In this essay we will analyze if’Information Technology matters’ anymore nowadays. For that analysis we willtake a deep look in the articles of the most famous experts to derive to thedecision if ‘IT matters or not’ and if it brings sustainable competitiveadvantage of business. In the very beginning of this essay I will start withbrief information about what is Information Technology. IT is a structuralcomponent of Information Systems or explained with simple words: consider thatIT is the CPU of our computer which is only one component of the computer whileIS is the whole unit – the computer.
IS includes each part of the companywhich is involved within the organization for example the information,processes and the people who are connected with the dispersion of information.IS can be seen as an executor of diverse functions like management, engineeringprocesses, marketing support to giving authorization for Cloud computing orengaging with (VPN) access. The main distinction of IS and IT is thatInformation Systems are concentrated on the information while InformationTechnology is focused more on hardware and software. How important is IT for business? In this paragraph we will explorewhat is the role of Information Technology in the successful business.
Incorporation of innovative and emerging technologies in business is expectedto contribute positive achievements to the business like bringing value, betterquality and higher productivity. The business over the last two decades hasbeen definitely influenced by the Information Technology. IT has made radicalreorganization of lives on people and organizations. The examples for thatchange are well known to nowadays society such as online shopping, socialmedia, online marketing, cloud computing and digital communication which helpsus in everyday lives. In recent times business without IT can’t operateeffectively because it is impossible to prepare a business plan or to performinstant customer support, or even implement efficiently its marketing program.
There are driving factors for business successwhich we will define as precise analysis, future plans, actions and vision forthe business. It is proved in a research that in the last twenty yearscompanies who have invested in innovations and technologies have gained successin achieving bigger market share and higher competitiveness. We have the chanceto use IT in many directions for example in particular data analyses or typesof planning. With the opportunities that Information Technology gives us we canplan the future our business or analyze specific data which will give usdirections how to proceed and what steps to undertake. In twenty first centuryvery important tool for the business is the digital marketing which enables usto promote or sell our products or services from home or our office. The cloudis giving us another advantage of global communication which gives us thechance to monitor our office and employees from every part of the world. What is competitive advantage? We can define competitive advantageas a condition which allows you to produce better products or service at alower price compared to your rivals on the market.
We have to find out if ITbrings competitive advantage to the company which is using it. We can considerdifferent components as a competitive advantage of a company. Such examples arehigher return on assets, higher profit margin, and good reputation of thecompany which brings to customer loyalty or some unique competence. If thecompany hasn’t identified any competitive advantage with which it can competeon the market it is afraid to be exceeded by its competitors which will bringthe company to leave the market. The two main types of competitive advantageare cost and differentiation advantage. Cost advantage means that the companycan offer the same product on a better price while differentiation means thatthe company can offer product with higher degree of differentiation. Nicolas Carr opinion The first person who pronounce the words “ITdoesn’t matter” is Nicolas Carr and there were many attacks later for hisaction. In his article of Harvard Business Review he denies InformationTechnology as a competitive advantage for the business.
Nicolas Carr statesthat the Information Technology strategic importance has diminished. Accordingto him all company functions depend on IT like the business operations andcustomer services. IT has become a basis of every business in order to operateand also an important part of the human life today.
It is calculated that in2016 people have spend 2.04 trillion dollars for IT which shows how importantis that industry for the world. Thirty five years ago all the old machines liketypewriters and calculators have been changed by computers. Can we say that ITgives a strategic value of the business to gain competitive edge? IT isubiquitous technology almost used in every company which brings us to theconclusion that it brings excessive strategic value. Is it true? What can bethe real reason certain resource to bring strategic importance for a companyand to be a basis for competitive advantage is not the ubiquity of certainresource but its scarcity.
If you have a business you can gain competitiveadvantage over your competitors on the market when you produce or havesomething that your rivals can’t do or they are unable to produce. Nowadays weare witnesses of the developing technologies and the basis for IT operationslike data storage, data processing, and data transport are accessible for everybusiness at reasonable prices. When all these factors are compiled together respectivelythey bring to the transformation of IT from a strategic resource forcompetitive advantage to a commodity factor of production in order our businessto operate. All factors are becoming an unseparable cost for contemporarybusiness and when they are paid from all the players in the business they donot contribute a distinction to any firm. With simple words in an early stagesthose companies who implemented IT, they could get advantage but nowadays itcannot provide these advantages anymore.
Example for justifying his proofNicolas Car gives in his article for inventions that were created in the pastlike the steam engine, the telegraph, the telephone and the electric generatorfor a certain period they have given its companies opportunities to forward-thinkingthat they can achieve competitive advantage. Due to the increased usage andcost reduction all these inventions have become ubiquitous over the time whichtransformed them from advantage edge to commodity inputs. And the sametransformation is appearing today with the information technology which isprofound. With those examples Nicolas Carr wants toexplain us that with the reduction of price of IT functionality has removedprobably the most important barrier to competitors. And the reaction of thatshould be great revision of the strategy in IT investment and management. Certainly Nicolas Carr was muchcriticized for his words and one of the first people who was against his theorywas Bill Gates who in a speech in front of American CEOs said that ‘Whensomebody says… IT doesn’t matter, they must be saying that with all thisinformation flow, we have either achieved a limit where it’s just perfect,everybody sees exactly what they want, or we’ve gotten to a point where itsimply can’t be improved – and that’s where we’d object very strenuously’ Sad,but true ‘IT doesn’t matter anymore’ John Naughton (May 30 2004) Another opponent of Carr is the web innovatorMarc Andersen who argues that ‘software is eating the world,’. A Mackinsey ViewOn..
Joe Wainman (May 17, 2013) Vrio framework Can a company achieve competitiveadvantage due to usage of Information Technology? We will explain it throughthe VRIO framework which is a tool that is used to analyze firm’s internalresources and capabilities. With that tool for appraisal we can identify if acertain resource can bring sustainable competitive advantage. Barney, J, B.(1995) is the author of the book ‘Looking Inside the Competitive Advantage’ inwhich he explains what should be the sources which firm must own to gainsustainable competitive advantage. In his book Barney, J, B (1995) hasdescribed that company resources must be: ‘Valuable? Rare? Costly to imitate?And is a firm organized to capture the value of the resources? If a company ownsa resource or capability which allows it to fulfill all these requirements thisresource can bring sustainable competitive advantage.
When we analyze InformationTechnology with VRIO analysis we find out that it cannot contribute forsustainable competitive advantage directly for an organization because thisresource is not scarce but ubiquitous and it is not hard to be replicated. Withthe competition nowadays among the big companies which drops the prices IT isnot costly to be imitated.