It was almost exactly two years ago – in June of 2003 – that mild-mannered academic Nicholas Carr wrote an article in the Harvard Business Review entitled ‘IT Doesn't Matter'. The article, considered and understated, was interpreted as a savage critique of the IT industry and many in IT management. Its publication sparked off a huge controversy, inciting hundreds of thoughtful and quite a few less well-reasoned responses from around the world.
That brouhaha was two years ago, and since then most people have all but forgotten Carr's name. His subsequent book failed to become a huge seller and his currency on the conference speaker circuit has fallen. But what of the substance of what Carr was saying? How is his thesis standing up?
Carr argued – and continues to argue – that IT has become so ubiquitous that it can no longer confer competitive advantage. Everyone has it, he says, so it is not worth trying to get ahead by investing heavily in technology. The focus, he says, should be on effective operations management and reducing risk exposure.
At least half of that message is, of course, not controversial at all: good IT practices, governance and risk reduction should be a top priority. But the other, more strident part of Carr's message – that investments in IT can no longer, in the vast majority of cases, give a business any competitive edge – is more interesting. In the past two years, that view has gained support, partly because the ubiquity of technology does make it harder to get a competitive edge and partly because falling IT prices create the illusion that cost cutting actually works.
But there is also a third, powerful reason: new technology has made it possible for businesses to thrive with almost no in-house IT all. Application service providers, such as Salesforce.com, for example, and some early generation utility computing service operators are promoting the argument that it is possible for customers to run a low-cost, risk-free, innovate, agile business without owning expensive infrastructure.
Sun Microsystems, one of the IT industry's great innovators, is one of those suppliers. Speaking at the Veritas Vision conference recently, its chief operating officer Jonathan Schwartz argued that IT products are increasingly being turned into services, which are transparently priced so that consumers can shop around. "It's not computers that are commoditising, it's computing," he said.
Where does that leave the innovation? The chance for a competitive edge? So far, it seems, Carr has largely been wrong in his arguments on technology competitive edge. Innovation in IT products and services has produced some dramatic winners in recent years. Take Apple and its iPod, or RIM and the BlackBerry. These innovators have earned billions from their products and from building services (such as iTunes) around them. These companies are, of course, technology product companies, whereas Carr might say he was writing about companies generally. But that distinction is no longer clear cut: BA.com, Amazon.com and Capital One are not IT companies – but effective, innovative use of IT (and heavy investment) has given them a competitive edge.
At a recent visit to Accenture's technology labs in France, consultants from the company demonstrated how innovative use of technology could give, or is giving, businesses a clear edge – in transportation, logistics, healthcare, marketing, retail and entertainment.
In each case, they argued that the benefits would result not so much from a huge investment in R&D so much as a good deal of creative thinking about how technology might change the rules.
But there is another twist to this: most businesses are not are over concerned with technical innovation, but with operational effectiveness – and this is something that Carr recommended. What he did not appear to foresee is that operational effectiveness – aided by a heavy investment in IT – would, on its own, become a competitive differentiator.
There are many, many examples of this: several banks now use the security of their systems as a key part of their advertising – with one, in particular, playing on consumer's fears of identity theft to encourage them to switch systems.
Other companies – airlines and retailers, for example – highlight the ease and speed of their systems to attract and serve customers. In these cases, IT does matter – they are making effective IT part of their brand. Carr might argue that that is precisely what he was saying: that businesses should concentrate on operational effectiveness, rather than attempt to innovate. But what he did not foresee is that operational effectiveness should become so important that IT now matters more than ever.