Analysis of Article
The main thrust of the article “IT doesn’t matter” by Nicholas Carr is the notion that IT (Information Technology) is no longer a means of competitive advantage but rather has become relegated to the status of a utility.
Carr states that “what makes a resource truly strategic, in that it has the capacity to provide a sustained competitive advantage, is not in its ubiquity but rather in its scarcity” (Carr, 2007).
To put it in simpler terms, the less access other competitors have to a resource you control the more likely you are to make a profit off of it.
It must be noted though that with recent trends in generic software availability and ever decreasing prices in software cost, proprietary in-house developed systems are becoming a rarity due to their cost of construction.
Most companies opt to forgo such a laborious and costly method of creation and merely opt to purchase generic systems which can be configured to their needs. Such systems often follow specific formats and established methods of generalized standards resulting in multiple companies having the same system.
As a result, the competitive advantage that has be ascribed to the use of IT by various industry managers is in fact more akin to the use of a utility that is ubiquitous and not really a basis to be used as a measurement or tool for competitive advantage.
If everybody is using systems that are widely available and affordable it cannot be said that IT is a method to be used to create a competitive advantage since literally anyone could pay to get the exact same systems as another company.
Examining IT Purchasing Behavior
As stated by Carr “the ability of technology to differentiate a single company from the pack, namely its strategic potential, declines as a result of it being accessible to all” (Carr, 2007).
It is from this that he poses the argument that the managers of companies who ascribe to the fundamental philosophy that an updated IT infrastructure is a means of gaining a competitive advantage over other companies are in fact wrong in their assumptions.
Carr states that this philosophy is costly and ineffective when taking into consideration the fact that a majority of companies rarely use the full capacities of their IT infrastructures which take the form of individual computers, servers, and software (Carr, 2007).
Most office computers are utilized mostly for office applications, email and various systems that barely utilize even a fraction of a computer’s capabilities. Yet inexplicably such equipment is replaced on an almost yearly basis as new forms of technology are released.
Concept of Irrational Exuberance
While Carr doesn’t elaborate sufficiently on the origins of this particular practice, for me this type of behavior is based off the concept of irrational exuberance first uttered by Allen Greenspan On December 6, 1996 (Carpo, 2004).
This particular concept is based on the notion that people tend to base their behavior on the actions of other people resulting in unduly escalated values of particular assets (Carpo, 2004).
In the article of Carr it can be seen that the unduly escalated value of a particular asset is the notion by various managers that continuous improvements to a company’s IT infrastructure in the form of new equipment or software system purchases is a form of developing one’s competitive advantage.
This particular behavior though is based off the actions of other companies who purchase new equipment based off the actions of other companies who do the exact same thing.
Comparing Costs to Added Value
While there is such as thing as standardization and corporate best practices the fact remains that the behavior of various companies regarding IT equipment purchases is in fact largely irrational when comparing costs to added value.
In the article by Carr it can be seen that the companies who are part of this apparent irrational exuberance in IT purchases spend as much as 3.2% of their yearly revenue on new IT purchases (Carr, 2007).
On the other hand these companies have far lower profits as compared to companies that only spend 0.8% of their budget on new IT purchases and in fact continue to maintain the same type of systems for years without the need for upgrading them (Carr, 2007).
The fact is most computer systems within a majority of companies today don’t need to be updated for several years, while there are exceptions such as various companies that specialize in software, gaming and media applications such companies are in the minority compared to the vast percentage of companies that don’t need to upgrade their systems for years (Taylor, 2006).
Disagreeing with the Notion that IT is reaching its Buildout Completion
While I do agree with Carr regarding the fact that information technology is moving towards a state of becoming an infrastructure system rather than being a proprietary based one he does state one disconcerting fact that I cannot help but disagree with.
Carr mentions in his article that “opportunities for IT based advantages are already dwindling with various best practices being built into software, being replicated and that IT spurred industry transformations that are going to happen have already happened or are in the process of happening” (Carr, 2007).
