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Is IT worth it for organizations?

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FOUNDATIONS IN INFORMATION SYSTEMS AND
TECHNOLOGY
SESSION 7
14/09/2019
7 – Does IT Matter?
Overview
• The debate: Nicholas Carr’s argument
• Recent history: the dot.coms
• Strengths and Weaknesses of Carr’s
argument
• Opportunities from IT
• Examples of IT success
• Lessons from the dot.com era
The Debate
• The IT promise of yesterday
• Today’s difficult climate for IT
• Two key questions
• Is there still opportunity to build a
technology-based business?
• How important is technology for business
success?
Remember the Late 90s?
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The “dot com” bubble
“Information at your Fingertips”
Difficult to find enough IT people
Y2K investments
• …The world has changed since then!
2001-Now: Harsh Realities
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•
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•
•
•
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Internet “bust”
Complexity of IT management
Security crises
E-mail: spam and distractions
Crashes and downtime
Monolithic application silos
Cynicism about software and hardware
Credit: Bill Gates, Microsoft, July 28, 2003; reported in the Seattle Times
Since Carr’s thesis
2008+
• Financial Crash
• Blurring of business sectors
• Mass Unemployment (e.g. Youth
unemployment in Europe)
• Free movement of people and political
concerns
• Data and information breaches
• Global political unrest and uncertainty
IT - Competitive Advantage or
Commodity?
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•
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Competitive Advantage
Information gives you a competitive
advantage (Porter 1980)
The panaceas: TQM, JIT, BPR,
knowledge management
“Get automated or get dead!” (1980s
quote)
“If you’re not an e-business, you’re
out of business!” (1990s quote)
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•
•
•
•
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Commodity
Productivity-Paradox (Strassman,
1985)
IT as a cost-pit
Homogeneous offerings in commodity
market (Carr, 2003)
Dot.con (Cassidy, 2002)
One-to-many ASP business model
(Currie, 2004)
Utility Computing (pay-as-you-go)
Spending on IT vs. Profitability
‘Productivity Paradox’
Paul Strassman, The Business Value of Computing, 1990, p. xviii
Spending on IT vs. Profitability
‘Productivity Paradox’
Spending on IT vs. Profitability
‘Productivity Paradox’
Spending on IT vs. Profitability
‘Productivity Paradox’
Is Opportunity Gone from IT?
• Nicholas Carr’s argument
– IT power and ubiquity have decreased its
strategic value
– Like the railroad and electricity, IT has become
an infrastructure commodity
– IT spending increases rarely translate into
superior financial results
– Little opportunity here
“IT Doesn’t Matter,” Nicolas Carr
Harvard Business Review, May 2003
A quote from Carr
“What makes a business resource truly
strategic – what gives it the capacity to be the
basis for sustained competitive advantage –
is not ubiquity but scarcity. You gain an edge
over rivals only by having something or doing
something that they can’t have or do”.
Carr, 2004, p. 7.
A quote from Carr
“By now, the core functions of IT – data
storage, data processing, and data transport –
have become available and affordable to all.
Information technology’s very power and
presence have begun to transform it from a
potentially strategic resource into what
economists call a commodity input, a cost of
doing business that must be paid by all but
provides distinction to none”.
Carr, 2004, p. 7.
Nicholas Carr’s examples 1
Secondary Source: HBR May 2003
Nicholas Carr’s examples 2
Secondary Source: HBR May 2003
Nicholas Carr’s examples 3
Secondary Source: HBR May 2003
Rate of Adoption
Electricity
(1873)
Telephone
(1876)
100
Television
(1926)
Radio
(1905)
90
80
70
Microwave
(1953)
60
50
PC
(1975)
40
Cell Phone
(1983)
30
20
Internet
(1975)
Percentage of Ownership
Automobile
(1886)
VCR
(1952)
10
0
1
10
20
30
40
50
60
70
80
90
100
110
120
Source: Rich Kaplan, Microsoft
Carr’s conclusion
• IT is no longer strategic to business
• Move from an offensive strategy to a
defensive strategy
• Spend less
• Follow, don’t lead
• Focus on vulnerabilities, not opportunities
Problems with Carr’s conclusions
There are two problems with Carr’s conclusion:
1. Historical and analytical arguments
2. There are still many opportunities from IT
When a Technology is Strategic…
• Work collaboratively with the technology
supplier (Apple, Tesco, Amazon)
• Look for differentiation from the
technology (Amazon ‘one click’)
• Cost, while important, is less important than
having the capability (News channels)
• Technology is ‘mission critical’ to business
(Banking, trading, retailing, traffic
management etc)
When a Technology is no Longer
Strategic…
• A business uses technology for support, not
as a strategic differentiator
• No business to business (B2B) collaboration
• Looking for low cost solutions
• May be important but not a differentiator
• (McFarlan’s grid, technology as a support
function, email, payroll, etc)
McFarlan’s Grid
Looking at History
We heard Carr’s arguments in both the early 80s
and the early 90s
• The PCs came to the office in the mid 80s
• The Internet changed business in the mid 90s
• Beyond 2000, technology has accelerated the pace
of business and blurred business boundaries
• Post 2010, mobile technology has revolutionized
traditional business processes, products, services
and customer relations
Conclusion on Spending
Business advantage has never come
from spending money on IT, but
from how you use IT
Analysis of Carr’s Argument
• Strengths of the argument
• Weaknesses of the argument
– What is IT?
