Saturday, May 1, 2010

Does IT matter by Nicholas Carr

When this article was published in Harvard Business Review (HBR-March 2003), it created such a stir, letters to editor ended up saying “enough is enough”. Such was the intensity and volume of response. For copious details refer :

Garr has a gift of articulating just about anything in a near zero sentimental way. He reminds me of a character in star trek episodes: DATA. The bye line of the title itself would make you sit up – “IT & the corrosion of competitive advantage” (IT as in Information Technology).
Garr declares “the transformation of IT from a source of advantage to a cost of doing business” raises a host of challenges for the business executive. If you think it is too presumptuous a remark to make, you would have read it with his examples to be convinced. Recall Mark Twain’s remark “Nothing is more annoying than a good example” - you may be annoyed mainly because it is more real than we would like.

At the heart of his sprawling argument is this: IT and Technology are means to do business. Now, they are commodity. Hence don’t look at them as differentiators but just as inevitable infrastructure items.

Let us take one of his stunning examples: Early in the 20th century, many large companies created a new management post called “Vice President – Electricity”. This is a clear acknowledgement of electrification transformation. But, in a short span of time, its strategic importance diminished so much that it quietly disappeared from the corporate hierarchy. Their work is done and hence they are out. He stops short of saying that for IT field. During its inception, when one or two manufactures used electricity to produce their products (whatever that is), they had a competitive advantage, but once everyone is into electricity, then it becomes a mere input to the business.

Like the Design guru, Donald Norman, Carr views computers and IT more as infrastructure, and remarks rightly that transformational power of new infrastructure technologies dissipates as they reaches the build out. After giving many examples (Machines Tools, Wi-Fi, Software, Web Services, SABRE system etc) he makes a profound statement: “When a resource becomes essential to the competition, but inconsequential to the strategy, then the risk it creates is more important than the advantage it provides.” How true! For example, take electricity in India. Certainly, it is nowhere near 99.xx % availability which perhaps can be taken for granted in certain advanced countries. In India, there would be power cuts, sudden surges and so on. Yet, the business has to run. So what is the solution?. In-house electricity generation when ever government supplied power goes kaput. Any firm that does not have in-house power generation will be very vulnerable and perhaps eventually earn the dissatisfaction of the customer. But, having them is no recipe for success; it is simply the cost of doing business.

His constant reference to the evolution of electricity is a bit unnerving if you belong to the IT field. At first, electricity was private; soon it became public and can be purchased as per your usage. It has become a utility. So would be data processing. Which computer processed your latest “Google search” he asks and adds that, “you don’t know and perhaps you don’t care” any more than which power plant generated the electricity that you home lights use.

Not long ago, when developing the information systems, companies would first decide how they wanted to do the business and then choose the software package that would support the process flow envisaged. Also, large efforts would be thrown in to customize it. This is true whether it is IT systems or technology side where each time around device drivers and other stuff would be written exclusively. Now, things stands reversed. Question is, how the enterprise systems which are available as packages should be modified to suit our business and also what are process editing which have to happen in-house to use these packages? Good news is that, standard process would be state-of-the-art. Bad news is that, everyone has access to it. As commodity wave hits, the plane of competition shifts. It is clear when it hits users stands to benefit but the sellers would have a nightmare unless they have something more as “value-adds”.

When Humans moved away from “hunting & gathering” to “centralized farming”, society and structures changed accordingly. It was essentially consolidation of physical powers. Per Garr, most of the society structures are temporary – without sounding philosophical, he states that they would be abandoned very easily depending on the spirit of times. Technology shapes economics and economics shapes society. He strongly thinks personal choices have no bearing on this, society is governed by economic trade-offs.

In the long run, it appears there is nothing “exclusive” about anything and eventually, law of gravity catches up. Celebrated sociologist Jane Jacobs observed that: “Invention of public libraries democratized the access to literature. Invention of public schools democratized the access to education. Invention of fashionable cloths democratized the access to personal appearance”. If she were around, maybe she would have added about Internet and so on to the list.

The telling lesson is that, when some stuff gets democratized or made available to a very large set of people, humanity as a whole would be benefited, but it does come at a cost of a small section of people who were selling those products and services when they were exclusive and fragmented. When “exotic” becomes “common” you better watch out. So, it is better to ask (say once in two years?) “Am I getting commoditized? Is my area getting democratized?” If so, you would should pull up your socks. Now I reminded myself, if I don’t come to the table at a good frequency, may be, I am already appearing on the menu!

