IT does matter

August 30, 2007

A few years back Nicholas Carr wrote an incendiary article stating “IT doesn’t matter“. He concisely describes the idea here: “My point, however, is that it is no longer a source of advantage at the firm level – it doesn’t enable individual companies to distinguish themselves in a meaningful way from their competitors. Essential to competitiveness but inconsequential to strategic advantage: that’s why IT is best viewed (and managed) as a commodity.” Another quote: “we’re at the point where any technological improvement in the management of information will be quickly and broadly copied, rendering it meaningless for competitive advantage.”

My friend started working at a very large, very profitable investment bank. Her job is to put together a new global group that consolidates a lot of the semi-autonomous groups in this division (the most profitable division, incidentally). What she discovered in her first week was so awful she almost quit. The IT systems are horribly bad, requiring long hours of manual labor to keep things barely working. By “manual labor”, I mean they spend hours looking through reports to manually locate and correct simple errors, whereas a computer could have done it in a second. The systems don’t communicate with one another, so people have to move data files around and reformat them every day to keep things running. The recent volatility in the markets brought their systems down. They don’t test their systems. They don’t document their code. Basically, it’s complete crap. [the small company she worked at before was generations ahead of this bank, she says]

After examining all the systems in this group, she has concluded she could easily double productivity within a month by applying some simple tech solution to the most glaring problems. However, the structure of the IT department only allows for glacial change. It will take a week to create a shared folder. She can’t install a wiki for internal use. She has to use an ancient bug tracking system built in the ’80s. And so on… These systems directly effect the bank’s customers and block her ability to offer new products. Though she had planned to set this group up and move on quickly, it now looks like she’ll be shuffling papers for quite a while. She’ll probably quit the day after she gets her bonus.

So the mistake that Carr makes is he assumes companies are making the most effective use of IT within their company. The fact that all banks have nearly the same IT structures perhaps implies they’ve all reached a plateau and IT can’t make a competitive difference. This is absolutely wrong. I’ve had a chance to chat with lots of IT people in lots of industries, and I can assure you that most are criminally incompetent. Their systems are laughably bad. To their credit, many are aware their systems are bad, but blame bad management, slow corporate culture, risk aversion, etc. for the state of IT software. The companies prevent them from building better systems. After a while, they are just clocking in to collect their paycheck.

My friend says many people at her bank believe that their systems are as good as they can be simply because they’ve never had anything better. They can’t believe the fantastic tales she tells… Systems that email you when there’s a problem. Software than can consolidate many reports and generate a user-friendly summary. Tracking a customer request with a issue tracking system. It’s like describing Star Trek technology to cavemen. They don’t believe her; they claim it’s impossible. Anyway, what they have now works and they are comfortable with it. So she’s hit a brick wall and Carr will continue to believe his thesis is right.

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