Carr, Nicholas G. Does IT Matter? Boston: Harvard Business School Press, 2004. ISBN 1-59139-444-9.
This is an expanded version of the author's May 2003 Harvard Business Review paper titled “IT Doesn't Matter”, which sparked a vituperous ongoing debate about the rôle of information technology (IT) in modern business and its potential for further increases in productivity and competitive advantage for companies who aggressively adopt and deploy it. In this book, he provides additional historical context, attempts to clear up common misperceptions of readers of the original article, and responds to its critics. The essence of Carr's argument is that information technology (computer hardware, software, and networks) will follow the same trajectory as other technologies which transformed business in the past: railroads, machine tools, electricity, the telegraph and telephone, and air transport. Each of these technologies combined high risk with the potential for great near-term competitive advantage for their early adopters, but eventually became standardised “commodity inputs” which all participants in the market employ in much the same manner. Each saw a furious initial period of innovation, emergence of standards to permit interoperability (which, at the same time, made suppliers interchangeable and the commodity fungible), followed by a rapid “build-out” of the technological infrastructure, usually accompanied by over-optimistic hype from its boosters and an investment bubble and the inevitable crash. Eventually, the infrastructure is in place, standards have been set, and a consensus reached as to how best to use the technology in each industry, at which point it's unlikely any player in the market will be able to gain advantage over another by, say, finding a clever new way to use railroads, electricity, or telephones. At this point the technology becomes a commodity input to all businesses, and largely disappears off the strategic planning agenda. Carr believes that with the emergence of low-cost commodity computers adequate for the overwhelming majority of business needs, and the widespread adoption of standard vendor-supplied software such as office suites, enterprise resource planning (ERP), and customer relationship management (CRM) packages, corporate information technology has reached this level of maturity, where senior management should focus on cost-cutting, security, and maintainability rather than seeking competitive advantage through innovation. Increasingly, companies adapt their own operations to fit the ERP software they run, as opposed to customising the software for their particular needs. While such procrusteanism was decried in the IBM mainframe era, today it's touted as deploying “industry best practices” throughout the economy, tidily packaged as a “company in a box”. (Still, one worries about the consequences for innovation.) My reaction to Carr's argument is, “How can anybody find this remotely controversial?” Not only do we have a dozen or so historical examples of the adoption of new technologies, the evidence for the maturity of corporate information technology is there for anybody to see. In fact, in February 1997, I predicted that Microsoft's ability to grow by adding functionality to its products was about to reach the limit, and looking back, it was with Office 97 that customers started to push back, feeling the added “features” (such as the notorious talking paper clip) and initial lack of downward compatibility with earlier versions was for Microsoft's benefit, not their own. How can one view Microsoft's giving back half its cash hoard to shareholders in a special dividend in 2004 (and doubling its regular dividend, along with massive stock buybacks), as anything other than acknowledgement of this reality. You only give your cash back to the investors (or buy your own stock), when you can't think of anything else to do with it which will generate a better return. So, if there's to be a a “next big thing”, Microsoft do not anticipate it coming from them.

August 2004 Permalink