ÜberTech


Study Refutes Nick Carr, Shows Data & IT Do Matter

Study Refutes Nick Carr, Shows Data & IT Do Matter

Summary: Lots of people have debated Nicholas Carr's argument that IT Doesn't Matter Anymore in the last 7 years, but few have offered new empirical evidence one way or the other. Now there is some - and it refutes Carr.

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I realize that all would-be Big Ideas must be boiled down to a headline in order to have any hope of catching on. But I still always found Nicholas Carr's argument that IT Doesn't Matter Anymore disturbingly anti-innovation and nihilistic. While there's been no dearth of rhetoric since Carr first made his argument 7 years ago, there's finally some empirical data addressing - and refuting - it.

Researchers at the University of Texas and Indian School of Business on Tuesday published a study of how 150 Fortune 1000 firms from various industries use their data, and how that correlates with their financial performance. You can either download the full part I of the study or just the press release.

The conclusion of the study? (full disclosure: sponsored by my employer, SAP subsidiary, Sybase) Companies could increase their annual revenue an average of $2.01 billion by improving employee productivity through making their data just 10% more usable and accessible.

The study's authors - professors Anitesh Barua of UT-Austin and Deepa Mani of the ISB, and doctoral student Rajiv Mukherjee of UT-Austin - never mention Carr directly. But their conclusion contradicts Carr's main thesis that investing in technology offers little competitive advantage to businesses.

"Our findings suggest that there is still room for major performance gains through additional investments in better data," they write. "Our results show that relatively small improvements in these [data] attributes can pay off with big financial returns."

The researchers surveyed Fortune 1000 employees and graded their companies' data use on 5 measures:

- Quality, i.e. accuracy, scope and timeliness;

- Usability, i.e. concise presentation, how easily it can be manipulated, consistency across databases;

- Intelligence, i.e. trends, demand patterns, and recommendations gleaned from that data;

- Remote accessibility, i.e. whether employees can get data from their laptops, smartphones and tablets out in the field

- Sales mobility, i.e. ability for salespeople to exchange price quotes, orders and delivery info with customers via their mobile devices.

The researchers then correlated that data with four popular corporate financial metrics:

- Sales per employee;

- Return on equity, i.e. net income/shareholder equity;

- Return on invested capital;

- Return on assets.

According to the research, companies with 10% higher data usability had 14.4% higher sales. Using the median sales per employee of $388,000, that implies that a firm could boost its sales per employee by a non-trivial $55,900 per year by making their data 10% more usable.

Some firms would benefit a lot more. For instance, the same 10% increase would boost the sales per employee at retail firms and consulting firms by 49% and 39%, respectively. Using dollars rather than percents, that would be a $5 million increase per consulting firm worker, or a whopping $9.9 million annual increase for telecom workers.

Meanwhile, a 10% increase in both data quality and sales mobility was correlated with an average of 16% increase in a company's Return on Equity. In other words, firms that took pains to clean and present their data better while also equipping their salespeople with app-enabled smartphones could increase their net income by $65.7 million per year.

Again, some firms would do much better. Energy, airlines and telecom firms, in particular, can expect a 200% increase in ROE from data quality and sales mobility investments.

Improvements in gleaning intelligence from data and then making it accessible to all employees could also significantly boost companies' Return on Assets. For instance, insurers, commercial banks and credit institutions could all enjoy 28% or better increases in ROA.

Telcos, air transportation firms, publishers, petroleum firms, wholesalers, electric/gas service services and steel firms would also enjoy big ROA gains.

This tells me that doing Business Intelligence smarter, or equipping your field service workers with better smartphones and apps, can still help companies beat their competitors.

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Does your company use, analyze and mobilize data well? Does it give you or your firm a competitive edge?

Topics: ÜberTech, Banking, CXO, Enterprise Software

Eric Lai

About Eric Lai

I have tracked technology for more than 15 years, as an award-winning journalist and now as in-house thought leader on the mobile enterprise for SAP. Follow me here at ÜberMobile as well as my even less-filtered musings on Twitter @ericylai

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5 comments
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  • RE: Study Refutes Nick Carr, Shows Data & IT Do Matter

    As with many things, IT is a tool. Any tool used poorly will end up costing more than it is worth. And a tool for tool's sake does not improve things. It is how well the tool is used that brings about the improvements. I have not read Nick Carr's opinion, but possibly he saw many companies investing in technology just for technology's sake yet did not invest in the expertise to use the tools to the fullest extent possible.
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  • RE: Study Refutes Nick Carr, Shows Data & IT Do Matter

    Don't disagree at all. Nick Carr's argument provided a useful counterweight against bloating IT budgets and orgs (though it's hard to believe that many companies in post-dot-bomb-era 2003 were being *that* wasteful with their tech dollars). However, I think Carr, in order to attract interest and perhaps because he genuinely believes it, crossed the line by making argument that tech was going to become like your water or electrical service, that it becomes a utility that provides no competitive advantage to most companies. The evidence all around me is that that is an overly-reductionist view of the world.
    ericylai@...
  • RE: Study Refutes Nick Carr, Shows Data & IT Do Matter

    Nick Carr is an editor and a writer by trade, so he, at least, uses words correctly. One "refutes" an assertion by showing that it is untrue. The study simply doesn't address any assertion made by Nick Carr, so "refutation" just isn't within the realm of the possible.

    The study says, simply, that IT installations vary in effectiveness; if they are used more effectively, there are benefits. No one--not Nick Carr, not Eric Lai, not me, no one--doubts this?

    In case you are wondering, Nick Carr was arguing about whether IT can provide a transformational benefit, the kind that railroads offered in a different era. He asserts that this kind of benefit is no longer available, because IT has become commoditized. To refute this line of argument, you would have to show that transformational benefits are available, not what the study shows.
    toppundit
  • Show me the costs!

    This study makes some claims for which I can find no substantiation ?The cost of increasing effective data is relatively minor compared to the resulting substantial returns.? What are the costs? I would suggest they are not "minor".
    richord@...