Adam Gifford: Running ragged at bleeding edge

Two years ago Harvard Business Review published an article by executive editor Nicholas Carr titled IT Doesn't Matter.

Industry executives went various shades of purple trying to counter the article and its follow-up book, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage.

But his argument continues to resonate, as people look at the millions spent on IT and ask: is it worth it?

Carr says as information technologies become part of the corporate infrastructure they become commodity inputs.

As they become commodities, they cease to give strategic advantage - if your competitors can quickly replicate what you can do, it becomes harder to repay the investment required to get there first.

That is not to say IT is not essential to a business. Try to run a medium or large complex, modern business without computers, generalised and specialist applications, internet connections and the like and you will be talking to the receivers sooner rather than later.

But that bleeding-edge IT project you are pouring your cash into which is supposed to put you so far ahead of the pack? Carr says wait for someone else to take the risk and become a fast follower.

Listening to Carr talking on National Radio last week, I was struck again by the seductiveness of his argument, but left with doubts about its fundamental soundness. But, but, but, I kept feeling like saying. That is a common reaction to Carr, and the reason his writing has been so valuable to the industry in generating debate and clarifying issues.

He is wrong, but right often enough, and not so wrong that he can be dismissed out of hand.

And like all such pronouncements which come out of the Northern Hemisphere, we need to relate it to our situation here at the bottom of the world.

Despite all the rhetoric about technology being an equaliser, about the internet overcoming the tyranny of distance, our exporters face unique problems in selling and delivering products to the world.

As an analogy, Carr compares the commoditisation of IT with the adoption of earlier technologies that reshaped industry, from the steam engine to the railroad to the telegraph and telephone.

In a way, the commoditisation argument is a bit like Francis Fukuyama's end of history thesis. To believe it, you have to accept a bunch of assumptions which end up being little more than marketing guff.

Most technology vendors have roadmaps that say their products are getting smarter, cheaper and easier to manage.

They talk of computing becoming a utility, where you pay for as much processing power, network connectivity or data storage volume as you need. Once we look up from the map, we realise the landscape isn't that well ordered, and isn't likely to be. Not only is technology changing, but there are a huge range of choices people can make, some good, some not so good.

There are any number of standard accounting and enterprise resource planning packages to fit any size of company.

Picking the right one, or even the right consultant to help you choose, is a skill in itself.

One product may be fine for discrete manufacturing, but can't handle the mathematics required in process manufacturing.

A package may be fine when you are a 40-person company, but three years down the track when you are at 120 staff and opening an office in Australia, it may not be able to cope.

Any good technologist will stress the people factor (wetware) over the hardware or software.

Many a project has gone wrong because the users or customers refused to accept the changes being imposed upon them.

The US market Carr knows well is full of narrow and deep companies, with IT suppliers to match.

Maytag makes washing machines. Lots of washing machines. It has efficient assembly lines and distribution channels to ensure it reaches the customer at a price cheaper than its competitor from, say, China.

Fisher & Paykel makes washing machines too. But without a huge domestic market to serve, it was forced to become smarter and more diverse. Its washing machines are packed with information technology and intellectual property. Bits of that IT and IP have gone into dishwashers, fridges, medical devices.

Successful New Zealand producers aim to remain above the commodity level, because that is the only way to insulate themselves from commodity economics.

Fonterra, the ultimate commodity company, is spending millions on what Carr would call commodity software from SAP to ensure its supply chain, its links with the world, conforms with best practice.

Competitors such as Nestle use the same software and methodologies, so that investment is about keeping up, not getting ahead.

But Fonterra's Aspire system to manage its milk collection, built by Christchurch's Jade Software, gives its farmer suppliers timely and consistent information which allows them to be best in class.

That can make a strategic difference.

Looking around the New Zealand technology sector, a lot of what is on offer is about mobility, agility, allowing people to get information quickly wherever they are, without huge expense.

With Carr, it is as though he is looking at the circus and seeing the elephants but not the acrobats.