The problem with this particular assessment by Carr regarding the state of the IT industry is seemingly entrenched in his notion that the IT industry’s buildout is nearing its completion when in fact that is far from likely.
One of the defining factors of the IT industry is in its ability for constant innovation, unlike the other examples stated by Carr it is far from likely that this particular industry will ever reach a buildout completion.
For example, new innovations such as Blu-ray disks, solid state hard drives and computer parts that actually use military grade hardware are constantly being reinvented and improved.
In fact the 2010 movie “Tron” showed a possibility in the near future where virtual reality may eventually become integrated into concepts of business, commerce and education surpassing the current IT infrastructures that we use today (Grant, 2010).
While it may be true that at the present such innovations seem like fanciful notions but it was barely 60 years ago that the first general purpose computer (ENIAC) was created. It had to be contained within an area roughly the size of two rooms and was described by the media as “a giant brain”.
Today, modern desktop systems far surpass the capabilities of machines from the 1946 and as such are an indication of how far technological development has come and its potential for future development.
It is due to this that while I believe that most of what Carr stated in his article is in fact viable and true his concept of the IT industry reaching its buildout completion is far from likely.
Recommendations for Companies
One of the recommendations of Carr on how companies can get the most out of IT is to delay in investing into particular IT products and services (Carr, 2007).
This notion is actually supported by the fact that with the current rate of technological innovation products bought at the start of new wave of innovative equipment are usually obsolete within 6 months to a year of buying them.
Based on projection from Asus, one of the largest manufacturers of computer components in the world, specific types of technological innovations usually reach their zenith within 2 – 3 years of their inception before new innovations enter into the market.
This is actually not a coincidence but a planned marketing strategy by various companies in order to better capitalize on the irrational exuberance of consumers to constantly upgrade their equipment into the latest standards with various multinational companies spearheading the foray into such endeavors.
In this particular case it is recommended that companies focus on conservative buying behaviors and focus on buying equipment that can last the 2 year time period until certain new innovations reach a point at which they are at their best before being replaced by new products.
By doing so companies are able to get equipment that will be of the highest quality, be viable for 2 more years and will actually be cheaper and more stable than earlier creations.
Irrational buying behaviors where yearly purchases of new equipment are done in order to remain “competitive” are not only costly to the company but are inherently useless due to the fast progression of technology.
It is due to this that conservative buying behaviors and timing purchases to coincide with technological zenith of the 2 – 3 year period would thus result in better buying behaviors and savings for the company.
Conclusion
Overall, I can say with certainty that the ideas presented by Carr in his work are valid arguments regarding the current state of the corporations and their notions regarding information technology. The one factor that I believe he is mistaken on is his belief that the IT industry is nearly its buildup completion.
For me this particular idea fails to take into account the fact that due to its very nature a complete buildup is relatively impossible since new technologies are in every decade that introduces businesses to new concepts and ideas of utilization that create and almost entirely new form of business altogether.
For example the current prevalence of online E-commerce today is an entirely new industry that didn’t exist 20 years ago yet was brought about through the creation of new innovation in technology, specifically the internet.
I believe that the IT industry itself runs in a cyclical pattern wherein new innovations are met by periods of integration, growth and development followed by a short period of stagnation whereupon new innovations are created once more to fuel new types of growth and development.
Carr may in fact be confusing the current state of stagnation with the potential for the IT industry to reach its buildout.
References
Carr, Nicholas. (2007). It doesn’t matter. Web.
Carpo, M. (2004). Post-Hype Digital Architecture: From Irrational Exuberance to Irrational Despondency. Grey Room, (14), 102-115.
Grant, A. (2010). VIRTUAL EVERYTHING. Discover, 31(7), 60-65. Retrieved from EBSCOhost.
Taylor, C. (2006). Vista Upgrade Can Be Costly and Complex, Analysts Warn. Electronic News (10616624), 52(50), 53. Retrieved from EBSCOhost.