An Exercise in Utility

If you want to see the future of tech, study the history of the electric power business, says one writer. Plus: the real cost of integrating ERP ap...
Scott LeibsJune 15, 2003

“All analogies are false.” So intoned a history professor of mine, usually just before or after making an analogy. Analogies are extremely useful, even when, as creative-thinking expert Edward de Bono has noted, they don’t quite fit, because they provoke fresh ways of thinking about problems.

One analogy receiving particular scrutiny at the moment is the notion of the information utility. As computers become cheaper, more standardized, and more connected via the Internet (the thinking goes), information processing and data communications will become, to steal a phrase from writer Nicholas G. Carr, “commodity factor[s] of production.” In an article in the May issue of Harvard Business Review provocatively titled “IT Doesn’t Matter,” Carr draws numerous parallels between the evolution of the IT industry and the development of electric power, the rail system, the telegraph, and other services that we now label utilities.

Some technology companies are actively pushing the same vision. IBM, Hewlett-Packard, and others, for example, now talk about making computing services available via a grid of interconnected machines that can be harnessed as needed. Software, aided by a set of standards dubbed Web services, may evolve toward a subscription model at both the business and consumer levels; Microsoft’s newest licensing terms are clearly designed around that vision. From “plug-and-play” to “apps on tap,” there have and continue to be a vast number of efforts to simplify technology, allowing those who use it to focus on what they want to do rather than how they must do it.

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Even if IT were as easy to tap as electric current, Carr does not believe, despite the title of his article, that IT doesn’t matter. His real argument, which is difficult to refute, is that information technology is quickly becoming a commodity, and as such, it should be managed not as a source of strategic advantage but as a potential liability.

Systems need to be kept up, and costs need to be kept low. While it will (and has) become almost impossible to develop any applications that provide competitive differentiation, it will be all too easy to spend too much on technology, or to suffer a security breach or systems failure that proves costly.

IT as a utility? Would that it were so. Companies may be spending less, consolidating on a select group of vendors, embracing standards, and relying more on the Internet each day. But they will nonetheless be laying much of their own track and managing the various sources of their digital power for years to come. Yet in their strategic vision and management practices, companies can and should begin to regard IT as a utility. Such a view will drive smart decisions, and prove that a faulty analogy can be supremely useful.

The Cost of Getting ERP Apps Talking

One of the most vexing IT issues facing large companies is deciding when and how to integrate the disparate “instances” of ERP software scattered throughout the organization. AMR Research suggests that companies begin by asking why.

In studying more than 60 companies in various stages of ERP consolidation, AMR found that such projects cost about $10 million for every $1 billion of company revenue, and that the typical 25 percent reduction in IT costs that results is not enough to justify the expense.

Instead, the potential benefits vary greatly from one company to another, and depend on corporate goals and strategy, particularly a company’s appetite for growth through acquisition.

The nature of the supply chain also factors in. Companies that have multiple manufacturing and distribution sites for the same products and want a global view of materials available, finished goods, and global coordination of sourcing and suppliers are wise to consolidate. Conversely, companies that lack and do not want to achieve common business processes, customers, and supply-chain management across divisions have found that consolidation does not ultimately pay off.

Even when there is a solid business case for consolidation, AMR warns that the change-management issues are significant and that the project should not be viewed as an IT issue, but as a broad transformation of corporate practices.

Training and Development: Can I Be the Race Car?

In this post-Enron world, corporate gamesmanship may be passé but game-playing is alive and well, thanks to a company called Root Learning.

Originally a consulting organization specializing in strategic planning, the company became disheartened when its carefully developed reports did little but gather dust on clients’ shelves. So it turned its attention away from what CEO Jim Haudan calls “the embrace of new ideas by the elite” and toward the ability of the masses to execute those ideas.

To that end, the company developed “learning maps” and templates that mimic board games and provide an interactive way for employees to learn about their companies. Mattel signed up for two versions, one that gives a macro view of the company and another that zeroes in on the financial factors that drive profitability.

Kevin Farr, Mattel’s CFO, says, “We get a cross-section of employees playing the game, and they get a much better idea of what each function does. In fact, it’s led to the creation of some informal networks.”

Haudan says one client developed a game focused on financial issues and, as a result, “employees said, ‘Now we can finally understand the annual report!’ ” While the PC version adds bells and whistles, Farr says Mattel opted for the actual board game because “the richness is in getting people around the table.”

Root Learning says the game metaphor is useful because it incorporates the “language of engagement”: visualization, dialogue, interactivity, and measurement. Haudan cites a 2001 Gallup poll in which 55 percent of company employees considered themselves “disengaged” from their work and another 19 percent went so far as to say they were “actively disengaged.” Winning support for new initiatives is tough, he says, when that many people are that tuned out.

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