IT Doesn't MatterIT Doesn't Matter

Why Is This Article Why Is This Article Important?Important?

► it causes us to consider the it causes us to consider the importance of the strategic, tactical, importance of the strategic, tactical, and operational importance of ITand operational importance of IT strategic - changing the course/objectives strategic - changing the course/objectives

of the business -- causing it to be of the business -- causing it to be distinguished from other businessesdistinguished from other businesses

tactical - changing how the business tactical - changing how the business accomplishes its objectivesaccomplishes its objectives

operational - changing how the business operational - changing how the business performs tasksperforms tasks

Article PremiseArticle Premise

"As information technology's power and "As information technology's power and ubiquity have grown, its strategic ubiquity have grown, its strategic importance has diminished"importance has diminished"

Power?Power?

Ubiquity?Ubiquity?

Carr SaysCarr Says

►"Today, no one would dispute that "Today, no one would dispute that information technology has become information technology has become the backbone of commerce. It the backbone of commerce. It underpins the operations of individual underpins the operations of individual companies, ties together far-flung companies, ties together far-flung supply chains, and, increasingly, links supply chains, and, increasingly, links businesses to the customers they businesses to the customers they serve."serve."

► the IT resource is critical to business, it went the IT resource is critical to business, it went from 5% of capital expenditures in 1965 to from 5% of capital expenditures in 1965 to 15% in the 1980s to 30% in the 1990s and to 15% in the 1980s to 30% in the 1990s and to almost 50% by 2000 almost 50% by 2000 (when will the growth (when will the growth end and at what % of capital expenditure?)end and at what % of capital expenditure?)

► the growth represents the critical nature of the growth represents the critical nature of IT, but does it represent a IT, but does it represent a strategicstrategic nature? nature? Does it change the course/objectives of the Does it change the course/objectives of the business and cause its distinction from other business and cause its distinction from other businesses?businesses?

IT Changes Management IT Changes Management ThinkingThinking

►Why? Why? ► faster, more possibilities, less cost, etc.faster, more possibilities, less cost, etc.►When did this happen?When did this happen?►mid 1960s was a sea change because of mid 1960s was a sea change because of

database technologydatabase technology►How?How?► it is the question of whether we master the it is the question of whether we master the

technology or be controlled by the technology or be controlled by the technology -- if you have a hammer, does technology -- if you have a hammer, does every problem look like a nail?every problem look like a nail?

What Is 'Vanishing What Is 'Vanishing Advantage'?Advantage'?

►"When a resource becomes essential to "When a resource becomes essential to competition but inconsequential to competition but inconsequential to strategy, the risks it creates become strategy, the risks it creates become more important than the advantage it more important than the advantage it provides."provides."

►Carr creates a conundrum -- both theory Carr creates a conundrum -- both theory and practice teach management to and practice teach management to eliminate risks yet you cannot eliminate eliminate risks yet you cannot eliminate something "essential to competition"something "essential to competition"

Different TechnologiesDifferent Technologies

► ProprietaryProprietary can be owned by a single company (for example can be owned by a single company (for example

a copyright or patent)a copyright or patent) present a barrier to other businesses that might present a barrier to other businesses that might

compete against youcompete against you these are strategic as long as the proprietary these are strategic as long as the proprietary

characteristic is heldcharacteristic is held► InfrastructuralInfrastructural

offer value in the sharing -- remember that IT is offer value in the sharing -- remember that IT is at its best when standardization is adoptedat its best when standardization is adopted

most proprietary technologies, by time or by most proprietary technologies, by time or by regulatory intervention, become infrastructural regulatory intervention, become infrastructural after some length of timeafter some length of time

The Broader ImpactThe Broader Impact

► infrastructural technologies lead to broader infrastructural technologies lead to broader impacts, impacts that affect markets instead impacts, impacts that affect markets instead of businesses or even industriesof businesses or even industries

