IT as a Commodity

Information Technology (IT) has transformed itself from a source of competitive advantage to simply being a cost of doing business.

Despite the spectacular gains during the past 50 years, says Nicholas G. Carr, a former Harvard Business Review executive editor, IT will distinguish no single competitor. This contradicts many executives' perception that IT ubiquity is an advantage. They miss the point the scarcity, not ubiquity, creates an advantage.

IT's core functions - the storage, distribution and processing of data - are available to all. Without differentiation IT is relegated to commodity status. This should force executives to re-think their IT spending plans and their vendor relationships. As this perception gains acceptance, risk and cost control will become more important than investments in innovation. In short, technology is headed down the same path the steam engine, railroad and electricity followed. Only by becoming a shared and standardized resource will IT deliver its maximum social and economic potential.

Carr says the greatest risk that IT represents is overspending. While IT is entwined with many business processes and represents a huge portion of any businesses’ expenses, it must be managed. There are several ways:

1. Cut waste. Commoditization permits buyers to negotiate better deals, tie payments to usage and shop among vendors.

2. Use Capacity. The overspending in the 1990 left many companies with more capacity than they need. Find ways to use it.

3. Place tight controls on IT usage. Carr says 70 percent of what is stored on corporate networks represents employees’ saved e-mails, MP3s, video clips and spam. Restrict the indiscriminate ability to save files.

4. Become more rigorous in systems planning.

Carr is a distinguished writer and thinker. His book serves as a wake-up call for anyone interested in competitive advantage. Although executives have grown wary of IT spending, they will have to cope with methods that will prevent the commoditization of IT architecture and applications if they are to save their companies' barriers to entry.

Anyone - be he or she a business executive or IT worker - should give this tome a close examination. Its implications will be mighty. ( )

From the start, Carr makes a great distinction that I think needs to be made in most IT shops and places that sell IT "Solutions" across the board -- the difference between proprietary technologies and infrastructure technologies. To put this into perspective, (and nothing against perforce here), but perforce is very much a "Proprietary technology," and CVS is at this point an Infrastructure technology. He also points out that IT and computer hardware is a cost-based commodity, and in order for companies to compete in any market other than a cost-market, that you need to have excellent service and support (something that I've been saying for at least a year). I think that if you implement IT in the right way, that you can earn back the cost that you spend on IT 10 fold, however, Carr states that IT has transformed itself from a source of competitive advantage to simply being a cost of doing business.

If you're in IT, or, even at a C-level, I would highly recommend reading this book. It's something that you should should read, think about, then read again to really get the full scope of what Carr is trying to say. ( )

Business Leaders do not buy IT but solutions ( )

http://kdegelau.blogspot.com/2006/10/does-it-matter.html ( )