of happening. When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides. But he was also making a prediction about the coming free fall in the price of computer functionality. Excerpted with permission from "Does IT Matter? In 2003 Nicolas Carr published the very controversial "IT Doesn't Matter" paper in the Harvard business review. IT is also highly replicable. They do, but their influence is felt at the macroeconomic level, not at the level of the individual company. The history of IT in business has been a history of increased interconnectivity and interoperability, from mainframe time-sharing to minicomputer-based local area networks to broader Ethernet networks and on to the Internet. When Gordon Moore made his famously prescient assertion that the density of circuits on a computer chip would double every two years, he was making a prediction about the coming explosion in processing power. Smart manufacturers, however, saw that one of the great advantages of electric power is that it is easily distributable—that it can be brought directly to workstations. In fact, the opposite is usually true. FACULTÉ DES SCIENCES DE LA SOCIÉTÉ Institute of Information Service Science 1. He edited The Digital Enterprise, a collec-tion of HBR articles published by Harvard Business School Press in 2001, and has written for the Financial Times, Business 2.0, and the Industry Standard in addition to HBR. Both the technology and its modes of use become, in effect, commoditized. For several years, in fact, AHS was the only distributor offering electronic ordering, a competitive advantage that led to years of superior financial results. The winners will do very well; the losers will be gone. he or she is an executive of uncommon intelligence and curiosity: the brightest CEO you know or can imagine, perhaps. The smartest users of technology—here again, Dell and Wal-Mart stand out—stay well back from the cutting edge, waiting to make purchases until standards and best practices solidify. After the introduction of the personal computer in the early 1980s, that percentage rose to 15%. As with earlier infrastructural technologies, IT provided forward-looking companies many opportunities for competitive advantage early in its buildout, when it could still be “owned” like a proprietary technology. An HBR Debate • W E B E XC LU S I V E If we’ve learned one thing from the 1990s, it’s that big bang, IT-driven initiatives rarely produce expected returns. We like to pretend that our ideal reader has chartered us to prepare a briefing every month. Its author, Nicholas Carr, says today that it … Scarcity—not ubiquity—makes a business resource truly strategic. Microsoft’s push to turn its Office software suite from a packaged good into an annual subscription service is a tacit acknowledgment that companies are losing their need—and their appetite—for constant upgrades. The importance of infrastructural technologies to the day-to-day operations of business means that they continue to absorb large amounts of corporate cash long after they have become commodities—indefinitely, in many cases. Little has been said about the way the technologies influence, or fail to influence, competition at the firm level. But with companies struggling to boost profits and the entire world economy flirting with deflation, it would also be dangerous to assume it can’t. And many of the major suppliers of corporate IT, including Microsoft, IBM, Sun, and Oracle, are battling to position themselves as dominant suppliers of “Web services”—to turn themselves, in effect, into utilities. Nicholas Carr's latest book - IT doesn't matter is out This is a collection of reviews opposing Nicholas carr's kernel argument that IT does not matter as it is becoming commoditized and therefore incapable of providing differentiating business value to enterprises. But those cases are becoming rarer and rarer as IT capabilities become more homogenized. Even the most cutting-edge IT capabilities quickly become available to all. Reprint: F0903G. Today, no one would dispute that information technology has become the backbone of commerce. an HBR debate. In turn, business profits evaporated. Peter Harrison highlights the science-religion debate as a symptom of the more general split between the sciences and the humanities. Now that IT has become the dominant capital expense for most businesses, there’s no excuse for waste and sloppiness. IT management should, frankly, become boring. Here they are, along with some strategies for managing each one. More and more threats in the form of technical glitches, service outages, and security breaches. Information Technology and the Corrosion of Competitive Advantage by: Nicholas Carr Roberta Casebolt MPA 605 2. Semantic Scholar is a free, AI-powered research tool for scientific literature, based at the Allen Institute for AI. At the same time, the buildout forces users to adopt universal