Columns

Harvard experts put hurt on IT

• By Jack Vaughan
• June 30, 2003

The Harvard Business Review (HBR) recently published a piece that gained attention among the media-savvy and the just plain technology-obsessed. “IT doesn’t matter” by Nicholas G. Carr (HBR, May 2003) presumes that IT someday soon will be taken for granted. Like the railroads, which once changed the world but are now common, IT will be revolutionary no more, suggests Carr.

Far be it from me to send you off the scent of a provocative read; yes, “IT doesn’t matter” has a great headline and will be water cooler conversation for days to come. But wait! Before you pay any attention to the arguments on IT’s demise, you have to consider something about the source of this info. The folks at HBR are the same ones who gave us the New Economy.

In case fate has been merciful and you have forgotten the concept, the New Economy comprised really “hep” virtual enterprises such as petsneedfood.com, idontneednostinkingbusinessplan.com, mydirtysocks.com and downloadtherecordstore.com, all of which were destined to replace the Old Economy. The Old Economy was composed of boring old companies that had customers and met payrolls and stuff like that. Snore. These fogies went under the sobriquet of “bricks and mortar,” which was New Economy shorthand for “Old and in the Way.”

HBR fulfilled an important function here. Recall that after the first push to Web glory, the Internet boom stalled. That was because no sane business model underpinned the Gold Rush. Fortunately, HBR -- and to be fair, darn it, a lot of other analyst-type people, some of whom have lost or are losing their licenses to analyze -- came to the rescue with the All-Important Philosophical Underpinnings for Greedy Excess.

Maybe I am biased, but I do not blame IT for the Internet overload. I think that, at the beginning of the rush, most IT departments stood for best practices, ROI estimation and capacity planning. These practices, like bricks and mortar, were pushed aside for a while by e-commerce marketing mavens who, and this is intended as sarcasm: “got it.”

Maybe a correction was needed on the part of HBR. Maybe they felt bad for going out on a New Economy limb and taking America’s retirement accounts along. But naively re-characterizing IT as passé is not a correction. A few good heads will roll before firms discover that the so-called analysts were blowing smoke again.

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HBR and IT were topics at a keynote for developers and system administrators at Microsoft’s Tech.Ed Conference last month in Dallas.

Microsoft Senior Vice President Paul Flessner addressed the topic of the moment in his Tech.Ed keynote, coming down hard on the side of innovation.

“I could not disagree more,” Flessner said, referring to the HBR article and a slew of follow-up articles in other media suggesting that the IT explosion is over. “The story’s premise is that, if everybody has access to technology, it [provides] no competitive advantage.”

But clever development teams will make the difference, Flessner said. Mere access to technology means little. “I have access to golf clubs,” he joked, “but I am not Tiger Woods.

“Cost of operations is high. This must change,” noted Flessner. But IT directors will not be able to simply squash new project plans. “You don’t succeed long as an IT director just saying ‘No.’ Just as bad is saying ‘Yes, but I will need more money,’” he said.

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The buzz about the article, which challenges the long-term future of IT as a power for business and social transformation, carried over to a luncheon panel for press members held at Microsoft Tech.Ed.

Panel moderator and Gartner Inc. analyst Darryl Plummer set the tone, summarizing the HBR item. The article suggests IT becomes a commodity for most, and an advantage only for the first movers, he said. After the first rush, everyone has access to the same technology, and then no one can gain strategic value from it. Plummer’s own premise is that IT is more like an arcane art than it is a science or engineering discipline. Thus, he said, it is nowhere near as well-understood as is a railroad utility. Notes on other panelist’s comments follow.

* Notes on comments by Nathan Hanks, director of technology, Continental Airlines: If you look at the work of classic economists, said Hanks, they will say profits are eaten away in the long run. Money is made in frictional gains between paradigms. That can add up over time and you can set yourself off from competitors. One way Continental has used IT to do this is via customer kiosks at the airport, which provide self-ticketing and reduce Continental’s cost of doing business. Over time it adds up to productivity improvements, said Hanks.

This reporter would add: It is true that the infrastructure required to build a kiosk has become a commodity in recent years as the Web happened. But clever apps that ride on the kiosk could keep developers, and flyers, busy for many years.

* Notes on comments by Gafar Lawal, director of architecture, Merrill Lynch: The HBR article is a shallow misread of the trend in the industry, said Lawal. IT is the use of technology to enhance a business, he said, and that includes the classic servers and the software. Merrill Lynch uses software, customizes it and delivers unique intellectual property (IP) to clients.

If some part of the technology is becoming a commodity, Merrill Lynch is happy to say, indicated Lawal, “let it be commoditized.” But if it is something unique to the company’s mission, that is a different matter. “It is good for us to maintain the strategic advantage we have over competitors,” he said.

This reporter would add: Wall Street has been an example of leveraging IT for competitive advantage. It has not necessarily been an example that can be carried over into every other business in America. Distinguishing between what you can take from off the shelf and what you should plan to build yourself is a key task for programmers looking ahead.

* Notes on comments by Brad Sherrell, assistant vice president of IT, Pacific Life: When you think about IT, you may start to compare it to a utility company, Sherrell said. In fact, elements can be likened to a utility. But when you look at intellectual capital, the business rules in your software system are what you use to compete, he said.

Sherrell pointed to policy-making, the lifeblood of insurance. The software Pacific Life has created to calculate a policy draws value. But it can have many ways in which to be delivered, with each way a commodity of sorts. The policy calculator, he said, can run online or in client/server mode, and the company is looking at mobile delivery. Pacific Life is already exposing the calculator internally in a Web services mode and that may soon “flow externally,” Sherrell said.

This reporter would add: Harvard-style gurus are too quick to confuse the message, the messenger and the originator. Certainly, technology infrastructure looks like a utility ... It is! But what you do with those pipes makes all the difference.

* Notes on comments by Rachel Mileur, director of e-commerce system development, Airborne Express: At last! A technologist sees some merit in the HBR article. Airborne’s Mileur said her IT group looks to manage part of the organization as a commodity. The company has to lower the cost of mainframe operations but still add functionality. While the company has Unix in the shop, there is a deliberate effort afoot to standardize, where possible, on Microsoft Windows software.

When Airborne looked at what competitor FedEx did in the way of tracking applications, “we decided we had to be a little leaner, that there are some packages that are important,” she said, and the tracking app of Mileur and crew was focused on these packages and the most pertinent data. This can be done through Microsoft Outlook, Mileur indicated.

This reporter would add: Mileur holds a unique position at Airborne. Her company is in the shadow of two heavy-hitters in technology -- FedEx and UPS. For Airborne, the cost to stay even with FedEx in every function (e.g., full package tracking) might not be justified by sales. So Airborne takes another tack and looks to satisfy customers that would rather interface with the company at the Excel, Word or Outlook level, rather than directly through a Web browser interface. As always, technology is about decisions.