Information technology and strategic advantage Is Carr right? MBA 501 WEEK 13

THE PLACE OF IT IN THE ENTERPRISE: COMMODITY OR BUSINESS DRIVER?

The big questions What gives a firm competitive advantage? – Can Information Technology give competitive advantage? Do firms fully realize their return on investment? Is it really just about keeping the lights on? What trends have influenced the point of view that IT Doesnt Matter strategically?

The cheap revolution - factors Shift from buying expensive proprietary products to buying cheap generic products – Google runs on hundreds of thousands of commodity servers running Linux commodity servers – Craigslist has only around 30 employees and serves over 20 billion page views per month. It is the 50 th busiest site in the world, the 11 th busiest in the US (Alexa.com) (stats from Feb 2014) and it loads faster than 87% of other websitesAlexa.com Open standards Open source software Outsourcing to lower cost of labour VOIP Cloud computing

Rich Karlgaard – being on the wrong side of this cheap revolution in any industry, is not the place to be

Assignment 2: Section 3d of instructions Discuss Carr's writings with respect to whether or not information technology and the Internet have given, and can continue to give, competitive advantage in the case of your particular firm.

IT Doesnt Matter Because of these trends, Nicholas Carr argued that information technololgy doesnt matter anymore strategically IT has become an infrastructure technology, like electricity and the telephone Such technologies can create a strategic advantage only early in their life cycle when few firms have them, and using them is expensive and risky IT Doesnt Matter.IT Doesnt Matter. Nicholas Carr (2003) Harvard Business Review. vol, 81, Iss. 5

Carrs argument – contd Carr argues that strategic advantage rests upon innovation and the garnering of scarce resources such as patents or unique business processes. Only early in the lifecycle of a technology can firms use the technology to create competitive advantage – when it is hard to copy Once a technology becomes neither proprietary nor expensive – it becomes a commodity Commodities are available to everyone, and thus cannot provide any individual firm with a competitive advantage through differentiation IT Doesnt Matter.IT Doesnt Matter. Nicholas Carr (2003) Harvard Business Review. vol, 81, Iss. 5

Carrs recommendations… Success hinges on defense (risks), not offense (opportunities for competitive advantage). Management of IT should become boring, and focus on three areas: – Manage the risks. Focus on vulnerabilities rather than opportunities. There will be plenty of risks because open systems are more risky than proprietary systems. – Keep costs down. The greatest risk is overspending, so only pay for use and limit upgrading (do not upgrade PCs when its not needed, for example). – Stay behind the technology leaders, but not too far behind, because experimentation is expensive. Delay investments until there are standards and best practices, and prices drop. Innovate only when risks are low. IT Doesnt Matter.IT Doesnt Matter. Nicholas Carr (2003) Harvard Business Review. vol, 81, Iss. 5

Video clip – interview with Nicholas Carr (c|net) – IT still doesn't matter (16 minutes) IT still doesn't matter Do you agree?