Does IT Matter?Does IT Matter?

Introduction By Thomas Introduction By Thomas StewartStewart

►notes that there are 3 perineal itemsnotes that there are 3 perineal items new ideasnew ideas truths (that should not be forgotten)truths (that should not be forgotten) disputesdisputes

►Carr started a disputeCarr started a dispute

► IT expenditures grew to almost 50% of IT expenditures grew to almost 50% of corporate capital spending by 2000 and corporate capital spending by 2000 and then collapsed -- why?then collapsed -- why?

►the article does not say IT is dead or the article does not say IT is dead or that IT will not continue to be a source that IT will not continue to be a source of dramatic, transformational changeof dramatic, transformational change

►the article does say that IT is becoming the article does say that IT is becoming a commodity and that commodities are a commodity and that commodities are known to have little known to have little strategicstrategic impact impact

Brown & Hagel RebuttalBrown & Hagel Rebuttal

► Carr is right, businesses overestimated the Carr is right, businesses overestimated the value of ITvalue of IT how and why?how and why?

► Carr is right, the critical nature of IT on daily Carr is right, the critical nature of IT on daily business requires managers to become business requires managers to become more focused on vulnerabilitiesmore focused on vulnerabilities what do most managers know about the what do most managers know about the

vulnerabilities and risks?vulnerabilities and risks? what strategies have managers used -- why is what strategies have managers used -- why is

outsourcing a problematic response?outsourcing a problematic response?

►where is Carr incorrect?where is Carr incorrect? IT, by itself, never was the competitive IT, by itself, never was the competitive

advantage -- its advantage came by enabling advantage -- its advantage came by enabling innovative business processes and practices innovative business processes and practices (they reference the McKensey Global Institute (they reference the McKensey Global Institute study and there are many more)study and there are many more)►six of the 59 studied industries showed significant six of the 59 studied industries showed significant

positive productivity correlated to IT investment while positive productivity correlated to IT investment while 53 were negligible improvement53 were negligible improvement

►why? the advantage of the 6 'pulled' the other 53 to why? the advantage of the 6 'pulled' the other 53 to respond -- they did not reap significant benefits respond -- they did not reap significant benefits because they were responders instead of innovatorsbecause they were responders instead of innovators

►Carr was incorrect in counting only the Carr was incorrect in counting only the impact of the cost of data storage, impact of the cost of data storage, processing, and transmissionprocessing, and transmission impact of business practice changes such impact of business practice changes such

as distribution changes ala Wal Martas distribution changes ala Wal Mart impact of team/community solutions impact of team/community solutions

made available via networksmade available via networks relaxing the necessity of problem solvers relaxing the necessity of problem solvers

being proximate to solve problemsbeing proximate to solve problems

► IT impact has been more incremental IT impact has been more incremental than 'big bang' even though popular than 'big bang' even though popular media (and many business publications) media (and many business publications) only address the 'big bang'only address the 'big bang' the 'big bang' applications are high risk, they the 'big bang' applications are high risk, they

are more likely to fail spectacularly than to are more likely to fail spectacularly than to succeedsucceed

'bolting on' applications (such as CRM) has 'bolting on' applications (such as CRM) has been much more profitable but less been much more profitable but less glamorousglamorous

► IT impact continues to growIT impact continues to grow Moore's Law has continually defied the Moore's Law has continually defied the

experts by doubling power every 18 experts by doubling power every 18 months for a constant pricemonths for a constant price

that did not happen with Carr's examples that did not happen with Carr's examples of steam engines, electricity, railroads, of steam engines, electricity, railroads, and telephonesand telephones

►managers buying IT did not pay attentionmanagers buying IT did not pay attention thought solutions to problems was in the thought solutions to problems was in the buyingbuying of IT and not in the of IT and not in the usingusing of IT of IT

did not buy the skilled labor to use the ITdid not buy the skilled labor to use the IT IT is a long term practice, not a short term fixIT is a long term practice, not a short term fix IT is a means to an end, not the end itself IT is a means to an end, not the end itself

(remember the selling or ERP systems for (remember the selling or ERP systems for Y2K)Y2K)

IT has little value as a stand alone asset, IT has little value as a stand alone asset, there is great value in marrying it to other there is great value in marrying it to other assets in the businessassets in the business

McFarlan & Nolan RebuttalMcFarlan & Nolan Rebuttal

"In no other area is it more important to "In no other area is it more important to have a sense of what you have a sense of what you don'tdon't know know than it is in IT management. The most than it is in IT management. The most dangerous advice to CEOs has come dangerous advice to CEOs has come from people who either had no idea of from people who either had no idea of what they did not know, or from those what they did not know, or from those who pretended to know what they didn't. who pretended to know what they didn't. Couple not knowing that you don't know Couple not knowing that you don't know with fuzzy logic, and you have the with fuzzy logic, and you have the makings of Nicholas Carr's article."makings of Nicholas Carr's article."

