The Great Debate

Nicholas G. Carr's controversial article has sparked emotional discussions about the importance of information technology in business.

Companies Mentioned
Posted on Nov 03, 2006

Nicholas Carr confidently stepped onto the stage as the keynote speaker at the Society of Information Management's SIMposium conference in Chicago this past September, despite knowing he was facing 600 skeptical IT executives. All of them had read, or at least heard of, his controversial article, "IT Doesn't Matter," published in the May 2003 issue of the Harvard Business Review. And all of them were ready to debunk his position that IT has evolved to the point that it is now considered structural design -- much like a utility, comparable to electricity -- that is necessary for business, but does not offer a competitive advantage. His notorious article, which was expanded into a book published this past spring by the Harvard Business School Press, has ignited heated arguments. The back cover of his book jacket has quotes from Forbes and Fortune editors that say, "a bombshell of an article," and "dangerously wrong," respectively, which are representative of the industry at large. Carr, who held top editorial positions at the Harvard Business Review between 1997 and 2003, and who has also written for MIT Sloan Management Review, The New York Times, Financial Times, Wired, The Boston Globe and Industry Standard, is not shy when it comes to voicing his opinion. So as he stood before his audience at SIMposium -- having just a few weeks prior published a separate article on his Web site titled, "What's a CIO to do?" which paints a grim picture of the CIO role -- he came prepared to defend his position. Stand and Deliver
"There's been so much written and debated about my ideas, it is useful to go out and talk to people," Carr says. "Often they have a distorted, one dimensional view of what I'm saying. It's not that simple. In one sense, there is a negative side to what I'm saying. Maybe IT and people who manage it aren't as strategic as they used to be, but they are still essential and, in fact, there are things that can be gained by not being strategic." Despite the heated discussions, there's no arguing that Carr makes compelling points drawn from historical examples of railroads, telephone networks, highways and electrical grids. "I went back and studied these and they all tended to have a similar pattern. When it was an immature technology, innovative companies could use it in distinctive ways and get strong competitive advantage for decades," Carr explains. "But quickly it is built out and becomes a broad general infrastructure. Some turn into pure utilities." In that respect, IT needs to be invisible and reliable, he says, and should be -- if not already -- as easy as flicking a light switch. Don't Shoot the Messenger
Carr speaks with a deliberate yet easy style, as if he were teaching a class at his alma mater. Not forcing his message, he delivers plausible interpretations of a maturing industry backed by statistical data that captures the attention of even the biggest doubter in the crowd. Perhaps it's because the reference to IT as a "utility" is not that far-fetched. There are new service-on-demand models that allow customers to access software on an as-needed basis. Meanwhile, technology buyers often resist expensive upgrades, look to standards and, because reliability and quality are required in all products, the lower the cost the better. After all, IT budgets are often the first to get slashed. In addition, IT is increasingly becoming something that companies are outsourcing, much like they buy electricity from an outside utility. The question is: So what? Is it so bad that an industry is righting itself after years of an over-priced buying frenzy that put vendors in control? "There's nothing bad about the trend," Carr says. "You want technology to become standardized, reliable and shared rather than used in different ways by different companies. But companies need to take a different posture in thinking about how it is they invest in and manage IT." Companies on the leading edge often get locked into proprietary technology, or may be bottlenecked by an inability to integrate with more open technology. And the CIO is often the person who takes the fall for those technology decisions. The high turnover rates of CIOs may be due to over expectations of what IT can do, Carr says. "Maybe if we back away from that and move toward a view that IT is an important, essential resource, but the key to getting the most out of it is managing it well, not being an innovator, then CIOs can be more successful in an organization." A Method to the Madness
Carr maps out his strategy in the following way: There are two types of technologies -- proprietary (patents, trade secrets, licenses) and infrastructure (value that can be shared, but won't provide a competitive advantage). A company's IT strategy should fall into the latter category. Carr notes there are three categories of IT resources -- the technology, the use of it and the skill with which it is managed. Managing how the technology is used is the strategic advantage, he says. "In the wake of the dot-com bust I started to look at the fact that companies took for granted that IT is essential to business. But what I became interested in is whether companies can use IT innovation to distinguish themselves and gain competitive advantage. Or if it is so commonplace that you can innovate, but competitors quickly copy and neutralize your potential for advantage. Manage Wisely
"We've reached an inflection point. Basic assumptions are changing," Carr told the SIMposium audience. "The emergence of a bias to spend less on IT is a radical change from the last 30 years." So the advantage, according to Carr, comes in the management of a project, not the technology. "There is more focus on the vulnerabilities IT creates rather than the opportunities. A company needs to manage its infrastructure well, rather than focus on innovating on the top layer." Carr's theory has forced an industry to take a look at itself. Some observers agree with his ideas and some adamantly reject them. But for Carr -- who's become very thick-skinned -- the greatest achievement for an author is to inspire controversy. "If nobody said anything about [the article], I'd consider it a failure."

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