The Case for C-level Attention to IS Strategy

 

In May 2003 Nicholas G. Carr, editor-at-large at the Harvard Business Review, declared that "IT Doesn't Matter."

"IT provided forward looking companies many opportunities for competitive advantage early in its buildout" (p. 45).

"But the opportunities for gaining IT-based advantages are already dwindling [...]. And as for IT-spurred industry transformation, most of the ones that are going to happen have likely already happened or are in the process of happening" (p. 47).

Carr, N. G. 2003. IT Doesn't Matter. Harvard Business Review (May): 41-49.

 

Predictably, this article has received varied and energetic responses in the business media.

David Broncaccio, host & editor of Marketplace, interviews Adam Lashinsky, magazine, about media response.

Please listen to their discussion "Relevance of the IT Industry" (second show on the list):

www.marketplace.org/shows/2003/06/02_mpp.html

(Marketplace is public radio's daily magazine of business and economics. It is produced by Minnesota Public Radio and distributed by PRI, Public Radio International.)

 

Harvard Business Review has selected and published several Letters to the Editor from researchers and business executives in an article titled "Does IT Matter? An HBR Debate."

Please read my comments in this debate.

Schlueter Langdon, C. 2003. Does IT Matter? An HBR Debate--Letter from Chris Schlueter Langdon. Harvard Business Review (June): 16 [electronic document], available at http://www.hbr.org.

 

I am an information systems strategy professor, so it would be expected that I would disagree with Nicholas Carr's provocative assertion that IT doesn't matter. Indeed, I do. While I agree with much of Carr's excellent-but incomplete-analysis, I disagree with his conclusion.

Certain areas in IT have become commoditized and continue to be commoditized. Just like the phone system: A business user does not have to be a network engineer to use it; the phone is a plug-and-play utility available to anyone. The same is basically true for office-productivity software and computer networks-although many would argue that it is still much easier to plug in a new phone or fax machine than it is to hook up a PC to the Internet at home or to share a printer.

The analogy with the phone system breaks down at the point where Carr's analysis stops. Information systems, and software applications in particular, differ in versatility and adaptability. To exaggerate somewhat-but only a little-anything is possible with software, if not today then tomorrow.

In fact, the phone system will soon be an information system, with much of its value-added provided by voice-over-IP software. Value-added is being shifted from mechanical systems and their operations into software. This is yet another example of the evolution of business automation. The history of modern production is intimately tied to the automation of business processes. First, companies used steam engines, then conveyor belts, and today we use information systems, and especially software, to automate business activities. We might call it "softwarization." Companies in many industries now use ERP and CRM software to automate business activities. And this softwarization is not a one-step affair, like flipping a switch, but an ongoing process. Value-added is constantly being shifted into or embedded in software, with mature areas obviously becoming commoditized. Examples include computerized antilock brakes, credit cards and calling cards, airline ticketing, and yield-management systems.

Why would this process stop? Why would there suddenly only be mature areas? Are there not enough business activities left to be automated? Would it be too difficult or expensive to automate the remaining ones? The very commoditization of mature infrastructure technology reduces unit cost, which in turn frees up funding for continued softwarization without necessarily increasing total IT budgets.

Two trends ensure that the sky is the limit for softwarization. One of them is well known, while the other appears to be hidden. Carr mentioned the popular one-Moore's Law, which establishes that hardware will become more powerful and cheaper over time. Yet, even more important are advances in how increased processing power can be used. This leads us into the world of systems and software architecture design, with its fast-growing jungle of acronyms and ideas. One key advance in this field has been the recent breakthrough of object-oriented programming. The concept, as well as some tools such as the Smalltalk programming language, have been around for decades, but only very recently have these concepts turned into commercially viable implementations.
The bottom line is that powerful hardware together with more flexible software tools continues to fuel an ongoing process in which value-added is increasingly achieved with information systems.

While mature areas do indeed get commoditized and probably outsourced, new softwarization should receive more, not less, top management attention. Why? As Michael Porter argues, "[Business] activities are the basic unit of competitive advantage." As these activities get automated using software, top management's attention should shift to information systems architecture design.

Chris Schlueter Langdon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Send mail to csl@ebizstrategy.org with questions or comments about this Web site.

Copyright 1999-2007 Dr. Chris Schlueter Langdon

Last modified: May 13, 2007