Thank you for reading thus far.



Mukund S said...

Good note! For once, I have to disagree with one of the authors you comment on. Whilst I agree on what happened to electricity, I think it's too wide a gamut to bracket IT in the same realm. If the IT in question is about moving to an e-world from a non-electronic entity, then I agree there is a notion of that transformation becoming extinct. Not having read the book, I can't comment judiciously enough, but I have to say that the evolution that is happening in the IT space (rapidly at that) is more likely to follow the Moore paradigm than a commoditization paradigm. For e.g., the move onto "Platform as a Service", and "Infrastructure as a Service", from its origins of "Software as a Service" is an apt example of how the innovations are outpacing the market adoption rate - this did not happen in the case of electricity, or electrification as you call out. Thoughts?

Ramesh N Raghavan said...

Very good post and summary of the book. I can certainly see the trend of commoditization, albeit with some degree of customization in the way ERP packages are now dominating the standard IT implementations for most business processes, be it CRM, HR, Payroll, Inventory management and so on. Vendors have implemented all the basic blocks for most of these with sufficient options for customization to adapt to a specific organization's processes. In that situation, we are also clearly seeing the need for "real programmers" dropping quite drastically in such IT implementations. You only need someone who understands the business process, the basic features available in these standard packages and customize them as required, often with just screens and menus, instead of getting down to any coding or scripting. So, the programmers have to probably look for opportunities more in vendors of such packages and not in custom IT developments as such opportunities will reduce quite a bit. Probably this means that we will need lesser number of real programmers in the future and more package implementers. Taking the electricity analogy, more field technicians who do the final wiring, and only lesser number of real electrical engineers to manage the machinery at the large plants, equipment design houses, and probably at some substations(even here the number of technicians is probably more than the engineers).
I agree with the author that IT is fundamentally only an enabler for any business. It often helps you do things faster, in efficient ways and probably allows you to mine a lot of data and understand things better. We have all seen poor IT implementations sometimes coming in the way of user experience and efficiency as well. IT support has definitely become a hygiene factor for most businesses.
I read Mukund's comments. Mukund, in the example you have quoted, I would argue that the move from SAAS to Infra as a service or Platform as a service is a regression, and that the SAAS model has effectively failed to take off. Other than, I am yet to see a very convincing case. Google docs has not become widely popular and we have to see how the recent MS moves with Office 2010 are received. In Infra as a service or Platform as a service, I would say there is not much technology innovation, other than the underlying virtualization technology (which itself is not very new, was in IBM systems for a very long time). Software as a service in my understanding is a little more complex as you have to re-architect the software to work effectively over the Web, resolve issues such as data storage, provide offline modes of working, ensure that the latencies don't affect user experience and so on.

Best Regards,
N.R. Ramesh.

Mukund Srinivasan said...

Madhu-san, here's a new article published by the same author, last week:

Madhu Parthasarathy said...

Hi Mukund, NRR:
Thanks for the well thought out response.
1. If you want stage-by-stage compare-n-contrast, please refer Carr's work called "big switch".
2. Product and service are two sides of the same coin....
Eg: Voice Mail. It was previously a bulky device attached to phone. As technology improved, it was embedded in to the phone itself. Now, it is a service provided by companies. So, from product to service.This morphing occurs all the time for various stuff. When it happens at a lrage scale, it changes the dynamics of industry

Mohanakrishnan said...

In principle I agree with the author that IT is just an enabler and once it reaches a maturity it will become a commodity. Comparison with electricity is fine as long as we agree that IT implementation is marginally more complex than wiring your facility :-) Different organizations are at different levels of maturity on this.
The other point to note is that IT is still evolving due to new themes like employee mobility.
Once these changes mature and most organizations reach a maturity of implementation, IT will not matter any more.

ttk said...

We will make electricity so cheap that only the rich will burn candles - Thomas Alva Edison. Madhu, in fact it was you who first told me about this famous quote. Even for high-tech stuff " Yeppadi Yiruntha Naan Yipadi Aayitean" holds good. I may not like IT getting belittled so much so soon, but reality is Nicholas Carr in all probability would be having the last laugh.

Britannica Encyclopedia - Oh what a prized possession once it was !!. I do not think current generation would attach so much value to it. Relatively cheap Britannica CDs though with partial contents have brought their own value down though it just a desperate survival strategy from its publishers. With arrival of Wiki, Britannica Encyclopedia too is also run in the market though with some exclusive contents, they trying to maintain the 'exclusivity'.

