Guild Companies--IT Matters, But Not Like Vendors Think It Does

Almost universally, IT vendors have a bunch of bright but self-righteous people at the helm--in this regard, they are like newsletter editors, I suppose--and they do not take lightly any criticism of information technology and its importance in the fabric of our being. It's a matter of faith with all of these people that what they do matters, and matters in very important ways that are distinct from other important ways since the dawn of time.

I am not exaggerating. And they have the billions of dollars that seem to prove they are right.

So you can imagine how much fun it must be to be Nicholas Carr, the editor-at-large of the Harvard Business Review, who wrote a very interesting and insightful article (some might say inciteful) called IT Doesn't Matter, which appeared in May. At every opportunity, the top brass at the major IT players have been raking Carr over the coals and making him run the gauntlet. To his credit, Carr often shows up and faces off with the bigwigs of IT, as he did with Sun Microsystems CEO and chairman Scott McNealy about a month ago. They did it again two weeks ago, when Carr sat in on a panel at the Comdex trade show in Las Vegas.

If you haven't read this article and you are in the IT business, you should. I've been listening to all the nattering in the press about Carr's article, but I have been too busy doing IT and writing about IT to actually go get it and read it. Last week, I went to the HBR site and paid my $7 to buy a copy of the story online as well as vitriolic responses that HBR has published as an addendum to the article. (These responses are as enlightening as the story, so spend the extra buck and buy the version with them.) I found the whole thing fascinating--not because Carr was saying anything outrageous, but because of the intense reaction it has brought upon his head.

I like computers, and I think that access to one can have a positive, transformative effect on someone. I know this because I have lived it, in a manner perhaps distinct from your own, but maybe similar. (I have never been much interesting in programming or managing. I am more of a systems integrator.) So what I am about to say is not a slam on computers or information technology.

The point that Carr was trying to make in his article--that the ubiquity of inexpensive computing power means that IT alone cannot be the kind of strategic differentiator that it once was--is absolutely true. Just having the computer is not enough, and this is obvious to all of us. I have issues with some of his conclusions about what this means, in terms of how we should think about IT and how we should plan IT projects, but I also like some of the things that he says, too.

The simple fact is that in 2003, you can't start a business without a computer, a phone, and electricity. And whether you realize it or not, you make use of the national highway systems, international air systems, shipping fleets, and railroad systems that mark prior infrastructure developments that parallel the advent of information technology. (The Internet bubble is commonly compared to the railroad bubble in the 1860s and the electrification bubble in the 1900s.) Every business is built either directly or indirectly on these infrastructure foundations. These are the very substance of the economy. In a sense, IT has finally arrived as a normal part of our lives with the Internet. I find this comforting, and if the commoditization of IT infrastructure components, as Carr deduces, means IBM, Hewlett-Packard, Sun Microsystems, and Dell will have a tough time selling big, expensive computers, well that's just too bad for them. The advent of a simplified alphabet and left-to-right reading that literally transformed how our brains took in data in Greece 2,500 years ago gave rise to an educated and involved citizenry that invented philosophy, logic, and a funny little thing called democracy. I'm going to anthropomorphize a little, but it seems as if technology always wants to reach people, and now IT can.

Carr picked an utterly stupid title for his article, and he was clearly trying to be sensational when he did it. And he doesn't declare what he means by IT except in a footnote, where he limits it to being the technologies for processing, storing, and transporting digital data. IT is a lot more than this, and he knew it when he wrote the article. The problem is, the title of that article is incendiary to many in the IT industry, and it detracts from the many intelligent points Carr made in the article. I would bet that if IT luminaries read the whole article, they did so with clenched teeth and closed minds, which explains their allergic reaction to much of what Carr says.

One of the key points that Carr is trying to make is that computing by itself is not a strategic advantage for elite companies any more. This is obviously true. Commoditization of IT levels the playing field within industries and has created whole new ones. I love eBay as a concept (I don't use it) and Amazon.com as a reality (I use it). When I can personally own a 10 gigaflops Linux cluster with a 500 TB SAN and all the switching technology, I don't need someone from Harvard to tell me that IT is a commodity. I have been waiting for this moment. You see, now the interesting things are possible. PCs used to be a hobby in the 1970s, and then the IT vendors took it over. With servers and networks, we are moving in the opposite direction. Soon, networks of servers, which used to only be within reach of wealthy corporations, will be something we can all tinker with. The proliferation of servers, software, and infrastructure is going to drive the next level of innovation that Carr does not talk about in his article. IT may not be a differentiator, but IT--by which I mean sophisticated systems that do things that make money--is going to be fun and interesting instead of prohibitively expensive. The barriers to entry in businesses are dropping, and that is why so many small and mid-sized businesses are being created right now. People need jobs, and they are making their own in part because they can afford the IT ante that it takes to be in the game.

