How quickly time passes. . . It’s already been ten years since the publication of Nicholas Carr’s controversial article IT Doesn’t Matter. The article appeared in the May 2003 issue of the Harvard Business Review, where Carr was then an editor-at-large. CIO Magazine marked the 10th anniversary with an interview with Carr and a retrospective story on the reactions to the article by Ann Bednarz, who wrote:
“The jarring headline of Carr’s May 2003 article, IT Doesn’t Matter, is what many people remember, and it tends to overshadow his more thought-provoking thesis: that companies have overestimated the strategic value of IT, which is becoming ubiquitous and therefore diminishing as a source of competitive differentiation.” His claims that companies were overspending on IT, because the technology was becoming more commoditized and accessible to everyone “ignited an industry firestorm.”
In the interview, Carr said that the reaction to the article went way beyond what he expected. IT vendors were up in arms, because he was essentially telling their customers that the competitive advantage gained by IT investments was shrinking once everyone had access to the same technologies, and that they therefore did not need to be spending much money on the latest hardware and software products. CIOs and IT analysts had a more mixed reaction, with some disagreeing with Carr’s points, while others saying that they made a lot of sense.
“The industry, according to Irving Wladawsky-Berger, a strategy executive at I.B.M., has entered the post-technology era. It is not that technology itself no longer matters, he explained. Instead, he said, the steady advances in chips, disk storage and software mean that the focus is no longer on the technology itself - with its arcane language of processing speeds and gigabytes - but on what people and companies can do with it. . .”
“Mr. Wladawsky-Berger is in charge of guiding that strategy, which I.B.M. is promoting as on-demand computing. The on-demand concept represents a maturing of computing in a sense, he said, but more as ‘the next evolutionary step in information technology, where the fun really begins’ rather than an aging industry in decline.”
The On Demand strategy was built around three key premises. First, we strongly believed in the emergence of an open, integrated, heterogeneous IT infrastructure. The Internet had already convinced most people and businesses of the virtues of open standards. Linux and open source in general were becoming accepted across the IT industry. SOA and Web services were enabling us to tackle the integration of processes, information and just about everything needed to build open, global, integrated business solutions.
We thus were pretty much in agreement with Carr that IT was becoming increasingly standardized and accessible to everyone. But, we were also quite bullish about the potential implications of having such an integrated, ubiquitous, open IT infrastructure.
The Next Big Thing, we said, would no longer be any one technology innovation or new product, but the fact that technology was becoming integrated into, and transforming all aspects of business and society. IT was laying the groundwork for the horizontal integration of business processes across a whole company, as well as enabling companies to reach out to suppliers, partners and customers. Over time, this business integration would significantly transform companies and industries around the world. In particular, it would help them become more responsive and better able to adapt to the accelerated changes brought about by the continuing advances in technology and the competitive pressures of globalization.
We were also convinced that one of the biggest changes in computing would be the way customers acquired and paid for IT and IT-enabled services of all sorts, which people where then calling utility computing but a few years later became known as cloud computing. This was the logical outgrowth of several widespread changes: an increasingly powerful and reliable IT infrastructure; the continuing acceptance of open standards all the way to the business process level; and the growing economic and competitive pressures faced by every business. As Steve Lohr wrote in his NY Times story:
“The push toward utility computing, according to Mr. Wladawsky-Berger of I.B.M., fits neatly into his concept of a post-technology era. ‘In the last few years,’ he said, ‘the underlying components have become so powerful, reliable and inexpensive that you don’t have to worry so much about the underlying engine, and you can move up to higher-level concerns.’”
The On Demand initiative took time to play out. In the early 2000s, business was still reeling from the bursting of the dot-com bubble, and some interpreted our optimistic outlook on the future as just more Internet hype. Furthermore, there were no concrete silver bullets around On Demand, no specific technology or product that everyone could quickly understand. Our key point was that an increasingly standardized, plentiful, powerful and inexpensive IT infrastructure would lead to major innovations across business and society, something that has indeed played out over the past decade with the advent of social, mobile, cloud, and big data.
I went back and re-read IT Doesn’t Matter, and I think that Nick Carr was making similar points, albeit in a more provocative way. His article was more focused on the diminishing competitive advantage gained by an increasingly commoditized, accessible IT infrastructure, whereas in our On Demand initiative we focused more on the strategic potential that such an IT infrastructure would now enable As he said in the recent CIO Magazine interview:
“[The] idea that the basic technology was going to be neutralized as a competitive differentiator has basically panned out. . . . On other hand, there have been all sorts of other developments that you have to figure out - your cloud strategy, social media, marketing, apps. So from another point of view, I think I probably understated the new things that IT departments would have to grapple with. Some of those things aren’t necessarily located within IT departments anymore. They’re as much about marketing departments and other things. But I don’t think I expressed the full range of what was to come, and what was to influence what IT departments would do. I was mainly focused on the state that they were in back then.”
In 2004 Carr published a book based on his HBR article with the more toned-down title of Does IT Matter? Information Technology and the Corrosion of Competitive Advantage. He later became an early advocates of cloud computing, and in 2008 published The Big Switch: Rewiring the World, from Edison to Google, one of the first books on the subject. That summer, we were both speakers at a conference in the Boston area on The Promise and Reality of Cloud Computing. Cloud computing was just beginning to catch the industry’s attention, although few were sure what it was all about. “There is a clear consensus that there is no real consensus on what cloud computing is,” was how the conference organizer succinctly summarized the sense of the meeting.
In his keynote, Carr nicely framed the shift to cloud computing in historical terms by discussing the evolution of power plants in the 19th century. In the early days, companies usually generated their own power with steam engines and dynamos. But with the rise of highly sophisticated, professionally run electric utilities, companies stopped generating their own power and plugged into the newly built electric grid.
IT, he said, is the next great technology that is going through a similar transformation. Many IT capabilities, now handled in a distributed way, will be centralized in highly industrialized, efficient, scalable data centers which should free companies to invest in innovation where it really matters to their business. He said that IT clouds were quite different in nature from electricity - more complex and diverse in the services they offer, and it was too early to tell how they would evolve.
In the 10th anniversary CIO Magazine interview, Carr was asked how far along we were on the path to cloud. He replied:
“This also happens to be the fifth anniversary of my book The Big Switch, which was about cloud computing. And in that book, I said that I thought we were talking about a 20-year transition. I think that’s probably still true. If we’re five years into that, there’s still more than a decade to go. If you look at IT, the bulk of investment these days, certainly on the vendor side, is on cloud systems and applications. On the other hand, if you look at corporate spending, cloud is still a fairly small percentage of overall spending, even though it’s growing quickly. So we’re still kind of between two eras. A lot of corporate IT spending and attention still has to be devoted to proprietary databases and in-house systems. It’s going to take a long time to make that transition. I think we’re still at the beginning of that shift.”
He then went on to say:
“I do think that IT ultimately is going to be a smaller department in terms of headcount, but the successful IT departments and IT managers will play a more strategic and kind of consultative role - thinking about marketing implications of apps and social media and things like that. I think the emphasis is still going to be on being the bridge between technological possibilities and business goals, and less about optimizing the technology itself. That's a trend that has been going on for some time now and I think will continue.”
That’s a very good summary of why IT will still matter for a long time to come.