Can IT no longer confer a competitive advantage?
According to the well-publicized writings of Nicholas
Carr, it no
longer can. Whereas American Airlines’ famous SABRE reservation
system provided a true, and enduring, competitive advantage decades
ago (and is still the subject of business school case-studies, as I
can personally attest), Professor Carr argues that today’s technology—Cisco
routers, Dell PC’s, even IBM services—are standardized commodities
for sale to all comers. In such an environment, it no longer
pays to be cutting edge; indeed, the very concept of "cutting edge"
becomes questionable.
Rather, CEO’s and CIO’s need to be realistic about the changed nature
of the IT beast, and specifically:
- Focus on "good enough."
- Drive hard bargains (a commodity industry is often one with excess
capacity, and excess capacity typically implies tremendous flexibility
in pricing at the margin). - Don’t be creative; shun proprietary systems.
- Challenge ROI numbers.
This last point deserves elaboration: One should, of course, always challenge
ROI numbers, but I think Prof. Carr’s point is slightly more nuanced—at
least mine would be. To wit, one can no longer assume when investing
in a "commodity" that cost savings will flow through unimpeded to the
bottom line. That may be true for a day or a week or a month,
but your competitors will soon adopt the same commodity cost-savings
strategy, and you will no longer enjoy the "savings"—your
customers will, through lower prices.
Which is, after all, exactly what Adam Smith would have predicted.
