Does IT matter?

Does IT matter?

Summary: As someone who has been accused of publicity seeking through grand pronouncements I can understand the motivation behind Nicholas Carr's 2003 article in Harvard Business Review: "IT Doesn't Matter". His main thesis is:For a brief period, as they are being built into the infrastructure of commerce, these "infrastructural technologies," as I call them, open opportunities for forward-looking companies to gain strong competitive advantages.

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TOPICS: CXO
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As someone who has been accused of publicity seeking through grand pronouncements I can understand the motivation behind Nicholas Carr's 2003 article in Harvard Business Review: "IT Doesn't Matter". His main thesis is:

For a brief period, as they are being built into the infrastructure of commerce, these "infrastructural technologies," as I call them, open opportunities for forward-looking companies to gain strong competitive advantages. But as their availability increases and their cost decreases - as they become ubiquitous - they become commodity inputs. From a strategic standpoint, they become invisible; they no longer matter.

Admittedly when Carr published this article I was employed by an IT Research firm whose very existence depended on the premise that IT matters. Most people in the IT world have a visceral reaction to Carr's challenge. My own cathexis is reinforced daily as I see example after example of IT being used as a strategic differentiator that leverages one company above another. It is far too early to lump IT in with other historical improvements in technology such as railroads and telephones as Carr does.

Examples? Let's talk about six: Amazon S3, UPS, Marketwiki, Interactivebrokers, Kmart, and Tierconnect.

Oh sure, you say. Amazon S3. The on-demand storage service that just crashed and burned this Friday? Yes, that Amazon S3, sister to the EC3 on demand computing platform. What is relevant is that thousands of companies have begun to rely on Amazon's new outsourced IT services. For a small application or startup needing world class data center facilities it is now possible to buy it piecemeal from Amazon. You will see in this my counter argument to Mr. Carr. His fundamental assumption, that IT is commoditized and equally deployed by all companies is woefully wrong. Change is so fast that while your competitor is investing tens of millions in a new data center you can leapfrog them by using outsourced computing and storage. IT really matters to S3's users.

I see that UPS is using their computerized routing systems to come up with routes for delivery trucks that minimize left turns (which waste time and are less safe). This IT enabled advantage is saving UPS three million gallons of fuel a year and 31,000 metric tons of carbon-dioxide emissions. Talk about competitive advantage. And no, FedEx does not do this. IT matters in the competitive package delivery service business.

To say that IT is not a critical component of an organization's strategy is to ignore innovation. Wiki's for example. The concept is about ten years old, is almost free to deploy, yet how many organizations have figured them out? Marketswiki.com is creating a knowledge base of all things related to financial markets. They only launched two weeks ago so the site is in its infancy but in financial markets knowledge is everything and a Wiki is an IT innovation that makes knowledge searchable and useable. IT matters to finance.

A further example in the financial space is Interactive Brokers. From their web site:

Successful traders and investors understand that superior technology and low trading costs hold the key to greater returns. Our clients benefit from direct market access to options, futures, forex, stocks and bonds on over 70 markets worldwide, best price execution, ultra low commissions, high interest earned and low financing costs.

Interactive Brokers is making their trading platform available through an API that gives you the ability to program your own analysis, even trading. You can only imagine the strategic advantage this gives to someone executing a realtime trading algorithm. IT matters to financial markets.

KMart is a counter example. They have demonstrated that lack of IT matters as well. Or rather, KMart has demonstrated that a company that is leading in its segment can falter and even fail by missing the competitive advantage made possible by IT. In an earlier Harvard Business Review article George Stalk and fellow authors point out how KMart went from a leader in an industry that it created to an also ran as WalMart overtook KMart in less than a decade. The secret? IT. In what is now textbook material (I hope) WalMart deployed a pull inventory system. Centralized computers would recognize as soon as a particular product was scanned at the checkout counter and issue orders from suppliers "just in time". Meanwhile KMart (whose World Headquarters is in mothballs a couple blocks from ThreatChaos' HQ) forged ahead with its push system, relying on cadres of buyers to guess what customers want and then push them with discounts and sales gimicks. Remember the Blue Light Specials? Today WalMart is thriving and KMart has been taken over by a Wall Street invader who saw value in its real estate holdings. IT really matters to retail.

If IT was really as ubiquitous as Mr. Carr thinks you would not be able to quickly identify major holes in technology deployment  all around us.  Every manufacturer for instance would have automated inventory control. The founders of TierConnect were aghast when they realized that every manufacturing plant in the world was using hand written tagging systems to label defective components for return.  Over 30% of handwritten tags had ineligible or wrong part number, quantity or problem.  And of course there was no reporting or alerting so a new quality problem may not be communicated back to the supplier for as much as 30-60 days.  With a simple deployment of TierConnect's solution auto assembly plants are saving millions a year.  Household goods manufacturers, farm and construction equipment, and electronics manufacturers have yet to deploy TierConnect's solution. They will as they realize once again that IT matters to manufacturers.

Information Technology, IT, is not a single discipline. The mainframe number crunchers of yore have given way to myriad technologies all striving to demonstrate how they can provide a competitive advantage to those with the foresiht to deploy them.  IT matters now  and in the future will matter even more.

Topic: CXO

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