► knowing that eventually most proprietary knowing that eventually most proprietary technologies become infrastructural, technologies become infrastructural, managers need to plan for the passing of managers need to plan for the passing of the advantage of a specific technology -- the the advantage of a specific technology -- the passing to a macroeconomic level instead of passing to a macroeconomic level instead of a microeconomic levela microeconomic level

► think of a 'power curve' think of a 'power curve' (note that the (note that the curves on page 10 for railways, electric curves on page 10 for railways, electric power, and IT do NOT show a power curve)power, and IT do NOT show a power curve)

Commoditization of ITCommoditization of IT

►the cost of an application is the cost of the cost of an application is the cost of development since the cost to replicate development since the cost to replicate the code (which is merely a file) the code (which is merely a file) approaches $0approaches $0

► IT is the very essence of IT is the very essence of standardizationstandardization

►the price per unit of IT (millions of the price per unit of IT (millions of instructions per second is the standard instructions per second is the standard measure) continues to fallmeasure) continues to fall

From Offense To DefenseFrom Offense To Defense

►since IT is critical to many businesses, since IT is critical to many businesses, even a minor and brief lose can be even a minor and brief lose can be devastating - be defensivedevastating - be defensive

►new rules for IT managementnew rules for IT management spend lessspend less follow, don't leadfollow, don't lead focus on vulnerabilities, not opportunitiesfocus on vulnerabilities, not opportunities

Spend LessSpend Less

► Carr states "Studies show that the companies Carr states "Studies show that the companies with the biggest IT investments rarely post with the biggest IT investments rarely post the best financial results."the best financial results." actually, the large majority of studies show actually, the large majority of studies show

businesses (and industries) with higher levels of IT businesses (and industries) with higher levels of IT investments are better off financiallyinvestments are better off financially

the "rarely post the best financial results" is based the "rarely post the best financial results" is based on the fact that the biggest IT investments are on the fact that the biggest IT investments are generally in transaction processing businesses generally in transaction processing businesses (such as mailing out bills) and those types of (such as mailing out bills) and those types of companies would not be "best financial" whether companies would not be "best financial" whether they used computers or monkeysthey used computers or monkeys

Follow, Don't LeadFollow, Don't Lead

►Carr states that "Moore's Law Carr states that "Moore's Law guarantees that the longer you wait to guarantees that the longer you wait to make an IT purchase, the more you'll make an IT purchase, the more you'll get for your money."get for your money." if you wait three years you can buy used if you wait three years you can buy used

IT equipment for about 10 cents on the IT equipment for about 10 cents on the dollar - why don't people wait?dollar - why don't people wait?

what is the cost of lost opportunity or the what is the cost of lost opportunity or the cost of a competitor using new IT for cost of a competitor using new IT for years while you wait for the price to drop?years while you wait for the price to drop?

Focus On Vulnerabilities, Not Focus On Vulnerabilities, Not OpportunitiesOpportunities

► it is unusual for a business to gain it is unusual for a business to gain competitive advantage through the competitive advantage through the distinctive use of mature infrastructure distinctive use of mature infrastructure technologytechnology be prepared for dangers - can be caused be prepared for dangers - can be caused

by employee misfeasance and by employee misfeasance and malfeasance, electrical loss, obsolescence malfeasance, electrical loss, obsolescence of hardware or software, etcof hardware or software, etc

ceding IT to third parties has benefits and ceding IT to third parties has benefits and some decided dangerssome decided dangers

Discuss The Railroad AnalogyDiscuss The Railroad Analogy

► is it better to think of highways and is it better to think of highways and cars (especially when thinking of B2B cars (especially when thinking of B2B and B2C)?and B2C)?

►how much e-commerce is there? how much e-commerce is there? E-StatsE-Stats

►where do railroads go versus highways where do railroads go versus highways and where do businesses locate versus and where do businesses locate versus where consumers buy?where consumers buy?