”IT Doesn’t Matter” by Nicholas Carr
1. Summarize the positions of each side of the argument made in this article.
Carr’s Argument
 IT is backbone of commerce
 Companies view IT as a critical resource based on:
i. Spending habits
ii. Shifting attitudes of top managers
 Assumption of managers: as ubiquity of IT has increased, so has its strategic
value
 Position of Carr: scarcity makes a resource the basis for a sustained competitive
advantage; commonality of data storage, processing and transport has turned it
into a commodity
 Two types of technology
i. Proprietary – can be owned by a single company; as long as protected, can
be a foundation for sustained competitive advantage
ii. Infrastructural – more value when shared than when used in isolation (e.g.
electricity, railroads, etc.).
1. In early infrastructure build out, can take on form of proprietary
technology and can gain competitive advantage
2. If use technology in a unique way, can gain an advantage
3. Can lead to broader market changes and can gain a step over rivals
4. Infrastructure advantages are not available indefinitely. Small
window to capitalize.
5. As technology is standardized, best practices are created, and hard
to sustain an advantage.
6. Infrastructure technology can offer advantage at macroeconomic
level, not firm level
 IT is an infrastructural technology because:
i. It is a transport mechanism (carries data)
ii. More valuable when shared than when used in isolation
iii. Homogeneity of functionality
iv. Highly replicable
v. Generic applications (e.g. web services)
vi. Rapid price deflation, which destroyed a barrier to competition
 Gaining advantage with infrastructural IT technology
i. Capitalize on technology early in build out (e.g. AHS)
ii. Gain marketing or operating advantages
iii. Insight into the changing of an industry
 Most of the advantages of IT have already been fulfilled
 Reasons why build out of IT is nearing end:
i. Power is outstripping business need
ii. Price of functionality has dropped and is affordable to all
iii. Capacity of networks have caught up with demand
iv. Vendors are positioning themselves as commodities
v. Investment bubble has burst
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“When a resource becomes essential to competition but inconsequential to
strategy, the risks it creates become more important than the advantages it
provides” (p.11)
New focus for managers:
i. Mitigating risks and maintenance (vulnerabilities, not opportunities)
ii. Spend less, don’t overspend (evaluate benefits before investing)
iii. Follow, don’t lead (let others overspend, get technology on the cheap)
Much of computing resources are being abused (i.e. storage of emails, mp3s,
videos, etc.)
IT spending is not correlated with better financial results
IT management should be boring
2. Read the corresponding letters to the editors. Which points do you agree with the most? the
least? Why?
Brown & Hagel
 Carr isn’t saying IT doesn’t matter, saying IT is a diminishing source for strategic
differentiation
 IT alone isn’t enough; companies need to be aware of possibilities and act before
others
 Companies need to be willing to change business practices to exploit IT
 Innovation will continue because advances in IT will create new opportunities
 Companies think too narrowly about possibilities for IT when focusing on
business practices within the enterprise. Think about other relationships
 Economic impact comes from gradual improvements rather than big bang
initiatives
 Strategic impact of IT investment is the cumulative effect of sustained initiatives.
Focus on near-term to meet long-term goals.
 Lack skills to integrate state-of-the-art IT and business practices
 Senior managers need to have a high-level view of markets they want to operate
in and the company they will need to be in order to create long-term value
 Focusing on short-term will not lead to sustained advantages
 Vendors are part of the problem
McFarlan & Nolan
 “In no other area is it more important to have a sense of what you don’t know than it is in
IT management.”
 Cost performance of IT is improving rapidly and will continue to do so
 Carr’s graph is an example of How to Lie with Statistics
 Naïve to assume IT will follow same path as other commodities
 As business pace increases, need to consider how IT can change the rules of competition
 Senior management tends to limit opportunities available with IT
 New technologies can give companies methods to differentiate
 CEO’s should use multiple lenses when valuing IT
o Improving cost savings and efficiencies
o Focus on incremental improvement of organizational structure, products, and
services
o Focus on creating advantages through scope, partnerships, and changing the rules
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Skills needed in information age are changing dramatically
Role of CTO and CIO are growing increasingly important
Hittleman
 Role of manager is not to get boring, just different.
