What are the top 5 trends and how they are shaping the industry?

As IT’s power and ubiquity has grown , its strategic importance has diminished.»When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides!Based on “IT Doesn’t Matter” by Nicholas Carr (HBR paper), your team needs to debate and present a strong argument For OR Against it, in other words, whether you agree or disagreeWhat are the top 5 trends and how they are shaping the industry? ((( I only need this question ))) I attached the case below
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For the exclusive use of M. Osadebe, 2018.
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H BR A T L A R G E
As information technology’s
power and ubiquity have
grown, its strategic
importance has diminished.
The way you approach IT
investment and management
will need to change
dramatically.
IT Doesn’t Matter
by Nicholas G. Carr
With Letters to the Editor
•
Included with this full-text Harvard Business Review article:
1 Article Summary
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
2 IT Doesn’t Matter
10 Further Reading
A list of related materials, with annotations to guide further
exploration of the article’s ideas and applications
Does IT Matter? An HBR Debate
Reprint R0305B
This document is authorized for use only by Marian Osadebe in Strategic Information Systems Spring 18 taught by Rashmi Jain, Montclair State University from January 2018 to July 2018.
For the exclusive use of M. Osadebe, 2018.
HBR AT LARGE
IT Doesn’t Matter
The Idea in Brief
The Idea in Practice
To beat your competitors, are you devoting
more than 50% of your capital expenditures
to information technology? If so, you’re not
alone. Businesses worldwide pump $2 trillion a year into IT. But like many broadly
adopted technologies—such as railways
and electrical power—IT has become a
commodity. Affordable and accessible to
everyone, it no longer offers strategic value
to anyone.
To avoid overinvesting in IT:
COPYRIGHT © 2003 BY HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
Scarcity—not ubiquity—makes a business
resource truly strategic. Companies gain an
edge by having or doing something others
can’t have or do. In IT’s earlier days, forwardlooking firms trumped competitors
through innovative deployment of IT; for
example, Federal Express’s package-tracking system and American Airlines’ Sabre
reservation system.
Now that IT is ubiquitous, however, we
must focus on its risks more than its potential strategic advantages. Consider electricity. No company builds its strategy on its
electrical usage—but even a brief lapse in
supply can be devastating. Today, an IT disruption can prove equally paralyzing to
your company’s ability to make products,
deliver services, and satisfy customers.
SPEND LESS.
FOLLOW, DON’T LEAD.
Rigorously evaluate expected returns from IT
investments. Separate essential investments
from discretionary, unnecessary, or counterproductive ones. Explore simpler and cheaper
alternatives, and eliminate waste.
Delay IT investments to significantly cut costs
and decrease your risk of buying flawed or
soon-to-be obsolete equipment or applications. Today, smart IT users hang back from
the cutting edge, buying only after standards
and best practices solidify. They let more impatient rivals shoulder the high costs of experimentation. Then they sweep past them, paying less while getting more.
Example:
Businesses buy 100 million+ PCs annually—yet most workers use PCs for simple
applications that require a fraction of their
computing power. Start imposing hard limits on upgrade costs—rather than buying
new computers and applications every
time suppliers roll out new features. Negotiate contracts ensuring long-term usefulness of your PC investments. If vendors
balk, explore cheaper solutions, including
bare-bones network PCs.
Also assess your data storage, which accounts for 50%+ of many companies’ IT expenditures—even though most saved data
consists of employees’ e-mails and files that
have little relevance to making products or
serving customers.
FOCUS ON RISKS, NOT OPPORTUNITIES.
Many corporations are ceding control over
their IT applications and networks to vendors
and other third parties. The consequences of
moving from tightly controlled, proprietary
systems to open, shared ones? More and
more threats in the form of technical glitches,
service outages, and security breaches. Focus
IT resources on preparing for such disruptions—not deploying IT in radical new ways.
But the greatest IT risk is overspending—
putting your company at a cost disadvantage. The lesson? Make IT management
boring. Instead of aggressively seeking an
edge through IT, manage IT’s costs and risks
with a frugal hand and pragmatic eye—despite any renewed hype about its strategic
value. Worrying about what might go
wrong isn’t glamorous, but it’s smart business now.
page 1
This document is authorized for use only by Marian Osadebe in Strategic Information Systems Spring 18 taught by Rashmi Jain, Montclair State University from January 2018 to July 2018.