►when McFarlan and Nolan talk about the when McFarlan and Nolan talk about the societal changes of technologies they are societal changes of technologies they are talking the second wave theoriestalking the second wave theories for example, most people now understand for example, most people now understand

that the impact of railroads distributing that the impact of railroads distributing goods to geographically dispersed consumers goods to geographically dispersed consumers (as per Carr) was very small compared to the (as per Carr) was very small compared to the societal impact of transporting consumers to societal impact of transporting consumers to live in metropolitan areaslive in metropolitan areas

►the societal changes of a computer the societal changes of a computer that runs 10 million times faster in 20 that runs 10 million times faster in 20 years for the same cost makes the years for the same cost makes the train speed of 6 times faster in 20 train speed of 6 times faster in 20 years a laughable comparisonyears a laughable comparison

►Russell Ackoff wrote "Management Russell Ackoff wrote "Management Misinformation Systems" in 1967 - it Misinformation Systems" in 1967 - it caused a similar uproar and many of caused a similar uproar and many of McFarlan and Nolan's rebukes are McFarlan and Nolan's rebukes are similarsimilar

►the pace of computing theory (in the pace of computing theory (in communications, grid computing, etc) communications, grid computing, etc) will continue to accelerate the fantastic will continue to accelerate the fantastic growth even as stated by Mooregrowth even as stated by Moore

►the lack of nurture to sustain IT the lack of nurture to sustain IT competitive advantage has been a competitive advantage has been a primary reason that it does not always primary reason that it does not always lack (back to the earlier 'set it and forget lack (back to the earlier 'set it and forget it' attitude of managers towards IT)it' attitude of managers towards IT)

Strassman RebuttalStrassman Rebuttal

►points out that Carr's assertion that points out that Carr's assertion that economic vale of IT is diminishing is economic vale of IT is diminishing is wrong -- states that Carr cited Strassman wrong -- states that Carr cited Strassman for the decline but says Carr didn't for the decline but says Carr didn't understand what Strassman had writtenunderstand what Strassman had written pay attention here where Strassman pay attention here where Strassman

differentiate how hard technology (such as differentiate how hard technology (such as railroads) do not behave at the margin as soft railroads) do not behave at the margin as soft technologies (such as software) behavetechnologies (such as software) behave

► stating that IT is a commodity and does not stating that IT is a commodity and does not offer completive advantage ignores that most offer completive advantage ignores that most IT products are diverse and the strategic IT products are diverse and the strategic advantage is in the advantage is in the useuse of IT not the IT itself of IT not the IT itself

► the view that IT influence will be the view that IT influence will be macroeconomic versus microeconomic macroeconomic versus microeconomic beneficial to the firm is incorrect, it is a beneficial to the firm is incorrect, it is a contradiction to believe that giving a benefit contradiction to believe that giving a benefit to your customers does not have a positive to your customers does not have a positive economic impact to your firmeconomic impact to your firm

► says that Carr's citing of standard Microsoft says that Carr's citing of standard Microsoft applications is invalid because of how it is applications is invalid because of how it is used -- i.e. both Carr and Strassman wrote used -- i.e. both Carr and Strassman wrote their articles using Microsoft Word yet the their articles using Microsoft Word yet the outcomes were substantially differentoutcomes were substantially different

► Carr's assertion that IT is reaching maturity is Carr's assertion that IT is reaching maturity is wrong since the evidence shows rapid growth wrong since the evidence shows rapid growth in innovations and diversified applicationsin innovations and diversified applications

► risks do not exceed advantages -- executives risks do not exceed advantages -- executives should better understand what the should better understand what the advantages are and where they come fromadvantages are and where they come from

Broadbent, McDonald, & Hunter Broadbent, McDonald, & Hunter RebuttalRebuttal

►"To put it simply, it's not about the "To put it simply, it's not about the box; it's about what's inside the box."box; it's about what's inside the box."

►"The source of competitive advantage "The source of competitive advantage shifted from simply having a computer shifted from simply having a computer to knowing how to use it."to knowing how to use it."

Schell's RebuttalSchell's Rebuttal

► it was never the IT tool but the skill of it was never the IT tool but the skill of using the IT tool that matteredusing the IT tool that mattered

►managers of IT have frequently been managers of IT have frequently been chosen from non-technical areas chosen from non-technical areas because senior management viewed IT because senior management viewed IT as a commodity -- as such, it was not as a commodity -- as such, it was not considered a flaw that non-technical considered a flaw that non-technical people were managing technology and people were managing technology and technically trained professionalstechnically trained professionals

►decision analysis and choice sets and decision analysis and choice sets and timeliness of decisions matter -- tools timeliness of decisions matter -- tools that affect these problem that affect these problem characteristics must be understood, characteristics must be understood, not just usednot just used

►understand that Carr was making an understand that Carr was making an editorial statement as opposed to an editorial statement as opposed to an academic article - he achieved his academic article - he achieved his objective, lively debateobjective, lively debate