Wednesday, August 27, 2008

Does IT matter?

It has been more than five years since Nick Carr made his prediction about IT becoming inconsequential. His argument was that IT will become so standardized that it would cease to have competitive advantage. IT would roughly follow a utility provider type of evolutionary path. Since then we have had great strides made in Cloud/Grid computing and it appears IT infrastructure is on its way to become standardised. Though I have made points about capacity issues here and here, except for one major incidence there is no other slip up yet. Many of components (the Intellectual Property of IT), sitting on top of IT infrastructure such as ERP, CRM, BPM too, are standardised to great degree. So are we really going to have a standardized IT environment and hence IT would not matter strategically?

IT was necessary and sufficient for competitive advantage till some time back. But with the standardisation and proliferation of IT, it has become necessary but no longer sufficient for competitive advantage. What that means is just investing in IT will not give companies the strategic advantages. It however does not mean that IT investments can be simply cut back. So enterprises are going for the more bang for the buck thru outsourcing of infrastructure and business as usual activities, and the utilising the savings for transformational initiatives.

The next focus area for competitive advantage will be driving out risk in implementing these standardised capabilities. The enterprise who could implement these capabilities faster and reliably, will get the advantage. In my opinion we are in middle of this phase. This is when enterprise architecture and project management practices are being defined and utilised to its fullest. Over a period, these implementation practices too will be common place.

Then there still may be opportunities to gain competitive advantages thru IT. Unless you believe there are limits to human mind and how much it can innovate - this is a distinct possibility. But the investments needed for such endeavours will be so high that, only outsourcers will invest in innovation and then charge enterprises differently thru differentiated offerings. Once that happens, the utility model will break down and enterprises will start moving to a non-utility model. It does not happen to utilities, because what utility companies distribute is indeed a commodity (well you cannot give more pure water to some of your consumers and charge more, can you?).

We are back to square one, aren't we?

That to me appears to be future of enterprise IT. So IT would continue to be of importance to enterprises, but enterprise would squeeze more value out of IT by using IT as shared utility rather than a captive resource. And this in the end it may result in IT becoming a captive resource again. Well this has happened in past. I wasn't born then, but I have heard stories about IBM Service Bureau and their shared services model.

No comments:

Wednesday, August 27, 2008

Does IT matter?

It has been more than five years since Nick Carr made his prediction about IT becoming inconsequential. His argument was that IT will become so standardized that it would cease to have competitive advantage. IT would roughly follow a utility provider type of evolutionary path. Since then we have had great strides made in Cloud/Grid computing and it appears IT infrastructure is on its way to become standardised. Though I have made points about capacity issues here and here, except for one major incidence there is no other slip up yet. Many of components (the Intellectual Property of IT), sitting on top of IT infrastructure such as ERP, CRM, BPM too, are standardised to great degree. So are we really going to have a standardized IT environment and hence IT would not matter strategically?

IT was necessary and sufficient for competitive advantage till some time back. But with the standardisation and proliferation of IT, it has become necessary but no longer sufficient for competitive advantage. What that means is just investing in IT will not give companies the strategic advantages. It however does not mean that IT investments can be simply cut back. So enterprises are going for the more bang for the buck thru outsourcing of infrastructure and business as usual activities, and the utilising the savings for transformational initiatives.

The next focus area for competitive advantage will be driving out risk in implementing these standardised capabilities. The enterprise who could implement these capabilities faster and reliably, will get the advantage. In my opinion we are in middle of this phase. This is when enterprise architecture and project management practices are being defined and utilised to its fullest. Over a period, these implementation practices too will be common place.

Then there still may be opportunities to gain competitive advantages thru IT. Unless you believe there are limits to human mind and how much it can innovate - this is a distinct possibility. But the investments needed for such endeavours will be so high that, only outsourcers will invest in innovation and then charge enterprises differently thru differentiated offerings. Once that happens, the utility model will break down and enterprises will start moving to a non-utility model. It does not happen to utilities, because what utility companies distribute is indeed a commodity (well you cannot give more pure water to some of your consumers and charge more, can you?).

We are back to square one, aren't we?

That to me appears to be future of enterprise IT. So IT would continue to be of importance to enterprises, but enterprise would squeeze more value out of IT by using IT as shared utility rather than a captive resource. And this in the end it may result in IT becoming a captive resource again. Well this has happened in past. I wasn't born then, but I have heard stories about IBM Service Bureau and their shared services model.

No comments: