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Russell Mickler, Principal Consultant, has over 17 years of professional experience leading and managing IT organizations.
A Discussion on the Future of IT Departments
Written on February 1, 2007
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>Professor Mickler,
Hey Bob -
> I have what I believe to be a strong argument against his theory.
Grin – you’re not alone; Carr is very controversial.
>New entrants likely will not possess the capital to purchase the software outright, so this places a high
>barrier against market entry. Obviously, this allows companies to continue to do business without too
>much stress while exploring other areas in which to regain competitive advantage.
True. New entrants could implement newer technologies faster and more mature companies will experience a switching cost if they are to rapidly deploy technologies. However, if technology is self-adaptive and constantly updating, as we see promise with subscription-based licensing or utilitarian perspectives of resources – like network or computing resources where everyone just has the same access to the Internet – then you can see that the competitive advantage earned by the new entrant is quite diminished. Switching cost is non-existent. There is no competitive advantage in the underlying networking technology because everybody moves just as fast.
> The true value of the IT department that I suspect will emerge from this is the support it lends to other >technologies.
I totally agree that innovation could revolutionize the use of IT. However, many organizations don’t treat their IT departments in this way. IT isn’t a profit center, innovating for new competitive products and services. It’s a cost center, impacted by the Z-Curve, unable to innovate its way out of a paper bag – stuck in the same ruts, supporting the same legacy equipment, working around the same problems. If the IT department was allowed to innovate, that’s great, but the budget numbers speak otherwise. IT, at best, is allowed to _surivive_; this year, we’re seeing COLA adjustments, 4-7-percent increases in annual budgets, no large capital outlays generally for things like Vista or Office 2007 or anything like that. I just don’t think the majority use IT as an innovating force. I just don’t think we fund our IT departments to be innovative. I do believe that folks like Apple, who do use IT in an innovative sense, or companies that farm out their IT expertise to transform themselves into a competitive profit center are far ahead of the curve on this one.
> I have already referred to this with WAl-Mart’s use of IT to support RFID technology, but it doesn’t much>of a stretch of imagination to see programs being designed to support research and development of>products as well as forecasting the viability of the results.
>All of these things become possible with IT support (and some are already being developed or are in limited
> use as you read this). What I’m saying, in the main, here is that the IT department will continue to be a>viable operation, but that it’s focus will shift.
If IT, as a department, is allowed to innovate an become part of the product and marketing solution, sure. The IT department’s mission then shifts from maintaining technology to innovating technology. This would be a dramatic shift in the traditional role of the IT/MIS department, from cost center to profit center. I’m just saying and I think what Carr is trying to say: the maintenance problem as it relates to IT is a non-issue. IT is a utility, a nearly free utility, that anyone can use and have access to. In a world where scarcity is eliminated and abundance reigns, and all of us have the same basic means of production, what will differentiate our competitive strategy? IT as an innovator? Perhaps. But that means IT as we know it is dead, and that’s what Carr is saying. In order to be competitive, companies will deploy new tech to attract and retain customers, but this is a shift from maintaining a data center.
I mean, what if your data center could be spare BIPS from Amazon, Microsoft, or Yahoo!? The future is farmed-out IT to take advantage of economies of scale, or IT as a costless utility, not as large underfunded cost centers.