8/7/2019 IT Doesn't Matter Maszuin Kamarudin

1/4

Management Information System

MBA January 2011 (Section 1)

IT Doesnt MatterThe Debate For and Against

Maszuin Kamarudin (KLCP109015)

8/7/2019 IT Doesn't Matter Maszuin Kamarudin

2/4

2

IT Doesnt Matter: The Debate

PROs:

a. IT has deeply transformed today's business world and all businesses use informationtechnology on a large scale. As a consequence, capital expenditure devoted to IT has

increased dramatically over the years and is still tremendous in spite of the current

economic situation. Besides IT tools are no longer considered for low-levelemployees, but are used intensively by top managers who openly value the supposed

competitive edge that they can derive from its usage. Behind all that lies the thoughtthat the pervasiveness of IT usage has led to its becoming more strategic.

On the contrary, Nicholas Carr shows us that IT has in fact become the latest item in a

list of commodities that helped shape business and industries as we know them. Beinga commodity, IT also becomes transparent to its users.

b. Proprietary technologies, may generate a competitive advantage to their ownersprovided adequate protection of their investors' rights. Conversely, Nicholas Carr

proves that Infrastructural technologies are more productive when they are shared,

although owning them may prove more cost-effective at the beginning of their

existence. Once standards are in place, that type of infrastructural technologies is

more effective when shared.

Nicholas Carr uses the striking examples of electric power production or trains to

prove his point, showing that no company would benefit today in purchasing andmaintaining its own railway network.

Also, one of the major pitfalls that managers fall into is the belief that competitiveadvantages brought by infrastructural innovations will last forever. At the end of the

buildout phase of a new infrastructural technology, new standards will emerge,

competition will rise dramatically and prices will fall. Even the usage of the new

technology will become standardised. Therefore, the advantage of infrastructural

technologies will shift from the micro to the macro-economical level for when they

become pervasive, only countries and regions benefit from their presence, whereas

individual companies are all competing on the same level.

Likewise, infrastructural technologies are often subject to overinvestment therefore

causing sweeping economic trouble. What we have witnessed with the 'Internet

Bubble' happened in a similar fashion with the overinvestment in railroads in the

1860s. The analogy shows that there is a risk for deflation to settle on our 21st centuryeconomies as in 1860. N Carr would like the analogy to end here but the risk cannot,

in his mind, be overlooked.

8/7/2019 IT Doesn't Matter Maszuin Kamarudin

3/4

3

c. Despite appearances, IT is truly an infrastrural technology and according to NicholasCarr, it is particularly prone to commoditisation due to the following characteristics:

y IT is a Transport vehicle for information and is greatly standardised. Softwarecustomisation is therefore fast becoming a non-starter for cost-effective IT

implementations,

y IT is highly replicable, not just in terms of software (reusable objects) but also interms of business processes. The Internet has acted as an accelarator upon this

standardisation and Web-based services will impact this trend even more, therefore

turning application software into a commodity too.y IT prices are subject to sharp deflation. As more computing power and more network

infrastructure are made available, more servers are being connected to the Internet,

and this technology is sold at more and more ridiculous pricesy Throughout the buildout of the IT infrastructure, a myriad of companies have been

able to derive significant competitive advantages from IT. Some have been able to

establish a durable competitive edge (e.g. Dell Computers and Wal-Mart) whereas

others have only been able to generate a temporary advantage. But the ability togenerate a competitive advantage from IT is becoming very rare nowadays, as is

always the case with infrastructural technologies according to Mr Carr.

Whereas it is not possible to predict the end of the buildout of an infrastructuraltechnology, there are many signs that the ramp-up of IT infrastructure is nearing its

completion:

y IT is now delivering more power than is required for business,y IT prices are so low that they have almost become affordable to all,y There is (far) more network capacity available than is required,y IT vendors are now positioned as utilities, mainly with their plans for selling web-

based services.

y The Internet bubble has burst.The incentive for customisation will now be marginal and reserved to a few nichevendors which offer some highly specialised software.

CONs

a. New technologies will continue to give companies the chance to differentiatethemselves by service, product feature, and cost structure for some time to come. Thefirst mover takes a risk and gains a temporary advantage (longer if there are follow-on

possibilities). The fast follower is up against less risk but also has to recover lost

ground.

b. The new technologies will allow new things to be transformed in nonlinear ways.Radio-frequency identification devices for grocery stores, smart cards, and automated

ordering systems for hospital physicians are all examples of new process targets that

technologies will soon address. In the more distant future we will see the improved

creation of drugs and treatments through the ability to rapidly and more deeply

analyze huge databases. Understanding the potential and then deciding when the time

8/7/2019 IT Doesn't Matter Maszuin Kamarudin

4/4

4

is right to seize these transformative applications will be neither routine nor boring forthe CEO or CIO.

c. Grid computing, standardization of components, and open systems, far from stiflingdifferentiation, provide a stable platform to build on and offer new ways of

differentiating, either by cost, structure, product, or service. Just as literacy stimulated

innovation, so do open systems and grids. Outsourcing the commodity infrastructureis a great way to control costs, build competence, and free up resources, which can be

used to combine data bits in creative ways to add value. Relatively bulletproof

operational reliability will be a key part of the price of success. Back-office or server

farms, help desks, and network operations will be outsourced to specialists to attain

this reliability (at rock-bottom costs). Packages like SAP further help remove

commodity maintenance activities and allow firms to better analyze customer

information and provide service at the sharp end. The package of skills needed inside

an organization is changing very fast for competition in the information age.