computer Janal Kalis points out an exceptional article in the May HBR by the magazine’s editor, Nicholas Carr, entitled IT Doesn’t Matter . The article, which unfortunately is not available online, has this provocative thesis:

What makes a resource truly strategic – what gives it the capacity to be the basis for a sustained competitive advantage – is not ubiquity but scarcity. You only gain an edge over rivals by having or doing something that they can’t have or do. By now, the core functions of IT have become available and affordable to all. Their very power and presence have transformed them from potentially strategic resources into commodity factors of production. They’ve become costs of doing business that must be paid by all but provide distinction to none.

Carr distinguishes between proprietary technologies, those that are embedded in a company’s product or service, and infrastructure technologies which gain their power from interface with outside parties. The latter, including most IT, offer only a brief window of competitive advantage before the need for connectivity demands ubiquitous, open standards and hence the technology becomes a utility and a commodity. That window, he argues, has now substantially closed.

At this point, the rules change, and ‘first mover advantage’ disappears, leaving only disadvantage to the serious laggard. The objective is to be in the mainstream, late enough to learn from pioneers’ mistakes and buy at deflated mainstream volume prices, and early enough to avoid being left seriously behind. The new reality, in the words of Sun Microsystems’ Bill Joy is that “[business] people have already bought most of the [IT] they need”. Just as with railroads and the telegraph, heavy investment in the leading edge of such technologies now becomes excessive and reckless, “too much of a good thing”, and the new rules become:

  1. Spend less
  2. Follow, don’t lead
  3. Focus on vulnerabilities, not opportunities

Some of the key applications of these new rules:

  • Be rigorous in evaluation of new purchases, e.g. re-evaluate the need for automatic laptop upgrades especially when most of the existing fleet are under-utilized
  • Look for cheaper solutions even if they sacrifice some unneeded benefits and functionality
  • Eliminate excessive data storage space
  • Delay IT expenditures as long as possible

This is a very sobering picture for those whose living depends on IT, and specifically for those whose living depends on innovation and new product development. I have argued, for example, that business needs to introduce next-generation personal weblogs and Social Networking Enablement (SNE) software to replace their dysfunctional, centralized, disconnected intranets. How can this new software hope for acceptance in a ‘spend less, follow, don’t lead, focus on vulnerabilities, not opportunities’ world?

First, this software needs to be sold to the companies that sell network hardware and software, not to the corporate end users, and embedded in their product offerings. You sell an improvement to the telephone switch to the phone company, not the phone user. And then the network product vendors need to appreciate and to show their customers how SNE software (a) can drastically reduce or replace the cost of intranet and database management, and (b) can dramatically improve employee productivity.

If Carr is right, the golden age of IT is over, and in the next 3-5 years, most large enterprises will drastically cut IT expenditures. If that happens, whole applications, including intranets, will be scrapped if they lack a strong, measurable ROI. Vendors who can fill the void with low-cost standard, open-source, packaged solutions will find ready takers. IBM is now offering site licenses of its end-user office productivity software free with network servers. Perhaps we need to get Microsoft to offer site licenses of business-quality weblogs and open-source SNE software with its enterprise-wide IE servers and software.

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  1. ed nixon says:

    Dave,Thanks so much for this excellent summary and evaluation. I tend to agree with your pessimistic conclusions.However, I’m not sure I can follow you along the marketing route you choose for weblogs and social software applications. I see the generic imbedding strategy through jadded eyes; we have a lot of historical data about the ups and downs of this strategy. I’ve just posted about this, writing about it from the browser point of view. Here’s the link: you and your readers can take a look and tell me that there are systemic, structural or behavioral differences between the two imbedding strategies — the one I describe and the scenario you describe here — that would make the later more ultimately palatable or beneficial for customers. It seems to me that the lessons this HBR article trys to teach software and equipment vendors will be ignored and the old same vendour behaviours — proprietary formats, user lock-in and FUD — will emerge as the competitive dynamic. That’s real pessimism.

  2. Dave Pollard says:

    Ed: I see your point, but I think there are some forces at work that will tend to prevent Shirky’s Power Law (first in any market space to get big, prevails, even if better alternatives come later) from leading to mediocre social software. First, buyers are getting more sophisticated and more demanding, even of ‘free’ stuff. Both the browsers and the so-called ‘office productivity’ software that Microsoft dominates are seriously threatened by new, lighter upstarts, much as Japanese cars supplanted the old American clunkers. Business is furious at the endless MS upgrades and are actively organizing to find alternatives to break the monopoly, bloat and inefficiency of MS products. In addition, independent developers are better networked, and more prone to use open sourcing to rapidly create and improve new software. It’s been said that software development is rapidly becoming a hobby that allows everyone to get free, quality software, much as blogs give you free information that you once had to pay for. And third, business is starting to outsource IT, hence eschewing home-built in favour of store-bought, and is also recognizing the value of opening up their information systems and content to customers and even competitors (“information is always trying to be free”, as McLuhan said). If that sounds counter-intuitive, recall that the first phone networks were proprietary. Business is realizing that rapid free exchange of information actually works to their benefit — they get more than they give, and they have the scale to do something with the information, which is where the competitive advantage of information really lies.So I’m, perhaps foolishly, an optimist that we’re going to see some blockbuster, open-source, low-cost, powerful social software soon, that we’ll all benefit from.But I wouldn’t want to work in the IT department of a big company today, or try to make a living selling software per se.

  3. Clearly having IT is not strategic any more – the basic scarcity / ubiquity argument sees to that.So the cheapening / commoditisation of the technology building blocks can only continue, and there can be little sense in looking to buck this trend – except genuinely new technologies – quantum devices or nano-tech perhaps, with many orders different scales of capability.Where IT can still provide strategic advantages is in how you use it. I’m particularly optimistic about genuine knowledge management adding to the effectiveness and creativity of the human resource. The only drawback is that new ideas themselves spread very fast, and strategic advantage though real can be relatively short-lived. (I have some other thoughts on lousy memetic evolution in the days of mass comms at the speed of light, but that’s another story.)The other points in the HBR article seem like motherhood – no-one should spend money an the un-needed – and one man’s vulnerability has always been another’s opportunity – etc.I’ve blogged several posts about the ICT/IT Techno-Economic Paradigm (Kondratiev Wave) being over the hump, as competitive strategies become self-defeating – still 20 years of business in it yet thought – if you have the “right” strategy. Try this one ..

  4. ed nixon says:

    Dave and Ian,Thanks for your comments.With respect to free information, it’s ironic that in a sense what was touted as the new killer product — information — has not lived up to the expectation. Most efforts to put a tap on it and turn it into a new, highly profitable draft beer are failing. I saw this but interpreted it to mean that people simply weren’t yet aculturated to pay for the more ephemeral electronic product. And also that the technology wasn’t “there yet” — remember the ongoing buzz about micro-payments? You seem to be saying that information is like air: ubiquitous and totally beyond productisation. If that’s the case, I wonder if we shouldn’t extend the analogy and think about ecological matters and air (information) quality as we do, if not enough, in the material world.Regarding ubiquity: I have lingering concerns about the sort of cognitive “invisibility” that comes with ubiquity. There are two features to my concern: a) I distrust the reliability of it all and b) the despair at the added difficulty of independently assessing technological factors (under ubiquity) as opposed to human, environmental, cultural, what you will when we are trying to get a handle on what is happening or what is going wrong or, for that matter, where we have been and where we are going. And in general related to both these comments: I don’t think it profits us at all as a species to give up our rights and responsibilities with respect to memory and history.

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