1. IT DOESN’T MATTER Information Technology and Management (B.A.560)
Present
Asst. Prof. Danuvasin Charoen, Ph.D

2. 1968 – Ted Hoff, Intel Engineer, discovered a way to put circuits for computer processing on a silicon chip.
Technology has become the backbone to operational
excellence, electronically linking data internally and externally.
IT is seen as a critical resource in fact spending capital spending on
technology has risen from 5% in 1965 to over 50% in the late 1990s.
Overview
Today CEOs often talk about strategic value of IT, and have even created
the CIO senior leader position in many organizations.
However, the proliferation of IT has reduced its strategic value. A
competitive advantage is only an advantage if it is scarce.
The premise of the article is that IT has become a commodity that is a
business essential and management should focus on risk management in lieu
of trying to achieve scarce competitive advantages.

3. Technology as a Competitive Advantage
Proprietary Technology
Defined as a technology that can be owned actually or effectively by one company.
Example: Pharmaceutical Company: Patent on Compound
Technology as a Competitive Advantage
Infrastructural Technology
Defined as technology that can not be protected and in contrast to roprietary technology is worth more to the economy as a whole when shared.
Example: Railroad or Electricity
“ IT is considered an infrastructural technology.”

4. Vanishing Advantage The Phases Of Infrastructural Technology Buildout
Early Phase
advantage takes the form of proprietary technology and enable new more efficient operating methods
“physical limitations to technology, intellectual property rights,
high costs, lack of standards, etc.”
Vanishing Advantage The Phases Of Infrastructural Technology Buildout
Market Changes
in addition to improving operations dramatic broad market changes occur due to infrastructural technology.
Example: Railroads in the mid1800s
The Trap
Executives make a mistake and assume that these advantages are sustainable when they are brief due to the technology becoming broadly adopted.

5. “Highly replicable – the most pure commodity – bytes of data.”
IT has all the characteristics of a infrastructural technology.
it is a transport mechanism – carries digital information.
it has more value when shared than when used in isolation.
Standardization
each stage in the evolution of IT has increased the standardization and homogenization.
“Highly replicable – the most pure commodity – bytes of data.”
Commoditization of IT
Perfect Delivery Channel
third party purchases similar to electric power by purchasing fee based services “the grid.”
Subject to rapid price deflation – Moore’s Law.

6. Are we near the end of the IT build out phase?
Power is outstripping business needs
Technology is affordable and available
Are we near the end of the IT build out phase?
Capacity has caught up with demand
IT vendors are repositioning themselves as commodity
suppliers or utilities
Investment bubble has burst

7. “When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides” Nicholas G. Carr

8. Greatest IT Risk? Overspending… Meanwhile…
As costs fall, new capabilities rise and business increases reliance on IT companies continue to invest resources towards large investments from big hardware and software suppliers.
Meanwhile…
Vast majority of business PC’s rely on a few simple applications.
Applications are technologically mature.
Applications require only a fraction of computing power.
Corporate networks are storing invaluable information.

9. New Rules for IT Management
SPEND LESS
Rigorously evaluate expected returns from IT investments.
Negotiate contracts ensuring long-term usefulness of your investment.
Assess data storage (eliminate waste and non-relevant information).
FOLLOW, DON’T LEAD
The longer you wait to make an IT purchase, the more you’ll get for your money.
Wait for standards and best practices to solidify.
FOCUS ON VULNERABILITIES, NOT OPPORTUNITIES
Focus IT resources on preparing for disruptions and proprietary control.

10. Summary IT is an Infrastructural Technology (no longer proprietary)
Vanishing Advantage for Corporate Sustainability
IT Has Become A Commodity
Standardization/Highly Replicable
Delivery Channel
Rapid Price Deflation
Focus IT Investments on Risk more than Strategic Advantages.
Greatest IT Risk is Overspending.
To Avoid Overinvesting in IT:
Spend Less
Focus on Risks, Not Opportunities
Follow, Don’t Lead

11. IT doesn’t matter? DEBATE
“When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides.” Nicholas G. Carr
IT matters.
IT doesn’t matter.
IT doesn’t matter.
IT matters.

12. “The commoditization of IT and its competitive advantage.”
Letter from John Seely Brown and John Hagel III
John Hagel III
John Seely Brown

13. Letter from F.Warren McFarlan and Richard L. Nolan
“The jobs of CTO and CIO are and will be of unparalleled importance in the decades ahead.”
Letter from F.Warren McFarlan and Richard L. Nolan
Richard L. Nolan
F.Warren McFarlan

14. “IT will always matter-it will just matter in different ways now.”
Letter from Jason Hittleman

15. “IT will always matter-it will just matter in different ways now.”
Paul A. Strassmann
“Carr will lead executives to focus only on controlling IT costs.
That is a necessary discipline,
but it is not the route to real business advantage.”
Richard Hunter
Mark McDonald
Marianne Broadbent

16. “Now that some of the IT mystique has been eliminated, corporate IT has to play by the same rules as everyone else.”
Letter from Bruce Skaistis
“The implementation of these IT-based systems does not come cheaply and requires continual retargeting, yet it underlies the success of many firms.”
Letter from Vladimir Zwass
“IT never mattered. What matters are the people who invent technologies and who deploy and use them.”
Letter from Mark S. Lewis
“There is no consistent correlation between IT spending levels and financial performance.”
Letter from Tom Pisello

17. “IT is and will remain of strategic importance for the next ten years
Letter from Roy L. Pike
“The move to a common infrastructure is inevitable. But it does not reduce opportunities for competitive advantage. It increases them.”
Letter from Vijay Gurbaxani
“IT is not the headline, it certainly matters (just like kidneys) because the work systems cannot operate without IT.”
Letter from Steven Alter
“Hardware and software can be intricately intertwined. Sometimes a single piece of outdated software can derail the deployment of important new functionality with real strategic value.”
Letter from Cathy Hyatt

18. “To exaggerate somewhat-but only
a little-anything is possible with software,
if not today, then tomorrow.”
Letter from Chris Schlueter Langdon
“Just because we continue to see new innovations in IT does not mean that it pays to be a pioneer.”
Reply from Nicholas G. Carr

19. IT doesn’t matter? Our DEBATE
IT matters.
What is the role of IT?
What are IT strategies?
What should CEI/CIO focus on?
etc.

20. IT
DOESN’T
MATTER
YES NO