For the exclusive use of M. Osadebe, 2018.
As information technology’s power and ubiquity have grown, its
strategic importance has diminished. The way you approach IT
investment and management will need to change dramatically.
HBR AT LARGE
IT Doesn’t Matter
With Letters to the Editor
COPYRIGHT © 2003 BY HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
In 1968, a young Intel engineer named Ted
Hoff found a way to put the circuits necessary
for computer processing onto a tiny piece of
silicon. His invention of the microprocessor
spurred a series of technological breakthroughs—desktop computers, local and wide
area networks, enterprise software, and the Internet—that have transformed the business
world. Today, no one would dispute that information technology has become the backbone
of commerce. It underpins the operations of
individual companies, ties together far-?ung
supply chains, and, increasingly, links businesses to the customers they serve. Hardly a
dollar or a euro changes hands anymore without the aid of computer systems.
As IT’s power and presence have expanded,
companies have come to view it as a resource
ever more critical to their success, a fact clearly
re?ected in their spending habits. In 1965, according to a study by the U.S. Department of
Commerce’s Bureau of Economic Analysis, less
than 5% of the capital expenditures of American companies went to information technol-
harvard business review • may 2003
ogy. After the introduction of the personal
computer in the early 1980s, that percentage
rose to 15%. By the early 1990s, it had reached
more than 30%, and by the end of the decade
it had hit nearly 50%. Even with the recent
sluggishness in technology spending, businesses around the world continue to spend
well over $2 trillion a year on IT.
But the veneration of IT goes much deeper
than dollars. It is evident as well in the shifting
attitudes of top managers. Twenty years ago,
most executives looked down on computers as
proletarian tools—glori?ed typewriters and
calculators—best relegated to low level employees like secretaries, analysts, and technicians. It was the rare executive who would let
his ?ngers touch a keyboard, much less incorporate information technology into his strategic thinking. Today, that has changed completely. Chief executives now routinely talk
about the strategic value of information technology, about how they can use IT to gain a
competitive edge, about the “digitization” of
their business models. Most have appointed
page 2
This document is authorized for use only by Marian Osadebe in Strategic Information Systems Spring 18 taught by Rashmi Jain, Montclair State University from January 2018 to July 2018.
For the exclusive use of M. Osadebe, 2018.
IT Doesn’t Matter •• •HBR AT L ARGE
chief information of?cers to their senior management teams, and many have hired strategy
consulting ?rms to provide fresh ideas on how
to leverage their IT investments for differentiation and advantage.
Behind the change in thinking lies a simple
assumption: that as IT’s potency and ubiquity
have increased, so too has its strategic value.
It’s a reasonable assumption, even an intuitive
one. But it’s mistaken. What makes a resource
truly strategic—what gives it the capacity to be
the basis for a sustained competitive advantage—is not ubiquity but scarcity. You only
gain an edge over rivals by having or doing
something that they can’t have or do. By now,
the core functions of IT—data storage, data
processing, and data transport—have become
available and affordable to all.1 Their very
power and presence have begun to transform
them from potentially strategic resources into
commodity factors of production. They are becoming costs of doing business that must be
paid by all but provide distinction to none.
IT is best seen as the latest in a series of
broadly adopted technologies that have reshaped industry over the past two centuries—
from the steam engine and the railroad to the
telegraph and the telephone to the electric
generator and the internal combustion engine.
For a brief period, as they were being built into
the infrastructure of commerce, all these technologies opened opportunities for forwardlooking companies to gain real advantages.
But as their availability increased and their
cost decreased—as they became ubiquitous—
they became commodity inputs. From a strategic standpoint, they became invisible; they no
longer mattered. That is exactly what is happening to information technology today, and
the implications for corporate IT management
are profound.
Vanishing Advantage
Nicholas G. Carr is HBR’s editor-atlarge. He edited The Digital Enterprise,
a collection of HBR articles published
by Harvard Business School Press in
2001, and has written for the Financial
Times, Business 2.0, and the Industry
Standard in addition to HBR. He can be
reached at ncarr@hbsp.harvard.edu.
harvard business review • may 2003
Many commentators have drawn parallels between the expansion of IT, particularly the Internet, and the rollouts of earlier technologies.
