The commoditisation of hardware and software will make it increasingly difficult for companies to exploit IT to...
achieve sustainable competitive advantage.
Nicholas G Carr, the author of a Harvard Business Review article "IT Doesn't Matter", was one of the panelists who tackled the topic of IT and competitive advantage at a finance conference in New York.
Carr has written a follow-up book titled, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage, in which he maintains that technology has become so pervasive "that (companies) can still innovate ... but the competitive advantage" gained through the use of IT can quickly be neutralised by corporate rivals.
And, as companies have become more concerned about the cost of IT investments, he argued that the "centre of innovation" has moved from the user to the supplier.
Users are saying, "I just want technology that's good enough from low-cost suppliers", he said.
That phenomenon has already begun to play out for customers of third-party software, claimed Carr, citing the CRM market as a prime example.
Until recently, companies such as Siebel Systems built only sophisticated and expensive systems for corporate customers. Then low-cost rivals such as Salesforce.com hit the scene with cheaper and simpler CRM systems, forcing Siebel and others to respond with comparable offerings.
As a result, the industry is reaching a point "where the technology becomes a necessity but no longer remains a source of competitive advantage", he said, adding that early adopters of leading-edge technologies are going to pay a lot for the competitive advantage of a new technology, but they would be unable to maintain that advantage long enough to make the investment worthwhile.
Carr said the same argument can be applied to homegrown software that companies develop themselves to help provide a service or product ahead of the market.
The window of opportunity for companies to capitalise on internally developed applications is shrinking, he added. Instead, companies should strive to use existing technology "as efficiently as possible", and not bother investing in technology that can provide, at best, only a short-term competitive edge.
Conference panelist Bill McNee, chief executive officer of Saugatuck Technology, a research and consulting firm, said he agreed with Carr "on many counts" but took exception to Carr's IT-infrastructure-focused argument.
"IT is not just about data transport," said McNee. "His primary argument is around infrastructure, and software is not infrastructure. Software is a very different game, and that's where I'd beg to differ with Nick."
McNee, a former Gartner analyst, also disagreed with Carr's conclusion that IT innovation has slowed to a crawl. "IT is not dead, innovation is not dead," said McNee, pointing to recent technological advances in radio frequency identification tags and nanotechnology. "I'd say we're in the fourth or fifth inning of this thing."
The other conference panelist, Dan London, a partner in Accenture's Atlanta office, agreed that IT in itself could not provide a company's competitive advantage. The companies that will succeed, said London, are those that apply IT effectively to gather the right information quickly for top brass to make informed business decisions.
Drawing upon his experiences at Gartner and Saugatuck Technology, McNee estimated that "maybe" 5% of Fortune 2,000 companies could be characterised as leading-edge technology adopters, while another 15% to 20% manage to keep pace with existing technology. The rest, he said, could be considered tech laggards. Therefore, McNee said, "there are very few firms that use IT as a strategic weapon".
McNee also agreed with Carr that IT innovation cannot provide companies with sustainable competitive advantage. But, he said, "channel masters" such as Wal-Mart Stores will continue to invest in IT wisely to help them dominate their respective markets.
Thomas Hoffman writes for Computerworld