Does IT Matter? Information Technology and the Corrosion of Competitive Advantage

A Bold Manifesto on the Future of Information Technology

Over the last decade, and even since the bursting of the technology bubble, pundits, consultants, and thought leaders have argued that information technology provides the edge necessary for business success.

IT expert Nicholas G. Carr offers a radically different view in this eloquent and explosive book. As IT's power and presence have grown, he argues, its strategic relevance has actually decreased. IT has been transformed from a source of advantage into a commoditized "cost of doing business"-with huge implications for business management.

Expanding on Carr's seminal Harvard Business Review article that generated a storm of controversy, Does IT Matter? provides a truly compelling-and unsettling-account of IT's changing business role and its leveling influence on competition.

Through astute analysis of historical and contemporary examples, Carr shows that the evolution of IT closely parallels that of earlier technologies such as railroads and electric power. He goes on to lay out a new agenda for IT management, stressing cost control and risk management over innovation and investment. And he examines the broader implications for business strategy and organization as well as for the technology industry.

A frame-changing statement on one of the most important business phenomena of our time, Does IT Matter? marks a crucial milepost in the debate about IT's future.

Make no mistake, Carr does not make claims that technical innovation is unimportant, nor does he claim that technology properly applied is useless. At issue is the way that technology is misused, which goes back to the fact that IT is so focused on technology that business suffers from unfulfilled promises, application of technology to non-problems, and plain arrogance of those who are supposed to be providing services and solutions to support business imperatives.

This book is must reading by the CxO community. It should wake up the business executives to the fallacies foisted upon them by IT to the point where CIOs and senior IT executives will be held accountable for how well they support business initiatives instead of how technically advanced their shops are. To that end the fact that this book is published by Harvard Business School Press, meaning that it stands a chance of being read by outsiders who do have the power to demand changes in IT, is one of the valuable aspects of this work.

Summarizing, this book is about chronic problems that plague most IT shops, and is also about looking at IT in a more objective way. Do not expect solutions because they are in short supply in this book, but do expect an honest look at the way IT has diverged from being a business support function to being a money pit for corporate resources. Also expect to see technology and IT services placed in their proper context, with all of the hype and mystery stripped away.


IT as a Commodity   September 17, 2004
Craig L. Howe (Darien, CT United States)
31 out of 36 found this review helpful

Information Technology (IT) has transformed itself from a source of competitive advantage to simply being a cost of doing business.

Despite the spectacular gains during the past 50 years, says Nicholas G. Carr, a former Harvard Business Review executive editor, IT will distinguish no single competitor. This contradicts many executives' perception that IT ubiquity is an advantage. They miss the point the scarcity, not ubiquity, creates an advantage.

IT's core functions - the storage, distribution and processing of data - are available to all. Without differentiation IT is relegated to commodity status. This should force executives to re-think their IT spending plans and their vendor relationships. As this perception gains acceptance, risk and cost control will become more important than investments in innovation. In short, technology is headed down the same path the steam engine, railroad and electricity followed. Only by becoming a shared and standardized resource will IT deliver its maximum social and economic potential.

Carr says the greatest risk that IT represents is overspending. While IT is entwined with many business processes and represents a huge portion of any businesses' expenses, it must be managed. There are several ways:

1. Cut waste. Commoditization permits buyers to negotiate better deals, tie payments to usage and shop among vendors.

2. Use Capacity. The overspending in the 1990 left many companies with more capacity than they need. Find ways to use it.

3. Place tight controls on IT usage. Carr says 70 percent of what is stored on corporate networks represents employees' saved e-mails, MP3s, video clips and spam. Restrict the indiscriminate ability to save files.

4. Become more rigorous in systems planning.

Carr is a distinguished writer and thinker. His book serves as a wake-up call for anyone interested in competitive advantage. Although executives have grown wary of IT spending, they will have to cope with methods that will prevent the commoditization of IT architecture and applications if they are to save their companies' barriers to entry.

Anyone - be he or she a business executive or IT worker - should give this tome a close examination. Its implications will be mighty.


Step back, read carefully and then decide ...   June 11, 2004
Victoria Tarrani (Betwixt FL and CA, USA)
33 out of 44 found this review helpful

I read this book because my husband left it laying around and I was mildly curious about the state of IT since I retired over five years ago. It is easy to see why this book has polarized readers in the same manner as some political books because the central theme is IT has an unjustified view of its own importance, and the technology employed is now viewed as a commodity.

There is ample evidence for part one of that theme. Carr's examples of IT disasters rings true with my own experience. From my early years as an RPG III programmer to later career work as a senior network engineer for two major integrators I've witnessed similar disasters in one job, project or client engagement after another. These disasters are relegating IT to a position of suspicion within many companies. The question is not whether IT can matter because of the competitive advantage it can give, but whether IT does matter if it is mismanaged. That is the key point Carr makes.

