The Argument Over IT

The Argument Over IT

One of the reasons for writing my article and my book is to underscore the danger of trying to tie competitive advantage to a particular resource rather than to a complex system of activities and resources and such

Author Nicholas Carr and CIO (US) editor in chief Abbie Lundberg go toe-to-toe on the strategic value of IT.

About a year ago, the Harvard Business Review published an article titled "IT Doesn't Matter". It ignited a vehement and often acrimonious debate over the value of information technology. Since then, Nicholas Carr, the author of the article, has expanded on his original thesis that while IT's value will increase as it becomes more standardized and ubiquitous, "the ability of any one company to use IT in a distinctive way to gain competitive advantage will diminish until . . . it will make more sense to manage IT as a commodity input - something that is absolutely necessary but [that] isn't going to set you apart from competitors".

At US CIO's April Perspectives conference, Carr has faced off with detractors in print and onstage, and this month sees the publication of his new book, Does IT Matter? the title of which suggests Carr may have backed off his original position a bit. (He hasn't.) Carr spoke recently with CIO editor in chief Abbie Lundberg to explore his conclusions and the assumptions underlying them, one of which is that all information technology is "infrastructure".

Locally, Carr will be making his first-ever trip to Australia when he keynotes at CIO magazine's Agenda 04 conference in Sydney on May 25 (one week after his book officially debuts).

CIO: Most people distinguish between infrastructure technologies and the applications that ride on them. You seem not to make that distinction.

Nicholas Carr: Over time, what we call infrastructure has expanded to incorporate much more of the hardware, everything from PCs to mainframes, and much more of the software, from fairly esoteric utility software that's been incorporated into operating systems through various application packages as well. I don't think that process is over. More and more of the IT that companies use will, over time, become viewed as infrastructure. And what isn't infrastructure continues to shrink and is meaningful to a smaller and smaller set of companies as a way to differentiate themselves.

CIO: So if you think of all of IT as a pie, what proportion of the pie falls into the infrastructure segment?

Carr: For most companies, you may as well think of it as 100 percent infrastructure and base your approach to IT management on that assumption. Ultimately, you'd want to just manage it as infrastructure, by which I mean a shared set of standardized hardware and software that is fairly homogeneous across companies.

CIO: I agree with you that the greatest value from IT will come once the infrastructure is standardized, secure, reliable, interoperable, transparent. Where we differ is that I believe once we have that, there will be a lot of opportunity for differentiation and new types of business activities that are IT-enabled. Take Google's search algorithms, which it has developed in a specialized, proprietary way on top of the common platform of the Internet to gain a unique advantage, which it has, in fact, been able to sustain.

Carr: A fairly small subset of companies can use distinctive secret algorithms, in effect, to create a fundamental competitive advantage. And if you're a search engine, in which your entire existence basically is those algorithms, then sure. But how widely applicable is Google's business model to other companies?

CIO: What about Amazon? It sells stuff. By leveraging the technologies it has developed on top of a common open infrastructure, the company has been able to achieve competitive advantage.

Carr: Whenever you have a new thing [like the Internet], you're going to have new companies rise up and take advantage of that new thing. So you have companies like eBay and Amazon and Google. But what's interesting to me about the Internet is how few companies you have like Amazon, eBay and Google.

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