Hagel v. Carr – IT doesn’t matter

In the May 2003 issue of the Harvard Business Review, Nicholas Carr argues that spending on information technology no longer delivers strategic value to enterprises. In fact, he boils down his thinking to three recommendations (and my paraphrasing of them):

  • Spend less — no one has demonstrated that higher IT spending generates better financial results. Why spend?
  • Follow, don’t lead — IT gets cheaper every day. Waiting to make IT investments can be financially rewarding. Why spend now?
  • Focus on vulnerabilities, not opportunities — Competitive advantage from technology is elusive but technology failures are very visiblye and embarassing. Spend only to button things up.

John Hagel takes a different point of view — suggesting that Carr’s only capturing the current boardroom mentality re: slowing IT expenditures. Hagel says his full comments will be published in a rebuttal to Carr’s article scheduled for the July HBR issue. To summarize Hagel’s points:

  • IT alone isn’t the key — it’s innovations in business practices (supported by IT) that matters to performance.
  • You’re only able to achieve value from IT if your organization maintains its “IT trim” incrementally — ny slacking off will destroy any hope of success.
  • Anything with true strategic impact takes a while to develop and emerge. Again, you must be patient!

Hagel also argues that we’re no where close to IT being commoditized:

We have yet to see a dominant architecture for IT emerge. In fact, we believe we are on the cusp of another major shift toward a true distributed service architecture that will represent a qualitative breakthrough in terms of delivering more flexibility and fluidity to businesses.

Clearly, in executive suites around the globe, the bloom is off the IT spending rose. Exhausted from Y2K related expenditures coupled with e-enabling everything during the boom years, most enterprises are catching their breath, getting IT spending under control, leveraging the deflationary IT economy for both hardware and services (but much more slowly for software). Is IT spending required to enable business innovation — sure. It’s the pace and associated rate of change that matters — and only CIO’s who can appropriately gauge the right level of IT investments in this new IT century will survive with their business line colleagues.

Naturally, Carr’s HBR article has stirred a lot of reaction — which he’s tracking on his web site. Carr’s article is a great read — highly recommended — even if you do work for a high tech company trying to sell your stuff to enterprise customers in the current climate!

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