– Limitations of comparing IT to electricity
– Limitations of comparing IT to railroads
Strengths of the Argument
• Don’t just spend on IT because you can
• Like electricity, availability, standards, and
reliability are improving in many areas—
access to parts of IT is no longer an issue
• While railroads are still important to
business, low cost rather than differentiation
is usually the goal—access is not the key
issue. Parts of the IT system are like this
Weakness of Carr’s Argument
What is IT?
• IT is much more than hosts on the Internet!
• IT is much more than a transport mechanism for
data
• IT is a system that is more than the sum of its
components; its role is in creating, transforming,
transporting, and interpreting information
• The true role of IT in business is in transforming
what is built and how it is built, delivered, and
supported.
Weakness of Carr’s Argument
Limitations of Electricity Analogy
• Some standards, but nothing analogous to a
standard plug into standard electricity for
the IT system
• Some capability is broadly available but not
all
• Older capabilities are increasingly reliable,
but not the total system
• Older processes may no longer be required
Weakness of Carr’s Argument
Limitations of Railroad Analogy
• Railroads have not changed substantially
from100 years ago
• Aerospace has created a discontinuity in the
transportation system
• The IT system, because of Moore’s Law,
undergoes a change like trains to airplanes
every five years!
• Wisely exploiting this change is where the
advantage comes from IT
Technology to Business
Less
predictable
Business Opportunity
Technology products
Technology
Moore’s Law
“The chip density will double every 18 months”
Gordon Moore, Intel Founder, 1965
Translated version:
The computer you buy in five years will have ten
times the capability at the same price, or similar
capability at one tenth the price.
Gordon Moore
• Today, Apple’s A11 chip has 4.3bn
transistors in 87.66mm2
– Any smaller and it will melt!
Gordon Moore
Gordon Moore
• Today, Apple’s A11 chip has 4.3bn
transistors in 87.66mm2
– Any smaller and it will melt!
• The future is with manufacturers designing
specialised chips for areas such as
games, Artificial Intelligence (AI) and data
analysis High Frequency Trading (HFT).
Technology Products
Less
predictable
Business Opportunity
Technology products
Technology
Technology Products
Biometrics
Wearable
PDA
query
Embedded
Web
pages
Databases
Experts
Documents
Agent-based search
Technology Products
Technology Products
Six Decades of Technology Adoption
Business Opportunity
Less
predictable
Business Opportunity
Technology products
Technology
Worlton’s Law
“If you speed something up by a factor of two,
you do the old thing faster…”
If you speed something up by a factor of ten you
do something different…
Jack Worlton, Fellow, Los Alamos Labs (retired)
Worlton/Moore Conclusion
• Every five years, a business can radically
redesign its processes (BPR, 1990s - BPO,
2002+)
• Customers will continue to expect more for
less (productivity vs. price)
• New product niches emerge and old ones
disappear at a very rapid rate (think of your
PC and mobile phone – accelerated
obsolescence )
Example Companies
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Dell Computer
Wal Mart
Amazon
Tesco
eBay
Processes, products, and markets are affected
by the transformation of IT—but it is not just
making the old ways of working faster! It is
re-engineering the business.
Some Key Ideas
But…many IT projects fail to meet cost,
schedule, or business objectives, or even
fail completely
The Challenge
• The promise of IT remains high
• The failures of IT are real
Together these factors call for a strategic
response…………….by senior management
Lessons Learned from the Dot Coms
• Lessons from the“Dot com” era need to be
learned
• Technology does create changes in the
business model, but you still have to make
money
• Technology assets do not guarantee a
competitive advantage
Is There Still Opportunity for a TechBased Company?
• Yes!
• Moore’s Law will continue to create
“gaps” that great new technology can
fill…but not in its current form where
speed is the differentiator
• A new business is more than a
technology idea—we need to consider
other foundational elements
16 January 2014 to November 16, 2018
Summary
• Modern examples show there is still lots of
opportunity to build a great tech-based business
• It is much more than a great idea—it requires a
solid business plan and execution
• It also requires getting the purpose, values and
practices right—from the start
• IT can be used strategically, but mostly it is used
as a commodity!
S C H O O L
O F
M A N A G E M E N T
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