This was a critique I wrote of Carr's "IT Doesn't Matter" that was published in Harvard Business Review.
1. Synopsis
Nicholas Carr has created a lot discussion in the IT scholarly field with nearly 400 articles citing his article "IT Doesn't Matter" published in Harvard Business Review in May 2003 (Google Scholar, 2007). The main thrust of his article is that organizations should treat information technology (IT) as a commodity in which it should attempt to keep costs to a minimum, minimize vulnerabilities, and avoid risk-taking. By comparing information technology to other commoditized industries like the railroads and electricity, Carr attempts to convince his audience of executive management and IT leaders that IT's role within an organization should not be treated much differently than any other cost it seeks to minimize. Carr believes that organizations should not attempt to build competitive advantage through IT investment because advantages built with it are short-lived as the innovation spreads through the industry and becomes commoditized.
2. Content Critique
As I mentioned in the previous section, Carr's audiences are executive managers and IT managers though the main thrust is very much towards executive managers. Carr's use of examples from the electrical and railroad industries demonstrates his position well. He posits that IT is an infrastructural technology rather than a proprietary technology. Proprietary technologies are the property of a single company and can be used to build competitive advantage. Infrastructural technologies are those that are often shared throughout an industry rather than used by a single company. He then uses multiple examples to demonstrate his position. Innovators and early adopters are able to get ahead of their competition but only for a time through the implementation of new infrastructural technologies. As a technology diffuses through the industry, it begins to lose its ability to create competitive advantage. This happened with the electrical and railroad industries, and the overinvestment in IT during the Internet bubble and bubble bursting parallels the same thing happening to the railroad industry in the 1860s.
Carr builds on his position for executives by describing how easy it is for IT to be commoditized. First is the fact that it is a "transport mechanism," specifically for data. Second is that it is "highly replicable" due to the ability to copy data very easily. The rise of the Internet accelerated this capability as it provided an easily delivery channel for the data. Lastly, IT is often experiences very rapid price deflation. While Carr uses Moore's Law (Wikipedia) to demonstrate his point, I do not believe it is an appropriate point. While the specific physical components of IT are subject to patterns such as Moore's Law, it is yet to be demonstrated that it applies to the software aspect of IT. Carr states that as cutting edge IT matures, it is soon available for everyone.
Having established his position, Carr continues with advice for companies on their IT investments going forward. There are three rules that he proposes for companies to use. The first is to spend less on IT, the second is to be a follower rather than a leader in IT, and to focus on the vulnerabilities of not implementing an IT investment rather than the opportunities created. It is in his conclusions that I feel are the weakness of Carr's case. While I agree with the majority of his findings in the rest of his article, I think that the final portion falls short. For example, Carr states that companies should make vendors stop with constant requirements for upgrading systems in order to run the latest and greatest. The difficulty with this assertion is that the operating system that runs over 90% of the desktop computers in the world was created by a single company, Microsoft (Burger, 2002). Microsoft's monopoly is a powerful one because the vast majority of software is written to run on their operating system. That means it is not a position of power that a company has in trying to force Microsoft to stop creating newer versions of its Windows operating system that require more and more powerful hardware. Microsoft makes hundreds of millions of profit every year and can easily afford to lose even hundreds of companies as customers.
Carr also criticizes how companies use their IT specifically in their IT policies with how users are allowed to store files. Thanks to Moore's Law and improvements in storage technology, the cost of not implementing a strict, regulated policy for storage usage is likely lower than the costs of managing such a policy both in real money and in the happiness of employees. I believe that Carr could have made a stronger case in his conclusions if he had collaborated with an IT manager skilled both technically and in business-IT alignment. Carr's article is likely to anger many IT managers with its position in regards to IT, and the technical flaws in it could present weaknesses for IT professionals to exploit in criticism of his article. This naïve example of just switching software when a vendor requires newer software and hardware in order to get the latest features demonstrates that more discussion of this area is needed. Such a policy would likely increase IT spending well beyond what Carr thinks a company should use.
