Nicholas Carr's Proposition That Ubiquity & Commoditisation Of It

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To Nicholas Carr's proposition that ubiquity & commoditisation of IT

Nicholas Carr's proposition that ubiquity & commoditisation of IT

Over the past three decades, a great deal of advice has been proffered in both the managerial and academic press about how information technology (IT) can add business value and help organizations become more competitive. It has been widely held that IT has the potential to create competitive advantage. And then along comes Nicholas Carr. The main premise of his article in the last issue of the Journal of Business Strategy (Vol. 25 No. 5) and the book from which it is excerpted (Does IT Matter?) is that IT is a mature technology. It has become a commodity and, as a consequence, corrodes competitive advantage as it automates functions throughout an organization. This corrosion is the result of best practices more and more rapidly turning into universal practices and traditional sources of advantage drying up. Carr's arguments have met with many varied responses. They have range from applause and cool assessment to rage and furious attacks.

Carr's claim is revolutionary when we consider that, in the US, over 50 percent of all capital investments made in 2004 are expected to be IT investments. Are companies really investing over half of their capital expenditures without any hope of influencing their competitive positions? Carr would probably say no, as there are always investments that are not instrumental to achieving competitive advantage but can be instrumental to losing it if not made. But there is more to this story. We believe that Carr's analysis, though well written (especially the end of his book which calls for careful analysis and common sense in IT investments), draws upon a straw man argument. It is based on analogy and gross simplification of the nature of IT investment.

First, Carr argues that IT has become a commodity, much as railroads and electricity became in the past, and therefore it cannot possibly produce competitive advantage. This argument hinges on two assumptions which are never justified: (1) IT really is analogous to railroads or electricity; and (2) IT truly has become a commodity. On both counts we do not wholly agree. In some respects IT has followed the S-curve path of earlier technological innovations, but that does not imply that all technologies are similar or have similar impacts on firms' performance.

IT is different from earlier technologies in two fundamental ways. First, its growth and change potential is unprecedented and still continues, and second, it is the most versatile and flexible technological platform the human race has ever created. The information technology in Word processing software is very different from the Amazon's e-commerce platform, which is very different from the genetic algorithms used to explore the structure of molecules. The context, the task and the nature of their impact is so different among these information technologies that it is naive to consider them together. Hence, it is not clear what the claim that IT is similar to electricity ...
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