technical standards, rendering proprietary systems obsolete. A confident showman, he challenged Mr Carr to a debate, on stage and on webcast. May 2003, Nicholas Carr wrote “IT Doesn’t Matter” which was published in the Harvard Business Review The article created a debate among professionals in IT, business and journalism. It was no coincidence that the largest U.S. manufacturer of nuts and bolts at the turn of the century, Plumb, Burdict, and Barnard, located its factory near Niagara Falls in New York, the site of one of the earliest large-scale hydroelectric power plants. It takes one side of an argument that’s undeniably urgent and … In 1965, according to a study by the U.S. Department of Commerce’s Bureau of Economic Analysis, less than 5% of the capital expenditures of American companies went to information technology. In the 30 years between 1846 and 1876, reports Eric Hobsbawm in The Age of Capital, the world’s total rail trackage increased from 17,424 kilometers to 309,641 kilometers. If vendors balk, explore cheaper solutions, including bare-bones network PCs. In fact, the greater speed, capacity, and reach of the railroads fundamentally changed the structure of American industry. These applications have been technologically mature for years; they require only a fraction of the computing power provided by today’s microprocessors. Most have appointed chief information officers to their senior management teams, and many have hired strategy consulting firms to provide fresh ideas on how to leverage their IT investments for differentiation and advantage. Instead of aggressively seeking an edge through IT, manage IT’s costs and risks with a frugal hand and pragmatic eye—despite any renewed hype about its strategic value. In 1968, a young Intel engineer named Ted Hoff found a way to put the circuits necessary for computer processing onto a tiny piece of silicon. Negotiate contracts ensuring long-term usefulness of your PC investments. Also assess your data storage, which accounts for 50%+ of many companies’ IT expenditures—even though most saved data consists of employees’ e-mails and files that have little relevance to making products or serving customers. When electric generators first became available, many manufacturers simply adopted them as a replacement single-point source, using them to power the existing system of pulleys and gears. Companies that were quick to recognize the broader opportunity rushed to build large-scale, mass-production factories. The combination set the stage for two solid decades of deflation. AHS gained a true competitive advantage by capitalizing on characteristics of infrastructural technologies that are common in the early stages of their buildouts, in particular their high cost and lack of standardization. Companies gain an edge by having or doing something others can’t have or do. Electricity remained a scarce resource during this time, and those manufacturers able to tap into it—by, for example, building their plants near generating stations—often gained an important edge. Behind the change in thinking lies a simple assumption: that as IT’s potency and ubiquity have increased, so too has its strategic value. Proprietary technologies can be owned, actually or effectively, by a single company. ". An industrial manufacturer may discover an innovative way to employ a process technology that competitors find hard to replicate. That’s not to say that infrastructural technologies don’t continue to influence competition. In addition to enabling new, more efficient operating methods, infrastructural technologies often lead to broader market changes. The key to success, for the vast majority of companies, is no longer to seek advantage aggressively but to manage costs and risks meticulously. Consider some statistics. Does IT matter? There is good reason to believe that companies’ existing IT capabilities are largely sufficient for their needs and, hence, that the recent and widespread sluggishness in IT demand is as much a structural as a cyclical phenomenon. From the CIO Point of View: The “IT Doesn’t Matter” Debate by L. DeJarnette, R. Laskey, and H. Edgar Trainor without a rational, effective investment strategy. So what should companies do? More and more, companies will fulfill their IT requirements simply by purchasing fee-based “Web services” from third parties—similar to the way they currently buy electric power or telecommunications services. And because it was proprietary to AHS, it effectively locked out competitors. (For more on the challenges facing IT companies, see the sidebar “What About the Vendors?”). Here, too, a company that sees what’s coming can gain a step on myopic rivals. What’s important—and this holds true for any commodity input—is to be able to separate essential investments from ones that are discretionary, unnecessary, or even counterproductive. 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