Carr: Spend less on IT; Metcalf counters

PALM DESERT, CALIFORNIA (03/09/2004) - Does IT matter anymore? In a sharp debate late Monday that marked the end of day one of Computerworld's Premier 100 IT Leaders Conference, author Nicholas G. Carr asserted that IT has largely lost its ability to provide companies with a competitive advantage, while Bob Metcalf, the inventor of Ethernet, rebutted Carr's views.

The exchange had users so enthralled by the speakers' arguments that they continued to question them for a half-hour beyond the intended closing time of the session.

Carr, a former editor at Harvard Business Review, began by recounting his article, "IT Doesn't Matter," which ran last year in that publication. In the article, he argued that IT applications and infrastructure, though essential to business and integral to business processes, have become so easily replicable that they no longer provide sustainable competitive advantage.

"When everyone is at parity, profit goes to customers, not to bottom line," Carr said.

Like railroads, telephone and electricity, IT has become part of the general business infrastructure -- absolutely necessary to compete but no longer strategic, he said. Companies still don't realize this, he said, and as a result, spend much more aggressively on IT than they should.

Today, he said, risk management in IT is more important than innovation, and the biggest risk is overspending. "Companies should have a bias to spend less year over year for IT," he said. "Follow, don't lead. Even small delays can save you lots of money and risk."

But Bob Metcalf, inventor of Ethernet and currently a principal at Polaris Ventures in Boston, came out swinging. "Carr has called you impatient, sloppy, wasteful, lavish spenders, counterproductive and lured into passivity by chorus of hype," he said. "So many people have debunked Carr before me that I feel like Elizabeth Taylor's ninth husband: I know what to do, but how do I make it interesting?"

Metcalf countered that IT matters to the tune of US$1.8 trillion dollars in IT spending in 2003, according to research firm IDG. Business executives spend 20 percent of their time dealing with IT matters, he added, and 58 percent of them say the strategic importance of IT is increasing. Just 2 percent say it is decreasing.

And yet, he said, Carr concludes "that you people should stop spending wildly, stop being suckers, stop squandering corporate assets unless you want to end up on some Sarbanes-Oxley perp walk."

Metcalf said Carr chose to cite only studies that support his thesis. "Studies have shown that studies show what they're intended to show," he said. "Be suspicious of studies."

The unsung heroes in the innovation machine are the IT leaders in the Premier 100 audience, Metcalf said. "If Carr's advice is followed, how will new technologies find markets and be perfected? Who will provide testbeds?"

Finally, he said Carr is not only wrong, but also dangerous because "he has succeeded in misleading the vast majority of Harvard Business Review readers who read only the titles." Unless his views are thoroughly debunked, Metcalf said, "Today's current crop of MBAs will be running WordPerfect on 286s," and American ingenuity will be "strangled in the bassinet."

After stating their cases, the two jabbed and parried, with the audience chiming in with questions and comments, nearly all of them challenging Carr. One audience member asked why, if IT is a commodity, there is a huge variation in the success of IT use by companies. Others offered Wal-Mart Stores Inc., eBay Inc. and Inc. as examples of lasting competitive advantage gained through innovative use of IT.

Even if Carr's thesis is partly right, said another, there are always new technologies that have yet to be commoditized. "You need to be pursuing the others that will keep you strategically relevant," he said.

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