I know full well the history of IT. It is a history of experimentation based on hope, hype, and outright lies. The vendors lie, you buy, you try, and then you lie--to yourself and your boss if the project doesn't pan out. Experimentation has always been the life blood of IT, and I don't think this is going to change. Many people want to believe that by becoming a commodity, all the issues surrounding IT will be settled. We'll just have this magical grid and that will be that. I doubt this is going to happen, mainly because of the tinkering nature of people and the malleable nature of computers, which separates them from all other forms of infrastructural advances--like shipping, postal, railroad, telegraph, and telephone systems--that preceded computing. IT doesn't work like that. With IT, it's almost as if you can't know what works until you figure out what doesn't.

Carr asserts that the best strategy to take when IT technology is mature (as some think it is) is to hang back and let innovators cut themselves on the bleeding edge and then wait to implement proven technologies. He says first-mover initiatives don't pay off, that the people who implement new technologies and create what become best practices pay a lot more costs than those that are more conservative and wait to implement after the bugs are worked out. I think speaking in such generalizations is dangerous, because companies are people. Different groups of people will take the same technology and get widely different results. But because there is no guarantee of good results does not mean that we shouldn't experiment. A dollar saved on IT could end up being millions of dollars of lost opportunity.

Understand me: I am not advocating the kind of careless spending that has been typical of some IT environments in the past 35 years. I am also not saying, as Carr seems to imply, that penny-pinching frugality is the key to managing IT from here on out. I believe that there needs to be a healthy amount of experimentation in IT as well as the regular systems design and maintenance that actually pays the bills by running transactions.

Just like most manufacturers have product research and development budgets, most companies should have IT research and development budgets. I have never heard of anyone looking at IT this way, but IT cannot and should not be looked at on a strict profit-and-loss basis. Yes, I wholeheartedly agree that companies should make more efficient use of their computers and that they have to be careful about being led down the garden path about the Next Big Thing. We've all learned from the past several decades, particularly the dot-com boom-and-bust. We're all wise to the IT vendors now and we have a very good sense about what computers can and cannot do for an organization, whether it is our families, our social networks, our companies, or our world. Moreover, open source operating systems like Linux and FreeBSD put the control of the platform in the hands of the smartest users, not companies that control platforms for their own profiteering. The next big thing in computing is going to be smart companies using as little IT capacity as possible to do more clever things than anyone has done yet. I don't even know what it is yet, but I can feel it.

The most important thing to remember in all this yammering about whether or not IT matters is that IT infrastructure is just an enabler now. It used to be the thing that made the difference, and now it is the thing that enables the many things that will make even bigger differences. A hundred years ago, the Sears & Roebucks catalog was just as earth-shattering to retailers as Dell's direct approach on the Web was eight years ago or Gateway's direct sales through PC magazines was as many years before that. (Gateway was the real direct sales pioneer, and I know it even if Dell doesn't want to talk about it.) Wal-Mart's idea that it could take over the retail market by being the retail tail (pun intended) that wags the supply chain dog by actually imposing order on its supply chain and wringing profits from it is what makes a difference now.

Now, what your employees think up regarding how to organize your business to serve customers, how you interact with those customers, and the way your programmers codify all of those processes and interactions into application logic is what matters. This is absolutely IT, and this is where the real artistry--however esoteric and costly it may be--of IT comes into play. Many of us welcome this change, many fear it. Now, your company's success and failure will rest on the innovative ideas you come up with and how well your programmers and other employees deliver on those concepts.

Leveling the basic IT playing field with commodity components does not mean that all companies will or should implement non-custom, homogenized solutions. It means that you pick the off-the-shelf components that you need to get moving, and you adapt that code and the processes they embody as your company needs to, and you try your best to differentiate and innovate. For decades, companies have had the choice to develop applications that are strategic to them or to use off-the-shelf software. Most companies still do both, and those that say they only use off-the-shelf software have probably so heavily customized it that it might as well be their own.

No matter what anyone says, a company is nothing more than the product it creates and the processes that are embodied in its people and applications. Choose your people and your code wisely. But be prepared to go back to the drawing board again and again as conditions change. IT is a process, not a product. IT is expensive, but worthwhile. IT can be as fun as it is frustrating, just like basic product R&D, and it is as vital to any company as R&D is. At least part of the IT budget should always be treated like an R&D expense, since it honestly is a complete gamble. Anyone who tells you otherwise has never really worked in IT or doesn't like or understand the people who do.