1. Oregon Executive Dads (OED) Team
IT Doesn’t Matter HBR Article by Nicholas G. Carr Including debate by John Brown, John Hagel III, Paul Strassman, et al
Oregon Executive Dads (OED) Team

2. Core Arguments of the Article
Do we really need to care about IT?
IT has become ubiquitous and a commodity
Commodities don’t have strategic value
Greatest IT risk is overspending
Puts your company at a cost disadvantage
Instead make IT management boring
To avoid over investing
Spend less on IT
Follow don’t lead industry in IT use
Focus on IT risks not opportunities

3. Premise
IT has moved from being differentiated technology to infrastructure technology.
Core functions of IT – data storage, processing and transportation are available to all
Like railroads, electricity and telephone
IT as a resource therefore cannot offer sustained competitive advantage
There is little value in creating proprietary differentiated solution for an advantage
IT technology as a data transport mechanism is more valuable when shared than used in isolation
E.g. Linking ERM systems for gaining efficiency in SCM

4. Premise
Executives continue to spend more on IT assuming advantage will be available indefinitely
One can only hope to get short term advantage with competitors eventually catching up
Even best IT practices are quickly added or replicated
US dept of Commerce Bureau of Economic Analysis

5. So what should companies do?
Go from offense to defense
Late 90s showed significant IT build-up
Post build-up manage risk instead of overspending
“When A Resource Becomes Essential To Competition But Inconsequential To Strategy, Then Risk Created Outweighs Advantage Provided”
Stronger cost management is critical

6. So what should companies do?
Reevaluate your refresh cycle
Push back on vendor driven upgrade cycles
Drive waste out
Top performers tend to be tightfisted
25 best performing companies spend just 0.8%
Typical company spends 3.7% of revenue on IT
Data from Alienan Consulting 2002
Intel spends 2.9% of revenue on IT
Mark Bryan, Intel Oregon Site Manager

7. Recommendation 1. Spend Less
Rigorously evaluate expected returns from IT investments
Penalties for wasteful spending will only grow larger as commoditization of IT continues
Explore simpler and cheaper alternatives

8. Recommendation 2. Follow, don’t lead
Moore’s Law gives you bigger bang for your buck if you wait
Let impatient rivals take the burden of higher cost of experimentation
Buy only when standards and best practices solidify

9. Recommendation 3. Focus on risks, not opportunities
Competitive advantage from mature infrastructural technology is rare
Outsourcing is likely when reducing costs which can make your systems vulnerable
Technical glitches, outages, and security breaches are inevitable in ubiquitous systems - shift attention from opportunity to risk management

10. Do you agree… why?

11. Analysis Title perpetuating a misguided view IT DOES matter!!!
Carr is suggesting that IT is diminishing as a source of strategic differentiation
However companies with insight to harness IT’s potential can still differentiate
Differentiation is in the practice of IT
Extracting value from IT requires innovations in business practices
IT’s economic impact comes from incremental innovations rather than “big bang” initiatives like in the late 90s
Cumulative effect of sustained initiatives brings strategic impact

12. Analysis Graph show commoditization of IT
Subject lesson for Darrell Huff’s well-known book – How to Lie with Statistics
Growth in computing power based on Moore’s Law is a source of differentiation that can be leveraged with services, product features and cost structures
Financials: E*Trade vs Charles Schwab vs Merrill Lynch
Laptops: Dell vs HP vs IBM vs Toshiba vs Sony
Shoes: Nike vs Adidas vs K-Swiss

13. Analysis
IT is not about the box as Carr suggests it’s about what’s inside the box
IT has the potential to improve productivity dramatically, this time by changing the way businesses work together
First companies used steam engines, then conveyor belts, and today we use information systems and especially software, to automate business activities.  We might call it “softwarization” ….. And this softwarization is not a one-step affair, like flipping a switch, but an ongoing process

14. Our Analysis Carr trying to instigate a debate – which he did!
Article written in 2003
Touched a nerve with executives that had made large IT spending in late 90s and were questioning business value
IT is more that just infrastructure technology. It includes systems and processes.
Therein lies the differentiation
Companies must challenge themselves in using IT in innovative ways

15. Our Analysis IT MOST CERTAINLY MATTERS!!!
The combination of business strategy and IT is the key
Examples
Customer Support Blogs
Sharepoint
Google for Intranet search
Net meeting
Wireless WAN based tools
IT MOST CERTAINLY MATTERS!!!

16. Additional Information
Nicholas Carr’s website
Includes responses to his article by Craig Barrett, Bill Gates, Carly Fiorina and others
Intel’s Business Value Index

17. Intel Business Value Index Chart