Is the Revolution Over?

Is the Revolution Over?

Information Technology was supposed to revolutionize business. It hasn's worked out that way.

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“IT Doesn’t Matter” by Nicholas G.
Carr, in
Harvard Business Review class="text14"> (May 2003), 60 Harvard Way, Boston, Mass. 02163.


Information technology (IT) was once thought a vital
strategic tool for gaining an edge on competitors. But these days, argues
Carr,
Harvard Business Review "text59">’s editor at large, IT has become just another humdrum
means of doing business.


“You only gain an edge over rivals by having or
doing something that they can’t have or do,” he points out.
“By now, the core functions of IT—data storage, data
processing, and data transport—have become available and affordable
to all.”


Before IT was so widespread, many
companies—including Mobil Oil, American Airlines, and Federal
Express—were indeed able to steal a march on competitors by their
innovative use of proprietary IT. But, says Carr, as happened with other
“infrastructural” technologies—the telegraph, railroads,
electric power—“the window for gaining advantage” remained open only briefly. The cost of a technology drops, “best
practices” are quickly identified and disseminated, and the
opportunities for breakthrough uses decrease. Today, hardware and software
available right off the shelf have much more power than most companies
need. As a result, Microsoft, IBM, Sun, and other IT producers are rushing
to reposition themselves as suppliers of “Web
services”—charging annual fees and becoming, in effect,
utilities.


IT “is entwined with so many business functions .
. . that it will continue to consume a large portion of corporate
spending,” Carr writes. But a kind of mania drove IT expenditures
during the 1990s from about 30 percent of all capital spending by U.S.
corporations to nearly 50 percent. He urges companies to cast a cold eye on
the amounts they spend for IT. Most workers don’t need the latest
blazingly fast PC to do their jobs, and a huge investment in data storage
simply to save employee e-mails and files makes no sense.


What’s more, Carr maintains, being stingy with
IT dollars is unlikely to damage a firm’s competitive position. A
consulting firm that looked at 7,500 large U.S. companies last year found
that the typical company spent 3.7 percent of revenues on IT. But the 25
firms with the highest financial returns spent, on average, less than one
percent.


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