E-Commentary -- Yes, Nicholas, IT Does Matter

Dec. 21, 2004
Information technology is more than a commodity.

A controversial article that appeared in a recent issue of Harvard Business Review (HBR) was entitled, "IT Doesn't Matter." Don't believe it. The essay, by Nicholas G. Carr, HBR's editor-at-large, raised a stir in manufacturing circles. Carr argues that information technology offers no strategic advantage because it's a commodity that all businesses -- manufacturers included -- can access. "The arrival of the Internet has accelerated the commoditization of IT by providing a perfect delivery channel for generic applications," Carr writes. "More and more, companies will fulfill their IT requirements simply by purchasing fee-based 'Web services' from third parties -- similar to the way they currently buy electric power or telecommunications services." It's true, a number of high-tech vendors are trying to act as IT utilities, providing services over a network. ERP software packages are sounding more vanilla every day. When a company does achieve a strategic advantage with technology, it's temporary. The other guys catch up. It's the information age -- it's hard to keep anything secret. In manufacturing, when was it any other way? Competition seeks to not only equalize, but surpass. Better product. Faster process. Lower cost. Still, few business advantages are permanent. Dell Computer Corp. and Wal-Mart, Carr writes, are "firms that have been able to turn temporary technological advantages into enduring positioning advantages." In reality, these companies' success in dominating their markets was as much, if not more, due to clever reshaping of business processes than IT. Dell figured out a way to cheaply assemble PCs to order from standard components. Wal-Mart exerted its purchasing muscle to get the lowest prices from manufacturers, snuffing out competition. You don't have to look hard to find manufacturers that were able to transform their business processes and improve their strategic competitiveness with the help of IT. A few that come to mind are Caterpillar, Weirton Steel and Dow Chemical. While it's true that a basic PC is a commodity, business software is about as much like electricity as a frog is like a doorknob. For one thing, software is not easily piped or measured. Software can best be likened to that from which it is spawned: brainpower. The limits to the nature, applications and functions of software lie in the human brain. The different applications of business software are almost innumerable. Nor is IT one technology, like electricity or the railroads Carr repeatedly mentions. IT is made up of several interconnecting technologies -- PCs, chips, mainframe computers, operating systems, databases, applications, networks, the Internet. Finally, the people who put all this together to work in harmony with some manufacturing process, workflow or business activity are a key part of the IT equation, too. Just ask any manufacturing executive -- people who understand both manufacturing processes and technology are anything but a commodity. Last time I checked, Ohm's Law hadn't changed in 175 years. But information technology is changing every 175 seconds, or faster -- anytime some Linux developer in Krakow or Winnipeg or Chicago posts an improvement to the free operating system over the Internet. This constant change offers new means to achieve competitive advantages -- albeit ones with limited life spans. Anyone -- or any manufacturer -- that thinks otherwise, is going to become the business roadkill of tomorrow. In sum, one way to achieve strategic advantage, however temporary, is not through the use of technology alone, but through creative use of technology as an enabler to improve or reshape a business process. Yes, Nicholas, IT does matter. Doug Bartholomew is a former IndustryWeek Senior Technology Editor. He is based in San Francisco.

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