Presentation on theme: "IT DOESN’T MATTER Information Technology and Management (B.A.560)"— Presentation transcript:
1 IT DOESN’T MATTER Information Technology and Management (B.A.560) PresentAsst. 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 operationalexcellence, electronically linking data internally and externally.IT is seen as a critical resource in fact spending capital spending ontechnology has risen from 5% in 1965 to over 50% in the late 1990s.OverviewToday CEOs often talk about strategic value of IT, and have even createdthe CIO senior leader position in many organizations.However, the proliferation of IT has reduced its strategic value. Acompetitive advantage is only an advantage if it is scarce.The premise of the article is that IT has become a commodity that is abusiness essential and management should focus on risk management in lieuof trying to achieve scarce competitive advantages.
3 Technology as a Competitive Advantage Proprietary TechnologyDefined as a technology that can be owned actually or effectively by one company.Example: Pharmaceutical Company: Patent on CompoundTechnology as a Competitive AdvantageInfrastructural TechnologyDefined 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 Phaseadvantage 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 BuildoutMarket Changesin addition to improving operations dramatic broad market changes occur due to infrastructural technology.Example: Railroads in the mid1800sThe TrapExecutives 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.Standardizationeach stage in the evolution of IT has increased the standardization and homogenization.“Highly replicable – the most pure commodity – bytes of data.”Commoditization of ITPerfect Delivery Channelthird 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 needsTechnology is affordable and availableAre we near the end of the IT build out phase?Capacity has caught up with demandIT vendors are repositioning themselves as commoditysuppliers or utilitiesInvestment 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 LESSRigorously 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 LEADThe 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 OPPORTUNITIESFocus IT resources on preparing for disruptions and proprietary control.
10 Summary IT is an Infrastructural Technology (no longer proprietary) Vanishing Advantage for Corporate SustainabilityIT Has Become A CommodityStandardization/Highly ReplicableDelivery ChannelRapid Price DeflationFocus IT Investments on Risk more than Strategic Advantages.Greatest IT Risk is Overspending.To Avoid Overinvesting in IT:Spend LessFocus on Risks, Not OpportunitiesFollow, 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. CarrIT 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 IIIJohn Hagel IIIJohn 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. NolanRichard L. NolanF.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 HunterMark McDonaldMarianne 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.