Is IT a Commodity? Examining Nicholas Carr's IT Thesis

Introduction: The Rhetoric of Technological Decline

The end of history. The death of the American nuclear family. The uselessness of IT. There is no better way to establish one's reputation as a controversial commentator than to make a sweeping — however unjustified — pronouncement about the death of something, regardless of whether one has the data to back it up. Charles H. Duell, the director of the U.S. Patent Office, did so in 1899 when he said, "Everything that can be invented has been invented" (Evans 2004). Duell was wrong about technology, but right in the way he went about making quotable declarations and a public relations splash.

Nicholas Carr's 2003 Harvard Business Review article "IT Doesn't Matter", which he subsequently expanded into a book, certainly drew accusations of generating more heat than light. However, Carr's central thesis deserves careful examination.

Carr's Central Thesis: IT as Commodity Infrastructure

Carr argues, from a historical business perspective, that when one examines the evolution of information technology in commerce, the technology is likely to follow a pattern similar to earlier commodity technologies such as railroads and electric power. For a brief period, as these infrastructure technologies were being built into evolving commercial networks, being on the cutting edge of the new technology gave forward-looking companies a significant edge and strong competitive advantages in their respective markets. But as availability of the new technology increased and its cost decreased, the infrastructure technology became ubiquitous — a uniform commodity input rather than a marketplace differentiator.

This pattern, Carr contends, is now repeating itself with information technology. What was once a source of strategic differentiation has become a baseline operational requirement, no more distinctive than access to electricity or telephone lines.

Industry Reactions and Counterarguments

Computerworld almost immediately rebuked Carr for his focus on IT cost-cutting rather than technical innovation, and for prioritizing risk avoidance over risk-taking (Keefe, 2003). Then, shortly after Carr's article appeared, the New York Times conceded that business analysts saw the balance of power shifting away from suppliers toward corporate customers, noting that reduced IT prices meant a good deal for customers but a tricky time for investors (Lohr, 2003).

However, General Motors CIO Ralph Szygenda offered a more nuanced response, countering that Nicholas Carr "may ultimately be correct when he says IT doesn't matter," but that "business-process improvement, competitive advantage, optimization, and business success do matter." These outcomes can be facilitated by IT innovation, "and they aren't commodities." To facilitate these business changes, IT can be considered either a differentiator or a necessary evil. Szygenda did agree with Carr that "spending the minimum on IT to reach desired business results" is ideal: "Precision investment on core infrastructure and process-differentiation IT systems is called for in today's intensely cost-conscious business — versus the shotgun approach sometimes used in the past" (Evans, 2003).

Conclusion: An Unresolved Debate

Carr's challenge thus remains controversial and provocative — until the next first-moving breakthrough technology gives a new or existing company another infrastructural advantage. The debate over whether IT can confer lasting strategic value is unlikely to be settled in the abstract; it will ultimately be answered by the emergence of the next genuinely disruptive platform that reshapes competitive dynamics, as railroads and electricity once did.

Works Cited

Evans, Bob. "IT is a Must." Information Week, 19 May 2004.

Keefe, Patricia. "IT does Matter." Computerworld, 14 May 2003.

Lohr, Steve. "A New Technology that is Now Old." The New York Times, 4 May 2003.

Murphy, Paul. "Gaining Strategic Advantage with Linux." Linux Insider, 15 Jan 2004.