What matters more than IT

At the end of the day, the measure of IT isn't whether it matters or is a commodity--it's whether the people responsible for delivering an IT platform have the right goals and can execute on a strategic plan.
Written by Dan Farber, Inactive
The "IT matters" debate continues to burn up brain cycles across the computing industry. Ever since Nicholas Carr published his article entitled "IT Doesn't Matter" in the May 2003 edition of the Harvard Business Review, Carr has been defending his thesis and industry executives have been waging a war of words in opposition to the idea that IT isn't a force multiplier. It's time to face the facts: IT does matter, but not necessarily in the way you think, and the biggest issue isn't technology--it's people.

Most recently Microsoft CEO Steve Ballmer and Sun Microsystems CEO Scott McNealy made their cases that IT matters greatly, and that business success and technology innovation go hand-in-hand.

Ballmer called the notion that technology no longer has the potential to transform lives and make people more productive "hogwash." McNealy believes IT is critical to competitive advantage: "To get an advantage, I need to know more about what happened in the last six hours than my competitor. It won't happen through smoke signals. IT is critical to make that happen."

Carr contends that companies can no longer gain much competitive advantage from IT investments. "Companies have to make the investments to maintain competitive parity, but if you think that you can innovate your way using technology to a competitive advantage that will be lasting, I think you're fooling yourself," Carr said at a recent conference.

After listening to both sides for the last few months, and weighing in with my own analysis, I can only conclude that the two sides are more alike than different in their perspectives.

Rather than focus on the inflammatory "IT doesn't matter" headline, the real question is whether IT is becoming more of a commodity and the implications of that trend. Of course, IT matters. It's like saying access to water or the sun don't matter to living beings. It's an essential part and cost of doing business in the 21st century.

Does IT matter as a tool for competitive advantage? It depends on how you use it. For Amazon, Wal-Mart, Dell, and almost any other company, the application of technology is a key success factor. Leveraging technology--such as a superior customer relationship solution, more efficient supply chain management, or a datawarehousing implementation--can allow a company to outperform competitors. It is only a part of the success formula, but it is an integral part of the ongoing investment to be an industry leader. For example, an inefficient supply chain can destroy companies that live on thin margins and large-scale distribution. Or, achieving a lower cost infrastructure can deliver more profit or fodder for R&D than a less efficient competitor.

Industry leadership and technology leadership are not necessarily two halves of the same coin. Many companies who aspire to be technology leaders fall on their faces. Just being first to market with a new technology innovation is no guarantee of success. It may provide a temporary advantage, but as Carr suggests, longer term it is unsustainable. A few companies may possess some secret sauce or patented technology that provides a unique advantage, but such is the rare exception.

If you believe that the vast majority of IT is becoming more of a commodity, then the unique advantages based solely on technology for any company are limited. And, it appears that the most powerful vendors are driving their customers in the direction of commodity, or utility-like, solutions.

Sun, Microsoft, IBM, Oracle, SAP, BEA, PeopleSoft are all preaching the virtues of more homogenized software stacks and more standardized hardware. The software Brahmins will tell you that you can avoid the high costs of integration by using pre-integrated software and emerging standards like Web services. Cost and complexity are not your friends, but simplicity and standards are. Whether you are Wal-Mart or a small wholesaler, you have access to the same set of infrastructure technologies.

Whereas the philosophy in the past has been to align technology with your business processes, the new mantra is to align your business with the technology. The functionality for most applications and industry-specific tasks out-of-the-box is preferable to the cost and complexity involved in extensive software customization.

This is the pragmatic approach, a less romantic commentary on the power of technology to transform businesses. The commoditizing of basic infrastructure hardware and software services that Carr predicts doesn't mean that customization is an anathema or that technology innovation is arrested.

The notion of off-the-shelf software for enterprise applications is unrealistic, unless the implementation scope is narrow. But, the complexity of customization is being moderated by the rise of Web services and improved integration tools.

Innovation will happen on top of the more commodity layers. And, the R&D will mostly come from the vendors, who are more interested in broad distribution of their innovations, lifting all boats as opposed to the few who want to pay for some high-priced proprietary code.

However, adopting the IT as commodity approach has some significant challenges. First, IT organizations tend to hang onto legacy systems for too long. They are reluctant to rip out the old stuff and replace it with less complex, more powerful solutions.

Certainly, risk is inherent in any rip-and-replace strategy, but the alternative is continuing to spend time and money maintaining systems with support personnel, bailing wire and chewing gum rather investing in more cost-effective, modern platforms.

Rip and replace doesn't necessarily mean getting rid of mainframes or other mission-critical systems, but it does require a holistic look at the entire infrastructure in the context of creating a platform that will be competitive in the next 10 years. The upfront costs and risks are potentially sizable, but a slower migration could be a real competitive disadvantage.

A second and more profound challenge is that IT organizations, as well as service providers, lack truly skilled, visionary people who can executive on a bold "commodity" plan. It's not a technology issue, but about people and leadership.

Given the disappointments of the last several years after the bubble, many organizations are gun shy and economically strapped when it comes to making IT investments. The fear factor creates a paralytic effect, which makes companies far more conservative in their decision-making. In addition, an exodus of qualified IT talent, as well as outsourcing, have decimated the ranks of many corporations, creating a situation ripe for consultants who may have their own self interest at heart in recommending an IT strategy.

At the end of the day, the measure of IT isn't whether it matters or is a commodity--it's whether the people responsible for delivering an IT platform have the right goals and can execute on a strategic plan. Blaming the technology for some poor performance simply avoids the fact that it's primarily a people issue.

People or technology? You need both, but which is the dominant source of IT woes? Write to me at dan.farber@cnet.com. If you're looking for my commentaries on other IT topics, check the archives.

Editorial standards