Competitive Advantage in Information Technology

Contemporary firms are making significant investments in information technology to align business strategies, enable innovative functional operations and provide extended enterprise networks. These firms have adopted information technology to foster changes in managing customer relationships, manufacturing, procurement, the supply chain and all other key activities and to enhance their competitive capabilities. A number of information systems researchers have posited information technology as an important ingredient of innovation development. Firms implement information technology to enhance and/or enlarge the scope of their products and services. As many innovation activities involve adding new services, expanding existing ones and/or improving the service delivery process, the success of an organization hinges on how well it implements its service innovation to create new markets.

In his seminal 2003 Harvard Business Review article "It Doesn't Matter" Nicholas Carr made the argument that while information technology has become the backbone of commerce, the importance of IT and information systems (IS) as a strategic resource capable of gaining sustainable competitive advantage has diminished. Carr's acknowledges that IT is critical to today's competitive environment. However, he makes the point that because IT/IS has become so essential to competition it is inconsequential to strategy. This conclusion is based on the assumption that what makes a resource a source of sustainable competitive advantage is not is ubiquity but its scarcity, that is, a company gains an edge over its competitors by doing something that they can't do or have. Since IS have become commonplace (i.e. data storage, data processing, data transport, CRM, etc), standardized, and available to all competitors as common adopted technologies, its potential as a source of differentiation has diminished. In summary, IS are becoming a commodity and an expense of doing business. In the 1990s , the US Department of Commerce's Bureau of Economic Analysis estimated that ...