3. Content Discussion
While the article does well in presenting facts that are likely to convince executive managers, I believe that it ignores important details or uses inappropriate facts or examples that keep the article from fully informing executive managers. The people leading their organizations need to have as much information as possible before them in order to make the appropriate decisions, and I believe that in some areas Carr has oversimplified the subject matter for his audience in its final recommendations.
Investments in IT are definitely an important area for an organization, and Carr has done an adequate job in making both executive managers and IT managers aware of the fact that IT costs have skyrocketed and that every IT investment should not be automatically green-lighted. Carr's article is more of an argument for business-IT alignment as opposed to minimization of IT within an organization. In a way, Carr's article is a bridge from Era IV to Era V as described in chapter two of Pearlson and Saunders (2006). Instead of using competitive advantage as a justification for IT expenditures, adding value to the organization must be the justification.
"IT Doesn't Matter" really needs to have an additional section that comes before the section titled "From Offense to Defense." I believe that companies can decide whether they have the desire and capability to use IT to create and sustain competitive advantage. Carr himself gives examples of company that have used IT to create and sustain their competitive advantage within their industries - Wal-Mart and Dell. While he claims that they support his belief that companies should be followers rather than leaders in IT, they do not necessarily attempt to minimize the costs of IT. Wal-Mart spends an average of 1% of its worldwide revenue on IT which was $256.3 billion in 2003 or $2.5 billion on IT (Sullivan, 2004). While less percentage-wise than most companies, that is certainly no small investment especially when you consider that Wal-Mart spends that much every year! The issue then becomes how to help companies decide whether they have the desire or capability to use IT for creative advantage and then how to judge IT projects that can accomplish that goal.
One particularly useful article for demonstrating this point was written by Varun Grover and Ganesh Bhatt titled "Types of Information Technology Capabilities and Their Role in Competitive Advantage: An Empirical Study" (2005). Information technology can provide a variety competitive advantage, but it is not a simple task. Within three different types of capabilities - value, competitive, and dynamic - companies can potentially gain competitive advantage through "IT infrastructure, IT business experience, relationship infrastructure, and intensity of organizational learning" (Grover & Bhatt, 2005). Grover's and Bhatt's article provides a model by which companies can assess their capability and willingness to use IT for competitive advantage. If Carr were to have included a discussion of that topic, I would be fully on board with his position. However, I think that his oversimplification of the subject is likely to only impact companies that cannot decide whether or not to use IT for competitive advantage. Those companies are likely better off following Carr's advice.
References
Burger, D. (2002, October 7). Retrieved September 23, 2007, from IT Jungle: http://www.itjungle.com/tfh/tfh100702-story03.html
Carr, N. G. (2003). IT Doesn't Matter. Harvard Business Review (May), 41-49. Google Scholar. (2007). Retrieved September 23, 2007, from http://scholar.google.com/scholar?hl=en&lr=&cites=8661364924339583106
Grover, V., & Bhatt, G. D. (2005). Types of Information Technology Capabilities and Their Role in Competitive Advantage: An Empirical Study. Journal of Management Information Systems , 22 (2), pp.253-277. Pearlson, K. E., & Saunders, C. S. (2006). Managing & Using Information Systems. Hoboken: John Wiley & Sons, Inc.
Sullivan, L. (2004, September 24). Retrieved September 23, 2007, from Information Week: http://www.informationweek.com/story/showArticle.jhtml?articleID=47902662
Wikipedia. (n.d.). Moore's Law. Retrieved September 23, 2007, from http://en.wikipedia.org/wiki/Moore%27s_law
If you are in a class taught by Michele G, I recommend that you don't copy or paraphrase this article. She knows about it, and we share a good laugh every time a student plagiarizes it. I do encourage using this critique in your citations, but do your own work.