The Engine That Drives Success

The Engine That Drives Success

Why You Can't Take the "I" Out of IT

With the actual evidence refuting his view, it's tempting to say that Carr's elegant thesis works well in theory but not in practice. Digging deeper, we see why it doesn't work in theory either.

The problem starts with Carr's definition of information technology. In making the case that IT has become a commodity, Carr's original definition includes data and information. He argues that "it's hard to imagine a more perfect commodity than a byte of data - endlessly and perfectly reproducible at virtually no cost".

In fact, nothing in the universe is as diverse as a byte of data, which can carry information ranging from baby pictures to a digitally signed million-dollar bank transfer. It's like saying that Shakespeare's works are a commodity because he uses the alphabet just like everybody else. As many critics of Carr's view have pointed out, nothing is more scarce than the right information at the right time.

Now, having retreated from that view, he's redefined IT as "all the technology, both hardware and software, used to process and transport information in digital form . . . this does not encompass the information that flows through the technology".

This is astonishing. If you exclude "information" from "information technology", surely we can all agree that IT doesn't matter in competitive advantage or in anything else! It's all about the information.

Superior IT enables superior information - a resource that rivals superior talent in competitive differentiation. High-performing business models are also based on superior information.

Smart Hardware Cannot Be Commoditized

Carr further weakens his position by arguing that IT does not include the growing technology embedded in consumer products. In doing so, he conveniently eliminates one of the most important emerging waves of IT innovation and differentiation. The Internet is becoming the Hypernet - a term my colleagues and I use to describe truly ubiquitous broadband and services-based computing. The physical world is becoming smart and networked. The PC is being eclipsed by millions (and soon billions) of new information appliances. These include customized PDAs for warehouses, couriers, physicians or patients in drug field trials - either custom built or as generic appliances that can be integrated into a new system - many of which constitute scarce resources and are not easily replicable. More important, thousands of new product categories are emerging: digital televisions, automobiles, fire extinguishers, assembly lines, doors, clothing and coffee cups. All are becoming IT appliances. Every company has a historic opportun ity to integrate IT-enabled services into its products. These devices are part of the future IT hardware, differentiating otherwise commodity products to lock out competitors.

DoCoMo I-mode went from zero to 30 million customers in just two years. In this case, a phone company understood that it could enrich its product - a simple wireless telephone - with IT services such as interactive games, shopping and other entertainment services. The result is a profitable juggernaut that is even now taking transaction revenue from banks. The Hypernet changes our concept of hardware. Of course, PCs, servers and storage technologies have become commoditized. But it is false to say that all hardware has become commoditized.

Carr is right to suggest that software has shifted considerably from being a proprietary resource to a purchased good that levelled the playing field. But he underestimates the customization required and the ensuing opportunities for distinguishing a company. Many companies today are implementing massive software projects that are hard to reproduce, using packaged software from companies like Oracle, PeopleSoft and Siebel. SAP, for example, has more than 2000 customers. But Ed Tobin, the CIO of Colgate-Palmolive, says that "not one of them is using it the same way. It's all about how you embed a package in the business."

And what about Web services - which Carr says will further commodify software? Evidence to date suggests the opposite. This revolution in software is changing the Web from a medium for presentation of information (that's what HTML was about) to a computational platform. Yes, the Net is becoming an infrastructure - but a programmable one! This will create infinite opportunities for custom software development, new business design and competitive differentiation. Software companies in the future will build components - enabling their customers to deploy custom functionality.

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