Carr's views of IT as a commodity may not be easy to buy into at first, but the evidence is all around us in not only personal computing but in data centers. What Carr missed, or failed to emphasize, is that innovation itself leads to the commodity status of technology. Indeed, innovation will assure it. Consider something as mundane as a home wireless network. Five years ago the thought of pumping 11 or 54 mbps over the air, eliminating expensive cabling, in a business setting was advanced. Now, for less than the cost of a circa 1987 3Com 3C501 card you can connect at least five workstations wirelessly to the Internet, with the added protection of a router/firewall. Only innovation could have made that possible, yet such a set-up is a commodity. The same with USB RAM drives, which allows you to dangle 1GB off a keychain. Made possible by innovation, yet because of that very innovation it is a commodity. This is not a new trend. Microsoft put networking itself on the path of commodity status when they released Windows For Workgroups back in 1992. This was the beginning of the end for Novell and Banyan as major networking vendors because Microsoft decided to build in networking with their ubiquitous desktop operating system. Today we take connectivity for granted, but back then it was an innovation in both technology and marketing. These examples should clearly show how right Carr is about IT as a commodity.

Like others I found Carr short on solutions, but he does show the problems and context. It's up to the reader to find the solutions.


Provocative title, narrow claim, strong argument   July 5, 2004
David Bridgeland (Sterling, VA USA)
17 out of 22 found this review helpful

You may recall the uproar in 2003 around a short Harvard Business Review article entitled "IT Doesn't Matter". Various IT company leaders spoke out against the article, with Carly Fiorina calling it "dead wrong" and Steve Ballmer calling it "hogwash". There were also many lengthy rebuttals. Nicholas Carr, the author of the original 8 page article, expanded the argument into a well-written book, explaining his claim more thoroughly and responding to his critics.

The book (like the article) has a provocative title, but in fact Carr's claim is much narrower than the title suggests. Carr is only focused on *corporate IT*, the systems that companies build and deploy for their own use and the use of their customers and suppliers. He is not looking at consumer IT --- the digital wonders that are showing up in our living rooms, cars, and in our pockets. And he is not looking at governmental IT --- the systems that are used to find terrorists, wage combat, or evaluate welfare eligibility.

More significantly, Carr is also focused on one corporate use of IT, to attain a *competitive advantage*. Can Coke achieve some competitive advantage over Pepsi by implementing a new application? Carr is not asking whether IT can add value to a company --- clearly there are thousands of examples of IT saving money, providing value to customers, to suppliers, and adding value in other ways. Instead, Carr asks whether we can expect IT to add this value in a way that competitors cannot quickly realize the same added value. Can Coke do something significant with IT that will not be quickly replicated by Pepsi?

Finally, Carr agrees that in the past IT has been used to gain competitive advantages. By automating reservations, pricing, and seat assignments in the 1960s, American Airlines really did achieve a lasting advantage over its rivals. By creating logistics applications in the 1980s, Walmart really did achieve a lasting advantage over Sears and Kmart. Carr's claim is that *those days are gone*, that the days of using IT for competitive advantage are over.

His claim rests on three broad trends, each of which undercuts the opportunities for competitive advantage. First, the time needed to replicate a particular IT application---the "technology replication cycle" in his words---has shortened considerably over the last few decades. Hardware, tools and platform technologies have made it increasingly easier, faster, and cheaper to replicate a successful application built elsewhere. This declining technology cycle is likely to continue, and make any advantage in the ownership of a particular application to be short-lived.

Another reinforcing trend is the push toward standardization. 40 years ago every company built their own applications. Since then software products have emerged. These products can always be customized to particular situations, but they often are not. It is often cheaper and easier to adapt the business to the best practices in SAP, rather than to customize SAP to the specifics of the business. The economics of standardization --- the cost advantages for companies to be like their competitors --- trump the advantages of maintaining differences. BPOs further this push to standardization, and away from competitive advantage via IT.

A third trend is the spread of IT business insight. It is much better understood today how to achieve value with IT. The secrets of how to do this spreads with individual experience, with analysts, with books and trade rags, and with consultants. If a company has success with a particular technology, everyone in their industry knows about it quickly.

These three trends (Carr claims) are reducing IT to a role much like electricity. Electricity is critical to all businesses today, but (aside from mishaps like the recent problems in California) no one would expect to find a competitive advantage in superior use of electricity.

Does Carr make his case? I think he does, although there are some big exceptions to his argument.


Well worth reading   May 30, 2004
23 out of 32 found this review helpful

I'm not a technologist and have no particularly strong feelings about information technology one way or the other. In my own experience, computers have good points and bad points. The reason I bought this book in the first place is because I read an interesting review of it in the New York Times. Now having read the book itself, I can say that I think it's really as much about how competition and strategy as about information technology per se. It's a very illuminating and thought-provoking book. It weaves together discussions of history, economics, and technology in an engaging way. The discussion gets complicated at times but it's always clearly written, even when the author's describing fairly esoteric aspects of software production. Unlike just about every other business book I've read, there's little jargon and few wasted words. It moves fast and covers a lot of ground. The book ends with a broader discussion of some of the the social and political consequences of computerization, which is also fascinating. So I can't say whether all Carr's recommendations are valid or not, and I guess that doesn't really matter to me. I enjoyed the book, and I learned a lot from it. I'd recommend it to anyone with an interest in business or business history.