Availability/accessibility of Net has brought down the value of teachers in schools/colleges. Quality teachers sooner would be so rare, good quality lectures/sessions on DVDs would become a commodity. Technology may enable multicast/broadcast of quality live sessions with lot more 'interactiveness'. Its too good for schools/institutions who do not/can not afford good teaching talent. The flip-side is education too would be a full-fledged commodity - thanks to IT 'enablers'.


Ramesh Emani said...

I have followed the storm generated by Nocholas Carr earlier and remember some discussions with customers. I somehow do not subscribe to the view that IT is a utility like electricity and is not part of strategic or competitive value to organizations. If we divide the IT into two portions - the computing power and the applications, then I may accept the argument that the computing power can be seen as utility. All computer suppliers are like power generation companies and, distributors are akin to cloud computing vendors. I do not have any doubt the world is moving in that direction and the reduction in hardware vendors for past many years is part of that process. But, we are not at that stage today and it may happen in next 5 years that will obviate the need for individual servers and desktops.

Just as electricity is not the end but only means for powering other 'applications' (like production systems), it is the applications that give the competitive advantage. Here again one may say if we divide the apps into standard processes (like payroll, HR, finance, etc) and special processes, then one can say standard processes may also move to utility level.

Somehow I am not ready to accept that life is as simple. Managing the complex systems that involve humans will turn out to be different proposition than managing machine oriented systems. Since these apps needs to be operated by humans, there will be continuous innovation that will bring in differentiation. It is the human users that will make apps differentiable.

Suresh S said...

What I believe is happening in the IT front is the commoditization of intelligence!! (I think IT as an infrastructure advantage has long vanished. Everyone has similar infrastructure. ) Instead of great algorithms being developed in companies for their business, the development of algorithms happens elsewhere and this intelligence is available to everyone. I mean, no company is going to invest money in developing an application which only they can use. So the intelligence of great minds is being commoditized and whatever super duper algorithms that say Caltech or MIT PhDs think of become a product which anyone can buy. Probably every company has some standard Business Intelligence package bought off the shelf driving their strategy. Commoditizing intelligence is good business for the brainy guys and that is the way the world will go. So it is finally a question of how you understand and run your business that will matter. Since I was a manager once I get such deep thoughts :) With that 'deep thought' I sign off :)

Praveen said...

Hi Madhu-san,
I agree (not strongly agree) with the author in that IT will become a commodity in the future like electricity is. Reasons:
1. IT companies are targetting for non-linear growth. More revenue per employee rather than more employees, more revenue. This has started just now. It is just a matter of time that this takes prime importance to achieving growth
2. To increase productivity, more tools are expected to be used in a project life cycle. More tools, more productivity, less man power
3. Automation
4. Reuse - Develop once, reuse multiple times across multiple platforms or products

Such initiatives or strategies will get extreme focus once competition hots up to run the business and sustain growth. This will eventually lead to development of technologies that will make this possible. 20 years from now, this may get commoditized. Complex solutions once involving a sizeable IT team becomes a tool on a DVD with just call-centre support !! You never know


Madhu Parthasarathy said...

Hello Ramesh Emani:
Many thanks for the insightful observations and views.
Your view of dividing it in to two viz: (1) Computing part and (2) the application part is incisive.
But applications which are first seen as "arts" slowly become "craft" and finally morph in to "utility" which can be done by a product or a sub-system.
Prof Clayton gives one interesting anecdote he had with a top surgeon.
"If you think doctors are not being commoditized" said that surgeon, I am being commoditized right now! Later, he went on to explain how knee surgery and hip replacement, a decade back, most of billings went to doctors and a very small portion went to implant manufacturers. Those days, it was heavily dependent on Surgeon’s skills. But the implant makers steadily improved,made it simpler and nearly foolproof that almost "any" surgeon could do it.
By 2004, implant makers bill crossed that of surgeon's bill in over all procedure.
Whatever can be part of infrastructure would become so very fast. After that, applications that were unique and proprietary would become commodity out of sheer pressure from technology and market developments. So, it seems like a moving target. So, if one is an USER pray for “commoditization ASAP”. If one is SUPPLIER or PROVIDER of such product or service, pray for “a delay so that next differentiator can be found”.

Best Regards,