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BPO Journal

Thursday, May 26, 2005

So...IT doesn't matter?

Nicholas Carr's controversial Harvard Business Review article "IT Doesn't Matter" engendered a visceral response from academics and practicing managers alike. The article, more nuanced than its title, states that the ubiquitous nature of IT is reflective of a change in its organizational role from a powerful strategic lever to a commodity input that's the cost of doing business. Allied IT management too shifts from identifying opportunities to reducing risk.

The contrarian view highlights the incompleteness of Carr's argument, and that the technological revolution has not peaked as Carr would have us believe. For example, in an article in the current issue of Optimize magazine, Erik Brynjolffson, a prolific researcher on linkages between IT investments and productivity, states that IT-intensive companies tend to be more productive, and that companies have not yet figured out how to take advantage of information technologies. However, he adds that the organizational-capital investment in productive "digital organizations" is typically 10 times larger than the average IT investment. Therefore, "IT is the catalyst, but organization capital is the hidden bulk of the iceberg". Brynjolffson enumerates seven practices that characterize the top-performing firms: (1) Digitization of processes (2) open, widespread information access to employees (3) Employee empowerment (4) Meritocratic incentive structures that link employee pay to performance (5) Investment in corporate culture (6) Recruitment of quality personell (7) Investment in human capital.

Correct me if I am wrong but it seems like Brynjolffson's argument converges with Carr's. IT is a necessary investment to boost productivity but it is not what sustains competitive advantage. The key to success is not technology management but sound organizational practices that have been around longer than the Digital Age. IT doesn't matter.

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