Is Info Tech All Washed Up?

DOES IT MATTER?

Information Technology and the

Corrosion of Competitive Advantage

By Nicholas G. Carr

Harvard Business School Press

193 pp -- $26.95

The title of Nicholas G. Carr's book, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage, might suggest that he has backed down a bit from his controversial article of last year in Harvard Business Review. That piece, more dramatically headlined "IT Doesn't Matter," contended that because information technology is pervasive, it no longer provides any competitive advantage to companies that use it. Carr went even further, saying companies should spend much less on computers and software and stay away from the leading edge to avoid paying premium prices for untested, soon-to-be-obsolete products.

Make no mistake: This slim, 193-page book by the former executive editor of HBR is at least as provocative as the article. Unfortunately, it's no more convincing. Carr argues, for example, that IT's "great transformational power is starting to fade." But then he makes an arbitrary exception for two of tech's fastest-growing markets: emerging countries and the entire field of consumer electronics. And his advice -- "follow, don't lead" -- seems especially off the mark at a time when market leaders, from Dell Inc. (DELL ) to Amazon.com Inc. (AMZN ), are still noted for their ongoing, adroit use of technical innovations.

Yet even if one disagrees with Carr's conclusions, the book is a worthwhile guide to where tech is headed for the long term. He's certainly right that the information-technology business has entered a new stage. After two decades of frenzied installation of tech gear, the core functions of processing, storing, and moving information are almost universally available, at least in developed countries. Thus, Carr argues, even though companies must spend on IT simply to remain competitive, they no longer derive any strategic advantage from using the latest computers and software.

That doesn't mean, as the book's title mistakenly implies, that IT will never transform the economy and society as much as railroads and electricity did. Writes Carr: "History reveals that IT needs to become ordinary -- needs to lose its strategic importance as a differentiator of companies -- if it is to fulfill its potential." Early in the last century, he points out, many companies had vice-presidents for electricity, but within a few years they vanished from the corporate hierarchy as electric power became merely another part of business infrastructure. This, he contends, is the period of senescence now facing IT.

But are we there yet? That's doubtful. Information technology still seems very much in flux. Relentless advances in chip speed, miniaturization, and data-transmission capacity continue, periodically coalescing into disruptive innovations. Thousands of software startups, with more forming all the time, offer new capabilities that are a long way from being universally adopted. New developments such as Internet phone calls and wireless networks are upsetting the telecommunications industry, creating potent new competitors, such as Net phone service upstart Vonage Inc. The music industry is under full-scale assault from Internet downloading, giving Apple Computer Inc. (AAPL ) new life as the leader in legal online music.

Carr may be right about where the industry ends up, but he's jumping the gun. He cites Venezuelan economist Carlota Perez' work charting the remarkably consistent history of technological upheavals, from the Industrial Revolution and railroads to electricity and the automobile. After the installation period of 20 years or so, there's a turning point marked by an economic downturn, followed by 20-plus years of pervasive deployment. But this pattern doesn't suggest that IT's current transformational power is already fading, as Carr would have us believe. Quite the contrary, what follows the turning point is a "golden age" in which true innovation accelerates.

That's why Carr's bottom-line advice is wrongheaded -- especially his suggestion that IT buyers save money and reduce risk by letting competitors take the lead in using new technologies. That delay can mean losing profitable customers in this dynamic economy. It's likely, for instance, that wireless Internet access eventually will be offered at most hotels, so it won't be a differentiator for long. But the few hotels that do offer it are getting my business right now -- and I may stick with them. "The key to success for the vast majority of firms," Carr writes, "is no longer to seek advantage aggressively but to manage costs and risks meticulously." Shouldn't they do both?

All that aside, Carr is careful to note that there are times when spending more on IT to satisfy customers or cut costs does pay off. He also rightly points out that blindly cutting IT staff could be a huge mistake because their skills will be crucial to wringing the most value out of commodity tech products. Even if its skepticism is excessive, Does IT Matter? will give executives and managers a way to sift through the next wave of tech hype.

By Robert D. Hof

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