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Friday, May 07, 2004How Much Does Information Technology Matter? Via NYTIMESHal Varian reviews Nicholas Carr's latest book - Does IT Matter?It's a good book. Mr. Carr lays out the simple truths of the economics of information technology in a lucid way, with cogent examples and clear analysis.His basic point is straightforward. At one time, information technology was so expensive and so difficult to manage that companies could make large amounts of money simply by being able to make systems work. (Think I.B.M.).Companies that lacked the skills to manage information technology effectively suffered compared with competitors that had mastered those skills. But over the years, as information technology has become cheaper and more manageable, this source of competitive advantage has been reduced and perhaps eliminated. Hiring knowledgeable employees is much easier than it used to be, and the tools to manage this technology are far more powerful than they were a few short years ago. Nowadays anybody can set up a Web server, or an accounting system, or an inventory management system.The ability to manage technology effectively is no longer the barrier to entry it once was. Hence, it no longer serves as a source of competitive advantage.So it is with every new technology. When electric motors became small enough to drive individual machine tools, it became possible to set up assembly lines and greatly improve productivity.Henry Ford and his colleagues created the assembly line and other techniques of mass production in the formative days of the automobile industry and enjoyed a significant advantage over their competitors for nearly 20 years. Hal Varian concludes his review by saying,"In my view, companies cannot afford to ignore information technology, or relegate it to the back burner. Commoditizing it does not necessarily mean innovation slows. If anything, it could accelerate as more and more innovators experiment and tinker with those cheap, ubiquitous information technology commodities". Powerful set of arguments by Nicholas carr - this created a big fizz last year. pl. watch this space for additional comments and reviews | |
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