Carr advises firms to pay less for software

Controversial author Carr says that IT does not meet user requirements

Nicholas Carr, the controversial author of the 2003 Harvard Business Review article "IT Doesn't Matter", has reiterated his belief that IT does not provide firms with long term competitive advantage and argued that with software increasingly " commodotised" IT chiefs should be negotiating harder on price.

Speaking at a debate organised by Microsoft on the business relevance of IT, Carr insisted that the commodotisation of many IT tools coupled with the emergence of the internet as a low cost means of delivering software meant that "power has shifted from the vendor to the user". He argued that firms now had so many different software options - most of which were commodotised - that they should be negotiating harder to drive down prices.

Carr also reiterated his claims that IT fails to provide firms with strategic benefits because it represents an "infrastructure technology", like electricity or rail, which is most effective when standardised and available to everyone. As a result many firms using IT to try and gain a competitive advantage fail to cling onto that advantage, according to Carr, because rivals quickly emulate them.

The recent emergence of hosted software as a viable delivery model underlines this shift towards IT as a standardised utility, Carr suggested. "We are at the beginning of a big change [in attitude] towards utility [software]," he said. " The big decision many mid sized firms will have to take is where they draw the line between utility and proprietary. They need to be cognizant of that now, as they don’t want to be locked in [to old proprietary systems]."

Carr also recommended that with IT failing to deliver competitive advantage the vast majority of firms should be "followers, not leaders", when it comes to IT adoption. "If you aren’t going to get an economic advantage for a significant period of time there is no point being at the cutting edge," he said, adding that it is the early adopters who are taking on the higher costs and risks.

Firms that deem IT as non-strategic should also shift their IT management strategy, Carr argued, in order to focus less on innovation and more on managing IT resources effectively to reduce the risk of failure.

However, Bob McDowell, vice president of information worker business value at Microsoft, countered that with the pace of IT innovation accelerating firms increasingly had to see IT as a strategic board level issue or risk "missing out on opportunities" and becoming less competitive than those rivals who do deploy new technologies.

"I am not a proponent of firms being on the bleeding edge, as it implies bleeding," he said. "But there is a right time to jump and that is why the CEO should be involved and it is strategic because you can make horrible mistakes if you jump at the wrong time."

"That is the problem with seeing IT as the same as electricity," he added. " Because if you think you can ignore it, you are ignoring a lot of business risk. "

Microsoft also unveiled new research carried out by Durham Business School, which concluded that medium sized UK firms numbering between 100 and 600 staff are more productive than larger organisations and while they tend to use less IT, where they do deploy technology it helps drive productivity and offsets the loss of staff commitment that tends to occur as a firm grows.

However, Carr argued that while it is unclear if there is a correlation it was worth observing that medium sized firms are more productive per employee, while also being less IT intensive than larger companies.