Eight to Late

Sensemaking and Analytics for Organizations

W(h)ither, Corporate IT?

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Nicholas Carr’s latest book, The Big Switch: Rewiring the World from Edison to Google, predicts that corporate information technology (IT) shops will eventually be replaced by computing utility companies akin to the power and water utilities we’re all familiar with.  Carr’s writing is always interesting and thought provoking,  so I’ve duly placed an order for his book (which I’ll review in a later post). The central thesis of the book, the switch to utility computing,  appears to have evolved from the ideas he articulated in a piece entitled, IT Doesn’t Matter, which was published in the May 2003 issue of Harvard Business Review (HBR).  I read the article not long after it first appeared,  and filed it away as something I’d want to read again later.  With the book just out,   now is perhaps a good time to take that second look,  and discuss some of the consequences for those who work in corporate IT.

The basic thesis of IT Doesn’t Matter is:

There is no strategic advantage to be gained from maintaining in-house IT departments because IT is fast being commoditised.  As a consequence of easy access to all, it no longer confers distinct advantages on any.

In the article, Carr draws a parallel between the present-day computing industry and power utilities at the turn of the last century. He points out it was common for industries in the late 1800s to have their own in-house power generation plants. At the time electricity was a scarce resource that offered manufacturers distinct advantages over traditional power sources such as water mills. Hence those who could built their own, and thus gained a strategic edge over those who didn’t. Power utilities changed everything by bringing cheap, reliable electricity to the masses.   Once this happened, any industry  – big or small, rich or not so rich – could access electric power inexpensively without having to go through the hassle of generating it themselves.  In-house power plants went the way of the pterodactyl and the rest, as they say, is history.  

Carr argues that the IT industry is being rapidly commoditized in much the same way as the power, railroad and water utilities were in the late 1800s. That this is happening today  is undeniable, and is apparent   from the increasing number of vendors providing fee-based hardware and software services.

As might be expected, the article generated a lot of discussion. In June 2003 HBR published a “debate” featuring a selection of letters along with Carr’s reply. Additionally Carr maintains a compilation of annotated links to article responses on his Web site.   I found it interesting that many corporate IT professionals tend to agree with Carr (in substance, if not detail)  but big  vendors and consultants, who potentially stand to gain from the change,  don’t.

What do I think?

Well, it is clear that Operational IT – the “lights on” business of keeping servers and networks humming along – is already halfway (or more!)  there. Countless providers offer  dedicated servers at very affordable rates, with the added attraction of not having to deal with any of the maintenance issues in-house. Many small businesses do just this, and larger ones consolidate several small IT units into  internal data centres.

For IT Development, however, the case isn’t quite as clear. Granted,  shrink wrapped products such as MS Office face competition from open source products and web-based software services, and at the other end of the spectrum, large enterpricey apps such as <insert any random ERP or CRM system here> can, and are, being provided as services too. In the middle, though,  lie countless applications that address important business needs,  but are too small and specialised to be of interest to potential providers of computing services.  What about these? Well,  present-day software such as spreadsheets and desktop databases  are loaded with features that enable technically savvy business users to build their own specialised applications.  Many end-users do so (thereby causing much angst to those who run corporate IT!).  Additional features and improvements in the useability of such software will only accelerate this trend, thereby obviating the need for dedicated IT resources to build and maintain these applications.   

What remains then? Clearly, not much in the way of technical jobs. Yet, corporations of the future will need people to manage vendor relationships, run projects and provide unbiased technical advice. These folks would need to have:

  • A good understanding of the business.
  • Good communication skills.
  • The ability to manage complex vendor relationships.
  • The ability to manage complex projects involving external parties.
  • A broad (but not necessarily deep) technical knowledge.

The future corporate workplace envisioned by Carr will be radically different from the one IT professionals are familiar with. However, it will have a place for those technical people who focus on business issues rather than technology. 

Written by K

February 14, 2008 at 5:29 pm

One Response

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  1. […] a year ago, I wrote a piece entitled Whither Corporate IT, where I reflected on what the commoditization of IT meant for those who earn their daily dollar in […]

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