CFO IT - Summer 2004 Issue

The Tract of the Matter

You read (about) the article, now read the book: Nick Carr expands his controversial thesis regarding IT's strategic importance.

Scott Leibs
CFO IT

June 15, 2004

Just over a year ago, Nicholas G. Carr offered a modest proposal that still has the information technology industry reeling. The veteran Harvard Business Review editor wrote an article headlined "IT Doesn't Matter," in which he argued that companies should stop looking to IT for competitive advantage and instead regard it as a utility — or, more accurately, a commodity factor of production. Clever (and expensive) deployments of IT, Carr argued, are no longer worth pursuing because successes are quickly (and cheaply) copied by competitors. Instead, companies should focus on efficiency, reliability, and security. That may not sound radical, but many in the IT industry reacted to Carr as though he were the intellectual equivalent of a repo man, come to take back the very idea on which untold fortunes have been built.

Carr has extended his article into a book-length treatise (Does IT Matter? Harvard Business School Press), and while he has changed the title from assertion to question, in no way has he modified his views. Now an independent writer and consultant, Carr recently sat down with CFO IT to discuss what really matters about IT.

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When your article appeared last year, many people seemed willing to grant that hardware of all kinds has become a commodity, but quite a few took issue with the idea that the same can be said of software. In expanding that aspect of your argument in your book, did you change your mind at all?
For the most part, I became more convinced that I'm right. Some forms of software development can still provide a competitive advantage — think of how a financial-services firm might rely on a special algorithm to manage investment portfolios, for example — but those kinds of opportunities are coming to pertain to a shrinking subset of companies.

A quick look at the notes section of your book reveals an almost laughably long list of "He's crazy!" editorial responses to your article. Were you surprised by the response?
There's a strong ideology in the industry that IT will never mature. Its leaders are very entrepreneurial, so they're wired to think that way. Some of the hype about IT verged on the utopian, but we are seeing the growth slow and a new infrastructure take hold.

One in which IT doesn't matter?
Well, if you botch it, IT certainly matters. Using it well may not gain you a lot, but using it poorly will put you at a competitive disadvantage. Even a commodity has to be managed well.

IT simply strikes many people as far too complicated to be considered a commodity.

It is complicated, and it will remain so for some time. But a first step in managing it well is to shift your viewpoint, to see it as a commodity and therefore look for ways to simplify it.

You see a strong move toward services as part of that?
Yes. Some might tend to want to handle it themselves, because certainly the component costs of IT are going down, but those are small relative to the large costs of integrating and managing everything. A service model offers a packaged deal, but progress will be slow: vendors still have a lot to prove in this regard.

That may be good news for CFOs, although one wonders where it leaves the CIO.
The CIO's role will vary by industry, and even by company, more than any other C-level executive. In some cases, it will be very strategic; in others, something akin to a purchasing manager. IT staffs will shrink, but the people who remain will become more important. Any hand-wringing about the fate of the CIO is misplaced — it's not the position that matters, but the person who holds it. It's the individual talent that counts.

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