IT doesn’t matter

Argument 1: It’s not ubiquity but scarcity that gives an IT firm the competitive advantage

Sure every firm now has access to the main functions of IT, database management, data storage etc, but why only certain firms become successful? This question bottles down to not how much hardware one has, but what one can do with it. In essence it’s the ability to use the systems is what that gives a firm the competitive advantage. Yes, there are companies with superior internal technologies that make them stand out. For example dell has internal infrastructure automation process which provides them a huge advantage. It’s not just having the technologies, keeping those technologies in “able” hands which make use of those technologies is a huge differentiator. Consider android development, anyone can download the android studio and start making their own apps, yet only few companies have used it to design apps which are successful and made billions. Why? Again it’s not what you have; it’s what you do with it that matters. People can design apps using studio or html or JavaScript, but to design a logic that’s irrefutable, a layout which is appealing, a successful campaign to market the product, having highly skilled people etc are the things that gives any company the competitive edge.

Argument 2: As any firm can buy the technologies and processes associated with it, IT provides distinction to none.

Again, buying IT might not provide any distinction, but innovating in IT definitely provides a competitive edge. Core processes which are achieved through the use of IT, is what you compete on. Consider Wal-Mart’s supply chain process. It’s their own core process which they developed on their own and it’s providing them the competitive edge. It’s not what you buy; it’s what you do with it that provides distinction. Consider ERP software that SAP provides. Any firm can buy it. But how you incorporate it into your strategy and make use of those processes in improving the business is the main differentiating factor.

Argument 3: The window of opportunity arising in any technology is very short lived.

Carr compares IT to electricity saying that many opportunities arise at the beginning or build out phase. But at the end of the phase, the opportunities cease to exist. This is not true. Innovation in technologies is going at a rapid pace. Even in electricity, managing power grids efficiently is an opportunity. Alternate methods of producing electricity, such as fusion, fission, nuclear ways etc provide new windows of opportunity. The window might be less for the basic discovery, but for the diverse branches it sprouts, there will be new opportunities that surface.

Argument 4: IT is just transferring of data, and that it is replicable.

IT isn’t just transferring of data. IT is transformation of that data by analyzing it to improve the business process. For example, analyzing the data of the customers buying behavior and providing suggestions and offering deals on the items they might like. Data collection, storage processes might be replicable but the algorithms to analyze the data collected by them and the processes to implement them are the core competency of a company. Even if other firms replicate the same, it hard to sustain for a multitude of ways. They might not have the experience as firmly established companies, not having a flexible management or skilled workers or have the capital to thrive. If they did sustain and become successful, then much of the success is attributed to the management than the infrastructure. There are a bunch of start-ups which are forming in India at this time. All companies have the similar access to the technology. But, few companies which have a different ideal or an effective process attract the eye of investors and stay ahead of the competition. For example, OLA cabs had a different proposition plan at the beginning which was so appealing to the investors. They had the same infrastructure as other cab services like Taxi for sure, but a new strategic thinking has made them thrive out other services by buying them with the huge investment they gained.

Argument 5: Managers spend hefty amounts at the beginning for the technologies which later become obsolete.

The very definition of a manager is that he manages the contracts to provide the best for the company. They are not spendthrifts but strategic thinkers. No one likes to buy technologies when they know that they won’t offer any benefits. No one now goes by the “hype” of some new technology anymore. Managers think strategically and only if they think a new IT change would be beneficial down the line, they buy and use it. And when such IT change becomes a norm later, they would have a huge experience in using it which gives them the edge. Consider the evolution of computer languages, from fortran to cobol to C to java. Managers who thought C or JAVA is more beneficial as it offers multiple ways to expand have begun working on incorporating them much before they were widely known. That kind of visionary thinking provides benefits down the line rather than showing immediate benefits.

Argument 6: Massive investment early on in a technology, leading to falling prices and quickly, commoditization.

Carr compares IT to railways, electricity and IT by plotting graphs for the number of railroads, electric utility generating capacity and number of computers. He says that huge investment after installation leads to falling of prices which then leads to commoditization. It’s true in case of electricity as it’s a commodity but IT isn’t. IT is more than just the number of computers. Again, ability to use them matters. Computers have been commoditized long before, IT isn’t. Sure some kind of IT falls into the category of commoditization. Consider email, we all have it and use it, it is not competition changing, so overinvesting in it is not wise. But there are industries where technologies play a major role. Consider Microsoft’s automated infrastructure. If we don’t have it, it’s difficult to even compete. Even if one manages to set up the one of those in place, it might not be successful as Microsoft. Because it’s an

organizational change which is a different one all together. So in industries where these kinds of systems are important then IT really matters.

Update1: Carr should have provided statistical data to support the claim that window of gaining advantage is short for technologies. A correlation study on how the time span for competitive edge is co related to lasting profits would have solidified the argument.

Update 2:Carr used a narrow definition of IT describing it as a process of transferring data just like how power infrastructure is transferring of electricity. A better explanation of IT would be a system which uses power of computation coupled with the way in which people interact with this system. With this definition in mind, Carr could have made statements. Just comparing IT with hardware and software doesn’t provide one a complete picture.

Update 3:Carr states that IT doesn’t provide competitive edge to individual companies, but it influences competition at macroscopic level. Is he refuting his own assumption? Most of the companies which are successful are successful because of the core processes rather than the hardware they have. Hence competitive edge depends on varied factors along with IT. Just stating that IT doesn’t influence a business is a myopic view of the point. A detailed description of the term competitive edge and what contributes to it along with quantitative research data on how they are related to IT would have made a compelling evidence to the claims.

Conclusion:I personally believe that IT matters and that a firm can achieve the competitive advantage not just by installing it but by using them efficiently. By successfully incorporating them so as to aid their core strategic thinking makes a firm successful. IT has made all the tedious processes so hassle free which greatly enhanced the lives of the mankind. Also, innovation in the IT which is bought by the companies will help them grab the unforeseeable opportunities. Finally, a novel business idea, vision, goals and a great work ethic coupled with information technology gives an organization a true competitive advantage.

Citations & References: IT does not matter, Nicholas Carr, Harvard Business review.

IT Does so matter, Kathleen Melymuka, Jul 7 2009, Computer world.

Why IT matters, Robert M.Metacalfe, Jun 1 2004, technology review.