Nicholas Carr, in his article “IT Doesn’t Matter” (HBR, 2003) raises a point that IT has become ubiquitous

and cheap and is no longer a competitive advantage for a business. While stating that IT can’t be
ignored, he asserts that strategic importance of IT has been diminished and advises his readers to think
before investing in IT as a differentiator. He makes an argument that any advantage provided by IT will
be available to an entire industry at macro level and any single firm cannot rely on using it as a
differentiator among its competitors.

Carr writes that companies are running into the risk of overspending without evaluating cheaper
alternatives and the returns from investments. We can see this over various failed IT projects over the
years. For example, in 1993, FoxMeyer Drugs, a pharmaceutical distribution company worth $5 billion,
spend $35 million on an ERP project. The new system was processing only 10000 orders a night
compared to 420,000 orders the old system was able to handle. The company went bankrupt in 3 years
(ComputerWorld, 2008). In another instance, Sainsbury’s, a British supermarket giant, invested $150
million to automate their fulfillment system. The system ran into barcode reading errors and had to be
scrapped after 2 years causing Sainsbury’s to write off the IT costs (ComputerWorld, 2008). This shows
that great expenditure not always results in best results.

Carr suggests that IT vendors should not drive buyers spending strategy, a point that is also echoed by
John Seely Brown, Former Chief Scientist at Xerox. Brown says “Rather than help companies understand
that IT is only a tool, technology vendors have tended to present it as a panacea” (HBR, 2003). Avantor
Performance materials, a global manufacturer of high performance chemistries and materials filed a suit
against IBM for a failed SAP implementation in 2012. They claim that IBM fraudulently misrepresented
the capabilities of its proprietary solution, which proved to be woefully misaligned with the needs of the
company and their customers (IEEE, 2012).

Carr’s article also raises an important point about the risks IT might create. He suggests that companies
should focus on vulnerabilities since even a brief disruption in availability of technology can cause huge
losses. For instance, a minor glitch in software upgrade to its banking software caused Royal Bank of
Scotland’s systems to go offline for days (The Guardian, 2012). This resulted in its customers not being
able to make payments, withdraw money or deposit money and the bank faced huge fines and fees
from regulators (BBC News, 2012). Companies should also focus on making sure the existing IT
infrastructure is secure, reliable and highly available. The recent hacks on Target and other tech giants
like Sony and Sabre stresses this fact.

But Carr incorrectly infers that since IT has become ubiquitous, business leaders should not see it as a
strategic advantage anymore. He comes to the conclusion that any benefits provided by IT will be
available for an entire industry rather than any one company. As John Seely Brown and John Hagel write
in their letter to HBR (HBR, 2003), “IT by itself may not offer any competitive differentiation, it is
inherently strategic because of its indirect effects.” As shown in earlier examples, just spending money
on IT will not give any additional benefits but when companies focus on improving their business
practices they can extract value from IT. Brown and Hagel provide the example of Wal-Mart, which
continuously innovated around IT, and even though competitors tried to replicate or adopt their
practices, Wal-Mart had 40% more productivity over its rivals. They also write that it is incorrect to see
IT as a commodity like wheat or aluminum where processing operations are standard but advantage lies
in securing them at lower cost. The potential to harness advantage out of IT will not be evenly
distributed (HBR, 2003), as all companies might not have the skills, capabilities and knowledge to extract
value from IT and those who do will always create economic value and gain market share.

Joe Weinman, in his book Cloudonomics (Cloudonomics, 2012), provides a rebuttal to Carr’s assertions
with an analogy that “pork bellies may be a commodity, but a Michelin three-star restaurant extracts
more value out of them than the average corner diner does.” Companies that use the existing
commodity software to find creative ways to provide benefits for its customers will always emerge as
standout choices among the customers. For instance, Chicago based BrokerSavant used technology to
address their customer pain points by eliminating manual data entry by developing a program that can
extract information from property flyers (Forbes, 2013).

