IT matter mutter.

Nicholas Carr reviewed Andrew McAfee’s recent HBR article.  

I’m reminded of most of the  speeches at Caesar’s burial. They begin by praising someone, but then go onto do the opposite, and get a crowd excited.  Unlike Mark Antony and Brutus, Nicholas is less than convincing this time. (Shakespeare and Nicholas do have similar views on the wisdom of crowds stuff though)

What Nicholas didn’t say is far more interesting.

Two weeks ago Nicholas argued rather smuggly that there has been no rebound in IT spend,  this, he feels, vindicates his IT doesn’t matter position (2003)

Andrew kicks off his article:

corporate IT spending has bounced back from the plunge it took in 2001. In 1987, U.S. corporations’ investment in IT per employee averaged $1,500. By 2004, the latest year for which government data are available, that amount had more than tripled to $5,100 per employee. In fact, American companies spend as much on IT each year as they do on offices, warehouses, and factories put together.

Nicholas didn’t challenge this. That is because the facts are on Andrew’s side. IT spending is up. Organisations are spending even more money on ERP and other Enterprise stuff than ever before. SAP and Oracle’s financial results illustrate this clearly.

AMR backs up Andrew’s point with some  soothsayerisms,

AMR Research forecasts U.S. companies will increase their ERP budgets by 11.3 percent in 2007. “This year and next will experience levels of ERP investment that we haven’t seen since the late 1990s,” said Jim Shepherd, a senior vice president at AMR Research. “At that time, new customers were replacing legacy systems with ERP suites. Today, spending is driven by a healthy mix of new customers, consolidation projects, add-on applications, and deployment to additional users.”

Most industries would call an 11.3 growth pretty good. And this is boring old utilitiesque ERP. Additionally, if we look to the booming hip SaaS sector, we see SFDC, successfactors and others doing really well too. Collaborative tools like wikis are taking off (Socialtext and others are doing rather nicely)

Andrew’s final sentence is key,

Vendors offer a wide range of FIT, NIT, and EIT, so these technologies are not rare and seem to be highly imitable. However, people often forget that while the software itself might not be any of those things, a successfully implemented system isn’t easy to replicate. Because of the managerial challenges inherent in its implementation, IT meets all four criteria when a company succeeds in applying a technology and, consequently, gains valuable capabilities.

 I’m not the only one that thinks that Nicholas gets it wrong. Neil over at  Macehiter Ward-Dutton notes

However, I disagree with Carr’s conclusion:

McAfee’s article may not be quite as clarifying as it is intended to be.

Had McAfee had stopped at the classification then I would have agreed. It’s the marrying of the technology classification to the organisational implications where McAfee clarifies things, since it helps to facilitate a dialogue between business and IT in a language which both sides understand. Equally importantly, it moves beyond the technology selection phase to outline the role of the business during adoption and subsequent exploitation.

Nicholas picks up that Andrew’s 3-tier model is  a simpification of reality, and it doesn’t work in all contexts. But no model does.  Sitting here in software land I find the model more useful than blunt 1.0 vs 2.0 oversimplifications.  Does the model help managers understand IT better? Well yes it does.  In a page or two of an HBR article packed with case study snipbits one can’t really expect much more.

Nicholas, as a former editor, should know that Harvard Business Review is not really an academic publication- It is aimed a business manager readership, and lets us businessy types think that we are reading something academic. That makes us feel cleverer than we are, and that is a nice, warm feeling.  It is made up of short, interesting thought pieces but it is not the home of rigorous academic model building.  I think it is a fabulous magazine, no mistake.

I’d suggest that Nicholas should read this paper from Andrew and his colleagues, Erik Brynjolfsson, Michael Sorell, and Feng Zhu.  It is dense, heavygoing and empirically sound.  And it knocks his IT doesn’t matter argument for a Kevin Pieterson.

 To quote a bit….

This section empirically investigates the effects of rapid IT adoption on the competitive dynamics of US industries. As Figures 1a and 1b show, the U.S. economy became substantially more IT intensive from 1987-2004. Figure 1a plots corporate IT stock (at historical cost) per FTE by year; the graph shows accelerating IT intensity from 1987-2000, followed by two years of decline corresponding to recession. IT  per FTE resumed its upward trend in 2003. By 2004, at more than $2,600, it was the highest it had ever been and was more than three times higher than it had been in 1987, even before adjusting for the large increase in real computing power delivered per dollar of expenditure. Figure 1b plots IT’s percentage of total investment in tangible wealth each year, together with the equivalent percentages for equipment and plant (the three values for each year sum to 100). IT’s share of the total increased more than 10% during this period to almost 23% of total tangible wealth.

Stretching my Shakespeare metaphor beyond repair, it is time for Nicholas Carr and Andrew McAfee to meet at Philippi. 

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