Effect of IT Commoditization on Corporate Competitiveness

In the articles “IT Does’nt Matter” and ‘The End of Corporate Computing”, that appeared in Harvard Business Review, during 2003 and Spring 2005 issue of the MIT Sloan Management Review 2005 respectively, Nicholas Carr examines both the demand and supply side of the IT. In these articles he argues based on his findings that IT is of no more strategic advantage to large corporations


In “IT Does’nt Matter”, Nicholas Carr, examines the demand side of IT. His arguments are that the IT has reached commoditization, which is similar to what has happened to infrastructure systems such as Electric Power, Railway Systems etc. During earlier times, when IT was just introduced, they proved to be infrastructure for commerce. Then, it proved to be of strategic advantage to corporate. But as IT reached its demand threshold, in Nicholas words, “their availability increased and their cost decreased – as they become ubiquitous – they become commodity inputs. From a strategic standpoint, they become invisible; they no longer matter”. Meaning, they retain competitiveness but are of no special advantage.


The IT commoditization is an anti-thesis of the technological advents. Nevertheless, the accent has shifted from mere technology products, services and information to management, architecture, process and execution. There are numerous examples in the industry, such as the ISP businesses that were initially profitable are now mere infrastructures, and companies do not derive direct profits from them, but from other services bundled in the portal. This shift is also evident from the accent that has shifted from Chief Technology Officers to Chief Information Officers, this is reflected in the recent salary surveys. There is a decline in the salaries of CTOs while that for CIOs have improved.


IT commoditization has also lead to off-shoring of its production, because of its cost advantage and the trend will continue, like it has happened in the manufacturing sector. This has a huge impact on the socio-economic conditions on those who rely on IT for their lively-hood. In USA, there has been a constant decline in students pursuing IT. According to The IT Professionals Association of America, (ITPAA, inc www.itpaa.org)” Salaries continue to decline in IT, and entry-level positions for new graduates are hard to come by since most of these have been offshored to India and China. Given that the average college student graduates with $50,000 in debt, it makes sense that he or she would avoid fields such as IT that are disappearing, and go into those that provide the income necessary to pay back that debt.”


In “The End of Corporate Computing”, Nicholas examines the supply side (how the technology industry will be organized to supply IT to companies). In particular, he examines how the wastefulness of the current, fragmented model of IT supply is unsustainable. As with the factory-owned generators that dominated electricity production a century ago, today’s private IT plants will be supplanted by large-scale, centralized utilities. The transition to the new supply model promises to bring challenges and opportunities to the users of IT while upending the status quo of the computer industry. His premise is based upon common platform multi-tenancy.


The supply and demand vortex is turning ‘exclusiveness’ into ‘inclusiveness’, so the world is becoming flat and the need for pluralistic society is becoming more and more evident. The looming danger is in the dichotomy that will afflict society, systems and self alike.


Ref: http://www.nicholasgcarr.com/articles/matter.html

Ref: ITPAA, inc www.itpaa.org


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