Information Technology and Management (B.A.560)

PresentAsst. Prof. Danuvasin Charoen, Ph.D

IT DOESN’T MATTER

1968 – Ted Hoff, Intel Engineer, discovered a way to put circuits for computer processing on a silicon chip.

Technology has become the backbone to operational excellence, electronically linking data internally and externally.

IT is seen as a critical resource in fact spending capital spending ontechnology has risen from 5% in 1965 to over 50% in the late 1990s.

The premise of the article is that IT has become a commodity that is abusiness essential and management should focus on risk management in lieuof trying to achieve scarce competitive advantages.

However, the proliferation of IT has reduced its strategic value. Acompetitive advantage is only an advantage if it is scarce.

Today CEOs often talk about strategic value of IT, and have even createdthe CIO senior leader position in many organizations.

Overview

Technology as a Competitive Advantage

• Proprietary Technology Defined as a technology that can be owned actually or effectively by one company.

Example: Pharmaceutical Company: Patent on Compound

• Infrastructural Technology Defined as technology that can not be protected and in contrast to roprietary technology is worth more to the economy as a whole when shared.

Example: Railroad or Electricity

“ IT is considered an infrastructural technology.”

Vanishing Advantage The PhasesOf Infrastructural Technology Buildout

•Early Phaseadvantage takes the form of proprietary technology and enable new more efficient operating methods

“physical limitations to technology, intellectual property rights,

high costs, lack of standards, etc.”

• Market Changes in addition to improving operations dramatic broad market changes occur due to infrastructural technology.

Example: Railroads in the mid1800s

• The TrapExecutives make a mistake and assume that these advantages are sustainable when they are brief due to the technology becoming broadly adopted.

Commoditization of IT

• IT has all the characteristics of a infrastructural technology.–it is a transport mechanism – carries digital information.–it has more value when shared than when used in isolation.

• Standardizationeach stage in the evolution of IT has increased the standardization and homogenization.

“Highly replicable – the most pure commodity – bytes of data.”

• Perfect Delivery Channel third party purchases similar to electric power by purchasing fee based services “the grid.”

• Subject to rapid price deflation – Moore’s Law.

Are we near the end of the IT build out phase?

• Capacity has caught up with demand

• IT vendors are repositioning themselves as commodity

suppliers or utilities

• Investment bubble has burst

• Power is outstripping business needs

• Technology is affordable and available

“When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides”

Nicholas G. Carr

Greatest IT Risk?• Overspending…– As costs fall, new capabilities rise and business increases

reliance on IT companies continue to invest resources towards large investments from big hardware and software suppliers.

• Meanwhile…– Vast majority of business PC’s rely on a few simple

applications.– Applications are technologically mature.– Applications require only a fraction of computing power.– Corporate networks are storing invaluable information.

New Rules for IT Management

• SPEND LESS– Rigorously evaluate expected returns from IT investments.– Negotiate contracts ensuring long-term usefulness of your investment.– Assess data storage (eliminate waste and non-relevant information).

• FOLLOW, DON’T LEAD– The longer you wait to make an IT purchase, the more you’ll get for your

money.– Wait for standards and best practices to solidify.

• FOCUS ON VULNERABILITIES, NOT OPPORTUNITIES– Focus IT resources on preparing for disruptions and proprietary control.

Summary

• IT is an Infrastructural Technology (no longer proprietary)• Vanishing Advantage for Corporate Sustainability• IT Has Become A Commodity

– Standardization/Highly Replicable– Delivery Channel– Rapid Price Deflation

• Focus IT Investments on Risk more than Strategic Advantages.• Greatest IT Risk is Overspending.• To Avoid Overinvesting in IT:

– Spend Less– Focus on Risks, Not Opportunities– Follow, Don’t Lead

“When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become

more important than the advantages it provides.”Nicholas G. Carr

IT doesn’t matter? DEBATE

IT matters.IT matters.

IT matters.IT matters.

IT doesn’t matter.IT doesn’t matter.

IT doesn’t matter.IT doesn’t matter.

“The commoditization of IT and its competitive advantage.”Letter from John Seely Brown and John Hagel III

John Hagel IIIJohn Hagel III

John Seely BrownJohn Seely Brown

“The jobs of CTO and CIO are and will be of unparalleled importance in the decades ahead.”

Letter from F.Warren McFarlan and Richard L. Nolan

F.Warren McFarlan F.Warren McFarlan

Richard L. NolanRichard L. Nolan

“IT will always matter-it will just matter in different ways now.”

Letter from Jason Hittleman

“IT will always matter-it will just matter in different ways now.”

Paul A. Strassmann Paul A. Strassmann

Marianne BroadbentMarianne BroadbentMark McDonaldMark McDonald Richard HunterRichard Hunter

“Carr will lead executives to focus only on controlling IT costs. That is a necessary discipline, but it is not the route to real business advantage.”

“Now that some of the IT mystique has been eliminated, corporate IT has to play by the same rules as everyone else.”

Letter from Bruce Skaistis

“The implementation of these IT-based systems does not come cheaply and requires continual retargeting, yet it underlies the

success of many firms.”Letter from Vladimir Zwass

“IT never mattered. What matters are the people who invent technologies and who deploy and use them.”

Letter from Mark S. Lewis

“There is no consistent correlation between IT spending levels and financial performance.”

Letter from Tom Pisello

“IT is and will remain of strategic importance for the next ten years.”Letter from Roy L. Pike

“The move to a common infrastructure is inevitable. But it does not reduce opportunities for competitive advantage. It increases them.”

Letter from Vijay Gurbaxani

“IT is not the headline, it certainly matters (just like kidneys) because the work systems cannot operate without IT.”

Letter from Steven Alter

“Hardware and software can be intricately intertwined. Sometimes a single piece of outdated software can derail the deployment of

important new functionality with real strategic value.”Letter from Cathy Hyatt

“To exaggerate somewhat-but only a little-anything is possible with software,

if not today, then tomorrow.”

Letter from Chris Schlueter Langdon

“Just because we continue to see new innovations in IT does not mean that it

pays to be a pioneer.”

Reply from Nicholas G. Carr

IT doesn’t matter? Our DEBATE

IT matters.•What is the role of IT?•What are IT strategies?•What should CEI/CIO focus on?•etc.

IT DOESN’T MATTER

YES NO