Carnegie Mellon University © Robert T. Monroe Management Information Systems Does IT Matter? Management Information Systems Robert Monroe August 30, 2010

Carnegie Mellon University © Robert T. Monroe Management Information Systems Goals Provide a context for evaluating the different Information Technologies we will explore in the course Take a look at an ongoing, heated, and unresolved debate within the IT community Start to understand the role that IT does, and/or should, play in business

Carnegie Mellon University © Robert T. Monroe Management Information Systems Nicholas Carr’s Argument – IT Doesn’t Matter The core functions of IT have become available and affordable to all competitors – (aka commodities) –Data storage, data processing, and data transport Scarcity makes a resource strategic, not ubiquity  IT is no longer a source for sustainable advantage IT strategy should switch from offense to defense –Spend less –Follow, don’t lead –Focus on vulnerabilities, not opportunities

Carnegie Mellon University © Robert T. Monroe Management Information Systems How Does Carr Define ‘IT’?

Carnegie Mellon University © Robert T. Monroe Management Information Systems IT Infrastructure As Commodity IT infrastructure has a long history of commoditization –Computers, telecom, networks, storage devices –Operating systems, databases, office suites, business apps Historically, standardized has beaten out proprietary –IT components increase their value by working with other IT components –Sometimes standard is set by market leader (de-facto standard) Microsoft operating systems, Intel microprocessors, Cisco routers –Sometimes standard is set by standards organization, such as ISO Generally called “open standards” TCP/IP, HTTP, SCSI, OASIS Continuously falling costs for IT infrastructure has led to widespread adoption of the technologies.

Carnegie Mellon University © Robert T. Monroe Management Information Systems IT As A Commodity “Although more complex and malleable than its predecessors, IT has all the hallmarks of an infrastructural technology” –IT Doesn’t Matter, page 7. Do you agree that Information Technology is now a commodity? –Why or why not?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Are Information Systems A Commodity? Does the commoditization of IT infrastructure imply the commoditization of Information Systems?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Discussion Examples Have these companies been able to achieve sustainable competitive advantage with their information systems? –What were the results of their attempts to do so? –Are their information systems still a source of significant competitive advantage?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Carr’s Recommendations for IT Strategy

Carnegie Mellon University © Robert T. Monroe Management Information Systems Carr’s Recommendations For IT Strategy How does one implement this strategy? Is this a winning strategy for all organizations? For what types of organizations might this be a bad strategy? What are the consequences of this strategy?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Rebuttals This article created a tremendous amount of discussion and debate within the IT world. Carr’s argument: “IT Doesn’t Matter” IT’s response: “Does Too!” Let’s look at some carefully considered rebuttals

Carnegie Mellon University © Robert T. Monroe Management Information Systems Rebuttals – John Seely Brown and John Hagel III Core argument: IT is inherently strategic because of its indirect effects – it creates possibilities and options that did not exist before. Extracting value from IT requires innovations in business practices. The strategic impact of IT investment comes from the cumulative effects of sustained initiatives to inovate business practices in the near term. IT only matters in the context of a concerted effort to innovate based on new possibilities and opportunities created by the technology. Then it matters – and will continue to – a lot.

Carnegie Mellon University © Robert T. Monroe Management Information Systems “IT can change rules and assumptions about competition” The challenge is determining when that will happen, and what the implications will be for your industry, and how to respond effectively Three lenses for looking at IT: –Improving cost savings and efficiencies –Incremental improvements to processes, services and products –“Game changer” opportunities Rebuttals – McFarlan and Nolan

Carnegie Mellon University © Robert T. Monroe Management Information Systems Profitability and IT spending are unrelated, even if identical technologies are used (Strassman) The differentiation is about information, business processes, and applications. (Gartner) What makes the difference is a set of benefit conversion factors that influence how well investments in IT-enabled business initiatives are turned into real business value. These factors include: (Gartner) –Clear decision rights –Accountability for IT related decisions –Integrated business and technology planning and execution –Strong collaborative behaviors Rebuttal – It’s People and Process, Not $’s Invested

Carnegie Mellon University © Robert T. Monroe Management Information Systems Rebuttal – The “End Of History” View Is Flawed Widespread availability creates new business opportunities (Strassman) The end of IT has been pronounced many times before… Analogies to previous technologies are flawed –Electricity is just an energy source (?) –Railroads are capital-intensive in a way that IT is not –In previous examples, the big changes didn’t happen until the fundamental infrastructure became commoditized –Information Technologies are still being rapidly applied to new domains and to old domains in new ways

Carnegie Mellon University © Robert T. Monroe Management Information Systems Conclusions IT infrastructure rarely confers sustainable competitive advantage Innovative application of information technology that is difficult for competitors to replicate can lead to sustainable advantage: –The advantage created may be fleeting and come at great cost –In highly successful cases the short-term advantage can be used to create other forms of sustainable advantage Brand, efficiencies, switching costs, partnerships, etc. The most effective applications of IT also change processes Regardless of whether IT will provide companies with sustainable advantage in the future, it will continue to be a core function that must be executed effectively to remain competitive

Carnegie Mellon University © Robert T. Monroe Management Information Systems For Wednesday 9/1 Wednesday we look at core IT infrastructure elements and issues Detailed class preparation information is located on the wiki

Carnegie Mellon University © Robert T. Monroe Management Information Systems Resources Nicholas Carr, “IT Doesn’t Matter”, Harvard Business Review, May 2003., Reprint R0305B