Student Projects:Does IT Matter:Synposis

Does IT Matter?

Reflections on Current Thinking by Alfred Schumer, Joanna Muench, Diana Bullion and Erik Jansen

In 2003, Nicolas G. Carr, business consultant and former editor of the Harvard Business Review (HBR), published a provocative article titled “Does IT Matter?” in the May issue of HBR. A year later he expounded on this original article in a book of the same name. In his article, Carr offered the observation that IT, which he defined as “all technology, hardware and software, used to store, process or transport information in digital form,” had become so ubiquitous that, rather than a strategic business resource, it has become a commodity.

Carr based his supposition on observed parallels with earlier technology adoption cycles including railroads, telegraphs and electric power grids from the mid to late 1800’s. From this, he concluded that the IT build out was largely complete and had transitioned from propriety to infrastructural technology. Therefore, Carr concluded, IT should be managed principally as a risk rather than an opportunity. Specifically, Carr recommended reducing IT expenditures, following rather than leading new technologies, and paying particular attention to managing existing risk.

Carr apparently touched a nerve in the IT business community no doubt following closely on the heals of the dot-bomb era when IT spending had already suffered extraordinary declines. The storm of controversy came from many quarters of IT industry (less so from business users) and focused on Carr’s definition of IT, whether IT was in fact commodizied, and the strategic implications of Carr’s recommmendations. Unfortuntaly, the counterclaims ranged from thoughtful to nearly religious, contrite to vitrolic, and largely served to confuse those who most need to understand Carr’s suppositions and decide whether a strategic change in their IT policy is warrented. It is for these policy decision makers this paper is written.

In the first part of the paper, Alfred Schumer will frame the claims and counter-claims made by Carr and others in order to focus the policy debate on only those issues most likely to weigh on a strategic policy. An attempt will be made to completely explore the fundamental premises made by Carr, including his definition of IT, and offer alternative comparisions Carr might have chosen in arguing for the commodization of IT. In addition, Alfred will offer possible explanations for the largely imperceptible and certainly uneven productivity gains from IT since the 1960s. In addition, the strategic implications of Carr’s recommendations will be examined with particular focus on future importance of “digitizing” business processes. Finally, a thought experiment will be offered applying Carr’s suppostions to the military, rather than just commercial, IT market.

In the next part of the paper, Joanna Muench will take the position that Carr argues that an infrastructure technology becomes a commodity when, “Both the technology and modes of use become standardized.” He proceeds to describe how the various aspects of IT (hardware, software and architecture) fit his definition of a commodity, but undercuts this argument, however, by discussing elsewhere the IT implementation fiascos that have cost businesses billions of dollars. Carr explains these fiascos as a symptom of adopting new technologies, but does not cite examples of increased success in implementation over the last decade.

If IT use is becoming standardized, there should be evidence of this both in increased rates of IT project success and broad adoption of standard implementation practices. A recent report of the Standish group did cite a doubling of the success rate of IT projects over the last decade with the caveat that the average project size is now smaller. Standardization of project management is harder to measure. More individuals are seeking certification from the Project Management Institute, with an increase of 25% from 2002 to 2003 alone, However only 60% of Senior IT project management positions posted on the Monster job site prefer or require certification. The goal of Joanna’s study will be to explore recent changes both to success rates and current of IT project management standards and explore what these trends imply about the commoditization of information technology.

Next, Dianna Bullion will analyze various aspects of the IT industry identifying areas that could be classified as a commodity and areas that should not be classified as a commodity. For example, Carr defined IT in the preface of his book as “all the technology, both hardware and software, used to store, process, and transport information in the digital form”. Carr’s definition encompasses the technology used to manage the data but not the data itself. Many of Carr’s critics claim that while some components of IT are commodities, others are not.

Dianna will investigate various components of IT and evaluate whether they should be classified as a potential commodity. There are many views of IT components; one view worth exploring will be Back Office, Customer Facing and Infrastructure. Back Office will include ERP, Data Warehouse, Shared Services and a Meta Data Repository. Customer Facing will include Retail, eBusiness, Call Center, Shared Services, CRM and Work Flow. Infrastructure will include Network, Operations, Desktop and Security. Dianna likes Dan Farber’s commodity definition, “IT is a commodity if the technology itself is built out of fairly standard components that don't vary greatly among vendors or provide truly unique advantages.”

