While philosophic in nature, Nick Carr’s hypotheses on the strategic value of IT investments has fueled a two-year debate—which means he’s hit upon the very root of the tension that exists between the technology and business camps in most organizations.
Here’s where there’s truth to his argument: Companies that consistently get the most value from IT investments clearly understand that there are certain cases where tech investments are best managed purely to achieve the lowest TCO (total cost of ownership).
But in other cases, these same companies realize that spending should be ramped up for specific projects to support the business. Knowing which projects deserve spending and which mandate thrift requires an examination and understanding of both internal and external conditions.
Every year, Alinean and its analyst partner IDC collect IT spending data from more than 400 companies and apply it to build regression algorithms to estimate spending trends.
We analyze quarterly IT spending and financial performance data for more than 20,000 companies worldwide to identify the companies that are best able to extract value from IT spending. We can then learn from their practices, and understand what differentiates their strategies from those that struggle.
When this IT spending and performance data is analyzed over the past three years—the period since Carr’s article first appeared—several interesting trends emerge.
Since 2003, leaders have clearly recognized the changes in the market and have ramped up IT spending. Dig deeper and you can see that they have driven down infrastructure costs and made strategic investments to support transaction optimization, information management and transformation.
In short, they’re managing IT investments in such a way as to enable the business to capture all of the potential in improving marketing conditions. They’re also managing IT investments in a hierarchy—treating core infrastructure as a commodity while increasing strategic tech investments to support key business goals.
The importance of context cannot be underscored enough. In fact, Carr originally used Alinean’s data to support his first suppositions of IT commoditization in his 2003 Harvard Business Review article. But he misinterpreted the research by ignoring the incredibly tight market conditions at the time, and no regard was given to granular IT spending analysis.
Next Page: Putting research lessons to work.