SESSION 5 - IT doesn't matter

Question 1

Whats the paper about?

Answer 1

• main paper message: as information technology’s power & ubiquity have grown, its strategic importance has diminished
• IT has become backbone of commerce –> IT’S power & presence have expanded = more investments
• simple but false assumption: IT’s potency & ubiquity have increased in sync with its strategic value but what makes a resource strategically valuable is scarcity
• lacking here as IT’s core functions (data storage, data processing, data transport) have become commodity factors

Question 2

Whats the difference between proprietory technology & infrastructural technology?

Answer 2

Proprietary technologies: can be owned (actually or effectively) by a single company (eg pharmaceutical firm that holds patent on compound that serves as basis for family of drugs)
- as long as protected, they are foundations for long-term strategic advantages

Infrastructural technologies: offer far more value when shared than used in isolation – become part of business infrastructure; at beginning phases of buildout can take form of proprietary technology as long as access to technology is restricted; often lead to broader market changes

Question 3

What are the buildout stage phases?

Answer 3

• beginning: advantage possible as long as access is restricted
• middle: commercial potential of technology is broadly appreciated, amounts of cash are invested, buildout proceeds with extreme speed  more competition, greater capacity and falling prices = easily affordable and accessible – forces users to adopt technical standards
• end: opportunities of advantage largely gone as easily available for everyone but companies can hope for cost advantage after buildout phase (hard to achieve)

Question 4

What are signs that IT buildout is ending?

Answer 4

1) IT’s power is outstripping most of business needs it fulfils
2) price of essential IT functionality has dropped so that it is affordable to most all
3) capacity of universal distribution network (Internet) has caught up with demand
4) IT vendors are rushing to position themselves as commodity/utilities suppliers
5) investment bubble has burst: indication that infrastructural technology is reaching end of buildout

Question 5

What are the risks associated with IT expenditures?

Answer 5

• in the long run: greatest IT risk companies face is overspending on IT
  –> thus important to separate essential investments from ones that are discretionary, unnecessary or counterproductive
• sloppy expenditures other than overspending: data storage wasted
• oftentimes waiting to make IT expenditures results in late-mover advantage
• greater expenditures rarely translate into superior financial results
  –> rather opposite = companies that only spend little on IT have better performance

Question 5

What are the risks associated with IT expenditures?

Answer 5

• in the long run: greatest IT risk companies face is overspending on IT
  –> thus important to separate essential investments from ones that are discretionary, unnecessary or counterproductive
• sloppy expenditures other than overspending: data storage wasted
• oftentimes waiting to make IT expenditures results in late-mover advantage
• greater expenditures rarely translate into superior financial results
  –> rather opposite = companies that only spend little on IT have better performance