Questioning the importance of IT

29 Sep 2003

Technology has become just another commodity and not that a big a deal for businesses. This view, albeit expressed at greater length in an article called ‘IT doesn’t matter’, stirred up some considerable debate in the States when it appeared a few months back in the Harvard Business Review.

Last week in London its author, Nicholas Carr, was making his case at a roundtable discussion hosted by BT Global Services, an organisation that is doing very nicely precisely because it is persuading its customers that IT matters a great deal.

While the lines were drawn for a rousing debate on the pros and cons of IT investment, the topic was rendered more muddy by the discussion’s premise that the difference between companies that successfully embraced technology and those who didn’t was the ‘true’ digital divide. Never mind the disconnected citizens, the real crisis in Europe is a failure of businesses to increase productivity by adopting new converging technologies.

Carr’s proposition has become a major talking point with the likes of Oracle’s Larry Ellison rising to the bait. Larry, needless to say, tells his customers to invest in a vision and not to worry about the business case. Andy Green, CEO of BT Global Services (pictured), offered a more pragmatic approach. “There is no doubt that people are looking for more bang for their ICT buck, which is fine. People should be trying to get more out of their businesses with less money. However, some people are translating that into lethargy about what they are doing post the dot-com boom. Some people are taking the attitude: ‘That was important, but it is no longer important for our business’,” he said.

“My sense is that we are firmly in the age of a digital networked economy. Far too few companies get it,” he continued. “They see their IT numbers as a spend and do not think through their business models. They do not put in sufficient energy at the board level to consider how their business models should change in that digital networked economy.”

Green’s job is to expand BT’s business offerings and sell large organisations an ICT framework that will meet their needs. The ultimate goal is to transform the way they go about their business, enabling them to reap the rewards through greater productivity.

Nicholas Carr argues that BT is just one of many. “I see the homogenisation of IT capabilities. My thesis is that as information and communication technologies have become more powerful, more commonplace, more standardised, more networked and cheaper, they are increasingly becoming part of the general business infrastructure from which all companies draw,” he said.

“Increasingly, they are not able to gain lasting competitive advantage from the technology itself. This puts added pressure on the way investments are evaluated. If all of their competitors will be able to match their capabilities in the long run, then any gains in productivity will go to the customer rather than to their own profitability.”

His bottom line argument was that it was time for companies to spend less on technology, and play safe as followers rather than leaders. He argued that IT was moving from being a source of business advantage to becoming a major cost, particularly in covering over its vulnerabilities such as issues surrounding security.

Andy Green, unsurprisingly, took the opposing view that now was exactly the time to invest in more technology. “For people in a corporation, it seems to be completely the wrong signal to say, ‘IT is just a risk, worry about reducing the cost of it’. I think it is exactly the wrong moment to be giving that message. A fundamental question is to work out how IT works with your business model now.”

He cited Ryanair as a company that is emerging as a leader precisely because of its commitment to “knitting technology into its business model” and he had little time for Carr’s even keel approach. “This is not just a question of minimising the risk of spending on IT. It is about really analysing what you can do to fundamentally remake your business models. The gulf is widening,” he warned.

“Certain international companies are moving ahead at breakneck speed in the way they use information and IT to drive their businesses. We see many European businesses getting left behind. The message should be: this is a CEO issue. Understanding how you work in a digital networked economy is a CEO issue that needs to be addressed firmly.”

In the face of living and breathing success stories like Ryanair, Dell and Wal-Mart, Carr’s position became harder to defend. Here, after all, are organisations that have reinvented themselves through technology and pulled away from the pack. Technology has helped them differentiate.

The reality is that not everyone is going to be an innovator and leader. For the rest, Carr’s more cautious approach may well be the key to survival. “We’re at the point where attention should be turned to how to use this [technology] well. But I do not think you start from the assumption that you spend more,” he said. “You start from the assumption that perhaps you should spend less and not worry about staying on the cutting edge, but rather focus on the nuts-and-bolts at this stage.”

By Ian Campbell