A summary of Nick Carr's HBR article
This lens is a summary of Nick Carr's Harvard Business Review article on the value of information-technology. The basic thesis is that while advantage comes from scarcity and not ubiquity, IT is now so ubiquitous that unproven technologies offer no advantages, only problems if it goes wrong
Propriety vs Infrastructure Technologies
There are two types of technologies: propriety technologies and infrastructure technologies. Proprietary technologies are more valuable to a company when they are exclusive. In other words, the less people using the technology the more it is worth. A propriety technology is kept exclusive through the strategic use of intellectual property, high price, lack of standards, and physical limitations.
Infrastructure technologies, on the other hand, have more value when shared. Once the initial buildout phase is over the opportunities for competitive advantage based on technology disappear. The rush to invest leads to more competition, greater capacity, falling prices, making tech more accessible and affordable. Eventually, buildout forces users to adopt standards, rendering propriety systems obsolete. Through this process best practices become standardized.
Infrastructure technologies, on the other hand, have more value when shared. Once the initial buildout phase is over the opportunities for competitive advantage based on technology disappear. The rush to invest leads to more competition, greater capacity, falling prices, making tech more accessible and affordable. Eventually, buildout forces users to adopt standards, rendering propriety systems obsolete. Through this process best practices become standardized.
IT has become an infrastructure technology
IT transports data, much like railroads transport trains. As an infrastructure technology, the protocols become much more valuable when they are standardized and shared. While there are benefits of customization, these benefits are outweighed by the drawbacks of isolation. For example, why write your own email software (or supply management software) when you can buy state of the art software for a fraction of the cost? A few companies (eBay, Wal-Mart) have turned temporary advantages into long term enduring positioning advantages, but opportunities for doing this with IT are dwindling.
The best IT strategy is no longer offense, but defense
- When a resource becomes essential for competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides.
- Worrying about what might go wrong is more important than speculating about the future, and the biggest risk is overspending.
- Companies must separate essential investments from ones that are discretionary, unnecessary, or even counterproductive.
- Companies need more rigor in evaluating expected returns, and more creativity in exploring cheaper alternatives.
- The companies that win today are the ones that aren't the ones who are the best at looking for a technological competitive advantage, but rather the ones who are the best at cutting out waste. One way to do that is to have greater openness toward outsourcing and partnerships.
- As opportunities for IT-based advantage narrow, penalties for overspending grow.
Three Practical Takeaways
Spend Less
- Rigorously evaluate expected returns from IT investments.
- Separate essential investments from discretionary, unnecessary, or counterproductive ones.
- Explore cheaper alternatives, and eliminate waste
Follow, don't lead
- Cut costs on technology spending
- Decrease risk of buying flawed or soon-to-be obsolete equipment or applications
- Buy only after best practices solidify.
- Let others shoulder the costs of experimentation.
Focus on risks, not opportunities
- Switching from proprietary software to open, shared systems creates more bugs, outages, and security breaches.
- Resources should be spent preparing for such disruptions, not deploying IT in radical new ways.
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- BFuniv.com BFuniv.com Mar 27, 2009 @ 10:41 am
- "IT is now so ubiquitous that unproven technologies offer no advantages, only problems if it goes wrong."
Traditionally this logic is why folks bought IBM or Microsoft - The tech manager couldn't be blamed if something went wrong and everyone was doing it. It also applies to the derivatives mess in finance, or Museums buying deca-million dollar pieces of contemporary modern art, or ...
