From Commodity to Utility - Nicholas Carr’s Latest on the IT function

Nicholas Carr’s “IT Doesn’t Matter” created headlines in 2004. Carr challenged whether information technology provides businesses with a source of strategic advantage. Information technology had become a commodity, available to anyone, and hence unsuitable for competitive differentiation. Consequently, IT should be managed accordingly, as a risk and as a commodity rather than as an opportunity and a unique asset. This included seeking to contain costs sharply.

His latest book “The Big Switch focuses on Carr’s proposition that utility computing will replace organisational IT departments. Reviews suggest that this could be as controversial.

Carr’s previous book found support by those who had gone through the ERP hype of the 1990s, the Y2K dread, and the dotcom bubble and crash. Pricey ERP systems had relativised the differentiation in business processes and made large-scale systems look like commodities. Cost-cutting within IT was a logical consequence, which appears to be continuing these days. Those who felt challenged by Carr’s point of view were considered to be those with a direct stake in information technology, not the business people.

It does not appear that Carr’s latest publication, preceded by a 2005 article, will generate similar levels of controversy. He suggests that business computing has moved from commodity to utility, rendering distinct IT functions within organisations obsolete in the near future. The commoditisation has been the prerequisite for utility computing, which delivers ‘generic’ applications over the internet. Should companies be able to address the bulk of their computing needs through utility computing, huge cost savings could be accomplished.

The impact of global scale systems on the business IT function is currently characterised by analysts such as Gartner as “disruptive discontinuities”. Gartner offers some advice on adaptive strategies to their audience, while Carr sees major shifts occurring in the workforce, not only in relation to the IT function but also in other professions such as journalists and information workers globally.

In contrast, for Joe Peppard of Cranfield University, the IT function as a distinct entity is not foremost challenged by large-scale technological development. Peppard believes that this idea of the separate IT unit has spawned a range of inward looking measures for addressing the quest for business value, which have proved rather ineffective. Among these are: the focus on internal processes as documented in ITIL, and the use of SLAs and the management of the IT function as a profit-centre, which do not recognise that value is co-created. In Peppard’s view, any step that solidifies the divide between business and IT is detrimental to establishing a common shared knowledge that is fundamental to business value creation.