Finally, Erik Jansen will identify several recent historical companies, mergers or buyouts in approximately the same number of industries where IT utilization was an distinguishing, critical or elemental factor in the situation described. In all cases, he will draw upon public records, management interviews (including some by him if possible) or statements, company-issued documents, or other sources as he can find them to analyze the IT issues and outcomes as they related to the positioning, industry trends and financial results achieved.

Erik hopes to identify corroborating situational data to test major portions of Carr’s platform that IT is neither a meaningful element of strategy nor a basis to expect superior ROI. While he believes many of the examples will likely (by their very recent existence) overturn much of Carr’s hypothesis in certain situations, he also expects that several of Carr’s baser conjectures may be shown as truths for some business organizations that are sub-critical mass or below scale within their chosen competitive ranks and/or industry. Given available time and success with insights gathered above, Erik will try to develop one or potentially two new industrial analogs to the dynamics of the IT environment today (past, present, future) as compared to Carr’s reliance upon telegraph, rail and others for predicting future trends.

Preliminary Resource Utilization

Alfred Schumer

“IT Doesn’t Matter.” Nicholas G. Carr. Harvard Business Review, May 2003.

Does IT Matter? Nicholas G. Carr. Harvard Business School Press. Boston, 2004.

IT Doesn’t Matter, Business Processes Do. Howard Smith and Peter Fingar. Meghan-Kiffer Press. 2003.

Letter to the Editor. John Seely Brown and John Hagle III. Harvard Business Review, June 2003.

Letter to the Editor. Paul A Strassman. Harvard Business Review, June 2003.

Letter to the Editor. Marianne Broadbent, Mark McDonald and Richard Hunter. Harvard Business Review, June 2003.

Letter to the Editor. Bruce Skaistis. Harvard Business Review, June 2003.

Letter to the Editor. Cathy Hyatt. Harvard Business Review, June 2003.

Unpublished Draft Letter to the Editor. F. Warren McFarlan and Richard L. Nolan. May 15, 2003.

“So, Does IT Matter?” Jon Strande. Write On Magazine. June 11, 2003.

“Knowledge Management in the Military Context.” S.G. McIntyre, M. Gauvin and B. Waruszynski. Canadian Military Journal. Spring 2003.

“Reflections on Information War”. Charles Knight, Lutz Unterseher and Carl Conetta. Project on Defense Alternatives. 1992.

War and Anti-War: Survival at the Dawn of the 21 Century. Alvin and Heidi Toffler. New York: Warner Books, 1995

“The Impact of New Technologies on the Military Area: Information Warfare” Captain Palo Fernando Viega Nunes. Air, Space Power Chronicles. March 2001.

Joanna Muench

Hawking, P. and A. Stein. (200) E-Skills: The Next Hurdle for ERP Implementations. Proceedings of the 36th Hawaii International Conference on System Sciences. (http://csdl.computer.org/comp/proceedings/hicss/2003/1874/08/187480235c.pdf)

Project Management Institute (www.pmi.org)

IEEE Revises Software Project Management Standard, Starts Agile Software Standard (http://standards.ieee.org/announcements/pr_1490p1648.html)

A Robust Search-Based Approach to Project Management in the Presence of Abandonment, Rework, Error and Uncertainty (http://csdl.computer.org/comp/proceedings/metrics/2004/2129/00/21290172abs.htm)

Trends in IT Project Performance and Best Practices (www.pmi-cpm.org/public/pages/news_events/ 2004_spring_conf/documents/PS_20.ppt)

Changing numbers reflect greater project success (http://techrepublic.com.com/5100-6330_11-1031505.html)

A Balanced Approach to IT Project Management (portal.acm.org/ft_gateway.cfm?id=954015&type=pdf)

Brooks, F.P. (1995) The Mythical Man-Month .

Dianna Bullion

Farber, Dan., “The end of IT as we know it?” Tech Update, May 2003