Nicholas Carr, in his article to Harvard Business Review, makes some fairly sweeping and strong statements as to the vanishing strategic advantage of IT in the business place The crux of his argument is that IT is now fundamentally an infrastructure technology - which provides no strategic advantage.. Carr has it only partially right.
Nicholas Carr, in his May 2003 article to Harvard Business Review, makes some fairly sweeping and strong statements as to the vanishing strategic advantage of IT in the business place. The crux of his argument is that IT is now fundamentally an infrastructure technology - which provides no strategic advantage - rather than a proprietary technology which can provide advantage. He then goes on to argue that it is time to scale back on IT investments, that there is such a thing as too much of a good thing, and that it is time to reevaluate and scale back IT.
Carr has it partially right. This paper addresses some of the points he missed and the valuable questions he raises but does not answer.
IT needs to be divided along the lines Carr proposes: Commodity IT and Strategic IT. Commodities are crucial to a company's business. Electricity is a commodity, yet no company survives without it. Commodities, as Carr correctly points out, should be boring. One should not have to think about whether or not you hear a dial tone when you pick up the phone. It should be reasonable to expect that when you flip on the light switch the lights turn on. In today's world it should be expected that your email systems work, your billing systems work, and your databases are up.
Commodity IT
What does this mean for running an IT organization? When I first joined a mid sized complex software and services company as an Executive Vice President in charge of both IT and Product Development, I was asked by the CEO if I needed a CIO to run the IT half of my job. My reply was "No, IT is baseline business. It should not require a significant amount of my strategic thinking or time. I expect to be able to let that portion run itself." My expectations and thinking were correct, but the reality was that the IT side was over spending and not yet a commodity organization. This is where most companies are today. They have not yet achieved commoditization of most of their IT infrastructure. Carr gives some good advice on how to change IT management:
· Spend Less
· Follow, don't lead
· Focus on vulnerabilities, not opportunities
Sound advice, if your company has its IT shop in order. The corollaries might be:
Focus spending on making sure your IT shop is commoditized. Migrate all proprietary, IT infrastructure to standardized, swappable, well known, cheap, parts. Mandate it and enforce it. Forget the religious wars on what vendor is best. Choose and stick with it for a significant period of time.
Follow, don't lead. Carr is talking about cutting edge technology, but I would go a step further. Follow the trend that is taking the commodity route. It is OK to buy "new" products if they are in their third generation and well adopted. It is also OK to buy new products if that area of your IT department is not unified and commoditized and buying new allows you to do so. However, don't buy technology because it holds the promise of suddenly being able to do something new. More discussion of this in the section on Strategic IT. It is crucial to know when something is strategic.
Vulnerabilities are opportunities. If your email system is known for breaking down every month, focus on how to really fix it, not how to patch it. Focus on what to outsource and what not too. Even if you never outsource, or decide not to, focusing on your IT department as if you were going to outsource is a great way of understanding the metrics that are important for your organization.
Related to this is a Focus on Vendors. Insist that your vendors commoditize. If they tell you that they have a proprietary database for their product, tell them you don't add new databases. Would you buy a European 220 volt, 50 HZ tool for your American home that uses 110 volt and 60 HZ. Sure you could buy a special transformer to make the tool work, but why? If your IT infrastructure is largely commoditized than you have the flexibility of walking away from any vendor and moving on to an new vendor. If they are "working on the version that is open right now" then you wait (see Follow, don't lead) or find a vendor that does almost the same thing, but is commoditized.
Once the baseline of your IT is commoditized you can focus on the few and rare instances where strategic, cutting edge, IT is needed.
Many managers of IT came from the ranks of IT workers, or at the very least are sympathetic to their concerns. There is no doubt that the role of the IT worker is changing, and this has to be acknowledged. IT workers are becoming the factory workers of the 21st century. It used to be a skilled craftsman that created a piece of fine furniture for your house, where s/he could personally be involved in its design and creation and each piece was unique and a piece of art. IT used to resemble this and only a few skilled people could fulfill the role. Now most IT is satisfied by specialized, somewhat skilled workers. This is not to denigrate the workers, but to acknowledge that the skills are easy enough that millions of Indian, Eastern European, and Chinese workers wait to do these jobs. IT is the same as the auto industry, or other industries. Workers and management has to face up to this and consider the implications. The caveat remains that it is increasingly harder to find true quality on the cutting edge, strategic, and design and management functions.
With the work force becoming commoditized also, there are a host of issues to consider on outsourcing versus in house. That is the subject of a different discussion as a failure to do outsourcing correctly can be catastrophic.
If your IT infrastructure is truly commoditized, you will not have too many specialists. Your IT personnel should be able to move from one position to another relatively easily. There should be no "irreplaceable" personnel.
Strategic IT
The question that Carr implicitly asks, without ever answering it, is what is Strategic IT? When should a company still spend significant amounts of money - and time and disruption - on something that is proprietary, cutting edge, or built in house?
Major IT projects, which can be defined by each company depending on size and complexity of the company, have an abysmal record. Multiple sets of research confirm what the Standish Group's research has show, which is over 50% of software (or IT) projects fail! Additionally: 31.1% will be canceled, 52.7% will cost 189% of their original budgets, only 42 % have their original features and function (i.e. less), and for large companies only 9% are on time and on budget - with or without their original features! Thus, be very careful with major IT projects!
Additionally, the Standish study does not discuss whether or not the projects are actually used 12 months after deployment. Most studies and indicators of success focus on the final stage of "roll out" not on whether or not the project lived up to its promise.
Nonetheless, there are times when it makes sense to engage in significant IT changes. A company has to ask itself:
Does this give me something that my competitors do not have? If so, will it give me a strategic edge. A new tool for forecasting profits or sales might be nice, but is it strategic? A new tool that allows for rapid response to the unexpected might be more strategic.
Will this be a commodity almost as soon as I expect to have it done in house? Almost as soon should factor in that at 189% of budget (which is the average) a 12 month project is really closer to 23 months.
Is it simply necessary to do business? E.g. If the company has gone from domestic only to international, there may be IT infrastructure that is just necessary to "turn on the lights" in the new paradigm. Or, new partners may simply demand it.
Will it hurt if my competitors have this at the same time as we do? It may not and you may be able to get it built by a vendor. Demand that it is commodititized.
Does it allow you to do something well that you were not able to do at all before, or does it simply allow you to improve on what you are doing already. The former is strategic, the latter is not. The latter should be focused on fitting in with the over all "commoditization" of IT rather than disrupting it.
Does it involve special skills that are hard to find, expensive, and not in house? If so this is a red flag. If you have a mature IT department and this is true, you may be stuck using consulting resources. If it is a strategic project one needs in house skills.
If the project gives a strategic advantage, how long will that advantage last and how will you turn it into something permanent when the technical edge has been lost - which it will inevitably be.
When these, and many more questions, are answered your list of strategic IT projects will be short. These strategic projects need to be few and far between but have your best team members on them. All companies should have a small team or set of teams devoted to these strategic projects and these resources are not commodities.
The rules have changed now that IT has the potential to be the new commodity, the trick is making it into a commodity, reducing the costs of that commodity, and focusing on a few strategic projects to take the company to the next level. This does not lesson the importance of the CIO, nor his/her department, it increases the importance. It does reduce the visibility of most of IT. IT is part of the business now, not the attention and money grabbing department it once was. The skill set for the CIO has once again changed to one vastly different than it was ten years ago.
|