Most of the comparisons, though, have focused on either the investment pattern associated with the technologies—the boom-to-bust
cycle—or the technologies’ roles in reshaping
the operations of entire industries or even
economies. Little has been said about the way
the technologies in?uence, or fail to in?uence,
competition at the ?rm level. Yet it is here that
history offers some of its most important lessons to managers.
A distinction needs to be made between proprietary technologies and what might be called
infrastructural technologies. Proprietary technologies can be owned, actually or effectively,
by a single company. A pharmaceutical ?rm,
for example, may hold a patent on a particular
compound that serves as the basis for a family
of drugs. An industrial manufacturer may discover an innovative way to employ a process
technology that competitors ?nd hard to replicate. A company that produces consumer
goods may acquire exclusive rights to a new
packaging material that gives its product a
longer shelf life than competing brands. As
long as they remain protected, proprietary
technologies can be the foundations for longterm strategic advantages, enabling companies to reap higher pro?ts than their rivals.
Infrastructural technologies, in contrast, offer
far more value when shared than when used in
isolation. Imagine yourself in the early nineteenth century, and suppose that one manufacturing company held the rights to all the technology required to create a railroad. If it wanted
to, that company could just build proprietary
lines between its suppliers, its factories, and its
distributors and run its own locomotives and
railcars on the tracks. And it might well operate
more ef?ciently as a result. But, for the broader
economy, the value produced by such an arrangement would be trivial compared with the
value that would be produced by building an
open rail network connecting many companies
and many buyers. The characteristics and economics of infrastructural technologies, whether
railroads or telegraph lines or power generators,
make it inevitable that they will be broadly
shared—that they will become part of the general business infrastructure.
In the earliest phases of its buildout, however, an infrastructural technology can take
the form of a proprietary technology. As long
as access to the technology is restricted—
through physical limitations, intellectual property rights, high costs, or a lack of standards—a
company can use it to gain advantages over rivals. Consider the period between the construction of the ?rst electric power stations,
around 1880, and the wiring of the electric grid
early in the twentieth century. Electricity remained a scarce resource during this time, and
those manufacturers able to tap into it—by, for
page 3
This document is authorized for use only by Marian Osadebe in Strategic Information Systems Spring 18 taught by Rashmi Jain, Montclair State University from January 2018 to July 2018.
For the exclusive use of M. Osadebe, 2018.
IT Doesn’t Matter •• •HBR AT L ARGE
When a resource
becomes essential to
competition but
inconsequential to
strategy, the risks it
creates become more
important than the
advantages it provides.
harvard business review • may 2003
example, building their plants near generating
stations—often gained an important edge. It
was no coincidence that the largest U.S. manufacturer of nuts and bolts at the turn of the
century, Plumb, Burdict, and Barnard, located
its factory near Niagara Falls in New York, the
site of one of the earliest large-scale hydroelectric power plants.
Companies can also steal a march on their
competitors by having superior insight into the
use of a new technology. The introduction of
electric power again provides a good example.
Until the end of the nineteenth century, most
manufacturers relied on water pressure or
steam to operate their machinery. Power in
those days came from a single, ?xed source—a
waterwheel at the side of a mill, for instance—
and required an elaborate system of pulleys
and gears to distribute it to individual workstations throughout the plant. When electric generators ?rst became available, many manufacturers simply adopted them as a replacement
single-point source, using them to power the
existing system of pulleys and gears. Smart
manufacturers, however, saw that one of the
great advantages of electric power is that it is
easily distributable—that it can be brought directly to workstations. By wiring their plants
and installing electric motors in their machines, they were able to dispense with the
cumbersome, in?exible, and costly gearing systems, gaining an important ef?ciency advantage over their slower-moving competitors.
In addition to enabling new, more ef?cient
operating methods, infrastructural technologies often lead to broader market changes.
Here, too, a company that sees what’s coming
can gain a step on myopic rivals. In the mid1800s, when America started to lay down rail
lines in earnest, it was already possible to
transport goods over long distances—hundreds of steamships plied the country’s rivers.
