Editorial: April 2003

You can always tell that an industry cycle has hit the bottom when articles bemoaning its imminent death start to appear. Oracle Chairman Larry Ellison’s recent diatribe on the impending consolidation in the technology industry comes to mind, as does Nicholas Carr’s recent article in the Harvard Business Review, called “IT Doesn’t Matter.” Carr’s contention is simple: Like any “infrastructural” technology, IT provided a strategic advantage only so long as it remained a scarce resource. But now that it has become a commodity, attainable on the cheap by practically anyone, he says, it can no longer be used to gain strategic value. Carr’s argument is compelling—in part because one effect of the hangover following the bursting of the tech bubble three years ago has been an unsuccessful search for the new new thing, the next killer app that would restore the industry and bring renewed competitive advantage to every kind of enterprise. But his argument is also wrong-headed. Here’s why:

Carr says IT is an infrastructural technology, and that’s true—for much of it. Our payroll systems, our networks, our e-mail, even our ERP systems have attained the status of infrastructures. But IT is essentially different from the railroad industry, to which Carr regularly compares it. Railroads attained commodity status in the first quarter of the 20th century, and after that, nothing changed. Carr’s argument assumes that like the railroads, IT’s transformative years are behind it. That’s not a bet I’d be willing to take.

Consider utility computing (now there’s a commodity concept if there ever was one). Most analysts believe the technology—while still several years in the future—has the potential to cut IT infrastructure costs as much as 50 percent. Even if it were only half that, the competitive advantage accruing to successful early adopters will be enormous. Or consider agent-based modeling: the use of IT to create simple rule-based agents to build models of complex business and social systems. This technology is still in its infancy, but it has the capacity to transform such essential business processes as supply-chain management, customer service—and even the strategic planning process itself.

There is absolutely no reason to believe that clever people will stop coming up with new ways to employ IT, whether it be wireless, sensors or MEMS. In this month’s research, 71 percent of IT executives said adopting emerging technologies continues to be critical for reaching strategic goals, and 51 percent said their companies had missed at least one important business opportunity in the past three years because it had failed to adopt a new information technology. Clearly, there’s no dearth of new ideas, and very little let-up in the corporate effort to use technology to strive for ever-new competitive advantages.

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