 Competitive advantage should never be sole concern of IT managers
 “IT must continue to support the business – not just through the logical application of
technologies but also through the logical application of common sense”
Strassmann
 Carr’s assertion that IT has lost value is based on reasoning and logic, not empirical
evidence. Marginal cost of software is declining
 IT products are diverse, not commodities. People can use the same products and get
different outcomes
 Availability of IT makes it more valuable
 Sustainable profits can be achieved at a firm level through the global marketplace and
when benefits accrue to customers. Small business growth has increased with IT.
 IT is not a transport mechanism. It’s not the transport that is important, but the message
itself.
 Use of standardized packages does not mean that homogeneity destroys value; can get
different results with standardization
 Generic applications can reduce total cost of ownership
 Dissemination of best practices means survival requires speed, innovation, and more use
of IT, not less
 Cost cutting is worthwhile if there is a lack of a strategic plan
Broadbent, McDonald, and Hunter
 IT matters due to intelligent and innovative application of information
 Source of competitive advantage is not having a computer, but knowing how to use it
 CIOs should manage costs and risks aggressively and work with business colleagues to
design IT governance appropriately
Skaistis
 Carr is giving a warning to managers in article. Be realistic about technology
 Aim IT efforts at helping the organization meet its strategic objectives
 Focus on using IT to respond to changing market conditions
 Focus on optimizing cost and performance of IT
 Focus on minimizing IT risks
Zwass
 Data storage, communication, and processing have been commoditized
 Can still use IT to learn more about customers or better manage interorganizational
relationships to gain competitive advantage
Lewis
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IT has never mattered. It’s how we use IT that matters when we combine technology
with intellectual capital (business models, organizational culture and creativity)
IT is a magnifying lens on our strengths and weaknesses
Even if the way IT is purchased is more like a commodity, it doesn’t necessarily mean
that IT is a commodity
Pisello
 Companies spending frugally on IT have superior overall results, but poorly performing
companies can be spending little as well. There is no correlation with investment and
performance
 What matters is what the company invests in and how well it is applied to business
practices
 Commoditization does not mean that good IT implementations will be replicable. Each
organization has unique needs
 Standardized hardware and software allow organizations to focus on more important
problems that deliver value (e.g. CRM, SCM)
Pike
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IT is all about productivity. This is very strategic for manufacturing and service
industries.
After helping individuals be productive, IT can then help businesses be more productive
as they work together
Gurbaxani
 Scarcity is not technology, it is the management that can create value with that
technology
 Carr suggests organizations do not need to develop own management capabilities because
they can be purchased; however, the current vendors cannot provide this service
 Common, generic systems will not fit all companies and they will need to have
customization or the business processes need to be changed. Neither is straightforward or
ideal
 Companies can use same applications differently
 “The move to a common infrastructure does not reduce the opportunity for competitive
advantage; it increases them.”
Alter
 Article could have read “Kidneys Don’t Matter”
 IT is not the headline, the system is more important. Work systems need IT
Hyatt
 With electricity, what matter is quantity, not quality; not so with IT
 Strategy of organization is either low cost or differentiation and IT systems for these
strategies vary dramatically
 Companies being frugal with IT may lose out if push too much on vendors or wait until
technology is standardized
 Corporate leaders must align IT with strategy
Langdon
 Parts of IT has become commoditized like networks and phones
 Incremental changes using IT is “softwarization”, which is not a one-time activity, but an
ongoing process. No reason for this process to stop.
o Moore’s law – cheaper and more powerful hardware over time
o Increased processing power is leading to new ideas
Response by Carr
 “As IT’s core functions – data processing, storage, and transmission – have become
cheaper, more standardized, and more easily replicable, their ability to serve as the basis
for competitive advantage has steadily eroded.
 Information systems can be used to manage process and information to achieve
competitive advantage, but the more tightly an advantage is tied to a technology, the
more transient it will be.