Businessmen probably assumed that rail transport would essentially follow the steamship
model, with some incremental enhancements.
In fact, the greater speed, capacity, and reach
of the railroads fundamentally changed the
structure of American industry. It suddenly became economical to ship ?nished products,
rather than just raw materials and industrial
components, over great distances, and the
mass consumer market came into being. Companies that were quick to recognize the
broader opportunity rushed to build large-
scale, mass-production factories. The resulting
economies of scale allowed them to crush the
small, local plants that until then had dominated manufacturing.
The trap that executives often fall into, however, is assuming that opportunities for advantage will be available inde?nitely. In actuality,
the window for gaining advantage from an infrastructural technology is open only brie?y.
When the technology’s commercial potential
begins to be broadly appreciated, huge amounts
of cash are inevitably invested in it, and its
buildout proceeds with extreme speed. Railroad tracks, telegraph wires, power lines—all
were laid or strung in a frenzy of activity (a
frenzy so intense in the case of rail lines that it
cost hundreds of laborers their lives). In the 30
years between 1846 and 1876, reports Eric
Hobsbawm in The Age of Capital, the world’s
total rail trackage increased from 17,424 kilometers to 309,641 kilometers. During this same
period, total steamship tonnage also exploded,
from 139,973 to 3,293,072 tons. The telegraph
system spread even more swiftly. In Continental Europe, there were just 2,000 miles of telegraph wires in 1849; 20 years later, there were
110,000. The pattern continued with electrical
power. The number of central stations operated by utilities grew from 468 in 1889 to 4,364
in 1917, and the average capacity of each increased more than tenfold. (For a discussion of
the dangers of overinvestment, see the sidebar
“Too Much of a Good Thing.”)
By the end of the buildout phase, the opportunities for individual advantage are largely
gone. The rush to invest leads to more competition, greater capacity, and falling prices, making the technology broadly accessible and affordable. At the same time, the buildout forces
users to adopt universal technical standards,
rendering proprietary systems obsolete. Even
the way the technology is used begins to become standardized, as best practices come to
be widely understood and emulated. Often, in
fact, the best practices end up being built into
the infrastructure itself; after electri?cation,
for example, all new factories were constructed
with many well-distributed power outlets.
Both the technology and its modes of use become, in effect, commoditized. The only meaningful advantage most companies can hope to
gain from an infrastructural technology after
its buildout is a cost advantage—and even that
tends to be very hard to sustain.
page 4
This document is authorized for use only by Marian Osadebe in Strategic Information Systems Spring 18 taught by Rashmi Jain, Montclair State University from January 2018 to July 2018.
For the exclusive use of M. Osadebe, 2018.
IT Doesn’t Matter •• •HBR AT L ARGE
That’s not to say that infrastructural technologies don’t continue to in?uence competition.
They do, but their in?uence is felt at the macroeconomic level, not at the level of the individual company. If a particular country, for instance, lags in installing the technology—
whether it’s a national rail network, a power
grid, or a communication infrastructure—its
domestic industries will suffer heavily. Similarly, if an industry lags in harnessing the
power of the technology, it will be vulnerable
to displacement. As always, a company’s fate is
tied to broader forces affecting its region and
its industry. The point is, however, that the
technology’s potential for differentiating one
company from the pack—its strategic potential—inexorably declines as it becomes accessible and affordable to all.
The Commoditization of IT
Although more complex and malleable than
its predecessors, IT has all the hallmarks of an
infrastructural technology. In fact, its mix of
characteristics guarantees particularly rapid
commoditization. IT is, ?rst of all, a transport
mechanism—it carries digital information just
as railroads carry goods and power grids carry
Too Much of a Good Thing
As many experts have pointed out, the
overinvestment in information technology in the 1990s echoes the overinvestment in railroads in the 1860s. In both
cases, companies and individuals, dazzled by the seemingly unlimited commercial possibilities of the technologies, threw large quantities of money
away on half-baked businesses and products. Even worse, the ?ood of capital led
to enormous overcapacity, devastating
entire industries.
We can only hope that the analogy
ends there. The mid-nineteenth-century
boom in railroads (and the closely related
technologies of the steam engine and the
telegraph) helped pr …
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