Carr’s reasoning that all IT-spurred industry transformations have already happened or are happening is
also specious. In the 12 years since the article appeared, there has been a mobile revolution, on demand
cloud services and various other innovations in IT. A business following Carr’s advice of “following and
not leading in adopting IT” would have led to making up for a lost ground against a competitor. The
classic case of Blackberry losing its market share to Apple and Google is well known (Wired, 2013). Also
today, customers no longer have to buy servers or build data centers but instead are using Amazon or
Google to deploy their applications. IBM had to sell their servers unit to concentrate on cloud-based
services and had to play catch up against Amazon Web Services (CNET, 2014).

In conclusion, CEOs and CIOs should pay attention to Carr’s assertions that spending big bucks in IT
would not lead to profits. Prof. McFarlan and Prof. Nolan (HBR, 2003), advise that leaders should focus
on cost savings and efficiencies and incremental approach to improve organization structure, products
and services. Businesses should not see the end goal of IT as a way to build a competitive advantage or
go extremely defensive by reducing IT costs. They should instead find the middle ground for investing in
IT and couple it with innovative business processes, skills and people power to gain market
differentiation. IT does matter and it will be at businesses peril to ignore the opportunities that IT will
create.

Another one

The ideas described in the article “It Doesn’t Matter” by N. G. Carr oppose the meaning of Information
System as a tool to get competitive advantage.

Mr. Carr compares Information Technology to infrastructure technology which provides an advantage
to users within very briefly time at dawn of its use, before other users start to apply it. The author
compare its use to use of electric power, steam engine, or railroad. Initially, these commodities
provided a great advance for their first users; then, the use of them became mandatory; otherwise,
the mere existence of businesses who did not apply them, was threatened. The similar process is
going with Information Technology. The author tells, “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… By the end of the buildout phase, the opportunities for individual
advantage are largely gone” because even the method of its use has become standardized. The best
results become built-in in new software.

The main idea is that when the technological potential which presents a strategic advantage of the
company has become affordable and accessible for others, it loses its meaning as an advantage. It
turns to be commodity. With progress, technology gains a great standardization and great
homogenization of its functionality. For the cost reasons, companies buy generic applications which in
turn imply common processes for users. The continuously increased amount of the companies fulfill
their IT requirements simply by purchasing fee-based “Web services” from third parties, while
gradually, even the most cutting-edge features become available to all users.

Today, the devoted use of Information Technology can have completely other consequences. As Mr.
Carr says, “Today, an IT disruption can paralyze a company’s ability to make its products, deliver its
services, and connect with its customers, not to mention foul its reputation.” Therefore, taking in
account the diminished meaning of IT for competitive advantage, combining with a high risk of its use,
the companies should pay attention to the amounts they spend on this commodity, e.g., they should
separate necessary investment from discretionary. The author mentions that companies’
management frequently buy new computers or another software, while most workers in the company
use very general applications which requires just little modification for their further use, and vast
spending on completely new hardware and software is unnecessary. He make examples of Wal-Mart
and Dell which don’t rush to use cutting-edge features, waiting until the standards and practices
solidify, and then, pass their competitors with higher profits because of economies. Consequently,
according to author’s opinion, “Given the rapid pace of technology’s advance, delaying IT investments
can be another powerful way to cut costs—while also reducing a firm’s chance of being saddled with
buggy or soon-to-be-obsolete technology.”

My opinion coincides with Mr. Carr opinion. I think the meaning of Information Technology for
strategic advantage has become exaggerated because the vast majority of the companies use same or
similar software, and differences can be only temporary since they are easily can be replicated. I
think, the use of Information Technology became commodity, necessary for the existence of any
company; yet, the level of its necessary use and its cost simply depends of the company needs.
Consequently, each company should meticulously weigh cost and effect of the Information
Technology System it is going to apply for the operations.