Question

briefly discussed in the textbook, Nicholas Carr posed that IT resources can be described as a commodity. Why? Do you agree with him?

How do IT resources “matter” in terms of the different roles they play in an organization? Which component of an information system is most critical to success in growing and transforming the business? Why?

Answer 1

. Nicholas Carr point on IT resources treated as a commodity :

Harvard’s Dr. Nicholas G. Carr recently published a book laying out his provocative and controversial thesis, “Does IT Matter?”. In it, he asserted that the strategic and economic advantages often associated with (and even conventionally expected from) the business deployment of information technologies has faded as a direct consequence of their being broadly available to all as a commodity. He consequently recommends that managers view investments in information technologies as being a source of more downside financial risk than upside
strategic opportunity. His work has sparked a broad (and often intense) debate as to its truths,mistruths and misconceptions.

Carr’s primary argument is that over time, information technology has moved from a source that could provide a competitive advantage for companies to the “simple cost of doing business." Carr asserts that with his definition of IT (CIT), IT is on a commoditization path, therefore it will offer little differentiation or competitive advantage to individual companies. Carr recommends that companies manage IT as a commodity input; companies should strive to achieve the necessary IT capabilities needed to compete, for lowest possible cost and risk. Carr claims that the only meaningful advantage most companies can hope to achieve from IT is a cost advantage.
We must consider scale when analyzing a company’s ability to leverage potential commodities in support of their MIT needs. There may be services readily available that a small
company could leverage and use as commodity IT components (in support of a small customer-base). The complexities inherent in dealing with large businesses, a customer-base that includes millions of customers, may prohibit an IT organization from being able to leverage those same services successfully.
CEO’s would benefit if Carr’s commoditization claims turned out to be true, that would imply IT is standardized, proven and less costly enabling companies to focus and invest in areas
that can provide a distinctive advantage. It should be noted that Carr does caution companies against investing in IT innovation, fifty percent of innovation investments fail and innovation has a long lead time; but if the innovation pays off it can provide phenomenal success.

. I agree with Carr as IT resources can be treated as 'commodity' because:- Carr makes a solid recommendation that makes good business sense; CEO’s should treat IT as a commodity input, run IT like a business. Structure internal IT departments to cost less, provide higher quality, be flexible and make the business efficient. This policy supports Carr’s
recommends, if companies treat IT as a commodity input organizations will get the IT they need for less money and with less risk. Carr recommends companies move away from cutting-edge technology and not invest in innovation unless it is necessary. If common sense prevails, this recommendation would serve as a general guideline (or policy if you will) but the final decision needs to take the enterprise road map into account as well as the project’s business requirements.
A small portion of the IT budget typically goes toward innovation; the risk of these projects failing is high, the reward even higher. A company should resist innovation unless it strategically aligns with the organization’s enterprise roadmap.

. IT resources “matter” in terms of the different roles they play in an organization:-

Once you move beyond shrink-wrapped software packages such as those discussed above, implementing new IT projects within a large company is a known source of nightmares.
The widely cited Standish Group study in 1994 brought attention to the extremely high cost of IT
projects and their relatively low success rate.45 The topic remains an active one in IT publications
and government projects are not immune; the IRS currently has IT project overruns of over $500 million.46 Carr notes that continued loss of capital due to failed IT projects is a significant problem for businesses47, but does not explore the reasons for those failures.
Follow-up Standish Group surveys in 1998 and 2003 still found high rates of failure and significant cost overruns, with some signs of improvement. From 1994 to 2003, the survey
reported an increase in the percentage of successful projects from 16% to 34%.48 Other studies find similar results. A large survey of project managers in the UK by Computer Weekly found lower project success rate than the Standish Group, with only 16% of projects being successfully completed, using the same criteria as the Standish Group but different project selection criteria.49 Finally, a 2003 study by the Hackett group also found a 30% project failure rate in large projects.50 In all these studies, attempts were made to understand the factors leading to project successes and therefore quantifying best practices for IT project implementation.
The following table from the Computer Weekly study quantifies changes in IT project management success from 1995 to 2003 by comparing the results of the Standish Group with their own. While there are distinct differences between the surveys, likely due to differences in underlying populations and methodologies, they all show that IT projects rarely fully succeed. However, the most recent Standish Group results illustrate that failure rates have dropped significantly over the last decade, from 31% to 15%.

While it is tempting to attribute the increase in success to standardization of IT use, this reduced failure rate alone does not indicate that adoption of more uniform business practices. The Computer Weekly survey found that project size directly correlated with chance of project failure. Less expensive, shorter-term projects ran failure rates of 6% or less, while more expensive, longer term projects had failure rates close to 15%. In the 2003 report, the Standish group mentions that average project budget was only half that in 1995, but does not break down project failure by size. Therefore, a significant reduction in the overall project failure rate could
be ascribed to undertaking smaller, more manageable projects rather than quantifiable improvements in process.

. Reason Behind IT resources that go through critical path to success:-
Analysis of project success rates over time does not conclusively support or dispute Carr’s argument that IT usage is becoming standardized. Carr does not comment extensively on the continuing struggle of IT managers to implement new IT projects but calls these failures, “…a natural consequence of the process of trail and error that goes on as any new technology is adopted by business.”51 Since the three reports cited above intend to analyze this trial and error,
we continue our analysis by investigating the factors that these groups feel lead to project success.
Factors leading to successful implementation of IT within a business can be broken down into two broad categories, organizational factors and those pertaining to individual projects. All three surveys look at organizational factors and, as shown in the chart below, highlight similar areas that have an impact on efficiency of IT use within a business.

All three studies show a high degree of consensus in organizational factors that improve the efficiency of IT project implementation within a company. They agree on the importance of a firm commitment to IT project success from the top levels of the company, and support at least adoption of a centralized project management methodology, preferably an actual project management office. All of the factors speak to IT being recognized as an important part of the organization.