IT Doesn't Matter-Business Processes Do

You've no doubt seen or heard talk of "IT Doesn't Matter" in the May 2003 issue of Harvard Business Review. It's one of those rare pieces of Harvard-speak that will be heard around the world, the likes of which hasn't been seen since HBR published Michael Hammer's "Reengineering Work: Don't Automate, Obliterate!" in 1990. That article triggered the great business reengineering and 'downsizing' wave. As Bob Evans of Information Week reported, "Carr's unshakeable belief leads him to a conclusion that's no doubt provocative … but also profoundly short sighted and dangerous."

Dangerous Articles

Did Evans rightfully dub Carr's article "dangerous?" Yes, dangerous, for the interpretations of Hammer's 1990 article led to great disruption and damage. CEOs across the land waved the article and later the follow-on book, Reengineering the Corporation, as a justification for "downsizing," or less euphemistically, "firing people." Indeed, many downsized themselves to the point of anemia. All this was in response to the extreme pain companies felt in the late '80s as globalization was kicking in and Japan dispelled the belief that a business could compete on just one of the three competitive variables: speed to market, better quality, or cost. Indeed Japanese manufac-turers were dominating global markets by competing on both cost and quality.

Dangerous? Yes, dangerous, because once again great pain is being felt in the business world--the bursting of the dot-com bubble, trillions sucked out of public financial markets and the uncertainty of global terrorism. While the types of arguments that Carr puts forward are clearly riding the current backlash wave of the irrational IT overspend of the late 1990s, we now have the emergence of an "IT Ice Age," and many CEOs will no doubt wave Carr's article in the air and put IT spending into a deep freeze (cryogenics if they could)--anything to cut costs in today's down-turned econ-omy. Whether intentionally or not, Carr, an independent business writer and consultant, has emerged as the poster-child for those who believe the IT sector is now a sunset industry. As the poster-child, his thesis could be quite handy for CEOs looking to justify downsizing and IT spending freezes. Indeed, following Carr's cost-control and risk-mitigation prescriptions, misguided executives can now more readily justify downsizing IT.

Hammer talked of two companies in his article, one of which went out of business before his best-selling book was published three years later. The other company's story was about streamlining 3-way matching of orders, invoices and receiving documents, and that is certainly not a very strategic issue. But worse, his article has been argued to have inflicted damage to companies that didn't look deeper into the underlying issues suggested in the text. It seemed that some companies only wanted to hear sound bites.

"Don't automate, obliterate!" became the clarion call of all those who set out to remove workers, rather than--as Hammer had intended--re-design work processes. The misuse of Hammer's work, and the intent behind his slogan, was partly a backlash against the tendency of some corporations, entranced by new computer systems, to believe that further enhancements in productivity could be gained solely by a re-deployment of office-automation systems, rather than the much harder task of serious and significant organizational re-design. Will Carr's article suffer the same fate, and will Carr, like Hammer before him, write in future issues of HBR of how the industry at large misunderstood his intent?

On the other hand, not everyone steers their business based on magazine articles. One such person not setting his future on Harvard-speak is Bill Gates who obviously concluded that "Harvard Doesn't Matter," dropped out of Harvard, and well, you know the story. One such company who won't be waving Carr's article in the air to irrationally justify cutting IT costs is GE. Beginning in 2000, as the stunning collapse of the dot-coms and the prevailing economic winds led the lemmings among the brick-and-mortar companies to decimate technology budgets, GE increased IT spending in 2001 by 12 percent, to $3 billion. To GE, IT matters.

Why has GE increased its IT budget in the midst of a major economic downturn? The answer was put in writing in GE's 2002 Key Growth Initiatives, "Digitization is the greatest growth opportunity our company has ever seen." It's a similar story at Silicon Valley poster child, Cisco Systems. Responding to Carr, CIO Brad Boston, states, "Cisco Systems has 1.9 billion reasons to believe IT does matter. That's the amount of money Cisco saved last year thanks to our investments in information technology. I'm referring to the same kinds of information technology that companies around the world use to run their accounting, customer service, e-business, financial management, and nearly every other task. Thanks to our strategic use of information technology, we not only lowered operational costs but also improved customer service and created better workforce intelligence, among countless other benefits. The key to Cisco's strategic use of information technology has been not how much we spend but how we spend it."

Are GE and Cisco talking about the same "IT" as Nicholas Carr? We think not. Words like IT, computerization, automation, and information are vague, and subject to as many definitions as the number of people you ask.